VZCZCXYZ0000
RR RUEHWEB

DE RUEHMU #0405/01 0442203
ZNR UUUUU ZZH
R 132203Z FEB 07
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 9087
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS MANAGUA 000405 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR WHA/CEN, WHA/EPSC, AND OES 
STATE FOR USTR - DOLIVER, MBURR 
STATE FOR DOC - AWATSON, DWEEMS, JGEHR, MSIEGELMAN 
 
E.O. 12958: N/A 
TAGS: SENV EAGR ETRD EINV PGOV NU
SUBJECT: NICARAGUA: NEW GOVERNMENT MOVES QUICKLY TO 
UNTANGLE LOGGING BAN 
 
SENSITIVE BUT UNCLASSIFIED.  PLEASE PROTECT ACCORDINGLY. 
 
¶1. (SBU) Summary.  New government officials have moved 
quickly to put the logging industry back on track by 
modifying a June 2006 total moratorium on raw timber exports. 
 The stated policy goals of the moratorium were to curb 
illegal logging activity and to spur foreign investment in 
wood manufacturing.  The ban achieved neither goal, instead 
forcing the closure of legitimate businesses while illegal 
logging activity continued to flourish.  Although the Ortega 
administration has acted quickly to save millions of dollars 
in investment, it has not yet addressed the environmental 
devastation caused by rampant illegal logging.  While the 
initial steps taken by the new government suggest that it is 
sensitive to investors, questions remain whether it can shape 
and enforce good forestry law.  End Summary. 
 
Logging Moratorium Cripples Forestry Sector 
------------------------------------------- 
 
¶2. (U) In June 2006, a logging moratorium on raw timber 
exports derailed the timber industry.  Law 585 put in place a 
logging ban on six hardwood species and outlawed the export 
of all wood in plank or roll form -- 95% of wood exports -- 
requiring that wood undergo a "second transformation" prior 
to export.  The goals of the law were to curb illegal logging 
activity and spur foreign investment in wood manufacturing, 
leading to job creation.  Law 585 achieved neither goal, 
instead forcing the closure of legitimate businesses while 
illegal logging activity continued to flourish. 
 
¶3. (U) Investors struggled to comply with Law 585, but it was 
an uphill battle.  The law failed to clarify whether or not 
the ban applied to work plans approved before its passage. 
It also lacked a grandfather clause for logs cut before Law 
¶585.  Furthermore, it failed to define to whom the "second 
transformation" rule applied or to include a grace period for 
existing investment.  With only a few months remaining in 
2006 and a change of administration looming, officials from 
the previous administration were reluctant to interpret the 
law or to push the National Assembly for clarification. 
 
New Government 
-------------- 
 
¶4. (U)  New government officials have moved quickly to put 
the logging industry back on track by modifying the June 2006 
total moratorium on raw timber exports.  Shortly after taking 
office on January 10th, the new director of the National 
Institute of Forestry (INAFOR), William Schwartz Cunningham, 
eased a "second transformation" requirement put in place by 
Law 585, dictating that all wood for export be planed and the 
edges molded.  Schwartz Cunningham assured investors that 
wood with "minimal surfacing (scraping or sanding)" would be 
approved for export.  Amanda Lorio Arana, the new Minister of 
the Environment and Natural Resources (MARENA), reversed her 
predecessor's decision to suspend the issuance of CITES 
certificates for mahogany exports -- even mahogany in "second 
transformation" -- while she awaits further guidance on Law 
¶585. 
 
¶5. (SBU) At a January 26th meeting of the National Forestry 
Council (CONAFOR) -- a committee composed of officials from 
the Ministry of Agriculture and Forestry (MAGFOR) and MARENA 
--  the council invited private sector representatives to 
meet its new members from the Ortega administration.  The 
hour-long meeting focused on the relationship between public 
and private interests in the forestry sector, and CONAFOR's 
plans to address the concerns of private interests.  A 
representative from a U.S. lumber trading company attended 
the meeting and reported to EconOff that CONAFOR council 
members appeared ready to resolve the long-standing problems 
created by Law 585.  He characterized new officials as being 
more "flexible and attentive" than those from the previous 
administration.  Hector Ramos, head of the Forestry Industry 
Association, told EconOff that he is optimistic about the new 
administration.  He noted that in the coming weeks he and 
other businessmen will meet with MAGFOR and INAFOR officials 
who have promised to "resolve issues." 
 
Comment 
------ 
 
¶6. (SBU)  Despite good intentions to reduce illegal logging, 
Law 585 has created more problems than it solved.  Although 
the Ortega administration has acted quickly to save millions 
of dollars in investment, it has not yet addressed the 
environmental devastation caused by rampant illegal logging. 
While the initial steps taken by MAGFOR and MARENA might 
suggest that the new government is sensitive to investors, 
questions remain whether it can shape and enforce good 
forestry law.  End Comment 
TRIVELLI