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PP RUEHWEB

DE RUEHMU #0436/01 0462357
ZNR UUUUU ZZH
P 152357Z FEB 07
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC PRIORITY 9127
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE PRIORITY
RUEHPE/AMEMBASSY LIMA 0408
RUEHQT/AMEMBASSY QUITO 0448
RUEHSJ/AMEMBASSY SAN JOSE 4927

UNCLAS MANAGUA 000436 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR WHA/CEN AND H FOR MIKE SMITH 
 
E.O. 12958: N/A 
TAGS: ECON KCRM KDEM PGOV PINR PREL PTER SMIG SNAR NU
SUBJECT:  SCENESETTER FOR CODEL NELSON 
 
¶1. (U) SUMMARY:  Post welcomes members of CODEL Nelson to 
Nicaragua February 18 to 20.  With the return of Daniel 
Ortega to the presidency and changes in the National 
Assembly, your visit comes at a most propitious time.  The 
United States remains committed to supporting Nicaragua's 
democratic and economic development by promoting good 
governance, strengthening civil society, encouraging a 
vibrant private sector, and implementing free market 
policies--including the advancement of CAFTA. You will have 
an opportunity to meet with members of the executive and 
legislative branches, leaders of the newly emerging 
democratic opposition, and representatives from the private 
sector.  Although we will have the opportunity to discuss key 
challenges and opportunities in our relations with Nicaragua 
upon your arrival, we are providing the following highlights 
of the current political climate, economic 
background, social issues, and relevant USG assistance 
programs to help you prepare for your visit.  END SUMMARY 
 
Political Background and Current Climate 
- - - - - - - - - - - - - - - - - - - - - 
 
¶2. (U) Despite its considerable progress toward democratic 
consolidation and greater macroeconomic stability following 
the turmoil of the 1980's, Nicaragua's democratic development 
remains incomplete.  Since the return of democratic rule in 
1990, marked by the election of Violeta Chamorro to the 
presidency, political power has been contested between two 
majority forces: the Liberals on the right, and the 
Sandinistas on the left.  After losing three separate races 
for president since 1990, FSLN candidate Daniel Ortega 
emerged the winner in his fourth run in the November 5, 2006 
national election, with 38 percent of the vote.  A confluence 
of events and sharp divisions among the Liberal forces 
created a perfect recipe for Ortega's victory. 
 
¶3. (U) A unique feature of Nicaragua's political system is 
the existence of "el pacto" (the pact), a power sharing deal 
between the Liberal Constitutional Party (PLC), led by former 
President Arnoldo Aleman, and the FSLN, led by Daniel Ortega. 
 The pact has enabled the two main parties to share control 
of the institutions of government and helped perpetuate an 
atavistic caudillo-style rule which has continued to the 
present time.  A key provision of the pact changed the rules 
of the presidential game by lowering the requirement for a 
first-round victory to 35 percent of the popular vote with a 
five percent lead over the second place contender, one of the 
factors that paved the way for Ortega's comeback. 
 
¶4. (U) Another significant factor in Nicaraguan politics is 
the continued influence of Aleman in the Liberal camp.  As a 
result of President Bolanos' (2001-2006) anti-corruption 
campaign, Aleman was convicted of money laundering and fraud 
in 2003.  This motion led to a split within the Liberal camp 
between Aleman loyalists, who remained with the PLC and 
viewed Bolanos as a traitor, and Liberals disillusioned with 
the PLC who, joining forces with some of the smaller 
democratic parties, coalesced into the Nicaraguan Liberal 
Alliance (ALN).  Although sentenced to a 20 year prison 
sentence and ostensibly under house arrest, Aleman is 
currently on "medical parole" and moves freely about Managua, 
thanks in large part to the pact and Sandinista control of 
the judiciary.  Aleman and his wife enjoyed front row seats 
alongside guests of honor at Ortega's inauguration on January 
10 -- clear evidence that the pact continues. 
 
¶5. (U) Five political parties participated in the November 
2006 national election, and four of the parties won seats in 
the National Assembly.  The ALN under the leadership of 
Eduardo Montealegre was a key contender in the 2006 race by 
capturing 28 percent of the vote, and represents one of the 
viable emerging democratic alternatives.  While pre-election 
polls looked promising for Montealegre, who proved to be 
Ortega's leading challenger, the Ortega-Aleman pact prevented 
a second round showdown dealing a victory for the "35 win by 
5" finisher. 
 
¶6. (U) Meanwhile on the left, the FSLN breakaway party of the 
Sandinista Renovation Movement (MRS) fielded the charismatic 
former Mayor of Managua Herty Lewites to challenge Ortega, 
but his sudden death in July possibly took some wind out of 
the MRS' sails.  His successor Edmundo Jarquin was not able 
to gain sufficient ground to compete with Ortega among the 
Sandinista faithful.  Ortega benefited from both divisions: 
on the right among the Liberals, and his traditional 
hard-core support on the left. 

Campaign Promises and Social Issues 
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¶7. (U) Although the second poorest country in the Western 
Hemisphere, Nicaragua has made progress on the economic front 
in the past 16 years by achieving macroeconomic stability, 
greater social investment, and steady growth.  UNESCO 
statistics show that 88% of primary school age children were 
enrolled in 2004, an increase from 73% in 1991.  Most recent 
statistics from the Minister of Education reported 92% school 
enrollment in 2005.  The infant mortality rate dropped from 
52 deaths per live births in 1991 to 31 per 1000 in 2004. 
Nicaragua has also improved in prenatal care coverage, and 
made impressive gains in the United National Human 
Development Index (HDI).  The average GDP growth rate for 
Nicaragua from 1980 
to 1989 was a negative -0.78% and in 2006 it is expected to 
reach a positive 3.7%.  Despite the statistical gains, 
however, the benefits of economic development have been 
uneven.  Poverty, blackouts, water shortages, and high 
gasoline prices are a fact of Nicaraguan life. 
 
¶8. (U) President Ortega's challenge will be to continue 
economic policies to sustain the momentum of progress made 
over the past 16 years, delivering on his sweeping campaign 
promises such as zero poverty and hunger, creating jobs, 
expanding access to education and healthcare, while also 
following through on his vision for a new Nicaraguan 
government of solidarity, peace, and reconciliation. 
 
¶9. (U) According to a public opinion poll published on the 
eve of Ortega's inauguration, the Nicaraguan people expressed 
greater confidence in Ortega's ability to manage the economy 
than in his ability to govern the political arena.  Six out 
of ten Nicaraguans polled for the survey were optimistic 
about an Ortega presidency, and expressed hope in terms of 
greater prosperity, social stability, and peace under his 
administration.  Nevertheless, the survey also found that the 
same percentage of people believed that the government 
institutions would be weaker and the "pact" between the FSLN 
and PLC would be even stronger under an Ortega government, 
thus weakening democracy and undermining the rule of law. 
Indeed, during his first mandate in office, Ortega has moved 
to concentrate executive power in the Presidency. 
 
USG Assistance to Nicaragua 
- - - - - - - - - - - - - - 
 
¶10. (U) The United States supports the economic development 
of Nicaragua and the prosperity of the Central American 
region as a whole.  To build upon the achievements of the 
past 16 years, the Nicaraguan Government must maintain fiscal 
responsibility, generate greater investment (especially in 
the power and transportation sectors), educate more of its 
population, reform the judicial system, and regularize its 
land titling system and resolve 1980s property confiscation 
cases. 
 
¶11. (U) As Nicaragua's largest trading partner, the United 
States is the source of roughly one-fifth of Nicaragua's 
imports and the destination for approximately one-third of 
its exports.  CAFTA-DR plays an important role in generating 
economic prosperity for Nicaragua and other Central American 
countries.  In 2006, bilateral trade with the United States, 
including free trade zone products, increased 29% over 2005 
levels.  Moreover, Nicaraguan exports of non free trade zone 
products surpassed $1 billion for the first time.  As a 
result of CAFTA-DR, Nicaraguan exporters have begun to ship 
new agricultural and food products to the U.S. market. 
 
¶12. (U) As one of the primary international donors working 
with the Nicaraguan government, the United States has 
contributed $1.7 billion since 1990 to Nicaragua's efforts to 
strengthen democracy, provide jobs and higher living 
standards for its people, and deliver quality healthcare and 
education to Nicaraguan families.  The current USAID program 
is investing $250 million over five years in support of 
democracy, economic growth, health, and education.  To give 
an example of some of the positive effects of U.S. 
assistance, this past year USAID launched an $8 million 
Family Health Project which will target 1,342 rural 
communities in 70 municipalities nationwide to improve health 
services for approximately 100,000 women and children.  In 
2006, 48,929 poor rural households received food security 
assistance.  Activities focused on increasing the production 
and marketing of high-value, non-traditional crops to 
increase family incomes.  Complementary feeding, maternal 
health and child survival activities improved health and 
nutrition in high-risk communities. 
 
13.(U) Under the Millennium Challenge Corporation (MCC) 
Compact with Nicaragua, the United States is investing $175 
million over five years to expand production, reduce poverty, 
and modernize Nicaragua's infrastructure in the departments 
of Leon and Chinandega.  The Compact features $92.8 million 
to upgrade key roads and technical assistance to improve the 
road maintenance capabilities of the Ministry of 
Transportation. During the fall of 2006, the MCC held a 
conference to attract investment to the region and worked 
with the Nicaraguan Government to deliver the first 26 of 
43,000 land titles to be issued under the property titling 
component of the program. 
 
New Horizons Humanitarian Assistance 
- - - - - - - - - - - - - - - - - - - 
 
¶14. (U) The U.S. military is also playing a vital role in 
improving the quality of life for many Nicaraguans at the 
community level, currently  through a $4.3 million 
humanitarian program financed by U.S. Southcom, executed with 
the assistance of the U.S. Embassy and Nicaraguan military 
forces.  This New Horizons project includes the construction 
of a new school in the rural community of La Calera, in the 
department of Carazo, as well as improvements in the water 
quality, medical services, and 
veterinary services that will provide help to the communities 
of La Pita, El Sol, and Santa Teresa.  Estimated U.S. 
military assistance from 2006 to 2007 totals $17 million. 
 
Security and Law Enforcement 
- - - - - - - - - - - - - - 
 
¶15. (U) The United States must continue to encourage 
Nicaragua to strengthen its police and military capacity to 
cope with corruption; money laundering; and trafficking in 
narcotics, arms, and persons--illicit activities tied with 
terrorism, gangs, and transnational crime.  A breakdown in 
law enforcement would pose not only a security threat, but 
would also alienate investors and impede economic growth. 
Consequently, sustained efforts to engage and promote 
professionalization of the Nicaraguan military and police 
forces, and increase civilian control of arms inventories, 
are integral to U.S. pro-democracy programs in Nicaragua. 
 
MANPADS 
- - - - 
 
¶16. (U) The Nicaraguan Army currently holds 1,051 MANPADS in 
its official inventory.  The Nicaraguan Government maintains 
that it needs the MANPADS to counter national security 
threats from neighboring countries.   The United States has 
significantly upgraded security measures where the missiles 
are stored.  We are working at all levels of government and 
with civil society to convince the Ortega Administration 
that the terrorist threat and maintenance/security costs 
posed by the MANPADS far outweighs any realistic military 
application. 
 
Combating Narcotics Trafficking 
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¶17. (U) Nicaragua is a major transit country for drugs moving 
northward to the United States by land, sea, and air.  In the 
past, most of the drug movement has occurred on the Atlantic 
Coast, a region that has served as a haven for smugglers, but 
more recently, there has been increased air and maritime 
trafficking along the Pacific Coast of Nicaragua.  Another 
area of concern is the Penas Blancas land crossing on the 
Costa Rican border to the south, where more than 200 trucks 
transit daily.  Under an agreement with the Nicaraguan 
Government established in 1997, the State Department's Bureau 
of International Narcotics and Law Enforcement (INL) is 
providing assistance to improve Nicaragua's National Police 
(NNP) and naval interdiction capabilities.  In addition to 
providing technical assistance and anti-narcotics training, 
the U.S. has helped recondition Nicaraguan Navy patrol craft, 
particularly for drug interdiction on the Atlantic Coast. 
 
Combating Trafficking in Persons 
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¶18. (U) Nicaragua is a source country for women and children 
trafficked internally and across borders for the purpose of 
sexual exploitation, and is currently on Tier 2 of the State 
Department's trafficking in persons (TIP) watch list.  The 
Nicaraguan government's protection efforts during the 2005 
TIP reporting period showed improvements in its prevention 
efforts.  Progress in bringing traffickers to justice, 
however, remained weak.  The government needs to increase 
investigations, improve victim services, and work with the 
National Assembly to pass reforms that bring the penal code 
up to international anti-trafficking standards.  The United 
States is encouraging the Nicaraguan government to improve 
its record on prevention, prosecution, and protection of 
victims, and is funding several pilot projects to assist 
non-governmental organizations and civil society in building 
capacity to help raise awareness of the trafficking 
phenomenon. 
 
Conclusion 
- - - - - - 
 
¶19. (U) Given President Ortega's social agenda and theme of 
national reconciliation in addition to U.S. interests in 
encouraging democratic consolidation and economic prosperity, 
there is much common ground to discuss during your upcoming 
visit.  Continued U.S. assistance, future trade, and 
investment in Nicaragua will be tied to continued progress in 
a number of key areas, such as continuing progress on 
property claims resolutions, reducing corruption, practicing 
good governance; cooperation in combating terrorism, 
narco-trafficking, and trafficking in persons; respect for 
intellectual property rights; and honoring CAFTA agreements. 
Your dialogue with Nicaraguan leaders, counterparts in the 
National Assembly, and private sector representatives will 
help demonstrate U.S. resolve in supporting peace, 
prosperity, and partnership in Nicaragua. 

TRIVELLI