VZCZCXYZ0005
RR RUEHWEB

DE RUEHMU #0453/01 0512154
ZNR UUUUU ZZH
R 202154Z FEB 07
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 9159
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS MANAGUA 000453 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/CEN, WHA/EPSC, EB/TRA 
PLEASE PASS TO USTDA FOR KMALONEY 
COMMERCE FOR ITA/MSIEGELMAN 
TRANSPORTATION FOR FEDERAL HIGHWAY ADMINISTRATION 
 
E.O. 12958: N/A 
TAGS: ELTN EWWT EAIR EIND EPET ECON ETRD PINR NU
SUBJECT: NICARAGUA: AMBASSADOR CALLS ON NEW MINISTER OF 
TRANSPORTATION AND INFRASTRUCTURE 
 
REF: A. MANAGUA 0384 
     ¶B. 06 MANAGUA 2587 
 
¶1. (SBU) Summary.   The Ambassador called on the new Minister 
of Transportation and Infrastructure Pablo Fernando Martinez 
Espinoza on February 7 to introduce himself and discuss 
transportation and infrastructure issues in Nicaragua.  The 
Ambassador explained that the Millennium Challenge 
Corporation (MCC) is spending $92.8 million on building roads 
in the Departments of Leon and Chinandega, and that the 
United States Trade and Development Agency (USTDA) is funding 
$750,000 worth of feasibility studies on the expansion of sea 
and air cargo facilities.  Martinez suggested that USTDA 
might also want to look at funding a feasibility study on a 
second runway at the airport, and that the MCC should 
consider investing in the Port of Corinto. 
 
¶2. (SBU) Martinez outlined the government's policy 
priorities: fighting poverty, combating corruption, 
developing democracy, and fostering the private sector.  He 
believes that the government sorely needs to establish a 
policy on investment -- first defining objectives, then 
setting investment criteria and establishing priorities. 
Decrying a ministry and a sector in disarray, Martinez said 
he wants to develop institutions and industry capacity, and 
to attract people to the ministry who want to achieve 
results, are not corrupt, and are willing to learn.  End 
Summary. 
 
¶3. (U) The Ambassador called on new Minister of 
Transportation and Infrastructure Pablo Fernando Martinez 
Espinoza on February 7 to introduce himself and discuss 
transportation and infrastructure issues, especially roads, 
in Nicaragua.  Martinez was joined by Vice Minister Fernando 
Valle.  DCM and Econoff accompanied the Ambassador. 
 
Millennium Challenge Corporation 
-------------------------------- 

¶4. (U) The Ambassador opened the meeting by acknowledging 
that in recent years the U.S. mission had not been very 
active in areas related to infrastructure.  However, this was 
changing now that the MCC is building roads in the 
Departments of Leon and Chinandega.  MCC road project tenders 
are starting to flow.  Over half of MCC's $175 million 
program is funding the construction of primary and secondary 
roads.  The Ambassador underscored that as a member of the 
MCC Board of Directors, the Minister of Transportation and 
Infrastructure is an integral part of what the MCC 
accomplishes. 
 
¶5. (SBU) Martinez commented that he is interested in 
replicating the MCC model in other areas because it keeps 
programs off budget, therefore avoiding distortions related 
to legislative and constitutional earmarks for education, the 
judicial system, and municipal government. (Note: there is no 
small irony in Martinez's comments, since the Sandinistas 
imposed most of these earmarks.)  Additionally, the model 
involves the private sector in the development of public 
infrastructure.  Martinez believed that the model might be 
applied to the construction of a Pacific coast highway 
between San Juan del Sur and the border of Costa Rica.  The 
Ambassador pointed out that along with a coastal road, one 
would want to make sure that there is adequate water and 
power supply to support increased regional development. 
 
Coastal Highway 
--------------- 

¶6. (SBU) Martinez estimated that a new coastal road along the 
Pacific Ocean would cost on average about $1 million per 
kilometer, versus the $200,000 cost of rehabilitating an 
existing road, given the need to build the foundation, 
drainage systems, bridgework, among other requirements. 
Because the objective of the road was to hasten tourism, 
economic benefits would accrue to a different measure -- a 
different kind of traffic. 
 
Expanding Cargo Capacity Under CAFTA-DR 
--------------------------------------- 

¶7. (SBU) The Ambassador informed Martinez that the United 
States Trade and Development Agency (USTDA) is providing a 
total of $750,000 to fund feasibility studies on the 
expansion of cargo facilities at the Port of Corinto and 
Managua International Airport.  Trade under CAFTA-DR had 
risen to the point where both the port and the airport needed 
to expand.  A lack of adequate infrastructure could adversely 
affect the country's international competitiveness.  To 
facilitate private sector investment in the ports, the 
Ambassador noted, USTDA will fund an advisory to help the 
government draft a ports law.  Currently, the ports are 
relegated to applying general procurement law, which 
precludes public-private partnerships such as joint ventures, 
build-operate-transfer projects, and concessioning terminals. 
 Martinez suggested that USTDA might also want to look at 
funding a feasibility study on a second runway at the 
airport, and added that the MCC might want to consider 
investing in the Port of Corinto. 
 
Policy Priorities and Investment Objectives 
------------------------------------------- 

¶8. (SBU) Martinez outlined the government's policy 
priorities: fighting poverty, combating corruption, 
developing democracy, and fostering the private sector.  He 
believes that the government sorely needs to establish a 
policy on investment -- first defining objectives, then 
setting investment criteria and establishing priorities. 
Until now, he commented, Nicaraguan governments have lacked 
the vision to do this.  One of the problems, he mused, is 
that Nicaraguans want to do everything at once, when it would 
be better to do things gradually, but well.  As an example, 
he pointed out that sometimes emergency repair done the wrong 
way actually destroys a road over the medium term. 
 
¶9. (SBU) Martinez added that the government has to start 
counting all of the economic costs of having roads in poor 
condition including, for example, the cost of killed cattle, 
road accidents, and the value lost by taking too much time in 
getting perishable goods like seafood and fruit to market. 
Taking into account all of these economic costs will help him 
justify funding road construction. 
 
Sector in Disarray 
------------------ 

¶10. (U) Referring to recent negative newspaper articles about 
the transport sector, Martinez decried what he saw at his 
ministry as well as in the construction industry.  There had 
been a lack of transparency at the ministry.  Contracts had 
not been drawn correctly.  Costs had been exaggerated. 
Planning had been ignored.  Ministry officials often lacked 
education and training.  Coordination with the municipalities 
had been poor.  Institutions had grown weak.  Moreover, the 
ministry had ignored the health of the construction industry 
and taken no steps to foster greater capacity, e.g., 
Nicaragua has no laboratory with which to test construction 
materials or the quality of road construction.  Even 
engineering professors are teaching old technology, Martinez 
said. 
 
Developing Institutions and Industry Capacity 
--------------------------------------------- 

¶11. (SBU) Martinez said that he wants to develop institutions 
and industry capacity.  He wants to attract people to the 
ministry who want to achieve results, are not corrupt, and 
willing to learn.  The most important thing, he asserted, is 
to instill a sense of professionalism.  He would like to 
provide incentives to construction companies to invest in 
themselves and build capacity in the industry.  He hopes to 
re-establish a testing laboratory at a local university, and 
work with universities to improve the quality of education 
for civil engineers. 
 
¶12. (U) The Ambassador wondered if the United States could 
assist in some way.  Could we put together a three-week 
training program in contract law for the ministry?  Could we 
bring a Fulbright scholar to teach at a local university or 
some other sort of professional exchange?  There seemed to be 
two immediate needs: construction science and contract law. 
Martinez showed interest in the possibility of putting 
together seminars on contract law for officials at his 
ministry, and perhaps officials from other ministries as 
well.  (Note: the Embassy and USAID are reviewing ideas along 
these lines.) 
 
Large Projects 
-------------- 

¶13. (SBU) The Ambassador asked about some of the large 
projects reported in the press, such as a canal across the 
isthmus that would compete with the Panama Canal (Ref B). 
Martinez quietly indicated his view that it is unlikely that 
these projects would materialize, but he did say that if a 
China or a Brazil were interested, it could happen.  He 
admitted that local industry is unprepared for such a large 
project.  Salinas added that a transisthmus oil pipeline 
might be viable in the medium term. 
 
Biography: Pablo Fernando Martinez Espinoza 
------------------------------------------- 

¶14. (SBU) Pablo Fernando Martinez Espinoza is well known to 
Nicaraguan construction and engineering circles.  From 1984 
to 1990, he was a member of President Daniel Ortega's first 
administration, serving as Vice Ministry of Construction.  In 
the early 1990s, Martinez founded CEICO SA, a construction 
company that has received a number of government contracts to 
build roads and bridges, as well as a dock at the Port of 
Corinto and an airport on Corn Island.  CEICO has also won 
contracts to maintain and rehabilitate national roads from 
the government's Roadway Maintenance Fund (FOMAV). 
 
¶15. (SBU) Martinez has already appeared before the National 
Assembly Committee on Infrastructure and Public Services to 
discuss the state of the ministry.  He claimed that the 
ministry is bloated and suffers from corruption.  He pointed 
to the fact that contractors regularly go over budget on 
projects they never finish, while ministry officials ran up 
large bills on things like personal gasoline allowances. 
Such finger pointing sessions at the National Assembly have 
included his predecessors Ricardo Vega Jackson, Ariel Lopez, 
and Pedro Solorzano.  (Note: Vega Jackson resigned under a 
cloud of corruption in the fall of 2006, but then promptly 
pointed the finger at Solorzano, his predecessor and then 
advisor to President Bolanos (Ref A).) 
 
¶16. (SBU) Martinez has been a member of the Executive Council 
of the Nicaraguan Chamber of Construction.  He holds a degree 
from the Central American University in Civil Engineering, 
and has worked as the Dean of the College of Engineering at 
the same institution.  He is one of the founders of the 
National Engineering University. 
 
¶17. (SBU) Martinez was recommended for the job by the 
Nicaraguan Construction Chamber and the Architects and 
Engineers Association.  Before becoming Vice Minister of 
Transportation and Infrastructure, Fernando Valle was the 
General Manager of the Nicaraguan Construction Chamber. 
TRIVELLI