VZCZCXYZ0000
RR RUEHWEB

DE RUEHMU #1689/01 1911637
ZNR UUUUU ZZH
R 101637Z JUL 07
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 0763
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE

UNCLAS MANAGUA 001689 
 
SIPDIS 
 
STATE FOR WHA/CEN GSCHIFFER & RGREENE, EB/IFD/OIA, PBROWN & NHATCHER 
& JFEELEY, L/CID EDAUGHTRY AND WHA/EPSC 
TREASURY FOR INL MDONOVAN AND GCHRISTOPOLUS, OWH/MSHWARZMAN 
STATE PASS TO USTR 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EINV ECON USTR KIDE NU
SUBJECT: NICARAGUA: SECTION 527 WAIVER OBSERVATIONS 
 
REF:  MANAGUA 00626 
 
Sensitive But Unclassified - Please Handle Accordingly 
 
¶1. (SBU) Summary: Post recommends that the Secretary of State issue 
an annual waiver to Section 527 of the Foreign Relations 
Authorization Act of FY 1994/1995.  Between August 1, 2006, and June 
30, 2007, the Government of Nicaragua resolved 34 Embassy-registered 
claims for 18 U.S. citizens.  While this number is below that of 
previous years, we recognize that the transition in administrations 
during the second half of the waiver year disrupted the normal pace 
of resolutions, which should resume during the 2007-2008 waiver 
year.  In addition, we have been making progress toward establishing 
working relations across the spectrum of bilateral cooperation, 
including trade and investment under CAFTA-DR, judicial reform, 
ensuring professional military and police forces, and the war on 
drugs and terrorism.  We believe that these factors justify a waiver 
to Section 527 this year based on U.S. national interest.  We 
recommend retaining last year's benchmarks, but calling for more 
rapid progress in achieving resolutions for U.S. citizen claims. 
End Summary. 
 
2006-2007 Waiver Year Benchmarks 
-------------------------------- 

¶2. (SBU) In her July 28, 2006, letter to then Foreign Minister 
Norman Caldera, the Secretary enumerated three benchmarks for 
granting a waiver in July 2007:  1) successful resolution of a 
significant number of Embassy-registered claims; 2) resolution of 
property claims held or controlled by the Government of Nicaragua, 
including the "Corporacion Nacional del Sector Publico" (i.e., 
CORNAP, the government's asset holding company); and 3) resolution 
of property claims controlled by the Nicaraguan Army.  While the 
Government of Nicaragua made some progress on the first benchmark 
during this waiver year, it made no progress on the second or third. 
 In particular, approximately 37 properties claimed by U.S citizens 
continue to be under the control of either the Army or the Army 
Social Security Institute (IPSM).  High-ranking military officials 
continue to occupy some residences. 
 
Waiver Year Progress Spans Two Administrations 
--------------------------------------------- - 

¶3. (SBU) In equal measure, this waiver year spanned two 
administrations, i.e., the end of the Bolanos Administration and the 
beginning of the Ortega Administration.  During the period between 
August 1, 2006, and January 9, 2006, the Administration of President 
Enrique Bolanos resolved 29 American citizen property claims.  Of 
the 17 U.S. citizens compensated, two were U.S. citizens at the time 
of confiscation.  The face value of property bonds issued to the 
entire group was approximately $2,378,851.12, with a current market 
value of approximately $1,058,588.75. 
 
¶4. (SBU) On January 10, 2007, Daniel Ortega was inaugurated 
president and quickly moved to install Sandinista party officials in 
positions of responsibility, including the Property 
Superintendent(Reftel)and the Attorney General.  They in turn hired 
new staff and embarked on a legal review of all settlements 
accomplished in the six months prior to assuming office.  The result 
was that the Ortega Administration made little or no progress in 
resolving claims through June 30, 2007. 
 
¶5. (SBU) Beginning in March, post sought to raise the awareness of 
the new government on the importance of resolving claims.  This 
resulted in the government declaring resolutions for dozens of 
claims for which it provided no evidence.  In one interview in May, 
Vice President Jaime Morales Carazo incorrectly told CNN that the 
Ortega Administration had resolved more claims in the short time it 
had been in office than the Bolanos Administration had ever resolved 
during the course of one full year.  While we were heartened to 
learn of the government's renewed interest and supposed effort, we 
informed the responsible officials that there was no proof of final 
resolution. 
 
¶6. (SBU) In May, the Ambassador reminded the Attorney General of the 
procedures that needed to be undertaken before a claim could be 
considered resolved.  On June 29, the Government of Nicaragua 
delivered to the Embassy final documents for 5 settlements awarded 
to a single U.S. claimant for more than 2,000 acres of premium 
coastal real estate in the Department of Rivas.  Post considers 
these resolutions significant because they lend some credence to the 
Ortega Administration's behind the scenes quiet efforts and provide 
evidence that the Ortega Administration may be ready to resume a 
more normal pace in resolving U.S. citizen claims. 
 
¶7. (SBU) Taken together with the 29 resolutions from the Bolanos 
Administration, the Ortega Administration's 5 resolutions bring the 
total for the waiver year to 34 claims resolved for 18 U.S. 
citizens, with a total face value of property bonds in the amount of 
$3,664,319.94.  The current market value of these claims is 
approximately $1,696,580.14. 
 
Property Indemnification Bonds (BPIs) 
------------------------------------- 

¶8. (SBU) The Government of Nicaragua typically compensates 
expropriated or confiscated property of American citizens via 
low-interest, long-term property indemnification bonds (BPIs). 
While rare, the return of property, cash payments, and landswaps are 
not unknown.  In December 2004, the Nicaraguan National Assembly 
authorized adding an independent Property Institute (INPRUR) to a 
complex mix of property resolution entities.  While legislation 
supporting the controversial institute is still on the books, INPRUR 
has never become operational. 
 
Selected Case Highlights 
------------------------ 

¶9. (SBU) While we are encouraging the government to settle further 
claims during the month of July 2007, the cut-off date for 
submission is June 30, 2007.  Cases listed below represent a sample 
of resolutions achieved between August 1, 2006, and June 30, 2007. 
Their full documentation confirms eligibility for Section 527 
consideration for waiver year August 1, 2006, to July 31, 2007.  All 
dollar figures have been calculated using the official exchange rate 
on the date of settlement. 
 
A) Becklin/Gonzalez Family: Claimant received compensation for 108 
shares of the 1979-nationalized "La Protectora" insurance company in 
the form of property bonds $219,842. 
 
B) Collado, Alma:  Final resolution was accomplished via the rare 
recovery of an urban lot in Managua through the local courts. 
 
C) Dubon, Oscar: Claimant received property bonds with a face value 
of $52,178 for an upscale Managua residence.  Note: Occupant Ivan 
Antonio Garcia Cortez was the subject of a 2004 Section 2225 request 
resulting in a 2006 visa denial. 
 
D) Fortunato, Gloria:  Claimant received property bonds with a face 
value of $834,833.45 for six houses in the Department of Matagalpa. 
 
E) Gonzalez, Amelia:  Claimant received property bonds with a face 
value of $630,524 for seven houses in Managua. 
 
F) Vallejos, Francisco:  Claimant agreed to a landswap worth less 
than his original property along with property bonds with a face 
value of $61,465.51 to make up the difference. 
 
G) Pinkes, Gyula:  Claimant received property bonds with a face 
value of $1,285,468.82 for approximately 2,300 acres of prime 
coastal property in the Department of Rivas.  [Note: This case was 
resolved during the Ortega Administration. End note.] 
 
Section 527 
----------- 

¶10. (SBU) Section 527 of the Foreign Relations Authorization Act of 
Fiscal Years 1994 and 1995 prohibits U.S. economic assistance or 
support in international financial institutions to any country in 
which U.S. citizens have not received adequate and effective 
compensation for confiscated property.  The prohibition can include 
all U.S. assistance through USAID, the Millennium Challenge 
Corporation (MCC), and our votes at the IMF and World Bank.  Section 
527 also authorizes the Secretary of State, as delegated by the 
President, to waive the prohibition on an annual basis if she 
determines that it would be in the national interest of the United 
States to do so. 
 
¶11. (SBU) Section 527 was amended on December 8, 2004, to base the 
waiver decision only on claims registered at the Embassy before 
August 1, 2005.  No new claims can be considered in determining 
waiver eligibility.  A separate database lists 17 property claims 
from 11 U.S. claimants registered at the Embassy after August 1, 
¶2005.  [Note: In 1998, the Government of Nicaragua announced that 
claimants of any nationality had to file new claims before December 
2000 to be considered for compensation.  End note.] 
 
Waiver Recommendation 
--------------------- 

¶12. (SBU) The primary consideration in deciding to issue a waiver 
each July is whether it is in U.S. national interest.  In the case 
of Nicaragua, we have been working toward establishing working 
relations with the Ortega Administration across the spectrum of 
bilateral cooperation, including trade and investment under 
CAFTA-DR, judicial reform, ensuring professional military and police 
forces, and the war on drugs and terrorism.  We believe that we are 
making progress toward achieving our goals. 
 
¶13. (SBU) Another consideration is the effort put forth by the 
Government of Nicaragua to resolve outstanding claims and the 
prospect of resolving more claims in future.  While the break in 
progress surrounding the transition between administrations is 
lamentable, it is to a certain extent understandable.  We believe 
that our counterparts in the Nicaraguan Government now understand 
the importance of making more rapid progress in resolving U.S. 
claims, have come to terms with their responsibilities, and are 
better prepared to work with us in future. 
 
Suggested Points for 2007-2008 Waiver Letter 
-------------------------------------------- 

¶14. (SBU) We recommend retaining last year's benchmarks for the 
2007-2008 waiver year as follows: 1) successful resolution of a 
significant number of Embassy-registered claims, with particular 
attention to longstanding, complex cases; 2) resolution of property 
claims held or controlled by the GON, including CORNAP and the 
Police; and 3) resolution of property claims controlled by the Army. 
 While achieving all three benchmarks in any given period is 
unlikely, retaining them underscores our commitment to achieving 
resolutions in all categories of U.S. citizen claims.  In addition, 
we recommend adding that while the number of settlements this year 
was significantly below that of previous years, we understand that 
the transition in administrations disrupted the pace of progress 
during this waiver year.  We hope that the pace of progress resumes 
in the 2007-2008 waiver year, and look forward to working closely 
with the Government of Nicaragua to help make this happen. 
 
TRIVELLI