VZCZCXYZ0017
PP RUEHWEB

DE RUEHMU #1847/01 2181618
ZNR UUUUU ZZH
P 061618Z AUG 07
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC PRIORITY 0930
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS MANAGUA 001847 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN 
3134/ITA/USFCS/OIO/WH/MKESHISHIAN/BARTHUR 
 
E.O. 12958: N/A 
TAGS: ETRD ECON PREL NU
SUBJECT: NICARAGUA: NEW TRADE MINISTER TAKES PRAGMATIC APPROACH TO 
BILATERAL TRADE RELATIONS 
 
REF: A) MANAGUA 1753; B) MANAGUA 1745; C) MANAGUA 1217 
 
Summary 
------- 

¶1. (SBU) New Minister of Trade, Industry, and Development (MIFIC) 
Orlando SOLORZANO Delgadillo says he will focus on areas of common 
interest between Nicaragua and the United States, including trade 
and economic integration.  He mentioned several specific areas of 
concern regarding CAFTA-DR, including peanut and cheese TRQs and a 
proposed U.S. tobacco tax that would harm the Nicaraguan cigar 
industry.  Solorzano suggested that U.S. development assistance 
should be more helpful to Nicaragua's effort to take advantage of 
opportunities presented by CAFTA-DR.  The Ambassador raised 
regulatory and legal difficulties U.S. investors are facing in 
aquaculture and oil exploration.  Solorzano, a seasoned FSLN 
technocrat, appears ready to work pragmatically on bilateral issues, 
with the support of a MIFIC staff that has remained largely 
unchanged since the Sandinistas took charge.  End Summary. 
 
A Pragmatic Approach to our Economic Relationship 
--------------------------------------------- ---- 

¶2. (SBU) In a July 27 courtesy call, New Minister of Trade, 
Industry, and Development (MIFIC) Orlando SOLORZANO Delgadillo told 
Ambassador Trivelli that he would focus on areas of common interest 
between Nicaragua and the United States, such as regional 
integration and trade, especially trade in agricultural goods. 
Solorzano, a seasoned technocrat with decades of experience in 
international trade policy, emphasized a pragmatic approach to the 
U.S. - Nicaragua economic relationship in his meeting with the 
Ambassador. 
 
¶3. (SBU) In describing his recent participation in the June 2007 
Americas Competitiveness Forum in Atlanta, Solorzano said that he 
favors a regional growth strategy that allows the United States, 
Mexico, and the Central American countries to cooperate in competing 
effectively with other regions of the world.  In particular, he 
commended practical trade measures such as regional cumulation (soon 
to include Mexico) and pocketing agreements for the textile and 
apparel sector.  [Note: MIFIC officials are hopeful the National 
Assembly will approve the amendment to Nicaragua's trade agreement 
with Mexico within the next week or two.  End Note.] 
 
¶4. (SBU) Solorzano suggested that Nicaragua must focus on 
encouraging investment outside of the free trade zones, where 
textile and apparel dominate.  Unfortunately, the current crisis in 
the power sector (Ref A) is a limiting factor in this regard. 
Solorzano suggested that the United States donate generating 
capacity to Nicaragua, as other countries had.  [Note: Venezuela has 
supplied 60MW of generating capacity and waived payment, at least 
for the time being; Taiwan is reportedly considering donating 
generating capacity and President Ortega occasionally mentions Iran 
and France as possible sources of generating capacity.  End Note.] 
The Ambassador responded that the United States is planning 
assistance in identifying and repairing transmission line losses and 
is implementing a project to promote energy efficiency among 
industrial users. 
 
¶5. (SBU) Another limiting factor in attracting new investment, said 
Solorzano, was poor road infrastructure, which prevents producers 
from getting their goods to market and the country from serving as 
an alternative to the Panama Canal.  The Ambassador responded that 
the United States is providing considerable assistance to improve 
roads in Leon and Chinandega through the Millennium Challenge 
Corporation (MCC). 
 
The Need for Trade Capacity Building Assistance 
--------------------------------------------- -- 

¶6. (SBU) Solarzano commented that he is disappointed in the level of 
U.S. development assistance directed toward helping Nicaragua take 
advantage of CAFTA-DR.  Echoing a theme often raised by the 
government in discussions with other donors, he said that current 
assistance carries too high an administrative burden, and that few 
resources trickle down to intended recipients.  Solorzano said that 
his government places special emphasis on assistance that makes a 
demonstrative contribution to poverty alleviation.  The Sandinista 
Government is taking this perspective as it reviews foreign 
assistance programs in Nicaragua.  The Ambassador offered to arrange 
a comprehensive briefing for the Minister on our extensive trade 
capacity building portfolio. 
 
Making CAFTA-DR Work for Nicaragua 
---------------------------------- 

¶7. (SBU) Solorzano said that close cooperation with the United 
States on CAFTA-DR implementation issues is critical to promoting 
economic growth in Nicaragua.  In this vein, he highlighted several 
issues, including improving market access for Nicaraguan cheese 
beyond existing tariff rate quota (TRQ) levels without renegotiating 
the agreement.  He questioned whether Nicaragua's 2.4 million 
reduction in its 2007 trade preference level (TPL) for poor 
performance in 2006 under the one-for-one agreement resulted in an 
April or June starting date for 2007.  [Note: We have since 
explained to MIFIC staff that with respect to the one-for-one 
agreement, the TPL year closes December 31, 2007.  Any 2007 first 
quarter numbers that Nicaragua was allowed to apply to the 2006 TPL 
year cannot again be counted toward 2007.  End Note.]  Solorzano 
protested that local peanut producers could not fill their CAFTA 
quota because U.S. domestic support undermined Nicaraguan 
competitiveness.  He complained that the current U.S. congressional 
proposal to fund healthcare with additional taxes on tobacco 
products unfairly targeted imports, at least in the case of cigars 
and cigar tobacco, most of which the United States imports from 
Central America and the Caribbean.  The tax, he argued, may not be 
consistent with CAFTA-DR commitments (septel).  On this last point, 
the Ambassador explained that domestic politics may well preclude a 
trade complaint here; President Bush had already threatened to veto 
the legislation. 
 
U.S. Investor Concerns 
---------------------- 

¶8. (SBU) The Ambassador noted that pending legislation on exotic 
species had the potential to shut down a growing aquaculture 
industry, including a U.S.-invested tilapia farm in Lake Nicaragua 
and shrimp farms elsewhere.  In response, Solorzano repeated a claim 
made by the new Minister of Environment and Natural Resources in a 
recent meeting with the Ambassador (Ref B) that tilapia farming in 
Lake Nicaragua contaminated the waters and damaged local species. 
In addition, he cited the negative impact the farm has had on 
tourism development on nearby Ometepe Island.  Solorzano maintained 
that the legislation would in no way affect shrimp farming, which 
took place primarily in coastal as opposed to fresh waters. 
 
¶9. (SBU) The Ambassador also voiced his concern that two U.S. 
companies have been unable to move forward on oil exploration 
concessions off the Atlantic coast thanks to legal challenges from 
the RAAN and RAAS (Ref C).  As insurer of the projects, the Overseas 
Private Investment Corporation's ability to support further 
investment in Nicaragua is tied to the resolution of the issue. 
Solorzano simply deferred to Minister of Energy and Mining Emilio 
Rapacciolli.  After the meeting, however, his staff requested (and 
received) additional information on the concessions and promised to 
follow up on the issue as appropriate. 
 
Biographical Note 
----------------- 

¶10. (SBU) Solorzano takes over the top spot at MIFIC after having 
served as Vice Minister in charge of external trade under former 
Minister Horacio Brenes.  Brenes resigned after an open dispute with 
former Vice-Minister in charge of internal trade Leana Lacayo, who 
was reassigned as an Economic Advisor at the Ministry of Foreign 
Affairs.  From 1980 to 1990, Solorzano served as Vice Minister for 
Economic Integration and International Trade in the Ministry of 
Trade and Planning.  In the interim, he worked as a private 
consultant on trade and economic integration issues with Nicaraguan 
business associations such as PROEXPORT, multilateral organizations 
such as the United Nations Development Programme and the 
Inter-American Development Bank, and regional groups such as the 
Secretariat for Economic Integration of Central America (SIECA).  He 
holds an advanced degree in international trade policy from the U.N. 
Economic Commission for Latin America and the Caribbean (CEPAL) 
Institute for Latin American and Caribbean Economic and Social 
Planning in Chile and an undergraduate degree from the National 
Autonomous University of Nicaragua. 
 
Comment 
------- 

¶11. (SBU) MIFIC has so far retained the core of its technical staff 
since the Ortega government assumed power in January 2007.  Unlike 
many ministers in the new government, Solorzano seems to afford 
MIFIC a measure of seasoned leadership.  Our responsiveness to his 
concerns on CAFTA-DR issues may help instill Sandinista confidence 
in other areas of our relationship.  Local USAID and MCC offices 
will address directly Solorzano's criticism of foreign assistance to 
make him fully aware of our strong commitment to economic 
development in Nicaragua.  End Comment. 
 
TRIVELLI