VZCZCXRO2511
RR RUEHLMC
DE RUEHMU #2655/01 3651724
ZNR UUUUU ZZH
R 311724Z DEC 07
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 1879
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHEHNSC/NSC WASHDC
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHDC

UNCLAS SECTION 01 OF 03 MANAGUA 002655 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/CEN, WHA/EPSC, AND OES 
SAN JOSE FOR EST HUB 
USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN 
3134/ITA/USFCS/OIO/WH/MKESHISHIAN/BARTHUR 
 
E.O. 12958: N/A 
TAGS: SENV EINV ETRD EAGR PGOV NU
SUBJECT: WITH FORESTS DESTROYED, NICARAGUAN GOVERNMENT FRUSTRATES 
FELIX SALVAGE EFFORTS 
 
REF: A) MANAGUA 0405, B) MANAGUA 2325, C) MANAGUA 1747 
 
¶1. (SBU) Summary:  As part of its post-Hurricane Felix relief 
efforts, the Government of Nicaragua (GON) suspended all commercial 
extraction of timber in Nicaragua's North Atlantic Autonomous Region 
(RAAN).  This ban was enacted pursuant to presidential decree 
92-2007, ratified by the National Assembly on September 21.  The 
decree directed that all existing wood products in industry 
lumberyards be used for local indigenous community housing and 
infrastructure reconstruction.  Industry and opposition parties 
decried the ban as "confiscatory."  The GON has since developed an 
action plan for post-hurricane forestry management and, on November 
2, promulgated a "regulatory clarification" for salvage logging 
operations.  While the action plan contains positive, if ambitious, 
survey, fire prevention, and environmental mitigation requirements, 
the new regulations also serve to deepen commercial uncertainty. 
While Hurricane Felix may open a window of opportunity to revisit 
the poorly conceived June 2006 Veda Forestal forestry extraction and 
export prohibition (Ref A), the situation for commercial loggers 
remains unclear.  Illegal logging and extraction of significant 
timber resources felled by the hurricane continues unabated.  End 
Summary. 
 
Hurricane Felix Damages Huge Swathes of Forest 
--------------------------------------------- - 

¶2. (U) Category Five Hurricane Felix slammed into the RAAN's 
northeast coast on September 4, killing more than 130 people.  (Some 
indigenous groups claim that as many as 500 died.)  Hurricane Felix 
destroyed more than 20,450 homes along with 100 schools, clinics, 
community centers, and churches.  Based on aerial and terrestrial 
surveys, the National Institute for Forestry (INAFOR) reports that 
the storm ripped through 1,400,000 hectares of territory, causing 
extensive damage to 560,000 hectares.  INAFOR estimates that Felix 
toppled as many as 11 million cubic meters of tropical forest 
product and that the value of this timber may exceed $500 million. 
 
Ortega Responds with a Decree Suspending Timber Trade 
--------------------------------------------- -------- 

¶3. (U) On September 21, the National Assembly ratified a sweeping 
presidential decree that suspends all commercial logging and timber 
trade in the RAAN (Ref B).  Article 5 of Presidential Decree 92-2007 
requires that all lumberyards channel existing inventory to meet 
demand for reconstruction and housing in the region--at no cost to 
customers.  However, the decree fails to specify how reconstruction 
will by managed or by whom, and makes no distinction between timber 
felled prior to Hurricane Felix and timber felled as a result of the 
storm.  Additionally, the decree contains no provision to compensate 
companies for lawfully felled timber. 
 
¶4. (U) Local timber operators have criticized the decree as an 
"illegal and unconstitutional confiscation of private property." 
National Assembly Deputy Wilfredo Navarro of the Liberal 
Constitutionalist Party called the law an "imposition, a 
confiscation, a taking, a sequestration, blackmail and wrong," 
adding, "if the President wants to do right for the people of the 
Northern Caribbean, he should pay the owners for the timber." 
 
¶5. (U) Unable to sell or export their timber, a number of logging 
companies have suspended operations and laid off workers (200 
reported for one company alone).  As a consequence, twenty local 
indigenous leaders from affected communities signed a declaration 
demanding that all levels of government support and respect 
commercial exploitation of timber felled by Hurricane Felix to 
reactivate local economies.  In response, the Vice President and the 
Executive Director of INAFOR defended the September 21, 2007, 
measure, declaring that the timber is a "donation," and that, "It 
would be a crime NOT to use the wood for housing reconstruction." 
 
The GON Drafts a Plan 
---------------------- 

¶6. (U) Regional and Central Governments drafted a comprehensive 
forestry management plan entitled "Action Plan for Assistance and 
Restoration of Forest Ecosystems in the RAAN."  Carrying a $67 
million price tag, the plan incorporates forest protection, 
harvesting, reforestation, research, monitoring, territorial zoning, 
and regional capacity building.  It calls for additional analyses, 
including a timber inventory, reforestation and forest protection 
plans, and a simplified plan for commercial harvesting at the 
community level. 
 
¶7. (U) On November 2, Administrative Resolution 75-2007 established 
a legal framework to allow salvage logging, exports, and commercial 
alliances with community groups.  In essence, the resolution sets 
forth regulations to implement Presidential Decree 92-2007 along the 
following lines: 
 
--   Private enterprise involvement will be approved 
     only for those that have "existing transparent 
     alliances" with local communities that have been 
     endorsed by the regional government.  Timber must 
     be processed to meet community reconstruction 
     needs first, and for free.  Only after "basic" 
     community needs for housing and infrastructure 
     have been met may surplus forestry resources be 
     sold and processed for resale at market prices. 
     However, any profits generated from such a sale 
     must be shared with affected communities. 
 
--   Processed, value-added timber may be exported 
     only from the port city of Puerto Cabezas. 
 
--   INAFOR, Ministry of Environment and Natural 
     Resources (MARENA) and Secretary of Natural 
     Resources (SERENA) technicians will supervise 
     extraction and issue non-commercial forestry 
     permits to meet local demand for home 
     reconstruction and infrastructure supplies. 
 
--   After INAFOR technicians conduct field 
     inspections, commercial forestry permits may be 
     provided to indigenous communities and their 
     beneficiaries. 
 
Analyzing the Law 
----------------- 

¶8. (SBU) The regulations to Presidential Decree 92-2007 have created 
even more confusion for logging companies than the decree itself. 
They severely limit and constrain the private sector, effectively 
transforming logging companies into little more than unpaid agents 
for community reconstruction.  Under the new regulations, only local 
commu&