VZCZCXRO4241
RR RUEHLMC
DE RUEHMU #0056/01 0162037
ZNY CCCCC ZZH
R 162037Z JAN 08
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 1930
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHDC
RHEHNSC/NSC WASHINGTON DC

C O N F I D E N T I A L SECTION 01 OF 03 MANAGUA 000056 
 
SIPDIS 
 
SIPDIS 
 
MCC FOR CEO AMB. DANILOVICH AND MBOHN 
 
E.O. 12958: DECL: 01/16/2018 
TAGS: EAID PREL PGOV ECON NU
SUBJECT: NICARAGUA: AMBASSADOR MEETS WITH PRESIDENT ORTEGA 
ON PROGRESS OF MCC PROGRAM 
 
Classified By: Amb. Paul Trivelli for reasons 1.4 b&d. 
 
------- 
Summary 
------- 

¶1. (C) At a January 8 meeting with the Ambassador, Nicaraguan 
President Daniel Ortega expressed his desire to better 
understand the Millennium Challenge Account's Nicaragua 
operations (MCA-N) ahead of the January 22-24 visit of MCC 
CEO Ambassador John Danilovich.  Ortega indicated that MCA is 
important to his administration and he wanted to make sure 
that the Danilovich visit was a success; however, his 
ministers raised alleged slow implementation of MCA projects 
and lack of GON involvement, in particular in the area of 
road construction.  The Ambassador responded, noting that MCA 
has succeeded thus far at meeting programmed milestones in 
general, and particularly for the road construction.  MCA-N's 
acting director provided detailed information on the range of 
activities in the infrastructure, rural business and property 
project.  The Ambassador raised delays in certain key 
decisions as a result of the loss of the GON chairman of 
MCA-N's board.  Ortega agreed to appoint an interim chairman 
from among current GON board members.   Ortega expressed his 
intention to accompany Ambassador Danilovich on site visits 
to MCA-N projects during his trip.  End Summary. 
 
------------ 
Participants 
------------ 

¶2. (C) On January 8, the Ambassador met with President 
Ortega, at the latter's request.  During the meeting, which 
took place at the Presidential offices/FSLN Party 
headquarters, Ortega was accompanied by First 
Lady/Presidential spokeswoman Rosario Murillo, Foreign 
Minister Samuel Santos, Finance Minister Alberto Guevara, 
Transport Minister Pablo Fernando Martinez, Presidential 
Advisor Paul Oquist, Presidential Advisor Rodolfo Delgado, 
and Nicaraguan Ambassador to the U.S. Arturo Cruz.  The 
Ambassador was accompanied by DCM and Millennium Challenge 
Account-Nicaragua (MCA-N) Acting Director Eddy Jerez. 
 
------------------- 
GON Raises Concerns 
------------------- 

¶3. (C) Ortega led off, noting that he had wanted to discuss 
the activities of MCA-N ahead of the &important8 visit of 
MCC CEO President Ambassador John Danilovich.  Ortega said 
that MCA-N had created high expectations, but he had concerns 
about the time frame of the implementation of projects and 
the need for greater involvement by the GON.  He then asked 
Finance Minister Guevara to elaborate.  Guevara asserted that 
there was little &concrete8 to show from MCA-N, 
particularly in supporting productive investment in rural 
areas, and urged that funds be devoted to direct financing of 
production, rather than merely in commercialization.  Then, 
Transport Minister Martinez intervened noting that the 
agreement establishing MCA-N had been signed in July of 2005 
and that it had a five year execution period that was not 
subject to modification.   He alleged that design process of 
the roads had gone very slowly, abetted by a bidding process 
which aggregated road segments into relatively large blocks 
and did not give Nicaraguan contractors the opportunity to 
successfully bid because of the large financial requirements. 
 He also wondered if administrative costs of MCA-N were above 
the norm and required a close look. 
 
--------------------------- 
Ambassador Details Progress 
--------------------------- 

¶4. (C) The Ambassador responded by noting first that the 
MCA-N agreement had been ratified in June of 2006 by the 
National Assembly and that the five year time period in fact 
ran from then, not July 2005.  He challenged the assertion 
that little had been done to support productive investment by 
rural producers, noting that he personally had visited a 
range of projects in the dairy, forestry and other 
agricultural sectors.  MCA-N projects, he noted, were largely 
proceeding according to previously agreed time-frames and 
within programmed budgets.  The GON's desire for construction 
of an additional stretch of road (Chinandega-Guasaule) had 
been accommodated using funds obtained from administrative 
savings from previous successful bidding processes.  He 
understood the GON's desire for rapid, visible action.  At 
the same time, it was undeniable that most of Nicaragua's 
road network was in poor condition precisely because it had 
been quickly and improperly built.  MCA-N was looking to 
construct roads that would last 20-30 years with normal 
maintenance. 

¶5. (C) The Ambassador asked MCA-N Acting Director Eddy Jerez 
to brief President Ortega on further details of ongoing 
activities.  Jerez reviewed the road portfolio of both of 
primary and secondary roads and he explained the dollar 
amount, estimated kilometers to be built and the current 
status on feasibility, design and construction bidding 
process.  He discussed bidding procedures on roads and noted 
a recent case where a deadline had been in fact relaxed to 
allow a Nicaraguan firm to bid.  He reviewed the Rural 
Business Project and described important investment promotion 
activities of MCA-N, including the encouragement of an 
apparel investment which now employed 250 women, and noted 
the prospects for another which would employee up to 1,500 
workers. 
 
¶6. (C) He provided further examples of MCA-N efforts which 
had allowed milk and bean producers to improve quality and 
thus get better prices for their output as well as access to 
export markets.  He noted that MCA-N's rural development 
activities were aimed not at the subsistence farmer but 
rather at small and medium farmers who could take advantage 
of injections of capital and technical assistance to make 
their businesses profitable, for example milk producers with 
seven cows or more.  First Lady Rosario Murillo noted that 
the GON's own programs were aimed at subsistence farmers and 
that assisting this somewhat more sophisticated sector was 
also important.  Jerez admitted that there had been some 
delay on implementing one main component of the Property 
Project due to changes requested by the GON to the 
procurement process and indicated that it was in the GON 
hands to collaborate with MCA-N to bring this component up to 
speed.  (Note: The Ambassador noted that regardless of this 
delay, some titles in fact have been given out and more will 
be given out during the Danilovich visit.  End Note.) 
 
------------------------ 
Reconstituting the Board 
------------------------ 

¶7. (C) The Ambassador raised the issue of delays in certain 
decisions which only the MCA-N board could take.  GON members 
hold their board seats by virtue of the holding certain 
government positions referred to in the MCA-N agreement. 
With the abolition of the Technical Secretariat of the 
Presidency, former board member Rodolfo Delgado (still a 
Presidential Advisor and present at the meeting) no longer 
held his position and the board could not be convened.  As a 
result, the board had not met since October.  Among pending 
decisions was the signing of the Modification Letter by the 
GON chairman approving the decision to build the 
Chinandega-Guasaule road section sought by the GON.   The 
Ambassador urged Ortega to name temporarily as board 
President a current GON board member, which could be done 
rapidly through an exchange of letters, leaving the naming of 
a permanent member until later if required.  Ortega readily 
agreed, and said that Finance Minister Guevara, as current 
voting GON member would be the interim chairman of the board, 
and that he intended to upgrade Transport Minister to a 
voting position on the board. 
 
-------------- 
Looking Forward 
-------------- 

¶8. (C) Ortega concluded discussion of these issues by noting 
that there is pressure for visible signs of progress from 
local mayors, particularly on roads, and a need for a 
coherent position between the GON and MCC.  He urged that 
mechanisms be considered for rapid execution of short road 
sections in sensitive zones which are particularly vulnerable 
to damage from flooding, etc.  The Ambassador responded that 
these were issues which the board could now take up since it 
could again meet.  He then briefly reviewed plans for Amb. 
Danilovich's visit.  Ortega said he looked forward to a 
successful visit, and that he wanted to join in Amb. 
Danilovich's visit to MCA-N projects.  He asked that the 
Embassy coordinate with the First Lady in organizing his 
participation in the visit. 
 
------- 
Comment 
------- 

¶9. (C) Despite his ministers carping about alleged 
deficiencies in MCA-N's operations, Ortega maintained a 
positive tone throughout the meeting, and received 
information about the real state of affairs with interest. 
He followed up with a letter formally naming an interim board 
president, as promised, and we have been working with the 
Presidency about Ortega's participation in Amb. Danilovich's 
visit.  Despite tensions in our overall bilateral 
relationship, the Millennium Challenge Account's Nicaraguan 
activities remain a stellar example of U.S. engagement here 
working to the benefit of the Nicaraguan people, something 
which, in the final analysis, the GON understands. 
TRIVELLI