VZCZCXRO9040
RR RUEHLMC
DE RUEHMU #1032 2252225
ZNR UUUUU ZZH
R 122225Z AUG 08
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 3018
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS MANAGUA 001032 
 
SENSITIVE 
SIPDIS 
 
STATE PASS OPIC AND IAF 
 
E.O. 12958: N/A 
TAGS: EAID ECON PGOV PREL NU
SUBJECT:  MASSIVE BLAZE LEVELS HEART OF MANAGUA MARKET, MORE BAD 
NEWS FOR MICROFINANCE 
 
REF: MANAGUA 932 
 
¶1.  (U) Summary and Introduction.  On July 31 a massive fire 
destroyed over one-third of Managua's Eastern Market, reportedly the 
largest outdoor dry goods market in Central America.  According to 
media reports, over 1,500 small businesses were destroyed or 
damaged.  Many of these family-owned businesses depend on 
microfinance institutions (MFI), which in turn have offered to 
restructure debts, extend terms of payment, or to negotiate mutually 
acceptable alternatives.  The fire's timing is particularly 
unfortunate given recent violent riots in northern Nicaragua against 
microfinance institutions, which followed inflammatory rhetoric on 
the part of President Ortega (reftel).  End Summary and 
Introduction. 
 
¶2.  (U) On July 31 a massive fire erupted in Managua's Eastern 
Market center, home to its biggest distributors who also supply 
other Nicaraguan markets.  If normal operations are not quickly 
resumed, the larger economy could experience distribution problems 
and potential shortages.  Politicians have sought to capitalize on 
the disaster.  President Ortega, FSLN-mayoral candidate Alexis 
Arguello and Vamos Con Eduardo-Constitutional Liberal Party 
(VCE-PLC) mayoral candidate Eduardo Montealegre made well-publicized 
visits to the area, promising aid to the victims of the blaze. 
 
¶3.  (U) Total losses from this fire remain unclear, though a local 
representative from a prominent MFI,  Financiera Nicaraguense de 
Desarrollo (FINDESA), told us they could well exceed $30 million. 
FAMA, another large Nicaraguan MFI with numerous Eastern Market 
clients, has begun to renegotiate debt so its clients can recover 
from the disaster. Victor Telleria, FAMA  General Manager, appeared 
on Channel 2's morning news program on August 5 and stressed the 
need to customize each solution according to the client.  Some 
businesspeople lost 100% of their merchandise, while others had 
warehouses where they had stored a large part of their inventory. 
Others were victims of looting during the chaos which ensued during 
the blaze. 
 
¶4.  (U) Immediately following the fire, Telleria said FAMA decided 
to freeze interest payments, which in many cases are due on a 
monthly basis.  Telleria said priority one is to reorganize the 
market so that merchants can get back to business; financial 
institutions will not be able to provide loans until shops are 
physically relocated.  FINDESA's representative said the GON's role, 
along with the municipality of Managua, is pivotal to the 
reconstruction of the Mercado infrastructure. 
 
¶5.  (U) FAMA will ask the GON to use a portion of the Nicaraguan 
Investment Fund (FNI) to assist by subsidizing interest rates. 
Telleria added that the GON's "Zero Usury" program can provide 0% 
interest because it is subsidized, but this is not an option for 
private institutions.  He opined that President Ortega--along with 
his advisors--have scant knowledge about microfinance markets. 
 
¶6.  (SBU) Comment:  The damage to the Eastern Market and its 
recovery is already becoming a political football.  Merchants are 
already vocally complaining that they have not received 
reconstruction loans yet.  At the same time, many are complaining 
about plans by the Managua city government to push access roads into 
the market to be able to deal better with any future fire (the roads 
would come at the expense of some stall-holders' properties).  In 
this turbulent environment, we suspect that the GON's preference for 
using its "Zero Usury" program for reconstruction may in part be 
motivated by a desire to acquire closer political control of this 
economically vital entity as it staggers back to its feet. 
 
SANDERS