VZCZCXRO4096
RR RUEHLMC
DE RUEHMU #1396/01 3232058
ZNY CCCCC ZZH
R 182058Z NOV 08
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 3405
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHINGTON DC
RHEHNSC/NSC WASHINGTON DC
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUMIAAA/CDR USSOUTHCOM MIAMI FL

C O N F I D E N T I A L SECTION 01 OF 02 MANAGUA 001396 
 
SIPDIS 
 
STATE FOR WHA/CEN, WHA/EPSC AND EEB 
TREASURY FOR SARA SENICH 
USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN 
 
E.O. 12958: DECL: 11/13/2028 
TAGS: ECON EFIN ETRD NU PGOV PREL
SUBJECT: NICARAGUA: ECONOMIC ROUNDTABLE TALKS GLOBAL 
FINANCIAL CRISIS AND MUNICIPAL ELECTIONS 
 
Classified By: Amb Robert J. Callahan for reasons 1.4 b & d. 
 
 ¶1.  (C) Summary.  Private sector leaders and economists at 
the Ambassador's inaugural economic roundtable on November 4 
focused on the impact of the global financial crisis and the 
November 9 municipal elections.  The main impact of the 
global financial crisis in Nicaragua appears to be more 
expensive credit, a slowdown in remittances, and a lower 
demand for certain exports to the United States as a result 
of recession.  Participants also decried the effects of 
Ortega's anti-U.S. rhetoric on foreign direct investment. 
Most Nicaraguan elites will try to weather the Ortega 
administration, shifting operations to neighboring countries 
whenever possible.  Most believed that voter turnout was 
critical if the opposition were to have a chance at pulling 
off key victories in the municipal elections, particularly in 
Managua.  End Summary. 
 
 
Global Financial Crisis: Effects on Nicaragua 
--------------------------------------------- 
 
¶2.  (C) According to Luis Rivas of BANPRO, Nicaragua's 
largest bank, the Nicaraguan economy was experiencing a 
decline even before the financial crisis broke in the United 
States.  That Nicaragua's major trading partner is 
experiencing recession can only negatively affect exports. 
Other consequences yet to express themselves will be the lack 
of liquidity, a slowdown in remittances, and more expensive 
credit. 
 
Investment and Rhetoric 
----------------------- 
 
¶3.  (C) All participants agreed that President Ortega's 
reckless anti-U.S. rhetoric negatively influences Nicaraguan 
investment decisions.  Regrettably, they also concurred that 
the FSLN seems indifferent to world opinion-as long as it can 
achieve its principal objective of consolidating power.  A 
finance professor at a prestigious local university even 
suggested that Ortega feels uncomfortable when the economy is 
doing well; he has one of those personalities that prefers 
chaos.  Ortega prefers to solve problems by depending upon 
the largesse of his ALBA (Bolivarian Alternative for the 
Americas) partner Hugo Chavez.  During the 1980's Ortega's 
main source of support was the Soviet Union.  Chavez now 
plays the role of the Soviets in a similar client-state 
model. 
 
¶4.  (C) Mario Arana, head of a prominent think tank, stated 
that the FSLN moderate group, led by Senior FSLN Economic 
Advisor Bayardo Arce, has so far prevailed in terms of 
economic policymaking.  Although Ortega is much more radical 
and prone to taking extreme positions, if politically 
feasible, macroeconomic policymaking has not diverged much 
from the previous administration.  Nonetheless, for political 
reasons, country risk has been rising by some (not 
necessarily all) measures.  Interest on short term dollar 
deposits in Nicaragua has risen, but insurance rates have not 
changed. 
 
Nicaraguan Municipal Elections 
------------------------------ 
 
¶5.  (C) There was considerable discussion of municipal 
elections then less than a week away.  Mario Arana predicted 
that if there were a large vote-count difference between the 
opposition and the FSLN, it would be difficult for the 
Sandinistas to commit fraud.  If the difference were small, 
it would be easier to manipulate the results.  Comment: 
Arana's prediction was prophetic.  The vote difference was 
too great to mask the wholesale fraud the FSLN appears to 
have committed.  End Comment. 
 
¶6.  (C) Participants thought that the primary motivation to 
vote for the FSLN was personal economic gain from backing the 
right political horse-property interests, business favors, 
etc.  Another participant, representing Nicaragua's largest 
bank, opined that, with former President Arnoldo Aleman 
involved, the municipal elections could well strengthen 
 
MANAGUA 00001396  002 OF 002 
 
 
relations between the Constitutional Liberal Party (PLC) and 
the FSLN, through the infamous "Pacto" they share.  One of 
the other attendees concurred: if Montealegre loses, the 
result will consolidate the "Pacto".  Alternatively, if 
Montealegre wins, it could usher in a new three-party power 
structure in Nicaraguan politics (Vamos con Eduardo, the PLC, 
and the FSLN). 
 
The Nicaraguan Elites: Ready Refugees, Again? 
--------------------------------------------- - 
 
¶7.  (C) The Ambassador asked roundtable participants whether 
they were likely to leave Nicaragua should the FSLN pursue 
1980s-style harassment tactics.  Luis Rivas  responded by 
saying that when businesspeople returned to Nicaragua in the 
1990s, they spread their operations throughout Central 
America as a way of diversifying risk.  This allows them to 
relocate to El Salvador or Costa Rica, if the situation in 
Nicaragua becomes untenable.  Ramiro Ortiz of BANPRO observed 
that Nicaraguan college students studying abroad are already 
making the decision not to return.  On the other hand, their 
parents who are established here show no desire to leave, 
some of them for a second time.  It is, after all, not easy 
to start over again in another country, another business, or 
another culture.  Moreover, the current global financial 
crisis limits options. 
 
COMMENT 
------- 
 
¶8.  (C) The observation that the FSLN is indifferent to world 
opinion seems spot-on following the apparent fraud and 
aftermath surrounding the November 9 municipal elections 
here.  Most of these prominent figures in the business 
community appear ready to ride out the rest of Ortega's 
tenure.  Those who can will likely continue to shift focus to 
regional projects. 
 
¶9.  (SBU) Roundtable participants were the following: 
 
--Duilio Baltodano, President Cisa Agro (a wholesaler) 
 
--Luis Rivas, General Manager BANPRO (Nicaragua's largest 
bank) 
 
--Mario Salvo, Former Minister of Agriculture 
and owner of Eskimo, the nation's largest dairy producer 
 
--Mario Arana, Former Central Bank President and current 
Executive Director FUNIDES (an economic think tank) 
 
--Eduardo Montiel, Professor of Finance, INCAE 
(Central American Business School) 
 
--Gabriel Solorzano, President BANEX (with 60,000 clients, 
the nation's largest microfinance bank, formerly FINDESA) 
 
--Ramiro Ortiz, Director BANPRO (owner, second largest bank) 
 
--Mario Alonso, Former President Central Bank 
 
--Roberto Bendana, former head of the Competitiveness 
Commission and President of Cafe Don Paco, a coffee exporter. 
CALLAHAN