VZCZCXRO7584
PP RUEHLMC
DE RUEHMU #1436/01 3381527
ZNR UUUUU ZZH
P 031527Z DEC 08
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC PRIORITY 3453
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHCV/AMEMBASSY CARACAS 1329
RUEHLP/AMEMBASSY LA PAZ 0218
RUEHQT/AMEMBASSY QUITO 0482
RUEHBS/USEU BRUSSELS
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RHEHNSC/NSC WASHINGTON DC
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHDC

UNCLAS SECTION 01 OF 03 MANAGUA 001436 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAID ECON EFIN PREL KMCA NU
SUBJECT: NICARAGUA: ORTEGA SAYS VENEZUELAN ASSISTANCE TO 
REPLACE MCC AND OTHER DONOR PROGRAMS 
 
Summary 
------- 

¶1. (SBU) In reaction to MCC's announcement to freeze 
disbursements and review its program, President Ortega said 
on December 1 that Venezuelan President Hugo Chavez had 
promised to provide funds to continue the implementation of 
MCC programs if they are canceled.  Ortega claimed that U.S. 
assistance to Nicaragua from 2001 to 2007, which he said 
totaled $500 million, was nothing more than an installment 
payment toward the $45 billion dollars that the United States 
"owes" Nicaragua.  That amount, he explained, includes 
interest on the $17 billion in punitive damages the 
International Court of Justice allegedly assessed the United 
States in 1986.  Some opposition politicians have asked the 
USG to refrain from "punishing the people of Nicaragua for 
the sins of the government."  Others, including former 
candidate for mayor of Managua Eduardo Montealegre, place the 
blame for cancellation more squarely on President Ortega. 
Business leaders have lamented the economic consequences of 
the decision to freeze disbursements, while beneficiaries of 
the MCC program in Leon and Chinandega have expressed their 
concern for how the decision will affect them directly.  End 
summary. 
 
Ortega: "We Feel Liberated" 
---------------------------- 

¶2. (SBU) In a letter dated November 24, Millennium Challenge 
Corporation (MCC) CEO John Danilovich informed Minister of 
Finance Alberto Guevara that "As a result of the actions of 
the Government of Nicaragua in connection with the (November 
9 municipal) elections . . . MCC will not approve 
disbursements for any projects or activities not already 
contracted by MCA-Nicaragua until further notice."  When news 
of the MCC decision first reached President Ortega in Caracas 
on November 25, where he was participating in an ALBA Summit, 
he quipped, "We're not afraid, we're not going to back down . 
. . in fact, we feel liberated every time they take away 
aid."  Ortega boasted that unlike U.S. assistance, Venezuelan 
funds -- provided by a fellow revolutionary -- come with no 
strings attached. 
 
¶3. (SBU) In a nationally televised "Address to the Nation" 
carried live by Nicaraguan television channels on December 1, 
President Ortega responded more fully to the MCC 
announcement.  After delivering a tour d'horizon that 
included a request that the opposition be "good losers" and 
criticism of European donors, he recognized the importance of 
MCC programs for Nicaragua, specifically mentioning road 
construction and property titling.  He told his audience, 
however, that the decision to freeze disbursements would have 
only a "minimal impact."  Ortega claimed to have received 
assurances directly from Hugo Chavez that Venezuela would 
provide funds to continue the implementation of MCC programs 
if they are canceled.  "I want to tell the people of the West 
(Leon and Chinandega) to relax and trust in God, thanks to 
ALBA (the Bolivarian Alternative for the Americas) and the 
people of Venezuela," he said. 
 
¶4. (SBU) Ortega said Nicaragua is prepared to "sue" the 
United States if MCC decides to follow through on its threat 
to suspend its compact during its December 11 board meeting. 
To the delight of an audience of party faithful, Ortega first 
calculated U.S. assistance to Nicaragua from 2001 to 2007 at 
$500 million.  He then asserted that this was nothing more 
than an installment toward the $45 billion dollars that the 
United States owes Nicaragua.  That amount, he explained, 
includes interest on the $17 billion in punitive damages the 
International Court of Justice (ICJ) assessed the United 
States in 1986.  Ortega urged Nicaraguan citizens to seek 
collection of the balance -- $44.5 billion -- whenever they 
come across a U.S. citizen.  (Comment: The ICJ judgment is 
something of an "urban legend" in Nicaragua.  Our 
understanding, based on information provided by the Office of 
the Historian, is that (a) the USG never recognized the 
court's jurisdiction; (b) the court, while finding for 
Nicaragua, never imposed a specific monetary penalty; and (c) 
the government of Violeta Chamorro withdrew the Nicaraguan 
claim.  End comment.) 
 
¶5. (SBU) In the build up to Ortega's "Address to the Nation," 
other government officials offered more direct criticism. 
Vice Minister of Foreign Affairs Manuel Coronel Kautz, who 
was Acting Foreign Minister at the time, said, "If Mr. 
Danilovich feels sorry for the Nicaraguans, maybe he should 
think about the hundreds of thousands of deaths that the 
(United States) causes in other countries."  "(This decision) 
is not going to change our way of thinking, who we are, how 
we act," he added.  Coronel Kautz concluded, "They have not 
given us anything.  They have come to kill Nicaraguans.  We 
have been invaded five times."  Vice Minister of Foreign 
Affairs Valdrack Jaentschke, who coordinates foreign 
assistance for the government, complained that "It is 
unacceptable and unethical to link assistance with internal 
politics."  "Freezing disbursements," he said, is "part of a 
U.S. plot to destabilize the government."  The action 
violated the terms of the compact and in his view "could be 
described as interference in domestic affairs." 
 
The Democratic Opposition: Blame Ortega or Blame the USG? 
--------------------------------------------- ------------ 

¶6. (SBU) Some opposition politicians expressed concern about 
the impact the U.S. decision will have on rural poor in Leon 
and Chinandega.  Several members of former President Violeta 
Chamorro's cabinet -- including Antonio Lacayo, former Chief 
of Staff, and Enrique Dreyfus, former Foreign Minister -- 
wrote the Secretary of State and MCC CEO Danilovich on 
November 28 expressing disagreement with the decision to 
freeze MCC disbursements.  While recognizing that "assistance 
is more effective when it reinforces good governance," they 
argued that a cut in assistance would only hurt the poor. 
 
¶7. (SBU) In reference to the letter from Chamorro's cabinet, 
PLC Deputy Francisco Aguirre Sacasa, Foreign Minister during 
the Aleman administration, opined that MCC should refrain 
from "punishing the people of Nicaragua for the sins of the 
government."  Later, Aguirre Sacasa blamed Ortega's verbal 
assaults against foreign donors and attacks on democracy for 
the freeze in disbursements.  He has also argued that the MCC 
program could be saved if President Ortega is willing to 
solve the current political crisis by allowing for a fair and 
transparent recount of the municipal elections. 
 
¶8. (SBU) Other opposition leaders place the blame for 
cancellation more squarely on President Ortega.  Mario Arana, 
a former Trade Minister under President Bolanos who now heads 
the economic think tank FUNIDES, told econoff that with 
President Ortega back in office, MCC's decision to freeze 
disbursements was inevitable, as Ortega does not believe in 
democracy.  Former candidate for mayor of Managua Eduardo 
Montealegre publicly blamed Ortega for the decision to freeze 
disbursements.  He added, "Our message is one of unity, only 
if we are united will we defeat this dictatorship." 
 
¶9. (SBU) Business leaders have lamented the economic 
consequences of the decision to freeze disbursements.  Jose 
Adan Aguirri, President of a federation of business 
associations known as COSEP, said the impact would be felt 
directly by those employed in road building, but he also 
noted the impact on the rural economy and regional economic 
development.  Nicaragua would "lose the MCC program for 
political reasons," he lamented.  President of the American 
Chamber of Commerce of Nicaragua (AmCham) Cesar Zamora 
seconded this view, adding that while the poor would bear the 
consequences of cuts in assistance, "Politicians will not be 
affected at all."  AmCham Vice President Margarita Sevilla 
voiced the same sentiment in a meeting with the Charge on 
December 1, as part of an effort to enlist Embassy support 
for opposition efforts to mount a legislative challenge to 
the municipal elections results. 
 
¶10. (SBU) Extensive press coverage has highlighted the 
concerns MCC beneficiaries in Leon and Chinandega have for 
how the decision will affect them directly.  In an interview 
with local media, a representative of an agricultural 
cooperative in Chinandega that has received fruit trees and 
other assistance from MCC called on the United States to 
reverse its decision, saying "It isn't the government that is 
being hurt."  A plantain farmer from Chinandega who hopes to 
receive an irrigation system from MCC called for the United 
States to negotiate with President Ortega to resolve the 
situation.  Agrecio Osejo, who is Mayor of Somotillo, 
Chinandega and also a member of the MCA-Nicaragua Board, 
characterized the decision as a foreign policy issue and 
called on President Ortega to help reinstate the program. 
Summing up the views of those who stand to benefit from the 
MCC program, one farmer said, "We are farmers . . . not 
politicians, and it is sad that this program has been 
suspended.  We hope that the decision will be reversed." 

Comment 
------- 

¶11. (SBU) With MCC assistance at stake, and other donors 
heading for the door (septel), Ortega instinctively looks to 
Hugo Chavez to fill the gap.  Given falling oil prices, 
however, there is much skepticism here as to what Chavez will 
do (septel).  Nonetheless, from a domestic perspective, 
Ortega's grandstanding on December 1 makes political sense. 
His pledge to keep assistance flowing to Leon and Chinandega 
placates important FSLN constituencies there.  He also seeks 
to demonstrate to the opposition -- who seem unsure whether 
to blame Ortega or us -- that he does not need U.S. or 
European donors.  By blaming donors for not caring about the 
damage they do to Nicaragua when they withdraw assistance, 
Ortega has managed to temporarily shift the focus away from 
massive, systematic elections fraud to the supposed evils of 
capitalism, imperialism, and interventionism. 
SANDERS