VZCZCXYZ0000
RR RUEHWEB

DE RUEHMU #1546/01 3661744
ZNR UUUUU ZZH
R 311744Z DEC 08
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 3572
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE

UNCLAS MANAGUA 001546 
 
STATE FOR WHA/CEN, EEB/IFD/OIA, AND L/CID 
STATE ALSO FOR WHA/EPSC 
STATE PASS TO USTR 
TREASURY FOR INL AND OWH 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: EINV ECON USTR KIDE NU
SUBJECT: NICARAGUA: GON PROMISES BETTER COOPERATION ON ADVANCING 
CASE RESOLUTION DURING BILATERAL PROPERTY CLAIMS REVIEW 
 
REFS: A) SECSTATE 104850, B) MANAGUA 883, C) MANAGUA 1186, D) 02 
MANAGUA 877, E) MANAGUA 830 
 
SUMMARY 
------- 
¶1. (SBU) During the December 11-12 bilateral review of 
the Government of Nicaragua's (GON) property claims resolution 
process, Attorney General Hernan Estrada acknowledged that while the 
U.S. Government (USG) would not accept dismissals of U.S. citizen 
claims without a fair and transparent appeals process, it was 
unfortunate that the USG and GON did not agree on the status of 
these cases, asserting that it was "his responsibility to protect 
the national interests, social stability, and sovereignty of the 
country."  On U.S. claims under GON control, the Attorney General 
said the National Police and the National Corporations of the Public 
Sector (CORNAP), a state holding company, will join a commission 
already formed to deal with cases under the control of the 
Nicaraguan Army to advance the resolution of all property claims 
under possession of the government.  With regard to the lack of 
transparency in the GON's compensation offers, Estrada agreed to put 
more information on the Attorney General Office's website about the 
claims appraisal process, but remained non-committal regarding 
providing detailed explanations on GON settlement proposals to 
claimants.  Estrada also announced the formation of a liaison office 
to handle U.S. inquiries and a Nicaraguan Supreme Court commission 
to review U.S. cases that languish in the courts. 
 
¶2. (SBU) Although the bilateral review allowed the U.S. delegation 
to express our concerns about the GON's claims resolutions process, 
the GON did not make significant concessions on some important 
issues, such as reversing Decree 3 (1979) and 38 (1979) dismissals 
or providing detailed explanations of settlement offers.  From the 
GON's perspective, the bilateral review was an opportunity to stress 
to Washington the importance it gives to the overall U.S.-Nicaragua 
bilateral relationship.  We believe that Estrada's full 
participation in the bilateral review was a signal that the GON 
wants to work with the USG on several important issues as much as 
possible.  We are cautiously optimistic that the GON will work with 
us during the waiver year to resolve claims on all three Section 527 
benchmarks (Ref A), and reduce the number of dismissed claims, if 
only for the purpose of avoiding further tension in the overall 
bilateral relationship.  End Summary. 
 
BILATERAL REVIEW PARTICIPANTS 
----------------------------- 
¶3. (U) Christopher Webster, Director of the Office of Central 
American Affairs (WHA/CEN), led the U.S. delegation, which 
included: 
 
--Jeffrey D. Kovar, Assistant Legal Advisor for 
  International Claims and Investment Disputes (L/CID) 
--Heather Goethert, Office of Investment Affairs 
 (EEB/IFD/OIA) 
--Albert Kraaimoore, Nicaragua Desk Officer (WHA/CEN) 
--Joe Ripley, Economic Counselor, U.S. Embassy 
--Shante Moore, Property Officer, U.S. Embassy 
--Leonidas Henriquez, Senior Property Officer Assistant, 
  U.S. Embassy 
 
Note: U.S. Ambassador Robert Callahan opened the talks and Deputy 
Chief of Mission Richard Sanders closed them. 
 
¶4. (U) Attorney General Hernan Estrada led the Nicaraguan 
delegation, which included: 
 
--Yara Perez, Property Superintendent 
--Ruth Zapata, Head, Office of Assessment and 
  Indemnification (OCI) 
--Jeanette Garcia, President, National Confiscations Review 
  Commission (CNRC) 
--Magally Bravo, Administrative Director for Property 
  Issues, Office of the Attorney General 
--Bruno Gallardo, Senior Legal Advisor to the Minister of 
  Finance 
--Dinorah Peugnet, Head of the Fiscal Cadastral Office, 
  National Institute for Territorial Surveying (INETER) 
--Jose Zapata, Head, Office of Government Accounting 
 
POLITICAL TENSION SURROUNDS BILATERAL REVIEW 
-------------------------------------------- 
¶5. (U) The bilateral review was held amid tensions in the GON's 
relations with the United States and the international community, as 
well as local discontent with the government as a result of the 
fraud that occurred during the municipal elections on November 9. 
On November 24, Ambassador John Danilovich, CEO of the Millennium 
 
Challenge Corporation (MCC), sent a letter to Alberto Guevara 
Obregon, Nicaraguan Minister of Finance and Chairman of the Board of 
Nicaragua's Millennium Challenge Account (MCA-Nicaragua), to 
announce the suspension of disbursements for projects totaling $64 
million.  On December 8, four members of the U.S. House of 
Representatives sent a bipartisan letter to the Secretary urging the 
exclusion of Nicaragua from the Central America/Dominican 
Republic/United States Free Trade Agreement (CAFTA-DR).  On December 
11, the MCC's Board of Directors decided to maintain the suspension 
of its disbursements for an additional 90 days. 
 
¶6. (U) European donors had announced the suspension of aid for the 
remainder of 2008 and into 2009.  In 2008, the Budget Support Group 
disbursed only $15 million of $115 million in assistance to 
Nicaragua because of concerns about the lack of budget transparency, 
governance issues, and widespread fraud during the November 9 
municipal elections.  Opposition members would not allow legislation 
to be considered until a recount had been conducted of the municipal 
elections.  The opposition sought a vote to annul the elections in 
lieu of a recount.  Nicaraguan citizens and civil society continued 
to protest the elections.  A paralyzed National Assembly could not 
take action on a revised budget for 2008, or the government's budget 
for 2009, causing the International Monetary Fund to hold off on the 
third disbursal of its Poverty Reduction and Growth Facility to the 
Nicaraguan Central Bank. 
 
DAY I: U.S. DELEGATION SETS TONE 
 
U.S. CLAIMS TO REMAIN A PRIORITY 
-------------------------------- 
¶7. (SBU) On December 11, the Ambassador and Estrada opened the 
talks.  Ambassador Callahan acknowledged that the bilateral review 
was taking place during a difficult period in the relationship and 
there is increasing attention from the U.S. Congress vis-`-vis 
Nicaragua.  The Ambassador emphasized that U.S. citizen property 
claims carry a high profile in the U.S. Congress and remain a 
priority for the USG.  Webster and Kovar pointed out Nicaragua's 
Section 527 obligations [of the Foreign Relations Authorization Act 
Fiscal Years 1994 and 1995] to show progress on the Secretary's 
benchmarks to seek another annual waiver of Section 527. 
 
¶8. (SBU) Webster and Kovar outlined the following USG concerns about 
the GON's property resolution process: 1) U.S. claims dismissed for 
administrative reasons (lack of paperwork and/or proof of 
confiscation of the property in question) and under Decrees 3 (1979) 
and 38 (1979) that mandated the confiscation of property of 
individuals deemed Somoza family members or "allies" of the former 
regime; 2) U.S. claims under control of the GON, including the 
Nicaraguan Army; 3) the lack of transparency in appraising 
settlement offers to claimants; 4) U.S. property cases that languish 
in courts; and 5) cooperation between the Embassy Property Office 
and the GON (Ref B).  In fact, these topics constituted the agenda 
for the bilateral review. 
 
TOPIC I: DISMISSED CLAIMS: PROTECTING NAT'L INTERESTS 
--------------------------------------------- -------- 
 
¶9. (SBU) Office Director Webster informed the GON delegation that 
the USG does not recognize 146 claims administratively dismissed and 
for reasons contained in Decrees 3 and 38, as resolved claims. 
Webster reiterated that all U.S. claims should be subject to a fair 
and transparent process.  Kovar asserted that the Attorney General's 
Office sudden dismissal of these claims that had been previously 
accepted by the CNRC without prior notice, a hearing, or an adequate 
explanation for the basis of the dismissal violated fundamental 
notions of due process.  Estrada acknowledged that the USG would not 
recognize dismissals as "resolved."  He argued, however, that the 
Decrees 3 and 38 have the "force of law," and that "it was his 
responsibility to protect the national interest, assure social 
stability, and defend the sovereignty of the country."  OCI Head 
Zapata added that Law 411 (2001), which established the Office of 
the Attorney General, provided the authority to review past actions 
taken by previous governments, to protect the national interest and 
conserve the national budget. 
 
¶10. (SBU) Senior Legal Advisor to the Minister of Finance Gallardo 
argued that the USG should respect Nicaraguan law.  Without an 
example, he claimed that there were several U.S. claimants who 
worked for Somoza or former members of the National Guard.  He added 
that claimants subject to Decree 3 and 38 could go to court to 
overturn these decisions.  Assistant Legal Advisor Kovar pointed out 
that the Nicaraguan Constitution forbids confiscation of property. 
Even if Decrees 3 and 38 seizures were considered authorized under 
Nicaraguan law, he added, compensation was required under 
international law. 
 
 
¶11. (SBU) Estrada asserted that the GON has demonstrated flexibility 
on Decree 3 and 38 dismissals, and had compensated such claimants, 
such as Leonidas Guadamuz, a U.S. claimant.  Goethert asked whether 
the process for reviewing and/or appealing these dismissals would 
apply to other Decree 3 and 38 dismissals.  Estrada and his 
colleagues did not answer the question, but CNRC President Garcia 
explained that all administrative dismissals could be overturned if 
claimants provided necessary documentation.  She added that 
dismissals were not final until served on the claimants, and in most 
cases the government had not been able to serve them.  Once 
notified, however, claimants had just 10 days to appeal.  Kovar 
welcomed the news that the dismissals were not final, but requested 
that the GON show flexibility on the time allotted to file an 
appeal.  Ten days to appeal the sudden dismissal of a claim after 
waiting years without a response does not seem fair.  Garcia asked 
whether the Embassy could act as the addressee to notify claimants. 
Kovar replied that the Embassy could not accept official 
notification on behalf of the claimants. 
 
TOPIC II: CLAIMS UNDER GOVERNMENT CONTROL 
----------------------------------------- 
¶12. (SBU) Webster pressed Estrada to make significant progress on 
U.S. claims for property under government control, noting that the 
GON resolved only one claim under this Section 527 benchmark during 
the 2007-08 waiver year, and the Nicaraguan Army had not resolved 
any claims since the 2005-06 waiver period.  OCI Head Zapata said 
the GON is working diligently to resolve such claims.  She 
highlighted that the ad hoc committee established to deal with 
claims for properties held by the Nicaraguan Army in August (Ref C) 
is working with U.S. claimant Juan Barreto to resolve his 29 claims 
(Refs D,E).  Zapata said the Attorney General's Office is working 
with government ministries and the Nicaraguan National Police to 
compensate claimants or return their property, as in the case of 
U.S. citizen Elmer Hidalgo, whose property is controlled by the 
Jalapa Police (northern Nicaragua).  Zapata asked the U.S. 
delegation to urge claimants to accept indemnification bonds (BPIs) 
for properties controlled by CORNAP, the government's property 
management company, because several of the properties have multiple 
claims against them. 
 
TOPIC III: COMPENSATION 
----------------------- 
¶13. (SBU) Office Director Webster urged Estrada to develop a 
transparent process to explain to U.S. claimants how the government 
determines compensation and include improvements made to their 
properties to increase the final settlements.  Webster asked whether 
the GON had a policy to use two cadastral tables, one to determine 
compensation offers and the other to assess property taxes [Note: 
The Property Office received a copy of a letter from Estrada dated 
November 6, 2007, instructing the head of INETER to use one 
cadastral table to determine compensation offers and another to 
assess property taxes.  Estrada justified using two cadastral tables 
as a money saving measure for the government.  End Note.]  Peugnet 
responded that the GON was not implementing this policy and used 
only a single cadastral table.  She provided a detailed PowerPoint 
explanation of the method used to calculate the value of a property. 
 
 
¶14. (SBU) OCI Head Zapata stated that Nicaraguan law does not 
require the GON to negotiate with claimants.  She explained that 
claimants have two chances to appeal compensation offers, once with 
OCI and once with the Office of the Property Superintendent.  She 
explained that the GON could not provide detailed explanations on 
compensation offers until the software was upgraded to allow the 
compilation of data in a comprehensible manner.  Webster asked 
Estrada to publish the information on the property claims 
compensation process, including INETER's regulations for conducting 
appraisals, on the Attorney General's website.  Estrada agreed and 
the information was placed on the website the following day, 
December 12. 
 
TOPIC IV: CASES IN COURT 
------------------------ 
¶15. (SBU) Assistant Legal Advisor Kovar asked Estrada to do what he 
could to help move forward U.S. citizens' cases languishing in the 
courts.  He noted that some claimants have waited 15 years for a 
court decision.  Estrada agreed that the judicial system was 
inefficient, but noted that it functioned as an independent branch 
of the government.  Kovar also raised concerns about Estrada's 
August 22 letter to the Embassy outlining the GON's policy of no 
longer pursuing cases in court to recover property on behalf of 
claimants, and protecting individuals who illegally controlled these 
properties.  Estrada responded that his policy of completing the 
property transfers under Laws 85 (1990), 86 (1990), and 88 (1990), 
 
also known as the "Pinata Laws," was developed to maintain social 
peace and stability, and promote national security [Note: These laws 
were passed on the eve of the first Sandinista government to legally 
transfer property to supporters of the National Sandinista 
Liberation Front.  End Note.]  He told us that this policy affected 
six U.S. cases in the courts and he planned to petition the courts 
to rule in favor of the occupants.  He added that U.S. claimants 
should either accept BPIs or file their own lawsuit to recover the 
property. 
 
¶16. (SBU) Webster challenged the policy, arguing that the 
unwillingness to pursue court cases filed on behalf of claimants 
created economic and social insecurity and instability, and 
undermined the rule of law.  Foreign and local entrepreneurs would 
be reluctant to invest in Nicaragua if the government did not 
fulfill its legal obligations and defend the rule of law.  Director 
for Property Issues Bravo proceeded to defend the GON's policy under 
the precept that Nicaraguans had a right to a decent life.  In her 
presentation, she omitted a discussion of Articles 27 and 44 of the 
Nicaraguan Constitution.  Article 27 grants equal protection under 
the law and the right to due process to foreigners in Nicaragua. 
Article 44 states that the confiscation of property is forbidden; 
any expropriation of property requires cash compensation in advance. 
 
 
TOPIC V: COOPERATION 
-------------------- 
¶17. (SBU) Webster pressed Estrada to improve cooperation at the 
working level to advance the resolution of claims.  He argued that 
the Property Office should be able to call or e-mail its GON 
counterparts to follow up on claims.  Webster underscored that 
formal communication between only the Ambassador and Attorney 
General on property claims limits case resolution.  Estrada was 
non-committal, but announced that he was considering appointing a 
liaison within the Office of the Attorney General to answer 
inquiries from U.S. claimants and the U.S. Embassy, pending 
budgetary approval by the National Assembly.  Estrada asserted that 
it was important to maintain a buffer to allow his limited staff 
time to focus on the work of the Office and remove the temptation of 
corruption.  He presented six U.S. claims in which he alleged past 
irregularities in their resolutions.  Webster commented that more 
communication between the Property Office and GON is needed not only 
to resolve claims, but also to address these concerns.  Webster 
emphasized that the USG does not condone corruption, noting that if 
the GON has credible evidence of illicit activity by U.S. claimants, 
the Attorney General's Office should pass the information to the 
Embassy to take appropriate action. 
 
DAY II CLOSING SESSION: SOME CONCESSIONS 
 
GON SEEKS UNDERSTANDING ON DISMISSALS 
-------------------------------------- 
¶18. (SBU) The second day of the bilateral review focused on a way 
forward to resolve claims.  Before Estrada spoke, Gallardo gave an 
incoherent explanation as to why the USG should not have a "black 
and white vision of the property situation."  He asked the U.S. 
delegation to consider Nicaragua's growing public debt as a result 
of property compensations, and alleged that some U.S. citizens were 
either involved in bribing GON officials in previous governments to 
receive disproportionate compensations, or they did not pay taxes or 
service their debt obligations to banks and other financial 
institutions.  Gallardo stated that the GON should review all claims 
that have been previously settled to ensure that the government's 
national and budgetary interests are protected. 
 
¶19. (SBU) Estrada aggressively defended his Decree 3 and 38 
dismissals.  It appeared he received instructions from President 
Daniel Ortega on the GON's response to USG concerns.  Estrada argued 
that Decree 3 and 38 dismissals are sensitive issues for the 
government.  He asserted that President Ortega wanted to resolve 
U.S. claims but the GON must also protect Nicaraguan national 
interests and enforce the law.  He acknowledged, however, that the 
USG had clearly conveyed that it would not accept dismissals and 
that, for reasons of workload, he did not plan to review previously 
settled cases. 
 
NICARAGUAN PROPOSALS 
-------------------- 
 
¶20. (SBU) Estrada proposed the following measures to advance the 
resolution of U.S. claims: 
 
--Establishment of a liaison to handle U.S. Claims Inquiries 
[provided that the National Assembly approves funding]: the liaison 
will handle inquiries on U.S. citizen claims.  U.S. citizen 
 
claimants and the Property Office could routinely contact the 
liaison to inquire about the status of pending claims, and report 
directly to Estrada on a daily basis. 
 
--Establishment of a Commission to Review U.S. Claims Languishing in 
the Courts: the Nicaraguan Supreme Court and the Attorney General's 
Office will form a commission to address U.S. citizen property cases 
that languish in the courts, particularly the National Property 
Appeals Court.  The Property Office and the Attorney General's 
Office will identify U.S. citizen court cases to determine if the 
Supreme Court could advance their adjudication. 
 
--Updating Attorney General's Webpage with Information about the 
Claims Resolutions Process: Estrada agreed to add information 
regarding Government of Nicaragua's claims resolution process, 
including a flow chart of the offices involved in determining 
compensation offers.  This information was uploaded to the website 
on December 12. 
 
--National Police and CORNAP to Join "Ad Hoc" Commission to Resolve 
Claims under Government Control: the National Police and CORNAP will 
be invited to join the existing "ad hoc" commission that deals with 
claims under control of the Nicaraguan Army to advance the 
resolution of all private properties taken by the GON without 
payment of compensation to claimants. 
 
¶21. (SBU) Office Director Webster welcomed these initiatives as 
positive steps to advance the resolution of claims, but reiterated 
that the GON must show progress on the three benchmarks outlined by 
the Secretary in her letter dated July 29, 2008 (Ref A).  He 
announced that the Embassy would share its list of pending claims 
with the GON to identify discrepancies.  The Property Office and the 
GON will review their perspective lists during the next Working 
Group meeting on December 18 (septel). 
 
FOREIGN MINISTER SANTOS: SOME DISMISSALS JUSTIFIABLE 
--------------------------------------------- ------- 
¶22. (SBU) The U.S. delegation accompanied by Ambassador Callahan met 
with Foreign Minister Samuel Santos on December 12 after the 
conclusion of the bilateral review to reiterate USG concerns about 
the GON claims resolution process and to provide an assessment of 
the bilateral review.  Estrada attended.  Office Director Webster 
said the bilateral review was productive in that there were frank 
discussions concerning the GON's property claims resolution process. 
 He added that he hoped that the new proposals suggested by Estrada 
would accelerate the resolution of claims.  Santos expressed his 
satisfaction with the results of the bilateral review and reassured 
the U.S. delegation that the GON is committed to resolving U.S. 
citizen claims.  He explained that Decree 3 and 38 dismissals are 
sensitive issues for the GON, alleging that one of our claimants who 
was a member of the National Guard during the Somoza dictatorship 
had physically tortured him [Note: Post is investigating Santos' 
allegation.  End Note.] Santos said there are two or three U.S. 
citizen claims that the USG should investigate to fully understand 
the background of their cases. 
 
¶23. (SBU) At the conclusion of the meeting, Estrada pulled Webster 
aside to say that he occupied an influential position in the State 
Department vis-`-vis the U.S.-Nicaraguan bilateral relationship. 
Estrada told Webster that President Ortega had instructed him to 
underscore the importance of the bilateral relationship and that the 
GON wanted to continue working together in areas of mutual interest. 
 
 
COMMENT 
------- 
¶24. (SBU) Although the bilateral review allowed the USG to express 
concern about the GON's claims process, the GON did not make 
significant concessions on important issues, such as reversing 
Decrees 3 and 38 dismissals or providing detailed explanations of 
settlement offers.  From the GON's perspective, the bilateral review 
was an opportunity to stress the importance it places on the overall 
U.S.-Nicaragua bilateral relationship.  We believe that President 
Ortega ordered Estrada's full participation in the bilateral review 
to signal that the GON wants to work with the USG as much as 
possible. 
 
¶25. (SBU) We are cautiously optimistic that the GON will meet all 
three Section 527 benchmarks this waiver year, and reduce the number 
of dismissed claims, if only to avoid increasing bilateral tension. 
The Ambassador plans to conduct a mid-year review of the Section 527 
process with Attorney General Estrada in March.  By then, we should 
be able to judge whether the GON's newfound spirit of cooperation is 
legitimate. 
 
¶26. (U) This cable has been cleared by WHA/CEN Director Christopher 
Webster. 
 
SANDERS