VZCZCXRO6112
RR RUEHLMC
DE RUEHMU #0116/01 0271502
ZNR UUUUU ZZH
R 271502Z JAN 09
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 3694
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 02 MANAGUA 000116 
 
SIPDIS 
 
STATE PASS OPIC AND IAF 
 
E.O. 12958: N/A 
TAGS: EFIN ECON EAID PGOV PREL NU
SUBJECT: NICARAGUA: ORTEGA TELLS MICROFINANCE PROTESTORS TO PAY UP
 
REF: 08 Managua 932 
 
¶1.  (U) Summary. During the overnight hours of January 13 and 14, 
protestors in the northern Department of Nueva Segovia blocked the 
Pan-American Highway for more than eight hours, demanding that the 
Nicaraguan National Assembly pass legislation (the Ley Moratoria) to 
"protect" borrowers from high interest rates charged by local 
microfinance institutions.  Special Forces from the Nicaraguan 
National Police forcibly removed the protestors using tear gas.  The 
demonstrators, known collectively as the "No Pago" (No Payment) 
movement, vowed to continue their protests nationwide, though 
President Ortega publicly voiced his opposition during a recent 
speech.  GON officials and representatives from microfinance 
institutions are concerned that if enough people believe that they 
do not have to pay their debts, the result will be decreased credit 
availability for the agricultural sector during planting season. 
End Summary. 
 
¶2. (U) The Nicaraguan "No Pago" movement claims approximately 1,500 members, most of whom are small agricultural producers in northern Nicaragua. Headed by the former Sandinista mayor of Jalapa, Omar Gonzalez, the "No Pago" movement continues to conduct violent protests against microfinance lenders, whom they accuse of exploiting the poor through "usurious" interest rates. According to local media, on the eve of the most recent protests on January 13 and 14, Gonzalez dispatched a letter to the Nueva Segovia Citizen Power Council (CPCs--the FSLN's municipal party organ) in which he argued that the protests were to combat the current financial system, and encouraged borrowers to instead obtain loans from ALBA-CARUNA, the official Sandinista rural development bank financed by Venezuelan President Hugo Chavez (presumably, CPC leaders would decide who receives loans and who does not). Gonzalez denied that such a letter exists, and has stated that the "No Pago" movement is autonomous. We note that Gonzalez is also under investigation for embezzling funds during his mayoral term, and reportedly owes several microfinance institutions approximately $500,000.
 
¶3. (U) In July 2008, Gonzalez led similar protests against 
microfinance lenders in Ocotal, which culminated in the kidnapping 
of a local microfinance branch manager and the setting of numerous 
fires (ref).  These actions had at least partially been sparked by 
President Ortega, who had earlier called on borrowers to demand the 
renegotiation of usurious lending rates. 
 
¶4. (U) In a sharp about-face from his supportive rhetoric last July, President Ortega, during his January 15 "inaugural" speech for newly-elected mayors, strongly denied he was promoting the "No Pago" culture, calling on debtors to negotiate responsible agreements with their respective lenders. Saying that the "No Pago culture has disappeared from this country, we all have to pay," Ortega stressed that Nicaragua needs credit to finance the agriculture sector to offset the global economic crisis. Central Bank President Antenor Rosales condemned the "No Pago" movement, adding that it was imperative to keep financial resources flowing. Rosales further voiced doubts that the National Assembly would approve the proposed "Ley de Moratoria." On January 24 Finance Minister Alberto Guevara echoed this sentiment saying a GON priority will be to promote a culture of paying one's debts "at all levels." Vice President Jaime Morales added that if the "No Pago" culture continues, it would result in a major movement backwards for Nicaraguan development.
 
¶5.  (U) Alfredo Alaniz, President of the Association of Microfinance 
Institutions warned that if recent protests continue, microfinance 
institutions will decrease lending availability, negatively 
affecting a key part of the Nicaraguan economy during planting 
season.  Enrique Zamora, President of the Association of Producers 
and Exporters (APEN), seconded this concern.  Zamora told 
center-right daily La Prensa on January 21 that that it "would be 
very irresponsible if we put at risk the country's production 
because of a small number of people that don't want to pay their 
debts." A prominent banker in Managua observed that the "No Pago" 
culture is contagious; while it started with the microfinance 
institutions, it could move to credit cards and regular loans. 
 
¶6.  (U) Rodolfo Delgado, head of the Coporacion Financiera de 
Credito, a typical microfinance institution with 3,500 clients in 
Managua and in northern Nicaragua, told us he has changed 
strategies, providing credit only to current customers and not 
opening new credit lines.  Delgado said he will try to move his 
client base to the west and south of Nicaragua, where people are 
"less contaminated" by the concept of the "No Pago" culture. 
 
COMMENT 
------- 
 
¶7. (U) Ortega's sharp rhetorical departure from advocating on behalf of the "No Pago" movement to warning against it probably reflects his realization that microfinance lending in Nicaragua is both popular and essential to a vital segment of the economy that otherwise cannot access capital. Many microfinance loans are as low as $250. While interest rates are higher than conventional loans, Nicaraguan microfinance institutions provide valuable services such as helping clients develop business plans, providing marketing advice, and offering industry experience. We note that microfinance interest rates in Nicaragua are among the lowest in Latin America.
 
CALLAHAN