VZCZCXRO1849
PP RUEHLMC
DE RUEHMU #0560/01 1561512
ZNR UUUUU ZZH
P 051512Z JUN 09
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC PRIORITY 4209
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHBS/USEU BRUSSELS
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEAUSA/DEPT OF HHS WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 02 MANAGUA 000560 
 
SIPDIS 
SENSITIVE 
 
STATE PASS USTR 
USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN 
 
E.O.  12958: N/A 
TAGS: ETRD EAID ECON NU
SUBJECT: AMBASSADOR WARNS NICARAGUAN OFFICIALS AGAIN, RHETORIC HURTS 
INVESTMENT 
 
REF: A) MANAGUA 324; B) 08 MANAGUA 1374 
 
Summary 
------- 

¶1. (SBU) On June 3, 2008, the Ambassador hosted lunch for Alvaro 
Baltodano, Presidential Delegate for Investment Promotion, and other 
members of his investment team.  Baltodano recognized the important 
role the Pathways to Prosperity initiative plays in providing a 
framework for regional cooperation, but voiced his concern that it 
lacks substance on trade and investment issues.  The Ambassador 
warned Baltodano that President Ortega's harsh criticism of the 
United States and free markets would continue to make it difficult 
to attract U.S. investment.  Baltodano, while cognizant of the 
difficulties Ortega's rhetoric creates, said his task is now to work 
within political constraints to do what is best for Nicaragua.  End 
summary. 
 
Ambassador Hosts Nicaragua's Investment Team 
-------------------------------------------- 

¶2. (SBU) On June 3, 2008, the Ambassador hosted lunch for retired 
General Alvaro Baltodano, Presidential Delegate for Investment 
Promotion; Javier Chamorro, Executive Director of investment 
promotion agency ProNicaragua; and Alfredo Coronel, Executive 
Director of National Free Trade Zone Commission (CNZF).  [Note: 
Javier Chamorro is the son of Maria Rubiales de Chamorro, 
Nicaragua's Permanent Representative to the United Nations since 
2007 and during the 1980s.  Alfredo Coronel is the nephew of Manuel 
Coronel Kautz, Vice Minister of Foreign Relations and outspoken 
critic of "U.S. imperialism." End note.] 
 
Pathways to Prosperity 
---------------------- 

¶3. (SBU) Baltodano -- who represented Nicaragua at the Pathways to 
Prosperity Ministerial Meeting held in San Salvador on May 31, 2008 
-- praised Secretary Clinton's remarks delivered there.  Referring 
to them, he suggested that the United States has an opportunity to 
bring about profound changes in the way it relates to other 
countries in the region.  At the same time, he expressed frustration 
that the meeting and resulting declaration failed to address the 
importance of infrastructure financing for developing countries. 
 
¶4. (SBU) While recognizing the important role Pathways plays in 
providing a framework for regional cooperation, Baltodano said he is 
concerned that unless the initiative incorporates substantive 
commitments on issues such as trade and investment -- beyond simply 
committing to avoid protectionist measures -- it is doomed to 
failure.  In particular, he said it could be a useful mechanism to 
deal with rules of origin, including Nicaragua's efforts to take 
advantage of third-country fabric provisions included in CAFTA-DR 
(Ref B). 
 
Investment Climate 
------------------ 

¶5. (SBU) The Ambassador congratulated Baltodano on the World Bank 
naming ProNicaragua as one of the top investment promotion agencies 
in the region.  Nonetheless, he warned Baltodano that President 
Ortega's harsh criticism of the United States and free markets 
continue to have a negative impact on Nicaragua's ability to attract 
new investment.   Attracting new investment would remain a challenge 
as long as Ortega continued to decry capitalism and call for a new, 
socialist economic system. 
 
¶6. (SBU) Baltodano acknowledged that President Ortega's rhetoric is 
having an impact, but he countered that U.S. investors with ongoing 
operations are generally pleased with the treatment afforded to them 
by Nicaraguan officials.  Baltodano said his focus is on practical 
issues such as labor relations and customs administration for 
businesses located in free trade zones.  [Note: Sources suggest that 
Baltodano has been constructive on these issues, see Ref A.  End 
note.] 
 
¶7. (SBU) The Ambassador referred to U.S. investors' concerns with 
the recently passed Low Income Housing Law and pending Coastal Law 
legislation, both of which include provisions that weaken property 
rights.  ProNicaragua's Javier Chamorro responded that opposition 
politicians have spread misinformation about these legislative 
initiatives.  He defended the Coastal Law in particular, saying that 
it includes zoning restrictions but is in no way confiscatory. 
 
¶8. (SBU) The Ambassador noted that the political situation also 
hindered investment.  In particular, the government's efforts to 
restrict the activities of nongovernment organizations sent the 
wrong signal on Nicaragua's receptiveness to international 
engagement.  The stalemate in the National Assembly, he added, meant 
that legislative initiatives to improve competitiveness have 
languished.  Baltodano agreed that these political issues have a 
negative impact on the investment climate.  However, he claimed to 
no longer have any interest in politics.  He concluded that his task 
is now to work within political constraints to do what is best for 
Nicaragua. 
 
Comment 
------- 

¶9. (SBU) Baltodano's indifference to the political issues 
undermining his efforts to attract investment appears disingenuous 
to us.  We believe Baltodano is genuinely concerned, but he no 
longer has the influence he once had with President Ortega -- as he 
did, for example, when he ran his 2001 presidential campaign.  With 
Ortega and First Lady Murillo constantly undermining efforts to 
attract investment, Baltodano and his team have an uphill battle, 
particularly in attracting U.S. investors.  We are not aware of any 
significant new U.S. investment since 2007 when Cone Denim built a 
now-shuttered textile plant. 
 
CALLAHAN