Keep Us Strong WikiLeaks logo

Currently released so far... 64621 / 251,287

Articles

Browse latest releases

Browse by creation date

Browse by origin

A B C D F G H I J K L M N O P Q R S T U V W Y Z

Browse by tag

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Browse by classification

Community resources

courage is contagious

Viewing cable 09MANAGUA571, NICARAGUA: IMF REPRESENTATIVE ON BUDGET SUPPORT,

If you are new to these pages, please read an introduction on the structure of a cable as well as how to discuss them with others. See also the FAQs

Understanding cables
Every cable message consists of three parts:
  • The top box shows each cables unique reference number, when and by whom it originally was sent, and what its initial classification was.
  • The middle box contains the header information that is associated with the cable. It includes information about the receiver(s) as well as a general subject.
  • The bottom box presents the body of the cable. The opening can contain a more specific subject, references to other cables (browse by origin to find them) or additional comment. This is followed by the main contents of the cable: a summary, a collection of specific topics and a comment section.
To understand the justification used for the classification of each cable, please use this WikiSource article as reference.

Discussing cables
If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol). Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #09MANAGUA571.
Reference ID Created Released Classification Origin
09MANAGUA571 2009-06-09 22:14 2011-06-01 08:00 CONFIDENTIAL Embassy Managua
Appears in these articles:
http://www.nacion.com/2011-05-30/Mundo/NotasSecundarias/Mundo2758456.aspx
http://www.nacion.com/2011-05-30/Mundo/NotasSecundarias/Mundo2758467.aspx
http://www.nacion.com/2011-05-30/Mundo/NotasSecundarias/Mundo2758468.aspx
http://www.nacion.com/2011-05-30/Mundo/NotasSecundarias/Mundo2758464.aspx
http://www.confidencial.com.ni/articulo/4103/la-embusa-y-el-gabinete-de-ortega
http://www.confidencial.com.ni/articulo/4104/d-rsquo-escoto-en-onu-ldquo-un-desafio-de-ortega-a-ee-uu-rdquo
http://www.confidencial.com.ni/articulo/4102/estrada-y-la-ldquo-doble-cara-rdquo-ante-ee-uu
http://www.confidencial.com.ni/articulo/3966/la-ldquo-injerencia-rdquo-de-ee-uu-en-el-2006
http://www.nacion.com/2011-05-23/Mundo/Relacionados/Mundo2758764.aspx
http://www.nacion.com/2011-05-23/Mundo/NotaPrincipal/Mundo2758753.aspx
http://www.confidencial.com.ni/articulo/4041/millones-de-dolares-sin-control-y-a-discrecion
http://www.confidencial.com.ni/articulo/4040/la-ldquo-injerencia-rdquo-de-venezuela-en-2006
http://www.confidencial.com.ni/articulo/4047/rodrigo-barreto-enviado-de-ldquo-vacaciones-rdquo
http://www.nacion.com/2011-05-16/Mundo/NotasSecundarias/Mundo2757239.aspx
http://www.nacion.com/2011-05-16/Mundo/NotaPrincipal/Mundo2746658.aspx
http://www.nacion.com/2011-05-16/Mundo/Relacionados/Mundo2757244.aspx
http://www.nacion.com/2011-05-16/Mundo/Relacionados/Mundo2746673.aspx
http://www.confidencial.com.ni/articulo/3991/dra-yadira-centeno-desmiente-cable-diplomatico-eeuu
http://www.confidencial.com.ni/articulo/3968/pellas-pronostico-a-eeuu-victoria-de-ortega-en-2006
http://www.confidencial.com.ni/articulo/3967/barreto-era-ldquo-fuente-confiable-rdquo-para-eeuu
VZCZCXRO4683
RR RUEHLMC
DE RUEHMU #0571/01 1602214
ZNY CCCCC ZZH
R 092214Z JUN 09
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 4222
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUMIAAA/CDR USSOUTHCOM MIAMI FL
RHEHNSC/NSC WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHDC
RHEFDIA/DIA WASHINGTON DC
RUEAIIA/CIA WASHDC
C O N F I D E N T I A L SECTION 01 OF 02 MANAGUA 000571 
 
SIPDIS 
 
STATE FOR WHA/CEN, WHA/EPSC AND EEB 
TREASURY FOR SARA SENICH 
USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN 
 
E.O. 12958: DECL: 06/08/2019 
TAGS: EAID ECON EFIN PGOV NU
SUBJECT: NICARAGUA: IMF REPRESENTATIVE ON BUDGET SUPPORT, 
VENEZUELAN ASSISTANCE 
 
Classified By: Classified by Ambassador Robert J. Callahan for reasons 
1.4 b & d. 
 
Summary 
------- 
 
1. (C) The International Monetary Fund's (IMF) Resident 
Representative in Nicaragua told the Ambassador on June 4 
that the IMF is negotiating with the Nicaraguan Government 
(GON) and other international financial institutions to 
provide $85 million in direct budget support for the Ortega 
Administration, which would all but close the country's $120 
million budget gap.  He also told the Ambassador that 
Venezuela provided well over $400 million to Nicaragua in 
2008 (including foreign direct investment) and that 
assistance in 2009 will likely total as much.  Arbulu 
referred the Ambassador to a Nicaragua Central Bank report, 
summarized in paragraph 7, for additional details on 2008 
Venezuelan assistance.  End summary. 
 
2009 Budget: IMF to the Rescue 
------------------------------ 
 
2. (C) The IMF's Resident Representative in Nicaragua, 
Humberto Arbulu-Neira, met with the Ambassador on June 4 to 
discuss important modifications to Nicaragua's Poverty 
Reduction and Growth Facility (PRGF).  To date, the IMF has 
provided funds under the PRGF solely to the Central Bank to 
strengthen its international reserves.  However, according to 
Arbulu, a worldwide IMF policy shift in the wake of the 
global financial crisis means that these same funds are now 
available for direct budget support to national governments. 
For Nicaragua, this is particularly significant because 
European countries withdrew budget support after fraudulent 
2008 municipal elections, leaving a budget shortfall of $120 
million for 2009. 
 
3. (C) Arbulu told the Ambassador that the IMF, World Bank, 
and Inter-American Development Bank are currently negotiating 
with the Central Bank and the Ministry of Finance to provide 
$85 million in budget support for 2009.  That would leave a 
balance of $35 million -- a sum that according to Arbulu the 
GON could easily make up by cutting spending and issuing $15 
million in short-term debt.  Arbulu said that an IMF 
technical team had just completed a two-week visit to 
Nicaragua on June 3, and that Arbulu himself, along with 
Central Bank President Antenor Rosales, would travel to 
Washington soon to wrap up an agreement at IMF headquarters. 
Arbulu warned that negotiations may be contentious, because 
the agreement would include additional requirements for 
fiscal oversight that the IMF would demand in exchange for 
providing direct budget support. 
 
4. (C) Looking ahead to an upcoming IMF macroeconomic review 
of Nicaraguan progress under the PRGF, Arbulu said that he 
expected the GON to make the grade, though various European 
governments could "create problems" over the November 2008 
electoral fraud.  However, Arbulu suggested that the budget 
situation for 2010 could be complicated.  He said that the 
GON may need to move forward with tax increases that Ortega 
postponed this year given the economic situation.  Note: 
These are issues Arbulu's successor will have to deal with. 
Arbulu has served as the IMF's Resident Representative for 
over four years and is transferring to Washington in July. 
His replacement is expected in August.  End note. 
 
IMF Views on Venezuelan Assistance to Nicaragua 
--------------------------------------------- -- 
 
5. (C) Arbulu told the Ambassador that Venezuela provided 
more than $400 million in assistance to Nicaragua in 2008. 
He reported that the IMF had verified the figure and that it 
was accurate.  Arbulu stressed that this is a large sum of 
money for a small economy such as Nicaragua's.  For 
additional information on Venezuelan assistance in 2008, 
Arbulu referred the Ambassador to a Nicaraguan Central Bank 
report published on June 4 called "External Cooperation," 
which contains a two-page section on Venezuelan financial 
assistance (see paragraph 7). 
 
 
MANAGUA 00000571  002 OF 002 
 
 
6.  Arbulu said Venezuelan assistance in 2009 would likely 
top $400 million, including foreign direct investment and 
additional funds derived from the sale of Venezuelan 
petroleum through the Bolivarian Alternative for the Americas 
(ALBA), so-called "Petroleum Cooperation."  He told the 
Ambassador that in 2009 Venezuela,s PDVSA (Petroleos de 
Venezuela) would install state-of-the-art South Korean 
generators valued at $180 million.  PDVSA will also build a 
plastics factory and move forward with feasibility studies 
for an oil refinery called "Bolivar's Supreme Dream."  Arbulu 
said "Petroleum Cooperation" would be used to bolster the 
balance sheet of FSLN-linked financial cooperative 
ALBA-CARUNA, making it one of the largest financial 
institutions in Nicaraguan by the end of 2009. 
 
Central Bank Report Identifies $457 in Cooperation 
--------------------------------------------- ----- 
 
7. (C) The Central Bank's 2008 "External Cooperation" report 
states that Nicaragua benefited from $457 million in support 
from Venezuela during the previous year, summarized as 
follows: 
 
 
  A. ALBA Petroleum Cooperation (in millions) 
  ------------------------------------------- 
  Proceeds: 
    Donations through ALBA Development Fund:  $147 
    Loans through ALBA-CARUNA:                $146 
                                              ---- 
    Total:                                    $293 
 
 
  Expenditures: 
 
    Subsidies for Public Transportation:      $50 
    Streets and Houses for the People:        $23 
    Food Security:                             $6 
    Agricultural Microfinance:                $69 
    Health/Education:                          $8 
    Urban Transportation:                      $3 
    Institution Building:                     $23 
    Financing for Electricity Generation:    $111 
                                             ---- 
    Total:                                   $293 
 
  B. Bilateral Cooperation 
  ------------------------ 
  Donations to Water Utlility:                $2 
  Donations to Private Sector:                $22 
  Loans from Venezuelan Development Bank:     $9 
                                              --- 
  Total:                                      $33 
 
  C. Foreign Direct Investment 
  ---------------------------- 
  Electricity Generation (120 MW):            $98 
  Two Petroleum Storage Tanks:                $25 
  Construction Equipment:                      $8 
                                             ---- 
  Total:                                     $131 
 
Comment 
------- 
 
8. (C) Arbulu's explanation of the IMF,s current policy 
perspective toward Nicaragua is a significant departure from 
its previous position, which was to provide funds exclusively 
for strengthening the Central Bank's international reserves. 
Undoubtedly, the GON will be thrilled to learn that the IMF 
can provide direct budget support.  That would resolve the 
fiscal crisis created by the withdrawal of European donors in 
the wake of fraudulent 2008 municipal elections.  On the 
positive side, direct IMF budget support and oversight may 
improve fiscal transparency.  IMF budget support would also 
spare Nicaragua a fiscal crisis that Ortega may have resolved 
by tapping foreign reserves and undermining the country,s 
stable monetary policy in the process. 
CALLAHAN