VZCZCXYZ0000
PP RUEHWEB

DE RUEHMU #0695/01 1952123
ZNR UUUUU ZZH
P 142123Z JUL 09
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC PRIORITY 4345
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS MANAGUA 000695 
 
SENSITIVE 
SIPDIS 
 
USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN 
 
E.O. 12958: N/A 
TAGS: EIND EINV ECON NU
SUBJECT: NICARAGUAN NATIONAL ASSEMBLY PASSES LOW-INCOME HOUSING LAW 
 
REF: A) MANAGUA 416, B) MANAGUA 621 
 
SUMMARY 
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¶1. (SBU) Summary: The National Assembly approved a housing law to provide affordable housing for low-income families and overcome a housing shortage throughout Nicaragua. Foreign and local property owners are concerned about language in the law that would appear to allow the Government of Nicaragua (GON) to expropriate private property to build low-income housing. Industry representatives question how the GON will come up with the financial resources to implement the law. In addition, the GON appears to be providing housing on a partisan basis. Industry representatives see opportunities to support the GON's efforts to build low-income housing, while at the same time stimulating activity in the construction sector and protecting private property rights. Their challenge is to persuade the GON to implement the new housing law to accomplish these mutually beneficial goals instead of serving FSLN interests only.
 
PASSAGE OF HOUSING LAW 
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¶2. (U) On February 25, the National Assembly approved a housing Law (Law 677/2009) to provide incentives for the construction of housing for low-income families. Nicaragua has a shortage of 750,000 homes, and an estimated 150,000 homes are in need of repair. The law tasks the Institute for Rural and Urban Housing (INVUR) with facilitating the construction of low-income housing in cooperation with the central government, municipalities, and private sector. Some of INVUR's responsibilities will include the development of a mortgage market for low-income families and the administration of a National Property Trust that will allocate land to build housing not to exceed $20,000. For housing built through the program ranging from 36 to 60 square meters in size, an interest rate for a $19,000 loan will be 5% over 25 years, and the monthly mortgage payment will be $140. The law protects recipients of low-income housing from being evicted from their homes or loan default if they cannot pay their mortgage.
 
¶3. (U) The Social Fund for Housing (FOSOVI) will administer all government funding, subsidies, donations, and loan agreements with banks and other financial institutions to provide financial assistance and credit to low-income families to obtain mortgages for new houses or reconstruction. FOSOVI will regulate mortgages and seek funding for the construction of low-income housing. The law also requires employers in the public and private sectors to provide their employees an advance of up to 20% of their retirement or severance pay to use as a down payment for housing.
 
CONCERNS OVER PROPERTY RIGHTS 
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¶4. (SBU) Foreign and local property owners are concerned that the law would allow the GON to expropriate private property for low-income housing. Article 20 states that the National Property Trust can transfer urban or rural property to the GON that is "appropriate" for low-income housing. President Daniel Ortega has stated that any expropriation of private land to build low-income housing would be a "negotiated agreement," and landowners would be compensated based on the tax assessment of the property. In an attempt to protect their property, landowners are developing businesses or building homes on vacant lots. Local business associations such as the Federation of Business Associations (COSEP) and the National Chamber of Tourism (CANATUR) are lobbying the National Assembly to amend the law so that property rights are clearly protected.
 
FINANCING 
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¶5. (SBU) Real estate developers doubt the GON will be able to acquire funding to finance and build low-income housing. Jose de Jesus Rojas, General Manager of the Central Bank of Nicaragua, explains that banks and other financial institutions have tightened their lending requirements and raised interest rates for customers. For example, local banks are currently requesting a 30% down payment and have raised interest rates to 14%. Rojas explained that the global economic crisis has dampened demand for loans. Recent budget cuts also complicate the GON's efforts to generate the funds for construction for low-income housing. Rojas opined that the government should carefully analyze beneficiaries' financial situations to ensure that they can afford their mortgages; most of the beneficiaries either receive low wages -- the monthly minimum wage for workers is $80 -- or do not have steady jobs.
 
¶6. (SBU) Alfonso Silva, President of the National Chamber of Housing (CADUR) and supporter of the law, asserted that the GON is obtaining funding to build low-income housing. He pointed out that in January 2008, the Inter-American Development Bank gave Nicaragua a $15 million loan to build low-income housing. Under the new law, FOSOVI will administer those funds. On April 4, the Netherlands' Sister Cities Association and the Center for the Promotion of Local Development and the Eradication of Poverty (Ceprodel) signed an agreement with INVUR to provide $7.8 million to build low-income housing throughout Nicaragua (Ref A). He added that several international faith-based organizations and churches are also working with the GON to build low-income housing outside of Managua.
 
 
PARTISANSHIP 
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¶7. (U) The Government of Venezuela (GOV) is helping the GON to build and finance low income homes through ALBA-CARUNA, a financial cooperative linked to the Sandinista National Liberation Front (FSLN). Local media report that ALBA-CARUNA is planning to provide nearly $29 million to fund housing projects such as "Casas Para El Pueblo" and "Petrocasas." The GON, through ALBA-CARUNA, has reportedly built 409 homes and hopes to build 1,000 more by 2011. The GOV is also sending engineers and architects to assist with these projects. Our contacts report that only FSLN supporters may participate in these programs.
 
¶8. (U) In 2008, the board of directors of the state-owned National Social Security Institute (INSS) approved three loans totaling $2.5 million to an FSLN-linked construction company, Tecnosa, to build new low-income houses for the "Pueblo Presidente" housing development in Managua. Tecnosa is closely affiliated with Francisco Lopez, President of Petroleos de Nicaragua (Petronic), Vice-President of Bolivarian Alternative for Latin America, Nicaragua S.A. (ALBANISA), and Treasurer of the FSLN. In March, INSS approved another loan for $190,000 to Tecnosa to build 24 new low-income houses for the "Pueblo Presidente" development, and it discussed providing another loan of $1.09 million to the firm to build an additional 136 new houses for the project. Industry representatives report that FSLN supporters will be the only beneficiaries of these low-income housing projects.
 
COMMENT 
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¶9. (SBU) Industry representatives see opportunities to support the GON's efforts to build low-income housing, while at the same time stimulating activity in the construction sector and protecting private property rights. Their challenge is to persuade the GON to implement the new housing law to accomplish these mutually beneficial goals instead of serving FSLN interests only. With Venezuelan and other concessional funding for housing handled by FSLN-dominated organizations, their chances of success are slim. End Comment.
 
CALLAHAN