VZCZCXRO9733
PP RUEHLMC
DE RUEHMU #0789/01 2231502
ZNR UUUUU ZZH
P 111502Z AUG 09
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC PRIORITY 4423
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHMO/AMEMBASSY MOSCOW 0195
RUEHCV/AMEMBASSY CARACAS 1365
RHEHNSC/NSC WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RUMIAAA/CDR USSOUTHCOM MIAMI FL
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 000789 
 
SIPDIS 
SENSITIVE 
 
STATE PASS USTR AND USAID 
USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN 
 
E.O.  12958: N/A 
TAGS: EAID ELTN ETRD ECON NU
SUBJECT: NICARAGUA: NEVER LOOK A GIFT BUS UNDER THE HOOD 
 
REFS: A. MANAGUA 721; B. MANAGUA 600; C. 08 MANAGUA 1437 
 
Summary 
------- 

¶1. (SBU) On August 2, the first of 130 Russian buses began to 
transit the roads of Nicaragua.  Several months ago, President 
Ortega announced that Russia had donated the buses -- at an event 
where he also blamed United States policies for having impoverished 
Nicaragua.  A financial cooperative funded by the monetization of 
Venezuelan oil through the Bolivarian Alliance for the Americas 
(ALBA) is providing financing to favored transportation cooperatives 
allowed to purchase units at below-market prices.  This 
"sweat-heart" deal is the latest evidence of President Ortega's 
partisan approach to foreign assistance and public services. 
 
Ortega Announces Russian Bus Donation 
------------------------------------- 

¶2. (U) Several months ago, President Ortega announced that Russia 
had donated 130 new buses to replenish Managua's aging bus fleet. 
At an event held May 15, he declared, "The Russian Federation has 
helped us, without imposing political or economic conditionality." 
He contrasted this donation with the suspension (now termination) of 
a portion of the Millennium Challenge Account, complaining about 
"the Yankees and their interference" and lamenting that Nicaragua 
had one of the smallest MCA compacts "despite having been 
impoverished by the policies of the Yankee empire." 
 
Buses Finally Hit the Road 
-------------------------- 

¶3. (U) On August 2, Francisco "Chico" Lopez, Treasurer of the 
Sandinista National Liberation Front (FSLN) as well as President of 
ALBA Nicaragua S.A. (ALBANISA) -- the Nicaraguan/Venezuelan joint 
venture that funnels the proceeds of Venezuelan petroleum 
cooperation -- presided over the delivery of the first of the buses 
to transportation cooperatives.  A total of 59 units now traverse 
the streets of Managua.  Manufactured by the Gorky Automobile Plant 
(GAZ), they seat 25 passengers but can accommodate an additional 31 
standing. 
 
¶4. (SBU) After Ortega's announcement on May 15, mechanics at the 
Managua municipal garage, located next to the Embassy property, 
began modifying the buses to make them ready for Nicaraguan roads 
and weather.  Each unit required significant alterations, including 
the installation of airbrakes, radiators, windows for ventilation, 
and the red and black flags of the FSLN.  Passengers have told 
emboffs that the buses are comfortable, but they fear that the 
introduction of new equipment will eventually result in a hike in 
fares, currently 2.5 cordobas (about 13 cents) for urban routes. 
 
ALBA-CARUNA Financing 
--------------------- 

¶5. (U) The National Rural Fund (ALBA-CARUNA), a microfinance 
organization linked to the FSLN that has received funding from 
ALBANISA, is providing financing for those bus cooperatives selected 
to receive a unit.  The process by which ALBA-CARUNA chose 
recipients is unclear, but representatives of cooperatives not 
selected claim that only those with close FSLN ties were allowed to 
participate.  ALBA-CARUNA is offering the buses for $25,000, 
financed with 8-year loans at 2% interest. 
 
Donation or Sale? 
----------------- 

¶6. (SBU) An Emboff source familiar with the transaction asserted 
after Ortega's announcement that the buses are used and that they 
were not donated but in fact sold by GAZ to ALBANISA.  In addition, 
the now-deceased Mayor of Managua Alexis Arguello told the media, 
"The buses were bought, on soft terms."  Arguello later retracted 
his statement, claiming that he did not have all the details. 
 
¶7. (SBU) Russian Ambassador to Nicaragua Igor Kondrashev contradicted these accounts in a conversation with the DCM in late May. He said GAZ, of which the Russian Government owns a percentage, agreed to donate the buses to ALBANISA as a loss leader, in the hope that additional business would result. In fact, ALABANISA's Chico Lopez announced at the August 2 handover that the government would buy additional units this year.
 
 

 
 
Comment 
------- 

¶8. (SBU) ALBANISA, despite the fact that it is a joint venture 
between two state-owned oil companies (PETRONIC of Nicaragua and 
PDVSA of Venezuela), is clearly identified with the FSLN, as is 
ALBANISA-funded ALBA-CARUNA.  This "sweat-heart" deal to funnel 
busses to in-favor cooperatives is the latest evidence of President 
Ortega's partisan approach to foreign assistance and public 
services, as we have also seen in the areas of health, education, 
public sector employment, and food security (Reftels). 
 
CALLAHAN