VENEZUELAN FINANCIAL SUPPORT TO NICARAGUA,S FSLN

S E C R E T MANAGUA 001079

SIPDIS

NOFORN
SIPDIS

DEPARTMENT FOR WHA/CEN, INR/I

E.O. 12958: DECL: 05/17/2031
TAGS: PINR ENRG EFIN PGOV NU PREL SOCI VE EPET EAGR
SUBJECT: VENEZUELAN FINANCIAL SUPPORT TO NICARAGUA,S FSLN
(C-AL6-00642)

REF: A. STATE 77530

B. MANAGUA 0841

Classified By: Ambassador Paul A. Trivelli. Reasons 1.4 (B,D).


1. (S/NF) SUMMARY/BACKGROUND: Although Post possesses no
specific numbers on the level of support Venezuelan President
Hugo Chavez is providing to Sandinista (FSLN) candidate
Daniel Ortega, we are certain that Chavez' direct and
indirect assistance to Ortega is substantial, could well
reach the tens of millions of dollars, and possibly sway the
outcome of the November election. Embassy Managua has not
seen concrete evidence to corroborate the Liberal
Constitutional Party's (PLC) contention that Chavez is
providing USD 50 million in traditional and untraditional
forms of aid to advance Ortega's political campaign. We
believe that the PLC's allegations are in part an effort to
discredit Ortega to advantage their candidate Jose Rizo and
to convince the USG and potential private sector campaign
contributors that the PLC is the only party that can beat
Ortega in the November 5 election. Given that the average
cost of a presidential campaign in Nicaragua is USD 10
million to 15 million, even if Venezuela's support for Ortega
is considerably less than the rumored USD 50 million, the
funds could buy significant influence and possibly exert
considerable sway over the voting public.


2. (S/NF) SUMMARY/BACKGROUND CONTINUED: Most of Chavez's
material support to Ortega will likely remain under the radar
screen of public scrutiny -- in the form of an underground
network of cash payments (sources assert that several FSLN
party officials frequently travel to Venezuela and return
with large sums of cash),or laundered via Chavez's oil for
Nicaraguan mayors initiative and his fertilizer donations.
To our knowledge, the Venezuelan government (BRV) is not
supporting Sandinista dissident Herty Lewites' presidential
candidacy; Lewites has sharply criticized Chavez' support for
Ortega and Ortega's willingness to succumb to Chavez's
influence. However, we would not be surprised that if
Lewites emerges as a stronger candidate than Ortega as the
November election draws nearer, Chavez might approach Lewites
to offer his help. We have also heard from GON sources close
to President Bolanos that the Taiwanese may be prepared to
provide campaign financing to Liberal dissident Eduardo
Montealegre. A summary follows of our knowledge of Chavez'
support for Ortega thus far. END SUMMARY/BACKGROUND.

HELOS FOR DANIEL
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3. (S/NF) USG sources suggest that Chavez financed the use
of three helicopters for FSLN use during the March 5 Atlantic
Coast election.

OIL FOR SANDINISTA MAYORS INITIATIVE
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4. (SBU) The centerpiece of BRV support for the FSLN is a
special oil deal to provide Venezuelan oil to the
FSLN-dominated national mayor's association (AMUNIC) at
favorable loan terms for resale at lower than market prices
on the Nicaraguan market. The deal is meant to give the FSLN
the opportunity to both benefit politically from making these
products available below cost and to convert the profits into
cash for electioneering. Ortega and Marenco and a number of
Nicaraguan mayors traveled to Caracas to sign the oil
agreement on April 25 between the Venezuelan government and
AMUNIC. Responding to criticism that Chavez is intervening
in Nicaragua's internal affairs, Ortega justified Chavez's
actions in Nicaragua by labeling them "solidarity" and
distinguishing them from U.S. "interference."


5. (C) To date, technical issues -- lack of storage
facilities, no distribution network, etc.) have prevented the
deal's implementation. However, the agreement has attracted
much attention and the public appears to associate the
initiative with Ortega, as Chavez and Ortega intended. Some
interlocutors believe that the Chavez oil deal is not only
directed at supporting Ortega's campaign, but also meant to
eventually remove foreign (read U.S.) oil industry influence
in Nicaragua and replace it with a Venezuelan presence.
Local executives of ESSO (Exxon Mobile) who run Nicaragua's
only oil refinery also suspect that Venezuela's oil politics
are aiming to drive them out of the country, paving the way
for Venezuela to purchase the refinery at a bargain price.


FERTILIZER FOR THE RURAL POOR
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6. (SBU) The Sandinistas have announced that Chavez has
promised to donate 50,000 metric tons of urea (a powderized
fertilizer/animal feed obtained by the reaction of liquid
ammonia and liquid carbon dioxide from petroleum processing)
for distribution to the rural poor of Chinandega and Corinto
by the Sandinista Agricultural Services Cooperative
(Nicaraocoop). In an April 12 telephone conversation, Luvy
Perez, Director of Inspections for the Nicaraguan Customs
Agency (DGI) confirmed that 11,260 metric tons of urea have
already arrived from Venezuela and are ready for distribution
to FSLN-controlled municipalities. In a press report, the
president of Nicaraocoop said that the urea is being provided
below-cost rather than as a donation, although Sandinista
officials called it a donation when they announced the
program with great fanfare. FSLN opponents, including
Sandinista dissident/presidential contender Herty Lewites,
claim that the urea is part of Chavez's electoral aid package
for the FSLN.

LITERACY CAMPAIGN - YO SI PUEDO
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7. (SBU) The Venezuelans are also funding the
Cuban-administered literacy campaign "Yo Si Puedo" ("Yes I
Can"). While technically open to any city in Nicaragua (in
order to receive GON permission to operate),the program was
originally only offered to FSLN-controlled local governments
and only FSLN governments are now participating. Despite
earlier reports that the GON had planned to deny the
Sandinista-oriented Augusto C. Sandino Foundation (FACS)
permission to import equipment needed for the program, recent
press reports state that the GON capitulated and the
materials have entered. The equipment consists of 5,000
televisions, 5,000 VCRs and a large amount of training
materials (including 500,000 workbooks). The estimated cost
of the three-year program is USD 21.6 million. The Office of
the Mayor of Managua has begun airing television commercials
to sell the program and the Mayor of Masaya's office has
posted billboards.

MEDICAL CLINICS
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8. (U) The BRV has launched its campaign to provide surgical
eye care in Venezuela for 3,000 poor Nicaraguans; the first
120 patients traveled to Venezuela the week of April 17.
Administered by the FSLN-run Office of the Mayor of Managua,
the program also covers airfare and room and board. The
departure and return of the first group drew ample media
coverage. Nicaraguan media were provided free trips to
Venezuela to cover the event and were also likely paid to
present it with great fanfare.

FEEDING ORTEGA'S PROPAGANDA MACHINE
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9. (S/NF) Post has heard a number of reports that Chavez is
generously funding Ortega's media campaign, including the
provision of transmitters and other hardware, as well as air
space and press footage. For example, the Sandinista-leaning
station in Esteli has reportedly received four television
cameras, two 20K watt transmitters, and two network interface
systems from the Venezuelans.

CHAVEZ'S ATTEMPT TO DISGUISE POLITICAL BIAS
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10. (C) After drawing consideraQe criticism from non-FSLN
political circles, Chavez has made some efforts to cover the
politicalQias of his programs. For example, he invited a

number of PLC mayors to attend the signing of the
PDVSA-AMUNIC accord in Caracas on April 24. Despite orders
from PLC leadership to its mayors not to participate, six PLC
mayors traveled to Caracas for the event.

COMMENT
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11. (S/NF) Although we do not have information on the scope
of Venezuelan support for Ortega, clearly its assistance is
substantial. Further, unlike USG aid restrictions, much of

the Chavez support is not tied to the normal limitations of
foreign assistance. Complicating the situation is Nicaraguan
electoral law, which permits foreign campaign donations with
few restrictions that are easy to overcome. Leaders of
non-FSLN parties frequently warn us that unless the United
States counters this surge of Venezuelan aid, the electoral
playing field will be grossly uneven in favor of Ortega.


TRIVELLI