REARRANGING THE DECK CHAIRS ON THE TITANIC: RIZO

C O N F I D E N T I A L MANAGUA 001180 SIPDIS SIPDIS DEPARTMENT FOR WHA/CEN TPIERCE E.O. 12958: DECL: 06/02/2016 TAGS: PGOV PREL PINR KDEM KCOR NU ECON SUBJECT: REARRANGING THE DECK CHAIRS ON THE TITANIC: RIZO CAVES TO FEAR, ALEMAN PRESSURE Classified By: Ambassador Paul A. Trivelli. Reasons 1.4 (B,D). ¶1. (C) SUMMARY: Fear and ambition got the better of Liberal Constitutional Party (PLC) presidential candidate Jose Rizo, who set aside his earlier commitment to withdraw his candidacy and join Eduardo Montealegre if PLC caudillo Arnoldo Aleman and the party's leadership did not remove undesirable National Assembly candidates and the Aleman family refused to end its hegemony over the party. Thus, by the May 31 deadline, five presidential candidates and their legislative slates were registered to run in the November 5 elections: Herty Lewites (MRS); Eden Pastora (Alternativa por El Cambio); Daniel Ortega (FSLN); Jose Rizo (PLC); and Eduardo Montealegre (ALN). The fact that Rizo could neither successfully challenge Aleman nor abandon the PLC and join Montealegre has apparently convinced financier Carlos Pellas and several other members of his "capital set" once and for all that the PLC is not a viable option and that he should exclusively back Montealegre. END SUMMARY. REARRANGING THE DECK CHAIRS ON THE TITANIC - - - - - - - - - - - - - - - - - - - - - - ¶2. (C) On May 31, fear and ambition got the better of PLC presidential candidate Jose Rizo, who set aside his earlier commitment to withdraw his candidacy and join ALN candidate Eduardo Montealegre. In meetings with Ambassador and other Embassy officials over the past week, Rizo and his envoys insisted that Rizo would ultimately "do the right thing": either convince Aleman and his family to step aside and remove undesirable candidates from the party list, or withdraw his and running mate Jose Antonio Alvarado's candidacies and join Eduardo Montealegre's alliance. However, the saga ended on May 31 with Rizo's decision to remain with the PLC. Thus, by the May 31 deadline, five presidential candidates and their slates registered before the Supreme Electoral Council (CSE): Herty Lewites (MRS); Eden Pastora (Alternativa por El Cambio); Daniel Ortega (FSLN); Jose Rizo (PLC); and Eduardo Montealegre (ALN). A summary of events follows: MAY 11 - A BOLD IDEA - - - - - - - - - - - ¶3. (C) Rizo confidante/AMCHAM VP Terencio Garcia met with polcouns and expressed his and Rizo's frustration over Aleman's continued hold over the PLC. Polcouns suggested that Rizo could demonstrate his leadership by rallying PLC politicians disgruntled with Aleman's control to press the caudillo to step aside and allow the party to reform its leadership. She noted that if successful, these steps could lead to an alliance with Liberal dissident Eduardo Montealegre, who has publicly stated his interest in a broad alliance if the conditions are right. Polcouns added that if the effort failed, Rizo could still ally with Montealegre under the ALN umbrella. Garcia was receptive to the idea and promised to raise it with Rizo. MAY 12: RIZO PROPOSES TO CHALLENGE ALEMAN - - - - - - - - - - - - - - - - - - - - - ¶4. (C) Terencio Garcia shared with Ambassador and polcouns Rizo's plan to convince Aleman and his family to distance themselves from the PLC, reform CEN leadership, and to appoint suitable legislative candidates, meaning that Aleman's daughter Maria Dolores -- along with U.S. visa-less politicos Eduardo Mena and Donald Lacayo -- would be removed from the party slate. MAY 19: RIZO APPEARS COMMITTED - - - - - - - - - - - - - - - - ¶5. (C) Garcia reiterated to Ambassador and polcouns that Rizo was committed to challenging Aleman. He shared that Rizo and Alvarado would hold a press conference by the middle of the following week to challenge Aleman if he insisted on an unsuitable list of National Assembly candidates and refused to step aside. MAY 24: WEAK-KNEED RIZO BALKS AT DRASTIC MEASURES - - - - - - - - - - - - - - - - - - - - - - - - - ¶6. (C) In Ambassador's early morning meeting with Jose Rizo and Jose Antonio Alvarado (at their urgent request),Rizo and Alvarado appeared unwilling to go far enough to break Arnoldo Aleman's hold on the PLC. The reluctant pair admitted that the press conference they had planned to hold to challenge Aleman had slipped and might not occur at all (Note: The conference never materialized, although Rizo made a few half-hearted references following the PLC's May 28 convention regarding the need to modify the candidate list.) ¶7. (C) Ambassador reiterated that the U.S. will consider the PLC a viable, democratic party only if Aleman publicly resigns from the leadership of the party, the PLC forms a list of National Assembly deputy candidates who are not part of the Aleman family or his inner circle, the party replaces its current directorship (CEN),and it no longer meets at Aleman's El Chile residence. Rizo replied that sidelining Aleman must be done gradually and suggested that he might succeed in convincing Aleman to allow him to appoint "palatable" deputies to lead the Assembly list and relegate Aleman family members plus his inner circle to Parlacen, where they will exercise little influence. Ambassador replied that this action would not resolve the problem. ¶8. (C) Alvarado supporter Ariel Granera, who met later in the morning with polcouns, agreed that Rizo and Alvarado should go public and challenge Aleman in a press conference. However, Granera also argued that sidelining Aleman would "take time." According to Granera, Aleman and Ortega have already agreed that Ortega will win the presidency and they have determined which FSLN deputies and "Arnoldista" PLC deputies will win seats in November. MAY 27: RIZO AND ALVARDO GET COLD FEET - - - - - - - - - - - - - - - - - - - ¶9. (C) Rizo and Alvarado met again with Ambassador, this time fretting over their lack of progress in convincing Aleman to step aside and to agree to a suitable slate of Assembly and Parlacen candidates. Ambassador urged them to persevere for the good of their country. MAY 30: HOPE FOR A RIZO-MONTEALEGRE MERGER UNDER ALN BANNER - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - ¶10. (C) Rizo confidante Terencio Garcia shared with Ambassador, DCM, and polcouns that Rizo and Alvarado were now poised to ally with Montealegre, with or without the PLC. Garcia recounted that, as a result of a marathon meeting of Rizo, Alvarado, and others, Rizo had sent a letter of ultimatum to the PLC's CEN and Aleman via Bishop Abelardo Mata. In the letter, whose terms Garcia claimed are non-negotiable, Rizo set the deadline of midnight May 30 for the CEN and Aleman to agree to the following terms: --Aleman and all of his family must immediately and publicly withdraw from the party. --The CEN must replace undesirable Assembly candidates with individuals who are honest and qualified. ¶11. (C) According to Garcia, Rizo and Montealegre -- who had met earlier in the morning -- had agreed to collaborate in either of the following political scenarios: --Scenario One: Aleman and his family retreat from the party leadership and the CEN agrees to remove undesirable candidates (visa revocation cases like Donald Lacayo and Eduardo Mena and Aleman daughter Maria Dolores) from its slate of Assembly candidates. If this scenario occurs, Rizo and Montealegre will follow the terms of a May 9 proposed alliance brokered by former El Salvador President Calderon Sol. (Note: The terms included the following: Eduardo Montealegre would run as Rizo's VP candidate and Jose Antonio Alvarado would head the Assembly slate. Montealegre would be given 20 Assembly seat slots, and the PLC and ALN would negotiate possible government positions. End Note.) --Scenario Two: Aleman refuses to leave the PLC; the CEN supports Aleman's position (CEN president Jorge Castillo Quant is the first national deputy candidate). If this scenario prevails, Rizo and Alvarado will resign from the PLC and join Montealegre's alliance. Alvarado will be accorded the VP slot or an Assembly position and Rizo will be given a position that recognizes his merits. Rizo would also be given four to five deputy positions for his followers. ¶12. (C) Garcia added that if either scenario materialized, the parties would sign a document of alliance. He noted that it would be helpful if the Ambassador served as guarantor of the agreement. Ambassador declined, and offered instead to observe the signing and keep a copy of the signed document. According to Garcia, Rizo and Alvarado would next meet with the CEN to explain their position. Journalist/politico Jaime Arellano -- who attempted for days to convince Rizo and Montealegre to form an alliance -- shared similar details with polcouns of the Rizo-Montealegre meeting, mentioning that the second scenario appeared to be the most likely to occur. ¶13. (C) Montealegre contacts, including chief of staff Edmundo Leal, confirmed these discussions, but they were skeptical that Rizo's determination would prevail over Aleman's, or that Rizo would resign and join Montealegre's alliance. Leal was adamant that Alvarado was problematic, noting that the ALN would not accept him to run as its vice presidential candidate; to eliminate this possibility, Montealegre had already named Conservative Fabricio Cajina to the position. MAY 31 - RIZO FOLDS CLOSE TO THE ZERO HOUR - - - - - - - - - - - - - - - - - - -- - - ¶14. (C) Rizo and Alvarado met early in the morning with the PLC CEN to present their position. According to Arellano who was present at many of the discussions, Rizo and Alvarado next submitted a letter of resignation to the CEN. However, the CEN was unwilling to sideline Aleman, and later called on Aleman and Rizo's and Alvarado's wives to persuade them to reconsider their resignation. Note: We never saw the letter, nor did Montealegre; we warned Montealegre to avoid falling into a "Chavez trap.") By mid-afternoon, the rumor mill was working overtime, with some contacts claiming that Aleman had pre-empted Rizo's and Alvarado's resignations by replacing them with Francisco Aguirre Sacasa and Maria Auxiliadora Aleman. ¶15. (C) When it became clear that Rizo might indeed keep his word and withdraw his candidacy, Aleman brought in PLC heavyweights to press Rizo to reconsider -- including desvisado/Fiscal General Arguello Poessy. According to Senior Bolanos adviser Frank Arana, Rizo's and Alvarado's wives were also trotted in to convince them to remain with the PLC. (Note: Many of the meetings were held in the residence of Aleman's father-in-law Flores Lovo, who took the first plane out of Miami after learning of the PANAMA judge's May 17 detention order of him and a number of Aleman family members. End Note.) ¶16. (C) In an effort to appease Rizo, Aleman made a few minor "concessions" to Rizo: "downgrading" daughter Maria Dolores from the second to the fourth position on the National Assembly list and moving "desvisados" Noel Ramirez and Eduardo Mena from the National Assembly list to the Parlacen list. The CEN also agreed that from now on all of their meetings will be held at PLC headquarters rather than at Aleman's El Chile residence. ¶17. (C) Around 6 PM, PLC candidates Jose Rizo and Jose Antonio Alvarado retracted their supposed commitment to withdraw from the PLC and join the Montealegre alliance and they registered their candidacies soon thereafter. Leading PLC candidates are the following (brief bios will follow septel): National Candidates: Jorge Castillo Quant (CEN President) Francisco Aguirre Sacasa Enrique Quinonez Maria Dolores Aleman Guillermo Osorno (Camino Cristiano) Noel Pereira Majano Jose Castillo Osejo Martha McCoy Roberto Sarrias Carlos Carache Managua Candidates: Wilfredo Navarro Leopoldo Navarro Miguel Melendez Ana Julia Balladares Maria Auxiliadora Aleman Adolfo Calero (PRN) Orlando Mayorga Guillermo Montenegro Fernando Avellan Parlacen Candidates: Maria Haydee Osuna Noel Ramirez Fabio Gadea Diana Urbina Adolfo Garcia Blanca Rojas Eduardo Mena Leonel Panting ¶18. (C) According to Montealegre's chief of staff, Edmundo Leal, Rizo called Montealegre to convey his decision to remain in the PLC. Montealegre confirmed to DCM that he had indeed talked to Rizo and Rizo had thrown in the towel. In Arellano's view, Rizo's fears of the risks he would face if he left the PLC prevailed over his desire to do the right thing. Rizo rationalized his decision by claiming that he could not disappoint his many followers who had entrusted their confidence in them (read: people who would find no place in Montealegre's alliance). ALN LIST REFLECTS ITS DIVERSITY - - - - - - - - - - - - - - - ¶19. (C) Montealegre's alliance was the last to register -- around 9:30 PM. Montealegre underscored the fact that the ALN is the option that offers young leaders, new faces, and a varied alliance of Liberals and other political streams that is determined to win and transform the country. Commenting on Rizo's decision to remain with the PLC and the minor concessions Aleman granted to Rizo, Montealegre likened these efforts to "rearranging deck chairs on the Titanic," a futile effort. Principal ALN candidates are the following (brief bios will follow septel): National Candidates: Maria Eugenia Sequeira Jamileth Bonilla Salvador Talavera (PRN) Jorge Matamoros (PC) Indalecio Rodriguez Azalia Aviles (PC) Miguel Lopez Baldizon (APRE) Eduardo Chamorro Delia Arellano (Camino Cristiano) Managua Candidates: Pedro Joaquin Chamorro (Violeta Chamorro's son) Pedro Solorzano Ramiro Silva Carlos Garcia Adolfo Martinez Luciano Garcia Adolfo "Popo" Chamorro Parlacen Candidates: Eliseo Nunez, Jr. Alejandro Solorzano Comandante Max Enrique Gasteazoro Ariel Montoya VIEWS AFTER THE FALLOUT - - - - - - - - - - - - ¶20. (C) Montealegre and his followers were disappointed but not surprised that Rizo ultimately caved to Aleman. They also expressed relief that the political landscape is now clearer. Leal commented to polcouns that Rizo's waffling did not go unnoticed by the public, adding that Rizo's lack of courage will advantage Montealegre's campaign as it demonstrates that the PLC remains beholden to Aleman and the Ortega-Aleman pact. A number of private sector supporters of Rizo shared with us their frustration over Rizo's decision to remain in the PLC; some may renounce their support for him. Similarly, Senior Foreign Affairs Adviser Minister Ariel Granera, who fervently supported Alvarado's candidacy, acknowledged to DCM that his support for Alvarado had been a mistake. Financier Carlos Pellas, who had been urging Rizo and Alvarado to "close the deal" with Montealegre, confided in DCM his frustration with Rizo and indicated he would not support him. COMMENT - - - - ¶21. (C) Rizo's sincerity can be questioned, and even if his intentions were genuine, clearly he is too weak to stand by his stated principles. On the positive side, the fact that Rizo could neither challenge Aleman nor abandon the PLC and join Montealegre may have convinced financier Carlos Pellas that the PLC is not an option and that he should back Montealegre instead. However, the path to the presidency will not be easy for Montealegre, as he and his team will also face accusations of corruption. ¶22. (C) The PLC continues its crusade to besmirch Montealegre by alleging that he unduly profited from the 2001 issuance of bonds (CENIS) to facilitate the takeover of failed banks by sounder financial institutions, in one of which he has been a minority shareholder. Also, they imply that as finance minister and Central Bank Board member when the bonds were renegotiated in 2003, Montealegre is in part responsible for the large total domestic debt Nicaragua bears. The media immediately glommed on to Montealegre's selection of former Transport Minister Pedro Solorzano, whom the PLC has accused of mismanagement and corruption during his tenure as Transport minister, particularly regarding the cost overruns and significant delays in major donor-funded highway construction projects. TRIVELLI