2006 EXPROPRIATION REPORT: NICARAGUA

UNCLAS MANAGUA 001251

SIPDIS

SENSITIVE
SIPDIS

FOR WHA/CEN MKOPOLOW & NHATCHER, EB/IFD/OIA/JPROSELI
L/CID/EDAUGHTRY
PASS USTR
TREASURY FOR DONOVAN/CHRISTOPULOS

E.O. 12958: N/A
TAGS: EINV KIDE ECON USTR NU
SUBJECT: 2006 EXPROPRIATION REPORT: NICARAGUA

REF: A. A) STATE 60284


B. B) 05 MANAGUA 1815


1. This cable provides proposed language for the Nicaragua
chapter of the 2006 Report on Investment
Disputes and Expropriation Claims. Embassy will send
comprehensive annex with details of confiscated property
claims by June 10, as requested in Ref A.

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Property Confiscation Claims
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2. Despite progress in recent years, the resolution of
property cases in Nicaragua continues to be a serious
problem. Since the Sandinista government left office in
1990, thousands of Nicaraguans and other nationals have
registered claims with the Nicaraguan government
for more than 28,000 properties--homes, farms, bank accounts
and other assets--expropriated during the 1979-1990
Sandinista era. Most of those affected were Nicaraguans, but
many were, or have since become, U.S. citizens.


3. The government of Nicaragua has made continuing progress
in resolving outstanding U.S. citizen claims, including those
of individuals who became U.S. citizens after the decade of
confiscation. The current Nicaraguan administration has made
a concerted effort to resolve such claims involving
properties held by different agencies of the government,
notably the parastatal holding company CORNAP (Corporacion
Nacional del Sector Publico).


4. Beginning in late 2004, political forces aligned against
the Nicaraguan president attempted to weaken the executive
branch by using their control of the National Assembly to
enact a series of constitutional and institutional changes.
One of the measures was Law 512, which shifted responsibility
for property claims resolutions from the executive branch to
a National Property Institute under the control of the
legislature (Ref B). Published on January 22, 2005, Law 512
included certain provisions affecting cases in the court
system and others on appeal for a third tier administrative
review. Though the Institute was never implemented, Law 512
had a chilling effect on claims resolutions for many months.
Under the terms of an October 2005 political agreement,
implementation of Law 512 was put on hold until after the
January 2007 inauguration of the new administration. Until
the November 2006 presidential and parliamentary elections
are held and the composition of the new National Assembly is
known, it will be difficult to predict the fate of the
National Property Institute and the extent of future progress.


5. Section 584 (c) (i) of H.R. 4818, Consolidated
Appropriations Act, 2005 stated that after a cut-off date
(subsequently set at August 1, 2005),new claims registered
at the Embassy would not be considered in the U.S.
government's determination on whether to extend future
waivers to Nicaragua. However, the Property Office will
continue to make note of new claims and assist all U.S.
citizens with property claims. The new claimants receive
assistance and constitute a separate database presently
consisting of ten American citizen claimants pressing for
resolution of 16 property claims. The U.S. Embassy in
Managua has an American officer and two Nicaraguan attorneys
on staff who assist U.S. citizens in filing and tracking
their claims--positions unique to that post.


6. The 3,192 claims considered by the U.S. Embassy for the
purpose of determining if an annual waiver is to be granted
are those registered between January 1995 and July 31, 2005.
They belong to a total of 1,137 individuals, of whom 269 were
U.S. citizens at the time of confiscation. To date the
Nicaraguan government has resolved 2,466 Embassy-registered
claims. In some cases, property has been returned to
claimants, although most receive compensation in the form of
long-term, low-interest bonds. The Nicaraguan government has
issued bonds to Embassy-registered claimants with a face
value of an estimated US$305.6 million. The GON has also
resolved almost 2,000 U.S. citizen claims not registered with
the Embassy.


7. As of June 1, 2006, there remain 727 active
Embassy-registered claims of 319 U.S. citizens. Sixty-six of
these claimants, who have 119 current claims, were U.S.
citizens at the time of confiscation. The United States
government will continue to press vigorously for resolution
of all outstanding U.S. citizen property claims.


8. The usefulness of a strong performance by the GON in
resolving property cases cannot be overemphasized. An
internationally recognized arbitration or mediation mechanism
could help demonstrate Nicaragua,s commitment to economic
stability, improve its property-related closure strategy, and
provide a clear signal that longstanding property issues are
being addressed equitably and effectively.

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Investment Disputes
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9. Claimant A is a U.S. majority holder of a multinational
group of investors set on constructing a dry canal in
Nicaragua. The project proposes two deep-water container
ports with "post-Panamex" capability, one at Monkey Point on
the Atlantic and the other at Brito on the Pacific, connected
by a 377-kilometer railroad. Claimant A began the project in
1994 and was granted first rights to a canal concession by
the National Assembly in a 1996 televised signing. The May
2001 publication of Nicaraguan Law 2878 authorized an
interagency commission led by the Ministry of Transportation
and Infrastructure to issue a concession and associated
permits for a feasibility study and final design.


10. The Interagency Commission has not made progress despite
insistent pursuit by Claimant A and frequent intercessions by
U.S. Embassy officers. Claimant A raises credible
allegations that its intellectual property and work product
has been misappropriated and provided by Government officials
to a parallel company, tantamount to an expropriation. All
of Claimant A's work has been performed in reliance upon
agreements directly with the Government of Nicaragua.
Claimant A has reported investing over US$12 million in
engineering, financial, market and other studies, as well as
its local operations to date.


11. (SBU) Claimant A: Canal Interoceanico de Nicaragua or
CINN.



TRIVELLI