NICARAGUA: COMMENTS ON NIC WATCH LIST OF INTERNAL

S E C R E T MANAGUA 001434 SIPDIS NOFORN SIPDIS DEPT FOR S/CRS: BRENDA HAZZARD, WHA/CEN E.O. 12958: DECL: 07/03/2026 TAGS: KDEM MARR MOPS NU PGOV PINR PREL SUBJECT: NICARAGUA: COMMENTS ON NIC WATCH LIST OF INTERNAL INSTABILITY REF: STATE 94960 Classified By: Ambassador Paul A. Trivelli. Reasons 1.4 (B,D). ¶1. (S/NF) Post concurs with the bulk of the NIC Watch list's assessment of internal instability in Nicaragua. However, we recommend that the following clarifications and recent political developments be considered: CALL FOR A PUBLIC REFERENDUM ON CONSTITUTIONAL REFORMS - - - - - - - - - - - - - - - -- - - - - - - - - - - - ¶2. (S/NF) Post notes that not only President Bolanos, but also a number of pro-democratic presidential candidates and their parties/alliances, have called for the referendum on the so-called constitutional reforms (setbacks, really), which once in effect on January 20, 2007, will further erode the Executive's powers. Indeed, Eduardo Montealegre's Liberal Nicaraguan Alliance-Conservative Party caucus (ALN-PC) was the first to call for the referendum. Daniel Ortega's FSLN opposes the referendum, while recently Liberal Constitutional Party (PLC) presidential candidate Jose Rizo has endorsed it. It is unclear whether PLC strongman Arnoldo Aleman would in fact support the referendum measure, should it create tensions with the FSLN. The issue of National Assembly approval is not that debating it would revive inter-party hostilities; these hostilities are already active and we can expect them to increase in the lead up to the November 5 election, referendum or not. Rather, debate continues over whether the Ass embly's call for a referendum requires 47 votes or 56 votes; the latter is unobtainable without the FSLN votes. ¶3. (S/NF) If the Assembly does not call for a referendum, it could become a campaign issue, and voter preferences may reflect their views on the issue. There is also the possibility that the OAS may broker an agreement with the GON and the National Assembly to postpone the constitutional changes until a much later date and perhaps broaden the debate to other issues in a constitutional assembly. REMITTANCES, MCA, CAFTA - - - - - - - - - - - - ¶4. (S/NF) Post believes that the inputs of remittances, Millennium Challenge Account (MCA),and Free Trade Agreement (CAFTA "could," not/not necessarily "will," have a significant stabilizing effect over the next two years. Much will depend on the policies of the new government. EFFORTS TO UNITE ANTI-FSLN FORCES/POSSIBLE ORTEGA VICTORY - - - - - - - - - - - - - - - - - - - - - - - - - - - - ¶5. (S/NF) Efforts to unite Liberals behind a single presidential ticket have failed. On May 31, PLC presidential candidate Jose Rizo jettisoned his earlier inclination 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. Five presidential candidates and their respective legislative slates are registered to run in the November 5 elections: Herty Lewites (MRS, FSLN dissident/anti-Ortega); Eden Pastora (Alternativa por El Cambio, also likely to appeal to some Sandinista voters); Daniel Ortega (FSLN); Jose Rizo (PLC); and Eduardo Montealegre (ALN). A possibility still exists, however, that if Rizo fails to climb in the polls, he could withdraw from the race in September or October and back Montealegre. ¶6. (S/NF) Regarding a possible Ortega victory, at this stage it does appear unlikely that he could win on the first round, and in a second round Ortega would probably lose. However, given Ortega's party's control over the Supreme Electoral Council and the courts and a five-candidate race, if Ortega stole 3% to 5% of the votes, he could obtain enough votes to win on the first round (according to Nicaraguan electoral law, a candidate requires 35% of the vote with a 5% advantage over the closest competitor to win the election). An Ortega victory could not only result in significant capital flight and increased political factionalism, it could also hurt counternarcotics, counterterrorism, and mil-mil cooperation, and substantially increase concerns over Nicaragua's stock of 1,071 MANPADS. EFFECTS OF THE ORTEGA-ALEMAN PACT ON THE ELECTORAL LANDSCAPE - - - - - - - - - - - - - - - - - - - - - - - - - - - ¶7. (S/NF) Although Nicaragua enjoys inclusive suffrage, freedom of expression and organization, and associational autonomy, the country remains a quasi-democracy. Its long legacy of strongman-dominated ("caudillo"),authoritarian rule permeates its political culture, a culture where the rule of impunity, not rule of law, prevails. The Ortega-Aleman pact, dating from 1998, has virtually subjected all branches of government other than the Executive to Ortega's and Aleman's control and seriously eroded Executive authority. To stay out of jail, Aleman appears willing to cede his party and country to Daniel Ortega, possibly to the point of "allowing" Ortega to win the presidency in exchange for his freedom. NARCO PRESENCE AND PROBLEMS - - - - - - - - - - - - - - ¶8. (S/NF) While Nicaragua's growing narcotrafficking problem along its Atlantic Coast draws the most attention, its Pacific coastline has also experienced an increase in narcotrafficking and related problems. Certainly inadequate law enforcement contributes to the problem; however, Nicaragua's judiciary is equally, if not more, at fault. The courts routinely release narcotraffickers and money launders. VULNERABILITY TO NATURAL DISASTERS - - - - - - - - - - - - - - - - - ¶9. (U) In addition to Nicaragua's vulnerability to earthquakes, it is also prone to devastating hurricanes and occasional volcanic eruption. TRIVELLI