FOREIGN MINISTER CALDERA TO A/S SHANNON: IT IS

C O N F I D E N T I A L MANAGUA 001524

SIPDIS

SIPDIS

DEPT FOR WHA A/S SHANNON, WHA/CEN

E.O. 12958: DECL: 06/30/2016
TAGS: EAID ECON EFIN KDEM NU PGOV PINR PREL
SUBJECT: FOREIGN MINISTER CALDERA TO A/S SHANNON: IT IS
ALL ABOUT THE ECONOMY

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


1. (SBU) SUMMARY: During a June 27 lunch he hosted for A/S
Shannon, Foreign Minister Norman Caldera predicted that
Central America would sign a free trade agreement with the
European Union within the next three years. Caldera touched
on the recent free trade agreement between Nicaragua and
Taiwan, Asian involvement in the region, and a host of varied
economic issues. Caldera also commented on relations among
the Central American nations and progress on regional
integration. END SUMMARY.

Taiwan: The Asian Tiger in Central America
- - - - - - - - - - - - - - - - - - - - - -


2. (SBU) Foreign Minister Norman Caldera told A/S Shannon
June 27 that Nicaragua had just signed a free
trade agreement with Taiwan. He emphasized that Nicaragua
must maintain a balance between China and Taiwan in case of
eventual reunification. For the near future, he does not
believe China will exert much influence in Nicaragua. He
mentioned meeting with Chinese officials in Mexico to discuss
Chinese interest in augmenting their diplomatic presence in
the region, but reported that there had been no follow-up.
Caldera confirmed that Central America may try to join APEC
as a region.


3. (C) Shannon said China does not threaten U.S. interests
in the region, but it competes with Japan for Latin American
resources. He reported that during his recent trip to Japan,
the Japanese expressed interest in establishing democracy
programs in the region. Shannon suggested that such programs
would usefully differentiate Japanese regional involvement
from that of China. Shannon commented on the need to get
South Korea involved in similar programs.


4. (SBU) Caldera affirmed that Taiwan and Japan are the most
active Asian nations in Nicaragua. Nicaragua had considered
a free trade agreement with Thailand, but rejected the notion
because "cheap rice" from Thailand would ruin the local rice
market.

Nicaragua the New Panama?
- - - - - - - - - - - - -


4. (C) Caldera discussed Chinese involvement and interest in
building a canal in Nicaragua. He claimed the idea did not
make economic sense since the Panama Canal is not as
profitable as many believe and too little money would be
earned on such a venture to cover the huge investment costs.
(COMMENT: A canal in Nicaragua is a key item for the FSLN,
who see it as a way to boost tourism, ties with mainland
China, and Nicaragua's standing in Central America. END
COMMENT)

Regional Integration, Mexico
- - - - - - - - - - - - - - -


5. (SBU) Caldera said the pace of Central American
integration is lagging because of issues with Costa Rica and
Panama. He hoped to see a change in Mexico's interaction
with Central America; immigration remains a contentious
Centam-Mexico issue. Caldera asked Shannon about the U.S.
relationship with Mexico given the election's uncertain
results. Shannon said the U.S. had a close relationship with
Mexico that would continue no matter who was elected.

Free Trade Agreement with European Union
- - - - - - - - - - - - - - - - - - - - -


6. (SBU) Caldera speculated that Central America could
finalize a free trade agreement with the European Union in
the next three years. He stressed that the agreement must be
negotiated between the European Union and Central America as
a whole, not between individual countries. For that to
happen, Central America must formalize its own customs union
and common external tariff regime. He added that a few
contentious issues remain to be resolved, such as the EU's
proposed tariff increase on Central American bananas.


7. (U) Participants:

Nicaragua:
Foreign Minister Norman Caldera
Ariel Granera
Frank Arana

Leonardo Sommariba
Ambassador Stadhagen
Mauricio Herodocia

U.S.:
Assistant Secretary Tom Shannon
Senior Advisor for Public Diplomacy Maria Tamburri
Ambassador Paul Trivelli
DCM Peter Brennan
Polcouns Victoria Alvarado
Poloff Nicole Chulick (notetaker)

This cable was cleared by A/S Shannon.
TRIVELLI