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