Identifier
Created
Classification
Origin
06MANAGUA1678
2006-07-31 22:22:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Managua
Cable title:  

SCENE SETTER FOR CODEL BURTON/DAVIS

Tags:  PGOV ECON OVIP KDEM NU 
pdf how-to read a cable
VZCZCXYZ0003
PP RUEHWEB

DE RUEHMU #1678/01 2122222
ZNR UUUUU ZZH
P 312222Z JUL 06
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC PRIORITY 7131
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHBO/AMEMBASSY BOGOTA 1386
UNCLAS MANAGUA 001678 

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR WHA/CEN AND H FOR MIKE SMITH

E.O. 12958: N/A
TAGS: PGOV ECON OVIP KDEM NU
SUBJECT: SCENE SETTER FOR CODEL BURTON/DAVIS

REF: STATE 113750

UNCLAS MANAGUA 001678

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR WHA/CEN AND H FOR MIKE SMITH

E.O. 12958: N/A
TAGS: PGOV ECON OVIP KDEM NU
SUBJECT: SCENE SETTER FOR CODEL BURTON/DAVIS

REF: STATE 113750


1. (U) Summary: Post welcomes the members of Codel
Burton/Davis to Nicaragua and has developed an agenda that
addresses the Codel's interest in discussing the upcoming
elections with major political parties, registering
bi-partisan support for free, fair and transparent election
process, and witnessing the initiation of a USAID health
project and Millennium Challenge Corporation project. This
scene setter offers economic, USG assistance, political, and
election 2006 overviews as well as brief descriptions of
planned Codel activities. The cable is organized as follows:

- Economic Background
- USAID Programs in Nicaragua
- MCC Program in Nicaragua
- Political Background
- The 2006 Elections
- U.S./CEPPS and Civil Society Elections Support
- Codel Burton/Davis Activities and Meetings

Specific scene setters that outline each meeting and activity
in greater detail, including participants and press
availability, are provided separately. End Summary.

Economic Background
- - - - - - - - - -


2. (U) The United States is Nicaragua's largest trading
partner -- the source of roughly 20 percent of Nicaragua's
imports and the destination for approximately 30 percent of
its exports. There are about 25 wholly or partly owned
subsidiaries of U.S. companies currently operating in
Nicaragua. The largest of those investments are in the
energy, financial services, manufacturing, tourism,
fisheries, and shrimp farming sectors. Economic growth
continued in 2005, although at a slower pace, with GDP rising
4.0 percent, down from 5.1 percent in 2004. Inflation in
2005 was 9.6 percent up from 9.3 percent in 2004, mostly due
to higher oil prices. On April 1, 2006 CAFTA-DR entered into
force in Nicaragua. From January to May this year, exports
from the U.S. to Nicaragua have increased 30 percent over the
same time period last year. Imports by the U.S. of
Nicaraguan products increased 29.6 percent over the same time
frame. Potential gains from increased export earnings
resulting from these increases, however, are likely to be
offset by high spending on oil imports.


3. (U) The implementation of CAFTA-DR will provide new market

opportunities for Nicaraguan products in the U.S., especially
in the areas of meat, dairy, seafood, produce and processed
foods. Nicaragua offers considerable business opportunities
in the tourism sector that are augmented by attractive tax
incentives. For Nicaragua to achieve long-term success at
attracting investment, creating jobs, and reducing poverty,
however, it must maintain macroeconomic stability, resolve
Sandinista-era property confiscation cases and lingering
problems with land security and title protection, establish
an independent judiciary committed to the rule of law, and
open its economy to foreign trade.

USAID Programs in Nicaragua
- - - - - - - - - - - - - -


4. (U) From 1990 to 2006, USAID assistance to Nicaragua
totaled $1.66 billion. The current assistance program has
the following overall goals: foster responsible, transparent
governance; provide assistance for economic growth; promote
investment in people through better governance of social
institutions and improved access to quality health services
and education. The 2006 USAID budget is divided thus:

Ruling Justly: $9.4 million
Economic Freedom: $14.5 million
Health/Education: $14.4 million
P.L. 480 Food Security: $9.7 million


5. (U) Strengthening Democracy: USAID supports the
modernization of Nicaragua's judicial system and legal
reforms that increase access to justice, rule of law, and
protection of human rights. USAID assists civil society
organizations that promote legal reform, advocate for
government transparency, and increase public awareness of
citizens' rights. USAID also provides election support to
help Nicaragua comply with internationally recognized
standards for free and fair elections (see paragraph X).


6. (U) Increased Trade, More Jobs, Higher Incomes: USAID
assistance promotes increased trade and investment,
development of a competitive, market-oriented economy, and
improved environmental management to help Nicaragua take
advantage of the opportunities of the CAFTA-DR agreement and
other free trade agreements.


7. (U) Healthier, Better Educated People: USAID concentrates
its social sector assistance on efforts to: improve
government capacities to plan and manage health and education
investments; increase access to quality education at the
primary level; and improve health status at the household and
community level.


8. (U) Food Security: Reaching 43,700 poor rural households,
activities focus on increasing the production and marketing
of high-value, non-traditional crops to increase family
incomes. Complementary feeding, maternal health and child
survival activities improve health and nutrition in high-risk
communities.

MCC Program in Nicaragua
- - - - - - - - - - - - -


9. (U) Through its MCC Compact, the Governmen,ZzQQ#{~
growth potential due to its fertile land and connection to
markets in Honduras, El Salvador, and the United States.
After extensive consultations, the GON identified insecure
property rights, under-developed infrastructure, and low
value-added rural business activity as the greatest barriers
to growth that could be addressed with MCA assistance.


10. (U) The Compact will contribute to improving the lives of
the residents of the Leon and Chinandega area by raising the
average household income in the region and will serve as a
model to replicate in other regions of the country. The
Compact has three primary objectives: increase investment by
strengthening property rights in Leon; reduce transportation
costs between Leon and Chinandega and domestic, regional and
global markets; and help transition producers to higher value
products and activities.

Political Background
- - - - - - - - - - -


11. (U) Since the inception of democratic rule in Nicaragua
in 1990, political power has been contested between two
majority forces: the Liberals on the right, and the
Sandinistas on the left. The civil war and economic
mismanagement in the 1980s, and the Sandinista giveaway of
government property to party leaders in 1990 (the "pinata"),
turned a significant majority of the population against the
Sandinista Front (FSLN),preventing the FSLN from winning
national elections. Recognizing demographic realities, the
Sandinistas have consistently promoted divisions on the right
and worked to maximize their voting strength by building a
large and disciplined party structure.


12. (U) Nicaragua's opposition forces came together under the
United National Opposition (UNO) to win the 1990 elections,
but soon splintered apart. The Liberal Constitutional Party
(PLC) emerged as the dominant Liberal forces, in large part
due to the energetic and charismatic leadership of party
president Arnoldo Aleman. The rest of UNO broke away into an
alphabet soup of minor Liberal parties, the traditional
Conservative Party (PC),which was reduced to a small
minority except in a few areas, the Nicaraguan Resistance
(PRN) formed by ex-Contra fighters, and parties formed to
represent the evangelical population, such as the Nicaraguan
Christian Path Party (CCN),and the Christian Alternative
(AC).


13. (U) Discontent also grew within the FSLN after the 1990
"pinata" of FSLN leader Daniel Ortega and Ortega's continued
electoral defeats during that decade. Some leftist elements
broke away from the FSLN during this period, most notably the
Sandinista Renovation Movement (MRS) under the leadership of
revolutionary activist Dora Maria Tellez. The FSLN was
better able to maintain its integrity, however, using
threats, coercion and discipline. Despite repeated defeats,
Ortega pledged to "rule from below" using residual Sandinista
influence in governmental institutions such as the police,
armed forces, and the court system.


14. (SBU) The PLC and Arnoldo Aleman emerged victorious in
the 1996 national elections, but were unable to gain a
supermajority (56 votes) in the National Assembly, which
would have allowed the party to name Supreme Electoral
Council (CSE) and Supreme Court (CSJ) magistrates without
Sandinista votes. This situation led to a political pact
between the PLC and FSLN to divide control of the
institutions of government between the two parties, which has
continued to the present time. Hence, virtually all
employees of governmental institutions that are controlled by
appointments by the National Assembly are affiliated with the
PLC or FSLN and serve the interests of those parties.


15. (U) Before the 2001 election, the PLC was able to bring
most of the smaller democratic parties into an alliance.
Aleman personally selected Enrique Bolanos as the alliance's
presidential candidate as well as many of the National
Assembly and Central American Parliament deputy candidates.
This process is known as the "dedazo" (finger). Bolanos won
the election and instituted an anti-corruption campaign.


16. (SBU) In 2003, Aleman, who stole tens of millions of
dollars from state coffers, was convicted of fraud and money
laundering, stripped of his parliamentary immunity (which he
enjoyed as an ex-President) and sentenced to 20 years in
prison. This process caused a great upheaval in the Liberal
ranks. When the dust settled, a small number of Liberal and
Conservative deputies broke from the PLC alliance to form a
new political caucus to support Bolanos, but the vast
majority remained loyal to Aleman (owing their power to
Aleman's dedazo) and condemned the President as a traitor.
The Conservatives and Liberals unhappy with Aleman's
continued influence in the PLC formed the Alliance for the
Republic (APRE),a party loyal to and supported by the
Bolanos administration.


17. (U) Aleman and Ortega manipulated the pact and Sandinista
control of the judiciary to allow greater degrees of freedom
for Aleman (he began his sentence in a prison cell, was moved
to a hospital, then to house arrest, and now is allowed to
move freely about Managua under "medical parole") in exchange
for concessions to the FSLN in the CSE and CSJ. (Comment:
The pact has provided obvious benefits to Aleman and Ortega
but alienated Liberals and Sandinistas disgusted with their
leaders' concessions to the enemy and anti-democratic and
corrupt manipulation of the powers of state. End Comment.)
The pact has consistently attacked and undermined the Bolanos
administration, at times threatening the stability of the
country.


18. (U) Having won comfortable majorities since 1990, the
Liberals lost badly in the 2004 municipal elections. The
Sandinistas won 88 of 152 municipalities, the PLC 58, APRE
five, and the PRN one. The Sandinistas claimed victory with
a plurality of the vote in most of their 88 municipalities,
with the PLC, APRE and other minor parties dividing the
anti-Sandinista vote. The abstention rate was also slightly
higher than normal, which many people blamed on the voters'
unhappiness with the pact.

The 2006 Elections
- - - - - - - - - -


19. (U) Three candidates emerged in 2005 to challenge the
Aleman-Ortega pact. Excluded from the majority parties by
the two caudillos, Sandinista dissident Herty Lewites broke
from the FSLN to head the MRS ticket, and Liberal dissident
Eduardo Montealegre formed the Nicaraguan Liberal Alliance
(ALN) out of PLC dissidents, the PC, PRN, and other small
democratic parties. PLC outcast and prominent Bolanos
Administration official Jose Antonio Alvarado ran as the APRE
candidate. Daniel Ortega was once again the pre-ordained
candidate of the FSLN, and Bolanos' vice president Jose Rizo
was chosen as the PLC candidate in April 2006.


20. (SBU) The CSE deadline to register party candidates at
the end of May 2006 drove both a consolidation and division
amongst the political parties. The Christian Alternative
(AC) party left Lewites' alliance, changed its name to
Alternative for Change (same initials) and chose the erratic
Eden Pastora as its presidential candidate. Jose Antonio
Alvarado became Jose Rizo's running mate in the PLC, but APRE
joined the ALN. Arnoldo Aleman again imposed several
unpopular PLC deputy candidates by dedazo, causing Jose Rizo
to threaten to resign his candidacy (he backed down).


21. (U) The political upheaval did not end in May -- MRS
candidate Lewites died from heart complications in early
July. Lewites' running mate Edmundo Jarquin assumed the
candidacy and MRS leadership convinced popular Sandinista
revolutionary songwriter Carlos Mejia Godoy to accept the
vice presidential nomination. The impact of Lewites' death
on MRS political support is still unknown, but some predict
that many of Lewites independent anti-pact supporters will
now back Montealegre. In addition, there is a constant shift
of Liberal politicians back and forth between the PLC and
ALN, depending on their calculation of personal benefit,
although most of the defectors have left the PLC for the ALN.


22. (U) The latest IRI-sponsored poll released in June showed
the following results for the candidates and their parties:

Candidate Party
-------------- --------------

Ortega: 29.2% FSLN: 30.6%
Montealegre: 22.4% ALN: 17.7%
Rizo: 20.0% PLC: 24.2%
Lewites: 14.9% MRS: 11.3%
Pastora: 0.7% AC: 0.7%
None: 12.0%

Due to a pact-inspired change in the Electoral Law during the
Aleman administration, the front-running candidate can win
the election in the first round with 40 percent of the vote
or 35 percent with a five percent lead over the next most
popular contender.

U.S./CEPPS and Civil Society Election Support
- - - - - - - - - - - - - - - - - - - - - - -


23. (SBU) CEPPS partners IFES, IRI, and NDI and their local
affiliates are now fully engaged in helping Nicaraguans
prepare for their November 5 national elections. Election
program activities are exerting a significant positive impact
on the electoral environment, encouraging greater
transparency and accountability from the CSE and increasing
voter participation and awareness. As the political parties
begin campaigning in earnest, we expect the civil society and
technical assistance components of the program will rev up to
ensure a more substantive debate and greater responsiveness
to constituent interests. A summary of CEPPS efforts:

-- Padron Audit: NDI, working with the local chapter of
Ethics and Transparency (ET),finalized a civil society audit
of the voter roll (padron) and presented their findings to
political parties, civil society and the international
community June 7-9. According to the audit, roughly 25% of
the voting population is incorrectly listed on the padron,
which will impede their ability to vote. Further, 10% of the
voting population (individuals currently possessing a
national/voter ID card, called "cedula") is not included on
the padron. According to ET, both of these problems can be
remedied through the CSE verification process. NDI
redirected program monies from other projects to fund
national observation of the verification process and a public
awareness campaign. CSE President Roberto Rivas claimed that
ET had not been "authorized" to perform a civil society audit
of the padron, but the CSE has not refuted any of the
findings of the study. NDI has offered to provide training
to all the political parties on how to use the findings of
the audit to ensure their constituents are registered to vote.

--Padron Verification: With over 21 percent of eligible
Nicaraguan voters estimated to have verified their status and
location on the official voters list (padron),the CSE
proclaimed the June 10-11 and 17-18 verification process a
success. This assessment was supported by observers from the
Carter Center and the Latin American Council of Electoral
Experts (CEELA). IFES has worked closely with the CSE on
padron verification, providing technical assistance and
training for regional and municipal CSE officials. IFES
invested 100% of their public awareness funds on the
verification process given the potential impact on the
upcoming elections and the CSE's unwillingness to invest
adequate funding in the verification campaign. The OAS
Election Observation Mission (EOM) fielded 29 observers.

--Voter Education and Awareness: IFES has doubled the
capacity of the CSE voter hotline to meet the rising number
of citizen inquiries regarding the electoral process. IFES
has helped the CSE update its website, making it more
interactive and responsive to voter inquiries. IRI has
initiated grassroots voter awareness projects with four
Nicaraguan civil society organizations. Youth Vanguard is
distributing flyers promoting voting and cedulas at
university campuses. Movement for Nicaragua (MpN) has radio
and television adds encouraging citizens to obtain their
cedulas prior to the August 6 deadline. MpN and the
Institute for Development and Democracy (IPADE) are
canvassing secondary schools encouraging 16-18 year olds to
participate in the electoral process. MpN's youth outreach







--Citizen Attention Centers: With NDI support, MpN has
extended operations in Managua. It has also opened seven new
Citizen Attention Centers (CAC) thq6H*8UQQnalized the
training schedule for Herty Lewites' MRS and Eduardo
Montealegre's ALN political party poll watchers, which will
begin in late June and continue through August. Based on the
lists submitted by both parties, IRI will train 12,000 poll
watchers for MRS and 18,000 for the ALN. With additional
funding, poll watcher training will be extended to Eden
Pastora's Alternativa por el Cambio (AC) and poll watcher
manuals will be distributed to all five parties. (Note: PLC
and FSLN poll watchers receive training through the CSE, an
institution totally controlled by these two traditional
parties. End Note.)

Codel Burton/Davis Activities and Meetings
- - - - - - - - - - - - - - - - - - - - - -


24. (SBU) Meeting with ALN Representatives: The Codel will
meet with Eduardo Montealegre, presidential candidate of the
Nicaraguan Liberal Alliance, and other ALN officials to
discuss the upcoming national elections. Montealegre has
promised to destroy the PLC-FSLN pact, fight poverty, promote
economic growth through micro-finance programs, provide jobs
for young people, and address the problems of single mothers.
Montealegre is generally viewed as competent and uncorrupt.
His new party is struggling to build a national network to
promote and defend the ALN vote.


25. (SBU) Meeting with MRS Representatives: The Codel will
next meet with MRS presidential candidate Edmundo Jarquin and
his advisors. Jarquin is a technocrat who has spent the last
several years outside of Nicaragua working at various
international institutions. He was the MRS vice presidential
candidate prior to the unexpected death of Herty Lewites in
early July. Jarquin has promised to uphold Lewites' legacy
and fight the PLC-FSLN pact and claims that he offers
Nicaraguan voters a "responsible Left" option. (Comment: The
Codel may wish to ask Jarquin how an MRS administration would
handle relations with Venezuela and Cuba and inquire about
his views on CAFTA. End Comment.)


26. (SBU) Meeting with PLC Mayors: Following the meeting with
MRS, the Codel will see a group of PLC mayors who have
publicly demanded that Aleman leave the PLC. These mayors
recognize that Aleman is a liability for the party and the
principal impediment to the unification of anti-Sandinista
forces in Nicaragua. (Comment: The Embassy has congratulated
these mayors on their courageous stand against the PLC-FSLN
pact in the face of pressure and threats against them from
the PLC's national leadership. The Codel may wish to inquire
what the mayors plan to do if Aleman refuses to leave the
PLC. End Comment.)


27. (U) MCA Nicaragua Signing Ceremony: One of the key
objectives of the MCC Compact is to increase profits and
wages of rural producers and entrepreneurs by assisting them
with transitioning to higher profit activities. This
includes direct assistance as well as market building
activities such as promoting regional brands, attracting
investors, and linking the rural sector to market
opportunities. To develop a regional brand and attract
investors/deals, MCA-Nicaragua plans to enter into a
partnership with ProNicaragua, an investment promotion agency
that provides support services to qualified investors seeking
investment opportunities in Nicaragua. The Codel will have
an opportunity to witness the signing of this agreement.


28. (U) USAID Famisalud Health Project (proposed for
afternoon if some Codel members elect to stay): The Codel
will participate in the launch of USAID's $8 million
Famisalud health project. The USAID-funded NicaSalud
Federation was formed in 1999, in the aftermath of Hurricane
Mitch. The Federation's 28 members are dedicated to
improving the quality and accessibility of maternal and child
health services. The Famisalud project will target 1,342
rural communities in 70 municipalities nationwide to improve
health services for approximately 100,000 women and children.
The event will take place in front of the Profamilia Health
Clinic, located in the municipality of Tipitapa, which USAID
built in 2001. The event will feature the Blue Bus, a
rolling health fair that travels to communities to present
programs on health and hygiene. Residents and school
children from Tipitapa will be invited for the ceremony.
TRIVELLI