NICARAGUA'S CAFTA ENVIRONMENTAL & LABOR PROJECT

UNCLAS MANAGUA 000576

SIPDIS

SENSITIVE
SIPDIS

C O R R E C T E D COPY (SBU ADDED)
DEPT FOR OES: CAROLE JACKSON & LARRY SPERLING, WHA/PPC:MIKE
PUCCETTI, DRL/IL:PAT DEL VECCHIO & GABRIELLA RIGG, LABOR
FOR ILAB:JANE RICHARDS, USAID/LAC/RSD:BARRY
MACDONALD,USAID/LAC/AA: MICHAEL MAGAN, USAID/LAC/RSD: JOHN
GARRISON, SAN JOSE FOR HUB: BERNIE LINK, SAN SALVADOR FOR
USAID: LAWRENCE RUBEY, TEGUCIGALPA FOR USAID: JILL KELLEY,
SANTO DOMINGO FOR USAID: DUTY GREEN

E.O. 12958: N/A
TAGS: EAID ETRD SENV
SUBJECT: NICARAGUA'S CAFTA ENVIRONMENTAL & LABOR PROJECT
PROPOSALS

REF: STATE 26123

1.(SBU) Per REFTEL, this telegram outlines proposals for three
environmental and two labor projects in Nicaragua in
accordance with DR-CAFTA and Mission Performance Plan
priorities. These proposals were selected based on
consultations with the Government of Nicaragua (GON),and
vetted by the country team. In addition to adhering to the
factors for funding approval detailed in the REFTEL, post
sought projects that would provide concrete environmental
and/or labor benefits related to broader USG priorities such
as trade capacity building. The proposals are placed in rank
order of mission priority. Complete project drafts will be
sent via e-mail to the individuals named in the pass line, as
well as to WHA/CEN. The three environmental proposals are
Institutional Strengthening in Trade and Environmental
Issues, Market Incentives for Improved Management of Critical
Biodiversity-rich watersheds, and Cleaner Energy and
Production to Enhance Competitiveness. The two labor
proposals are Workforce Development in a Globalizing Economy
and Improving Labor-Management Relations.


ENVIRONMENTAL PROPOSALS
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2.(SBU) INSTITUTIONAL STRENGTHENING IN TRADE AND ENVIRONMENTAL
ISSUES

ranks highest among the mission's environmental
proposals. Its purpose is to strengthen the ability of the
GON and municipal authorities to enforce existing
environmental legislation, including reinforcing
institutional and legal frameworks and the capacity to
develop, implement, administer and enforce environmental
laws, regulations, standards and policies. Currently,
institutions within the GON have limited human and financial
resources, or even full legal authority to enforce
environmental laws. Existing legal frameworks often lack the
implementing regulations and procedures, hindering
implementation. Technical assistance is required to help the
GON implement its obligations under the DR-CAFTA
Environmental Chapter. Specific elements include training
and equipping police and prosecutors to assist environmental
and forestry regulators, as well as establishing effective
and transparent procedures for dealing with violations of
environmental laws and regulations. This project will
complement the work to be performed by USEPA in country.
This project addresses the GON,s top two priorities under
the DR-CAFTA Work Plan, activities for which the GON
currently lacks the funds to implement. Potential partners
are EPA and CCAD. The estimated cost is $4 million over
three years.


3. (SBU) MARKET INCENTIVES FOR IMPROVED MANAGEMENT OF CRITICAL
BIODIVERSITY-RICH WATERSHEDS

ranks second among the mission's
environmental proposals. Its purpose is to enhance market
incentives for improved natural resource management and to
build the capacity for sustainable financial support for
watersheds of high biodiversity importance. In addition to
improving Protected Area and Private Nature Reserve
Management, this proposal seeks to increase options for
sustainable income generation. Specific elements include
providing technical assistance to significantly increase
hectares under improved environmental management, sales of
environmentally friendly goods, and sales of environmentally
friendly services, particularly those related to sustainable
tourism. We also seek to promote "payment for environmental
services" as a concept for improved management, with similar
programs currently operating in Costa Rica and Guatemala to
serve as models. This activity directly addresses priorities
established by DR-CAFTA in the ECA Work Plan, which
highlighted the need for sustainable financing for natural
resource management. This project matches several of the
GON,s CAFTA-ECA priorities. Furthermore, the activities
described here represent some of the most visible and valued
USG investments in Nicaragua and promise substantial public
diplomacy dividends. The estimated cost is $5 million over
two years. This activity will leverage new private sector
resources, both cash and in-kind, through the development of
Global Development Alliances.


4. (SBU) CLEANER ENERGY AND PRODUCTION TO ENHANCE COMPETITIVENESS

ranks third among the mission's environmental proposals. Its
purpose is to develop incentives for the GON and private
sector to make investment in cleaner energy and cleaner
projection technologies. It will establish flexible
voluntary mechanisms that provide incentives for public and
private partnerships that reduce pollution and production
costs. This project will assist the GON in untangling its
economically and politically costly petroleum-based energy
strategy and institutional arrangements to provide incentives
for investments in cleaner production technologies and help
local institutions provide fee-for-service cleaner production
technical assistance. As a result of this project,
Nicaragua,s private sector's environmental performance and
competitiveness will be increased because of reduced
pollution and reduced fuel and production costs. Currently,
the GON,s energy policy and regulatory system creates
enormous disincentives for investment in cleaner/renewable
energy sources. High start up costs for environmentally
friendly energy production from sources such as wind, water
and thermal energy have also discouraged investment in these
sources despite their abundance here. Additionally, this
project seeks to promote clean production best practices and
develop public-private partnerships to facilitate the
transfer and adoption of cleaner energy and production
technologies. The estimated cost of this program is $1
million over two years. This activity will leverage new
private sector resources, both cash and in-kind, through the
development of Global Development Alliances. USAID,s
implementing partners will continue to encourage and work
with private firms to increase their utilization of clean
production DCA. Recent meetings between GON officials
responsible for energy production and regulation have
identified renewable energy as a path out of Nicaragua,s
energy quagmire.

LABOR PROPOSALS
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5. (SBU) WORKFORCE DEVELOPMENT IN A GLOBALIZING ECONOMY

ranks
highest among the mission's labor proposals. Its purpose is
to open opportunities for Nicaraguan workers that will enable
them to develop the skills necessary to work productively in
a globalized economy and provide policy makers, investors,
and representatives of organized labor timely and accurate
information about trends and developments in the Nicaraguan
labor market. Activities will be conducted for labor policy
reform, labor market surveys and workforce training. This
project will focus on providing specific training for workers
interested in entering the emerging labor markets in
Nicaragua. This initiative will build on USAID success in
training workers for jobs in the agricultural processing of
export crops by targeting other emerging labor markets such
as tourism services, call centers, new apparel lines, and
value added agricultural processing. English language
training will be a key component.


6. (SBU) As a first phase, the project will develop the GON's
capacity to produce reliable and timely information about
labor market trends and employment rates. Assistance will
provide expertise and training for the staff of the national
statistics institutions to prepare labor market reports
consistent with internationally recognized best practices.
This information will inform the second phase, in which
workshops, seminars, and courses will be executed to assist
in re-tooling the workforce to meet the labor demands of
emerging markets. Rigid and outdated labor markets prevent
workers with little or no education from taking advantage of
new employment opportunities. If existing working age people
cannot find work in Nicaragua, more of them will attempt to
migrate illegally to countries such as the U.S. This project
will help investors to expand the job market and help workers
to fill these new jobs with the required skills. Information
generated by this project will also be of practical use to
U.S. investors looking for opportunities in Nicaragua. The
estimated cost is $500,000 over three years. Sponsored
activities will provide the mission with opportunities to
demonstrate USG commitment to workers' rights and employment
opportunities associated with DR-CAFTA.


7. (SBU) IMPROVING LABOR-MANAGEMENT RELATIONS ranks second among
the mission's labor proposals. Its purpose is to expand and
extend the Central American "Cumple y Gana" project
implemented by the Department of Labor through FUNPADEM and
Abt Associates to include the development of negotiation and
bargaining skills for labor unions/associations, management,
and the Ministry of Labor in both the public and private
sectors and demonstrate how working together will help all
parties to take full advantage of free trade opportunities.
The project will pursue legal reforms to the rigid labor
system, provide labor and industrial relations training,
disseminate information to stakeholders, strengthen labor
inspection systems, and strengthen alternative dispute
resolution and mediation systems.


8. (SBU) The project also includes strengthening the labor
inspection system by working with all of the stakeholders.
Improving labor relations in both the public and private
sectors will reduce economically and politically costly work
stoppages. These events tarnish Nicaragua's image as a good
place to invest. They also have the potential of derailing
government efforts to open the economy by enhancing the
political capital of anti-trade and anti-U.S. forces in the
country. On the other hand, good labor relations with more
predictable outcomes can send a positive message to potential
investors and increase jobs and benefits for workers. The
estimated cost is $500,000 over two years. Local
counterparts have expressed their satisfaction with the
current project and the need to expand it. The training and
other activities in this project will receive positive media
attention for US efforts to both protect workers' rights and
help attract new jobs, higher incomes and better working
conditions.
TRIVELLI