NICARAGUAN REGIONAL REPORTING--SOCIAL AND ECONOMIC

UNCLAS MANAGUA 000609 SIPDIS SENSITIVE SIPDIS DEPARTMENT FOR WHA/CEN E.O. 12958: N/A TAGS: SOCI ELAB ECON EFIN KIRF SMIG NU SUBJECT: NICARAGUAN REGIONAL REPORTING--SOCIAL AND ECONOMIC ISSUES: ESTELI AND MADRIZ REF: A. MANAGUA 568 ¶B. MANAGUA 578 ¶1. (SBU) SUMMARY: During an elections reporting trip to the northwestern departments of Esteli and Madriz March 8-10 (reported in reftels),emboffs discussed a variety of economic and social issues with local leaders, including representatives of most major political parties, the Catholic Church, several non-governmental organizations, and local chambers of commerce and other business organizations. These conversations paint a picture of neighboring departments that share some common challenges, but that otherwise are heading in opposite directions. Both suffer from poverty and unemployment, but Esteli has experienced significant growth and economic diversification in recent years, while Madriz remains among the poorest parts of the country, survival a daily struggle. END SUMMARY. RELATIVELY PROSPEROUS ESTELI STILL HAS A LONG WAY TO GO - - - - - - - - - - - - - - - - - - - - - - - - - - - - ¶2. (U) Although Esteli suffers from high unemployment (estimated at approximately 25 percent by most interlocutors) and poverty levels like every other department in Nicaragua, the local economy is stronger and more varied than that in many other regions, including that of neighboring Madriz. The city of Esteli, the departmental capital, is only a two-hour drive from Managua on a good road. Foreign investors, mainly from the U.S., have developed a strong tobacco cultivation/cigar production sector, much of which operates under free trade zone status, and produces 17,000 cigars per day. ¶3. (U) Esteli also boasts a strong ranching sector (employing 50,000 people) consisting of small and medium producers seeking to move beyond production for regional consumption and exploit national and international markets for meat and dairy products. The department has a solid commercial sector, concentrated in the capital, with over 7000 different businesses operating. Good roads, decent infrastructure and hotels in the capital, and the accessibility of a variety of nature reserves are also attracting increasing amounts of visitors and tourism investment. Small scale production of coffee, vegetables and basic grains (the latter mostly for subsistence) rounds out the departmental economy. ¶4. (SBU) Perfecto Rodriguez, head of the Esteli Rancher's Association, told emboffs that the positive economic trends are bounded by several factors. The fear of a Sandinista victory in the November national elections limits investment, and sows fears of new land and property seizures. According to Rodriguez, some of the rural poor are so certain that the Sandinistas will return to power that they have already stopped working and are waiting for the FSLN to take office and begin handing out seized property and businesses once again. Rodriguez and other local leaders also reported that delinquency and thievery have grown significantly in the department in recent years, forcing ranchers and others to spend resources on security that might otherwise be used to increase production. In both Esteli and Madriz, the illegal cutting of trees is also common, and is increasingly carried out by organized criminal networks with political connections. ¶5. (SBU) Both Rodriguez and Sergio Padilla, the head of the Esteli Chamber of Commerce, reported that the lack of low interest agricultural development loans or micro-credits for small businesses significantly dampens economic growth in Esteli. However, even with the limited growth that is occurring, both stated that Esteli is gradually becoming a major economic center for northern Nicaragua, having overtaken Matagalpa and closing on Leon. Even in relatively prosperous Esteli, feelings of neglect by the GON are widespread, and most interlocutors believe that the department has progressed despite the government, not because of it. ¶6. (U) The continuing lack of jobs leads many in Esteli to seek better opportunities abroad. Local leaders stated that Costa Rica, rather than the U.S., is increasingly the destination of choice because it is closer, the trip is safer and less costly, and migrants are more likely to successfully reach their destination. Such emigration is reportedly most significant in rural areas and the smaller towns that lack the relative opportunities of the departmental capital. MADRIZ AMONG NICARAGUA'S POOREST DEPARTMENTS AND FOCUS IS OFTEN SIMPLY SURVIVAL - - - - - - - - - - - - - - - - - - - - - - - - - - - - ¶7. (U) Although Madriz is Esteli's neighbor immediately to the north, it is one of the poorest departments in Nicaragua. Most interlocutors described the region as either the poorest or the second poorest in the country. There are no accurate official statistics, but local leaders estimated at least 60 percent unemployment in the department; some offered unemployment numbers significantly higher. What jobs exist are primarily provided by the government (including teachers and health care workers),small-scale ranching, and subsistence agriculture (mainly rice and corn). A few artisans scrape by and others find seasonal work cutting coffee. The viability of the subsistence agriculture varies year by year depending largely on the amount of precipitation during the rainy season (roughly May through October). ¶8. (SBU) The private sector in Madriz is small, barely profitable, and provides few jobs. The free trade zones that have lowered unemployment rates somewhat in other departments in recent years are entirely absent in Madriz. With the exception of incipient efforts to develop the scenic Somoto canyon for visitors, tourism is similarly nonexistent. Poverty in some parts of the department is so extreme that malnutrition is not uncommon, and illiteracy is widespread. A 2004 study by the Ministry of Education found that 47.16 percent of elementary school children in Madriz suffered stunted growth due to malnutrition, the highest rate in the entire country. A significant portion of the population has gone abroad in search of employment, and many of those who remain depend on remittances and the international donor community for survival. Local (non-Sandinista) leaders allege that much of the international aid is channeled through NGOs sympathetic to the Sandinista party, and Sandinista mayors reportedly distribute such aid only to their voters. ¶9. (SBU) Although the GON has maintained one good road through the center of Madriz, with this one exception, feelings of abandonment by "Managua" (including both the GON and the two major opposition parties--the FSLN and the Liberal Constitutional Party) are widespread. Many people rightly regard the Managua leadership of both the major opposition parties as utterly corrupt and doubt whether any future government will actually do anything to improve local economic and living conditions. TRIVELLI