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
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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
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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