NICARAGUA: AMBASSADOR CALLS ON NEW MINISTER OF

C O N F I D E N T I A L MANAGUA 000194 SIPDIS SIPDIS WHA/CEN/GSCHIFFER, WHA/ESPC, EB/TPP/BTA, EB/CBA E.O. 12958: DECL: 01/22/2017 TAGS: ECON EAID EINV NU SUBJECT: NICARAGUA: AMBASSADOR CALLS ON NEW MINISTER OF FINANCE Classified By: AMB Paul Trivelli, Reason: E.O. 12958 1.4 (b) (d) ¶1. (SBU) Summary. In a January 22 introductory meeting with the Ambassador, newly minted Minister of Finance and Public Credit Alberto Jose Guevara Obregon sressed that the clear intention of the Ortega administration is to maintain macroeconomic stability. Guevara reported that he is talking to the IMF, World Bank, Interamerican Development Bank, among other institutions, about continuing programs. In his view, an IMF program is particularly important to send the right signals to international investors and donors. He said that the government has no plans to expropriate property, close off investment in sensitive sectors, nor to do anything that might damage the investment environment. Guevara assured the Ambassador that his Ministry will continue to work with the Embassy to resolve property expropriation cases from the 1980s, though it may "take a while to become acquainted with the cases." He expressed interest in USAID's program with the Ministry of Family on results-based budgeting, stating that improving ministry performance is his "number one priority." Throughout, Guevara reiterated the intention of the Ortega Administration to fulfill its promise to reduce poverty in Nicaragua. End Summary. ¶2. (U) On January 22, the Ambassador paid a courtesy call on new Minister of Finance and Public Credit Alberto Jose Guevara Obregon. The meeting was cordial and at the end staff took a photograph of the two shaking hands. Guevara commented that President Bush's telephone call on the eve of Daniel Ortega's inauguration was well-received. He said that his door is always open to address any topic that the Ambassador would like to raise. Guevara did not invite any staff to attend the meeting, and took his own notes. The DCM and Econoff attended. U.S. Assistance -------------- ¶3. (SBU) The Ambassador mentioned several areas where U.S. technical assistance intersected with the Ministry of Finance, including U.S. Treasury and USAID-sponsored technical advisories in the areas of debt management and taxation. In addition, USAID and nongovernmental organization ProNicass had worked with the Ministry of Family on results-based budgeting. This effort had oriented 50% of the ministry's budget toward achieving ministry objectives, up from 20%. The Ambassador said that USAID and ProNicass are willing to work with Guevara to help other ministries manage their resources better. Guevara took note of the technical advisories and the ProNicass program, adding that improving ministry performance is his "number one priority." Guevara also praised the U.S. Millennium Challenge Account model, commenting that it is one that Nicaragua should replicate. Property Claims -------------- ¶4. (SBU) The Ambassador stressed the need to resolve property claims stemming from expropriations that took place in the 1980s. While the number of cases had been reduced from around 4500 to less than 700, it is still necessary to finish the job. The Ambassador handed over a list of high profile cases nearing completion. Guevara assured the Ambassador that his Ministry will continue to work with the Embassy to resolve outstanding claims, "though it may take a while to become acquainted with the cases." Economic Policy -------------- ¶5. (SBU) After the events following President Ortega's inauguration, where Ortega signed a series of political and economic agreements (still not publicly available) with Venezuelan President Hugo Chavez, Bolivian President Evo Morales, Cuban Vice President Jose Ramon Machado Ventura, and then Iranian President Maumoud Ahmadinejad, the Ambassador noted that U.S. investors had begun questioning what sort of economic model the new government plans to pursue. Guevara stressed that the overriding objective of the Ortega administration is to reduce poverty. As a poor country, Nicaragua is open to any investment that would help to develop the country. In this vein, the government's clear intention is to maintain macroeconomic stability and a sound investment climate. Guevara said that he is talking to the IMF, World Bank, Interamerican Development Bank, among other institutions, with respect to continuing programs to ensure macroeconomic stability. In particular, he noted the importance of maintaining an IMF program as a way of signaling to investors and donors that the Ortega administration is not contemplating a break with the past. ¶6. (SBU) Guevara added that the Ortega government has no plans to expropriate property (as in the 1980s) nor do anything that will damage the favorable investment climate that currently exists. In answer to a question as to whether the government is thinking about limiting foreign investment in sensitive sectors, such as energy or coastal property, Guevara hesitated a moment before saying that "Nicaragua is not going to shut the door on anyone ( (nor) obstruct investment in any sector." The Ambassador pointed out that Nicaragua's weak judicial system and corruption continue to negatively influence investor perception of the country, and that these areas need attention. Guevara responded that the government is working in this direction, but offered no specifics. Guevara's Bio -------------- ¶7. (U) Guevara's official curriculum vitae is not yet available. However, we understand that he holds two Masters Degrees from the National University of Nicaragua, one in Economics and Development and the other in Public Finance. At one point during his academic career, he received a scholarship from the Interamerican Development Bank to attend the Pontifical Catholic University of Chile, where he completed a course in macroeconomics. More recently, Guevara worked at the Central Bank, where he concentrated on debt sustainability, national income accounting, and statistical programs for the management of information systems. Comment -------------- ¶8. (C) We are unsure about Guevara's ability to manage the Ministry of Finance, as he appears to lack managerial and political experience. While we are encouraged by his openness, we see the meeting in terms of what appears to be a dual communications strategy. By keeping distance and criticizing the United States in public, the Ortega Administration retains its revolutionary stature at home and in the region. By pursuing a moderate economic policy course and programs with international financial institutions, the Ortega Administration placates investors and avoids alienating donors. Viewed in this context, Guevara may simply have been following orders rather than expressing his own views. Still, promises and expectations of the Sandinista faithful, combined with inherent contradictions and jitters created by the administration's foreign policy alliances, may make it difficult for Guevara to maintain the macroeconomic stability and fiscal responsibility he seeks. TRIVELLI