CHECKBOOK DIPLOMACY? TAIWANESE PRESIDENT VISITS

C O N F I D E N T I A L SECTION 01 OF 05 MANAGUA 002169

SIPDIS

SIPDIS

STATE FOR WHA, WHA/CEN, WHA/EPSC AND IO/UNP
STATE ALSO FOR EAP/TC--HART, BREMNER AND TOYROLYA
TREASURY FOR SARA GRAY
USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN
3134/ITA/USFCS/OIO/WH/MKESHISHIAN/BARTHUR
SOUTHCOM FOR POLAD
PACOM FOR POLAD

E.O. 12958: DECL: 09/20/2017
TAGS: PREL EAID ECON PGOV ETRD EINV ENRG TW NU
SUBJECT: CHECKBOOK DIPLOMACY? TAIWANESE PRESIDENT VISITS
NICARAGUA

REF: A. TEGUCIGALPA 1449 (NOTAL)


B. MANAGUA 1783 (NOTAL)

C. MANAGUA 1865 (NOTAL)

Classified By: Ambassador Paul Trivelli for reasons 1.4 b&d.


1. (C) Summary: On Aug 26-28, President Chen Shui-ban of
Taiwan visited Nicaragua as part of an effort to retain
Nicaragua's diplomatic recognition of his country. For the
Nicaraguans, the visit was an opportunity to secure more
assistance and foreign investment. Throughout the visit,
Chen repeatedly praised Ortega, calling him "brother" on more
than one occasion. While amounts as large as USD 400 million
were bandied about during the visit, in reality Taipei has
agreed to provide Nicaragua with support worth only about USD
830,000 for electricity generation, donations to a local
hospital, and support for the Hambre Cero anti-hunger program
-- all in exchange for continued diplomatic recognition of
Taiwan. In fact, the Taiwanese DCM has told us privately
that most assistance will be in the form of investment as
opposed to direct aid, and nowhere near the USD 400 million
that was reported in the press. Ortega used the discussion
of trade to criticize CAFTA, advocating again "fair trade vs.
free trade," and calling on the Taiwanese to engage in "fair
trade" with Nicaragua by providing technological and
financial assistance to improve the prices for Nicaraguan
goods overseas. Taipei views its relationship with Nicaragua
as the linchpin to retaining diplomatic recognition in
Central America and the Caribbean, as evidenced by Chen's
four official visits to Nicaragua since taking office.
However, the Ortega-Chen relationship is not an easy one for
Taipei, due primarily to Ortega's far left political
inclinations. Nonetheless, Chen tolerated the Sandinista
spin on the visit and assistance promises in order to secure
the precious fruit of continued diplomatic recognition. End
Summary.

Chen and Ortega- Best Buddies
--------------


2. (U) On Aug 26-28, President Chen Shui-ban of Taiwan
visited Nicaragua with an 88-member public-private
delegation. This is Chen's second visit in 2007 (he came for
Ortega's inauguration) and his fourth visit since his own
inauguration in 2000. For Ortega the visit affirmed current
Taiwanese assistance and commercial ties and presented new
ways to expand the relationship. For Chen the visit
reinforced Taipei's keen desire to retain diplomatic status
with Nicaragua and offered an opportunity to lobby for
support for Taiwan's petition to join the UN. The two
presidents signed a joint communique which reaffirmed their
friendship and cooperation; reiterated the importance of
continued investment by Taiwan in Nicaragua; promoted the
signing of a "fair trade" agreement; and recognized the high
value of democracy and the necessity of people to play an
active role in strengthening and deepening democracy.


3. (U) Throughout his visit, President Chen repeatedly
praised Ortega's achievements in improving education and
health and working to end poverty and illiteracy, and stated
he had "much to learn" from Ortega. He added that only
Ortega could "bring peace, work, and hope so that the people
may see progress and never suffer from hunger." Calling
Ortega his "brother," Chen pointed out that both men began
their careers studying law, then entered their countries'
respective revolutionary or democratic movements, and served
prison terms as political prisoners.

Taiwan's Diplomatic Priorities: Nicaragua, a linchpin
-------------- --------------


4. (SBU) Chen's effusive praise of Ortega was part of
Taipei's concerted effort to keep secure Nicaragua's
long-standing diplomatic recognition of Taiwan, a status
widely considered in jeopardy following Costa Rica's recent
official recognition of the People's Republic of China (PRC).
(Note: Taiwan closed its embassy in Nicaragua for ten years
during the 1980s. End note.) Both of Chen's 2007 visits have
tried to counter Ortega's campaign promises to return to full
diplomatic relations with the PRC. Throughout this visit,
Chen publicly repeated Ortega's affirmation of Nicaragua's
commitment to Taiwan. Ortega kept his options open, saying
that he hopes to establish formal diplomatic relations with
both the PRC and Taiwan, as Nicaragua should be able to
establish diplomatic relations with any country without
conditions. Chen supported the idea, saying that it would be
a great contribution to the diplomatic world -- indeed worth
y of a "Nobel Peace Prize" -- if Ortega could achieve dual
recognition.


5. (C) According to Taiwanese DCM, Ismael Wang, Taipei sees
Nicaragua as a linchpin in the region now that Costa Rica has
"switched sides." Wang told us that the Taiwanese fear that
if Nicaragua were to switch recognition to the PRC, it would
set off a domino effect among the other Central American and
Caribbean countries that currently recognize Taiwan. As
such, Wang said, "this is a matter of basic survival for the
Taiwanese," a fact that he said the U.S. does not appreciate
enough. In fact, during his visit, in the local press Chen
accused the PRC of trying to bribe Costa Rica with USD 400
million in assistance and investments to break off ties with
Taiwan.


6. (U) Chen was less successful in his visit's second
objective, to gain public Nicaraguan support for Taiwan's
petition to be granted UN membership. Chen stated publicly
that he believed Nicaragua will support the bid. However,
Ortega's only public statement was that he supported Taiwan's
proposed March 2008 referendum on its membership application.
He added that Nicaragua would make a decision based on the
result of the referendum. Chen insisted that privately,
Ortega had promised his support for Taiwan's UN bid.

What Nicaragua Gets in Return
--------------


7. (U) Throughout the visit, GON officials and media press
reports bandied about several amounts of promised Taiwanese
assistance. One report touted USD 1.1 million in financial
aid to fight poverty. Another claimed the two countries had
inked an assistance deal worth USD 400 million to cover
infrastructure, energy, environment, and education. Minister
of Health Maritza Quan requested USD 38 million in assistance
to improve the conditions in all of Nicaragua's health care
system, which the press claimed Chen promised to study
seriously.


8. (U) In contrast, actual deliverables for the visit were
quite slim. As soon as Chen arrived on August 26, he
traveled straight to Matagalapa for a rally at a Hambre Cero
site ("Hambre Cero," or Zero Hunger, is Ortega's signature
poverty reduction initiative; see Ref B (NOTAL)). There Chen
handed out 600 radios and ear-temperature thermometers to
program recipients, which during his remarks Ortega valued at
USD 1.1 million. In a separate ceremony on August 27, Chen
gave USD 30,000 for the purchase of new equipment to the
directors of the Roberto Calderon Hospital, the busiest in
the country.


9. (U) The Taiwan also promised to help Nicaragua acquire
power generators. Again, the GON and Taipei versions of this
assistance varied. The Nicaraguans claimed Taipei would
provide USD 30 million, but Chen said the two countries need
to decide on the make and model of generator before they
could discuss monetary terms. Taipei also pledged to look at
the feasibility of helping Nicaragua develop alternative
energy sources such as biomass.


10. (C) After the visit, Taiwanese DCM Wang told us that "not
a single cent" had actually been committed. Wang said the
value of Taipei donations, including the medical equipment,
electrical generation capacity and a grain seed donation to
Hambre Cero that was not reported publicly, was actually
closer to USD 830,000. With a wry smile, he said he had no
idea where the public figure of USD 400 million had come
from, and asserted that it would be impossible for Taipei to
actually come up with USD 400 million in direct assistance
just for Nicaragua. Noting that Taipei's general preference
was for assistance through direct investment, he said that
Taiwanese were still in talks with GON officials as to the
details. He confirmed that Nicaraguan FM Santos was expected
to visit Taiwan for October 10 National Day celebrations and
the aid package details would be worked out at that time.


11. (U) In response to criticism from home, Taipei
representatives stated that Chen did not engage in checkbook
diplomacy, as all of the assistance programs discussed during
the visit were part of established assistance programs. In
fact, Taipei has an a record of generous assistance to
Nicaragua. For example, it was one of the first countries to
deliver assistance after Hurricane Mitch, and it built
Nicaragua's Foreign Ministry, former Presidential Offices,
and National Assembly building in Managua.

The Private Sector May Derive More Benefits
--------------


12. (C) Taiwanese DCM Wang stated that most Taiwan assistance
will be in the form of investment as opposed to direct aid.
With investment, Taipei hopes to obtain a win-win situation
by creating employment for Nicaraguans as well as the
possibility of Taiwanese businesses actually getting some
return on their investment. Taipei is also hoping to get
Taiwanese state-affiliated enterprises such as Taiwan
Electric directly involved as well.


13. (U) Trade and investment are already the most fruitful
areas for Nicaragua-Taiwan cooperation. Two-way Nicaragua
and Taiwan trade was USD 21.6 million in 2006. Principal
imports from Taiwan included textiles, zippers (for the
maquila assembly factories),electronics, kitchenware,
plastic products, and knitwear. Nicaragua's top exports to
Taiwan were frozen beef, coffee, scrap metal, timber and
cotton fabrics. There are 21 Taiwanese firms generating
30,000 jobs in Nicaragua. Taiwan and Nicaragua have
negotiated a Free-Trade Agreement, which the Nicaraguan
National Assembly has already approved. However, the GON has
not published the FTA in the "Gaceta," the local equivalent
of the Federal Register, because it claims to lack the USD
5,000 to do so. Thus, the FTA has not been actually enacted.



14. (U) During the visit, Ortega called on Nicaragua and
Taiwan to implement the concept of "fair trade," so that
small countries can benefit as much as large ones. He
proposed the establishment of mixed enterprises, with
Taiwanese technological, financial, and investment support,
so that Nicaraguan products can fetch better prices. He
asked Taiwan to diversify investment out of maquilas and
focus on long-term investments in agriculture and animal
husbandry.


15. (U) Ortega also used any opportunity or conversation
regarding trade to rail against CAFTA. Focusing on his new
theme of fair trade vs. free trade, Ortega said "fair trade
does not leave you hanging when they want to; that is free
trade, it leaves you hanging when you least expect it."
Harping on a recent U.S. congressional proposal to impose a
tax on cigars to fund health insurance for children (Ref C),
Ortega added that "CAFTA is an unfair trade exchange, as when
the U.S. wants it bans entry of products to its territory and
slaps taxes on them, as in the most recent case with
Nicaraguan cigars. Nicaragua lacks the force to respond to
the U.S." Ortega recognized that in "other areas Nicaragua
is placing products in the U.S., which benefits the country."
But in the next breath he said "but one has to keep placing
them, to continue fighting. Each time I speak with the
representatives of the USG I tell then that they have to
change this concept of free trade for fair trade."

Dealing with the Sandinistas
--------------


16. (C) According to Taiwanese DCM Wang, the Ortega-Chen
relationship is not an easy one for the Taipei, as they see
Nicaragua's "leftist government" as more naturally aligned
with the PRC than with Taiwan. He suggested that Taipei must
adapt to the "new Nicaraguan way of doing things," pointing
out that President Chen purposely did not wear a suit jacket
to appeal more to Sandinista sensibilities. The atmospherics
for the trip surely made Chen uncomfortable at times. Ortega
and his wife, Rosario Murillo, used several events to fly the
leftist flag. During the August 26 rally in Matagalpa,
Ortega, Murillo, and Chen took to the stage together
accompanied by several socialist militant songs including
"The Internationale," "The People United," and "Nicaragua
will Triumph."


17. (C) Wang advised that the development of deep personal
relationships with key officials is of utmost importance when
dealing with the Sandinistas, especially individuals such as
first lady Rosario Murillo. He pointed out that, unlike many
other foreign missions, the Taiwan mission has managed to
maintain direct, easy, and high level access to all GON
ministries as a result of the personal relationships it has
cultivated across all levels of FSLN leadership. When asked
about Taiwan's previous loss of recognition during the first
Ortega Administration, Wang said that the Sandinistas had
actually cut off relations with Taiwan in retaliation for
Taipei's support for the Contras ) support that the U.S. had
"forced" Taipei to give.

Comment
--------------


18. (C) The Taiwanese are obviously uncomfortable with and
wary of dealing with the Sandinistas. However, they see the
maintenance of their relationship with the FSLN as a matter
of national security as well as diplomatic survival and are
thus willing to "endure the unendurable" to secure the
precious fruit of continued diplomatic recognition. Given
the proven mercurial tendencies of the Sandinistas and of
Ortega himself, their natural leftist leanings, and the fact
that China is now able to offer much richer awards than
Taiwan, our assessment is that the Taiwanese may be
overconfident in their ability to influence the Sandinistas.

BIO NOTES:


19. (C/NF) Ismael Wang: Taiwan Embassy DCM, married with two
children (both currently attending Purdue University). Wang
has served in Managua for six years, and was in Costa Rica
for six years before his current assignment. He has also
previously served a six-year tour in Spain. Wang plans to
return to Taipei in six months and is considering retirement
from the Taiwan foreign service. Wang speaks fluent Spanish,
Mandarin Chinese, Taiwanese, and most likely speaks English
at a professional level.
TRIVELLI