NICARAGUA: COMMENTS ON PROPOSED THIRD OPIC FINANCING FOR

UNCLAS MANAGUA 002456

SIPDIS

SENSITIVE
SIPDIS

STATE PASS OPIC FOR ZHEN HAN
USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN
3134/ITA/USFCS/OIO/WH/MKESHISHIAN/BARTHUR

E.O. 12958: N/A
TAGS: EINV ECON NU
SUBJECT: NICARAGUA: COMMENTS ON PROPOSED THIRD OPIC FINANCING FOR
BANCENTRO S.A.

REF: A. STATE 150812; B. MANAGUA 2185


1. (U) Summary: Ref A seeks post's comments on housing in Nicaragua,
Bancentro, and Bancentro owner Roberto Zamora in regard to a
proposed OPIC direct loan of $7 million to Bancentro to finance
housing mortgages for Nicaraguans affected by Hurricane Felix. Many
Nicaraguans, especially among the 50% who live in poverty, lack
adequate housing. Fitch Ratings grades Bancentro's long-term risk
at A, but the bank faces possible financial repercussions related to
acquisition of nonperforming assets in a 2001 liquidation of failing
banks. Post has no derogatory information on Roberto Zamora or his
family members. End Summary.


2. (U) Ref A seeks post's comments on housing in Nicaragua,
Bancentro, and owner Roberto Zamora in regard to a proposed OPIC
direct loan of $7 million to Bancentro to finance housing.


3. (U) Many Nicaraguans, especially among the 50% who live in
poverty, lack adequate housing. According to Nicaragua's 2005
housing census, there is a deficit of more than 600,000 units; this
deficit is growing by 28,000 units per year. Approximately 70% of
this deficit is housing for low-income Nicaraguans who seek less
expensive houses. Most of these low-income buyers would require
long-term, low-interest mortgages to purchase housing. Exacerbating
the housing deficit, in September Hurricane Felix destroyed 10,145
houses and damaged another 9,057, primarily in the impoverished
Northern Atlantic Autonomous Region (RAAN),the region targeted by
this proposed OPIC financing. On these development grounds, we
strongly support this proposed OPIC loan.


4. (SBU) Bancentro, founded in 1991, is one of seven privately owned
banks operating in Nicaragua. The Superintendency of Banks reports
that Bancentro is in good standing. In October 2007, Fitch Ratings
reaffirmed Bancentro's long-term risk as A and short-term risk as
F1. Fitch also graded Bancentro's outlook as "stable." According
to Fitch, these ratings reflect Bancentro's "solid position in the
market, improvements in the quality of [its] loan portfolio . . . an
extensive depositor base . . . and a varied income base."


5. (SBU) In 2001, Bancentro was one of several banks that
participated in the liquidation of four failing banks. The Central
Bank gave Bancentro $40.8 million in Negotiable Indemnification
Certificates (CENIs) to compensate Bancentro for nonperforming
assets assumed from Banco Mercantil. At the time of the
transaction, Eduardo Montealegre, currently leader of the opposition
National Liberal Alliance (ALN) party, was Bancentro's general
manager and a shareholder. When Montealegre became finance minister
in 2003, he resigned and sold his shares. The Office of the
Controller General -- run by loyalists of convicted felon and former
president Arnoldo Aleman -- has since accused Montealegre of
benefiting from the deal. [Comment: We view this as an attempt to
slander Montealegre for political purposes. End Comment.] Some
economists and politicians have called for a moratorium on Central
Bank CENI payments to redirect budget resources toward Hurricane
Felix recovery efforts. However, Central Bank President Antenor
Rosales has categorically stated that the Central Bank will continue
to make payments. Ref B provides additional information on this
issue.


6. (SBU) Post has no derogatory information on Roberto Zamora or his
family members. In the eyes of the public, his bank is identified
with the ALN. However, Mr. Zamora maintains relations with many
Nicaraguan political leaders, including President Ortega of the
FSLN.

TRIVELLI