NICARAGUA: AMBASSADOR CALLS ON NEW MINISTER OF

UNCLAS MANAGUA 000355

SIPDIS

SENSITIVE
SIPDIS

STATE PLEASE PASS TO USTR/AMALITO
DEPT FOR WHA/CEN, WHA/EPSC, EB/TPA

E.O. 12958: N/A
TAGS: ETRD EINV EAGR WTO MCC PINR NU
SUBJECT: NICARAGUA: AMBASSADOR CALLS ON NEW MINISTER OF
TRADE AND INDUSTRY


1. (SBU) Summary. In a cordial introductory meeting with new
Minister for Development, Trade, and Industry Horacio Manuel
Brenes Icabalceta, the Ambassador touched on CAFTA and U.S.
trade capacity building programs, the Millennium Challenge
Account, and WTO trade issues. Also discussed were recent
statements made by President Ortega and the toll that
corruption took on the poor. Brenes observed that the
impression that some have of Ortega's views is somewhat
distorted. The government's public discourse, he explained,
does not always agree with its actions -- Nicaragua was not
preparing to return to the 1980s. "Everybody knows," he
stated, "that if we do not maintain (macroeconomic
stability),nothing will happen." Nicaragua "had already
tried socialism," he explained, "and it did not work." On
the subject of corruption, Brenes became animated, stating
that corruption was why he had left Arnoldo Aleman's PLC.
Brenes feels that Nicaragua needed to educate itself away
from a culture of corruption. End Summary.


2. (SBU) The Ambassador called on new Minister for
Development, Trade, and Industry Horacio Manuel Brenes
Icabalceta on January 29. In a cordial introductory meeting
lasting less than one hour, the Ambassador touched on CAFTA
and U.S. trade capacity building programs, the Millennium
Challenge Account, and WTO trade issues. Also discussed were
recent statements made by President Ortega and the toll that
corruption took on the poor. From a policy perspective,
Brenes did not go into depth on any of these subjects. No
other Ministry of Development, Trade, and Industry (MIFIC)
official attended.

CAFTA
--------------


3. (U) The Ambassador explained that much what the U.S.
Mission does in Nicaragua revolves around helping Nicaraguans
take advantage of opportunities that the U.S.-Central
American Free Trade Agreement (CAFTA) has to offer. The
Ambassador pointed out that this activity reflects the fact
that CAFTA is the basis of our bilateral economic
relationship. The Ambassador described some of the trade
capacity building efforts in which the Mission was engaged.
Through ProCAFTA, for example, USAID is working with MIFIC to
encourage bilateral trade and investment, promote a
public-private dialogue on development priorities, and help
Nicaraguans meet international norms and standards to
facilitate trade. The U.S. Department of Agriculture is
working with Nicaraguan officials to help farmers and
ranchers meet U.S. food and health standards, so that they
may sell their products to the United States. The Millennium
Challenge Corporation is working with MIFIC to unlock the
regional potential of the departments of Leon and Chinandega,
including constructing roads and developing regional
processing and marketing channels to U.S. and other
international markets. The U.S. Trade and Development Agency
is funding $750,000 worth of feasibility studies on expanding
cargo services at the Port of Corinto and Managua
International Airport. Each of these programs reflects our
desire to help Nicaragua take advantage of the opportunities
that CAFTA has to offer.

Millennium Challenge Account
--------------


4. (U) The Ambassador told Brenes that he is optimistic about
opportunities that CAFTA, the Millennium Challenge Account,
and rising investment flows presented to Nicaragua. Trade
and investment is creating real jobs and raising Nicaraguan
productivity. The Ambassador added that he would soon be
visiting Leon to see a Mexican-Japanese plant assembling
electrical wire harnesses for Ford Motor Company. The plant
represented the type of investment that can take place within
the context of globalization -- the kind that the Millennium
Challenge Corporation (MCC) wants to attract and that might
someday find its way to Matagalpa, the minister's home
department. Matagalpa borders MCC's region; and Brenes
seemed to be well aware of what was going on in the
neighboring departments of Leon and Chinandega.

Ortega's Economic Policy
--------------


5. (SBU) The Ambassador asked Brenes about some of the points
that President Daniel Ortega made during his meeting with the
diplomatic corps on January 26. Ortega seemed to be
questioning the value of private participation in the
telecommunications and power sectors, lamenting the prospect
of negotiating a program with the IMF, and regretting that
the country would have to pay $100 million this year on bonds
issued to indemnify property confiscations of the 1980s.
Ortega also spoke on the failures of "neo-liberalism," as if
no progress had been made during the past fifteen years.


6. (SBU) Brenes replied that the impression that some have of
Ortega's views is somewhat distorted. The country has taken
"some severe blows" over the years, sometimes devastated by
earthquakes and hurricanes, and at other times by war and
politics. Brenes highlighted the corruption of former
president Arnoldo Aleman. He claimed that 80% of the
population had not been adequately represented in decisions
taken in Managua. However, Nicaragua "had already tried
socialism," he said, "and it did not work." The government's
public discourse, he explained, does not always agree with
action; Nicaragua was not preparing to return to the 1980s.
"Everybody knows," he declared, "that if we do not maintain
(macroeconomic stability),nothing will happen." In fact, he
stressed, "If there were something more I could do to
preserve macroeconomic stability, I would." Brenes continued
to say that he believes in free enterprise and wanted to see
it work for Nicaragua. For this reason, he planned to work
closely with the small and medium enterprise institute, which
reported to his ministry. He pointed out that small and
enterprise covers 70% of the "masses."

Corruption
--------------


7. (SBU) Brenes, who was soft spoken throughout most of the
meeting, became animated on the subject of corruption. He
said that corruption was why he had left the PLC. "Aleman
acts like he is the owner the party," he said. Brenes then
recounted that, at one point during the last election
campaign, Brenes approached Aleman to tell him that he was
"killing the party." After that, Aleman tried to approach
Brenes through an intermediary, the first and last of whom
Brenes summarily rebuffed. Brenes recalled a lecture he once
had at INCAE. The professor walked into the classroom asking
the class, "What is the problem with Latin America?" At the
end of the discussion, the professor paused to say, "The
problem with Latin America is corruption," and with that, he
walked out of class. Brenes reasoned that Nicaragua does not
just need to produce more, but also needs education (i.e., to
change the culture of corruption). The Ambassador suggested
that perhaps the American Chamber of Commerce should invite
the Minister to lunch to discuss these issues. The chamber
is quite engaged on the subject of ethics, transparency, and
corporate responsibility.

WTO Trade Disputes
--------------


8. (SBU) The Ambassador mentioned Ecuador's November 2006
request for WTO consultations on the European Union's new
import regime for bananas. The United States has joined as a
third party, but wondered if Nicaragua had missed the window
to join. Brenes responded that he has only recently become
aware of the case, but seemed to know that in the past
Nicaragua had supported Ecuador. He recognized the potential
for Nicaragua to increase its banana/plantain production to
historical levels.


9. (SBU) Brenes knew a bit more about peanuts. Nicaragua's
interest in peanut exports has caused it to join Canada's
request for WTO consultations on U.S. agricultural subsidies.
Specifically, Nicaraguan peanut producers, who are producing
increasing quantities of the product, are quite worried that
sales of U.S. subsidized peanuts are adversely affecting
Nicaraguan peanut sales to Mexico. The Ambassador noted that
Nicaragua did not come close to filling its U.S. tariff rate
quota under CAFTA, but that exports of peanut oil and other
value added products have been rising. The Ambassador
suggested that perhaps Nicaragua should look for ways to add
more value to the product before exporting it. Brenes agreed
that this idea had some merit. Note: On January 30, Brenes
penned a letter to the Ambassador stating that Nicaragua had
petitioned to join Canada's request for consultations as a
consequence of U.S. peanut subsidies.

Biography: Horacio Manuel Brenes Icabalceta
--------------


10. (SBU) Horacio Brenes is a 57-year-old businessman from
Matagalpa who became increasingly active in business
associations and politics in Matagalpa during the past ten
years. In 1995, Brenes helped found the Pro-Matagalpa Trade
Fair Committee, which by 1998 had transformed into the
Foundation for the Development of Enterprise in Matagalpa
(FUDEMAT).


11. (SBU) Brenes entered politics in 1996, when he ran for
mayor of Matagalpa. In his first campaign, he ran on an
independent ticket called Matagalpa 2000. He was defeated by
the PLC candidate. In his second campaign, he ran on the PLC
ticket for mayor of Matagalpa in 2000. He was defeated by
FSLN candidate Sadrach Zeledon. Nevertheless, Brenes earned
a seat on the City Council and began working with Zeledon.
In a unity pact, the two pledged to "work for the good of
Matagalpa." In his third campaign, Brenes again ran for
mayor of Matagalpa on the PLC ticket. This time he lost to
FSLN candidate Nelson Artola. Remaining a member of the City
Council, Brenes continued to work with Artola as he had
Zeledon until Brenes left to become Minister of Development,
Industry, and Trade.


12. (SBU) It appears that Brenes first identified himself as
a supporter of FSLN presidential candidate Daniel Ortega in
August 2006. Brenes was one of a group of liberals who
joined the FSLN's campaign for unity in a series of town
meetings held in Matagalpa and Boaco in support of candidate
Ortega. Ortega's wife and campaign manager, Rosario Murillo,
organized these campaigns and it is this relationship which
may have led to his appointment as minister.


13. (SBU) Brenes attended the Central American Institute for
Business Administration (INCAE),a well-known business school
Latin America with campuses in Managua and San Jose, Costa
Rica. Brenes told us that he also studied at Louisiana State
University for three years in the late 1960s. Brenes is
married to Tamara Hawkins, whose grandfather came from
Boston. He has four children, two boys and two girls. Two
of his children attend university in Florida.


14. (U) Post is still awaiting Brenes' official biography.
TRIVELLI