ORTEGA ACTIONS TEST TRIPWIRES

C O N F I D E N T I A L SECTION 01 OF 04 MANAGUA 000357

SIPDIS

SIPDIS

WHA A/S THOMAS A SHANNON, WHA/CEN

E.O. 12958: DECL: 02/07/2017
TAGS: PGOV EFIN KDEM MARR NU PARM PINR PREL PTER
ECON
SUBJECT: ORTEGA ACTIONS TEST TRIPWIRES

REF: A. MANAGUA 329


B. MANAGUA 323

C. MANAGUA 268

D. MANAGUA 242

E. MANAGUA 241

F. MANAGUA 225

G. MANAGUA 182

H. MANAGUA 179

I. MANAGUA 177

J. MANAGUA 157

K. MANAGUA 155

L. MANAGUA 140

M. MANAGUA 106

N. 2006 MANAGUA 2611

Classified By: Ambassador Paul A. Trivelli. Reasons 1.4 (B,D).


1. (C) SUMMARY/INTRODUCTION: With less than one month in
office, President Daniel Ortega and Sandinista National
Liberation Front (FSLN) lawmakers have already touched off a
number of our tripwires and placed opposition parties and
civil society, international financial institutions (IFIs),
and much of Nicaragua's democratic-leaning diplomatic
community on the alert (Reftels). While Ortega's actions
probably are partially attributable to disorganization and
inexperience, he also appears bent on gaining total control
over Nicaragua's powers of state and the national budget. We
expect the Nicaraguan government (GON) will continue to test
at every opportunity to determine just how far it can go
without being blocked by the opposition in the National
Assembly or by foreign leverage. Despite these warning
signs, however, opposition parties and civil society have yet
to raise the alarm, while much of the private sector does not
yet appear willing to challenge Ortega so long as he does not
infringe upon their business interests.


2. (C) Our primary bilateral objectives are to protect U.S.
citizens and their interests; keep Nicaragua on a just,
democratic, market economy path; ensure the GON's foreign
policies do not endanger our interests; and, obtain Ortega
government cooperation in combating arms, narcotics, and
people trafficking/smuggling. To this end, we are exploring
ways to help our Nicaraguan friends, and where appropriate,
encourage Nicaragua's neighbors and other international
actors to help keep Nicaragua on course. Over the next weeks
and months, we will continue to engage the new government,
use our leverage when appropriate, and encourage opposition
sectors to find common ground and purpose -- an essential
front to contain Ortega's inclinations towards
authoritarianism. We are forwarding a more detailed matrix
to the desk. END SUMMARY/INTRODUCTION.

PROTECTING U.S. CITIZENS AND INTERESTS
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3. (C) Our paramount objective is protecting U.S. citizens
and their property and investment interests in country, as
well as the mission's locally engaged staff (LES). Tripwires
include the systematic legal or administrative harassment of
our diplomatic mission employees including LES, and/or other
U.S. citizens; an unjustified or inexplicable slow-down in
resolution of outstanding property cases, increased
resistance to resolving them, or new property seizures; and,
harassment/unjustified legal proceedings against, or taxation
of, U.S. firms, or seizures of company assets.


4. (C) Thus far, we have not seen indications that the GON
is engaged in systematic harassment. Indeed, the Ortega
government appears to understand that it cannot cross these
red lines. According to Nicaraguan Ambassador-designate to
the United States, Arturo Cruz, President Ortega is closely
following a highly visible legal case involving U.S. citizen
Eric Volz (Ref. A) and is intent on ensuring Volz' rights are
protected.

ENSURING GON MAINTAINS SOUND ECONOMIC POLICIES, FREEDOMS
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5. (C) Our economic objectives vis-a-vis Nicaragua include
the following: GON maintains sound macro-economic policies;
GON maintains free floating currency with no restrictions on
the repatriation of profit for foreign companies; the
national budget reflects sound management of resources and

MANAGUA 00000357 002 OF 004


increases transparency in the administration of spending
programs; Nicaragua renews the IMF agreement; Nicaragua
remains in CAFTA and derives significant benefits; GON
maintains a significant role for the private sector in the
energy and telecom sectors; GON fosters transparency and
justice through commercial law and investment.


6. (C) The GON's announcement late January that it will
"consolidate" ministerial advertising budgets and manage them
through First Lady Rosario Murillo's Communications and
Citizenship Council violates Law 612 (which stipulates that
councils will have no part of the national budget and no
authority over the ministries) and appears to be Murillo's
ploy to control government messages, reward malleable media
outlets, and punish those who do not submit to
self-censorship. Airport and customs contacts tell us that
Ortega has instructed these entities to deposit their
revenues directly into a presidential "discretionary" fund,
thereby violating Law 550 on Budget Administration. (Note:
According to the IMF, they are being asked to significantly
increase the percentage of their revenues going to GON
coffers -- the presidential fund is a reality.) Ortega's
public criticism of the IMF raised some eyebrows, although
Central Bank President Antenor Rosales and Vice President
Jaime Morales have publicly clarified that
Nicaragua will seek an IMF agreement (Ref. B).


7. (C) While Ortega makes frequent reference to the need to
"adjust" CAFTA's "asymmetries," he has also requested
Ambassador-designate Arturo Cruz to provide him with evidence
that CAFTA works (Note: Embassy forwarded materials to Cruz
on February 5). However, the GON's talk of reviewing private
production in the energy and telephone sectors has caused
Victoria/Tona Brewery to abandon plans to consider entering
the energy sector. Also of concern are indications of FSLN
pressure on businesses to "toe the line" and contribute to
the party or lose legal status. Sources claim that following
the November election, Sandinista Chinandega and Leon mayors
met with major business leaders in those areas and implied
that business licenses might be "re-examined" if they did not
make donations to the Sandinista party.

ENSURE GON FOREIGN POLICY DOES NOT ENDANGER OUR INTERESTS
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8. (C) We reported previously our expectations that
President Ortega will maintain close ties with leftist allies
like Muammar Khadaffi, Fidel Castro, Hugo Chavez (Ref. N).
He will be especially vulnerable to Chavez and Khadaffi's
influence, as they both helped bankroll his campaign and
Chavez has promised the new government millions of dollars
through a number of development agreements. We will engage
the GON on any policies or actions that could endanger our
critical foreign policy concerns and interests, specifically
regarding Cuba, Venezuela, Central America, Iraq, Iran,
Libya, Israel-Palestine, North Korea, Taiwan, and China.
(Note: Nicaragua owes Libya $286 million in debt. Libya is
the largest non-Paris Club creditor. Negotiations to forgive
the debt have been unproductive so far. Iran holds $152
million of Nicaragua's debt, the fifth largest creditor.
While Iran has promised to look into forgiveness, no concrete
action has been taken thus far.)


9. (C) In this vein, Ortega's appointment of
Libyan-Nicaraguan Mohammad Lashtar as his personal secretary,
who will enjoy ambassadorial status and handle international
affairs, is disconcerting (Refs. D, K). Further, Iranian
President Ahmadinejad's visit to Nicaragua on the heels of
Ortega's January 10 inauguration, and Iran's and North
Korea's plans to open embassies in Managua rattled the
tripwires (Refs. F, M). An immigration official has warned
us that Cubans have started working in Nicaragua's
immigration offices. We have also heard that some 10,000
Cuban teachers and health workers are scheduled to assist the
new Ortega government with its efforts to improve these vital
social sectors. Likely, some of these workers will attempt
to indoctrinate their publics against the United States and
democracy. Additionally, we have received reports that
Venezuelan soldiers are in the North Atlantic Coast
Autonomous Zone (RAAN) in preparation for re-building the
Puerto Cabezas-Rio Blanco road (Ref. C). We will carefully
monitor these developments, assess their impact on our
interests and assistance programs, and engage GON officials

MANAGUA 00000357 003 OF 004


on these issues as appropriate.

ENSURE DEMOCRACTIC CONTINUITY, DEFEND BASIC FREEDOMS
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10. (C) While we believe the Ortega government is likely to
exercise more caution in setting off economic tripwires and
will step back if it meets resistance from the IFIs and
domestic and foreign investors, Ortega has already touched a
number of tripwires concerning Nicaragua's democratic
continuity and its protection of basic freedoms. Our
democracy and human rights objectives include the following:
GON maintains checks and balances in government powers; GON
protects basic freedoms/space, including freedom of
expression and assembly; education remains apolitical;
independent media functions unencumbered; domestic and
foreign cultural diversity respected; GON reforms civil
registry, voter roster (padron),and national ID issuance;
CSE professionalizes its functions to benefit equally all
Nicaraguans regardless of political affiliation; all eligible
citizens are allowed to vote.


11. (C) Only days following his inauguration, Ortega
hastened to ram through revisions to Laws 290 and 228
(covering the Executive's administrative authority and the
National Police, respectively),which would serve to
consolidate his power and establish new national councils
that would oversee ministries (Ref. E). Even before
proposing the revisions, the presidency issued a decree
granting these authorities. Although the final outcome --
Law 612 -- was less draconian than the original draft, the
new law consolidates somewhat the President's power.
Further, during the last week in January, the Ministry of
Finance announced that Murillo's Council will assume
oversight of all ministerial advertising budgets, in clear
violation of Laws 612 and 550. A few media outlets have
noted a decline in GON paid advertisements to
non-pro-FSLN/GON media and many fear censorship and a decline
in government advertising.


12. (C) While the Ortega government appears determined to
consolidate power, it also avoids transparency -- as
evidenced by the National Assembly's continuing reluctance to
pass a freedom of information bill, which would provide the
public information on government activities. On the other
hand, the Assembly has dragged its feet on revising the
section of the Assembly's Ways and Means Law allowing
legislative committees to summon domestic and foreign
residents for questioning on any topic and for any reason
(failure to comply could lead to a jail sentence). We have
also read that Sandinista-affiliated unions, like Fetrasalud,
are being instructed to refrain from striking and collective
bargaining, and were given a copy of a letter to this effect.


13. (C) The Minister of Education's announced plans to
"reform" curriculums and change textbooks and teaching
materials are also disturbing, as they suggest that the new
government may politicize Nicaragua's education system, akin
to the 1980s Sandinista era. The indication that Cubans will
send teachers for Ortega's literacy and education campaigns
lends credence to these concerns. The Ortega government's
decision to adopt a new official government seal that is
reminiscent of the Sandinista campaign mottos and colors as
well as their tendency to hold official state meetings at
Ortega's party headquarters/residence are evidence of the
GON's attempts to blur the divisions between party and state.

RULE OF LAW
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14. (C) Our priorities in the rule of law field include the
following: Judges are appointed based on merit, not
political affiliation; court sentences are non-partisan, not
swayed by bribery; civil servants' rights and continuity on
the job are protected; Liberal Constitutional Party (PLC)
henchman/felon Arnoldo Aleman is not released or pardoned;
and, court and other appointments are made according to
merit, not their pact association.


15. (C) According to Ministry of Government contacts,
employees have been summoned, required to explain their
programs, and then summarily instructed to submit their
resignation letters. In other cases, employees are given

MANAGUA 00000357 004 OF 004


additional work requirements and ordered to work long hours.
In the National Assembly, a number of advisors' contracts are
not being renewed. (Comment: In response to our suggestion,
the Assembly Labor Committee will review these cases.)

SECURITY AND DEFENSE COOPERATION
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16. (C) Our security and defense interests follow:
Immigration, Police, Military, National Assembly, Judiciary
cooperate with U.S. counterparts and enforce relevant
Nicaraguan laws/regulations; GON relations with third
countries hostile to our interests do not endanger our
security; counter-narcotics/money laundering unit formed and
operating; court rulings on trafficking cases are
non-partisan and not influenced by bribery; GON destroys
remaining MANPADS stocks (1,051); Assembly passes
Counter-terrorism Law; security forces remain independent;
GON does not establish parallel security forces; military
maintains its leadership and appointments are made according
to seniority and merit, not political affiliation; the
military does not suppress peaceful demonstrations and police
maintain their proper role; and, the GON does not resort to
martial law.


17. (C) Since the onset of Ortega's presidency, we have
received less cooperation from airport authorities, who
appear to be responding to instructions from the Presidency.
Reports of Cubans working in Immigration are also reasons for
concern, as is President Ortega's February 2 announcement
that he will not support MANPADS destruction because Honduras
has received eight U.S. planes. (Comment: Embassy issued a
communique on 4 February clarifying that the small, two-seat
spotter planes are to help combat narco-trafficking and
disaster assistance, and funded through Honduras' FMF
allocation.)

COMMENT
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18. (C) We expect the Ortega government will continue to
test at every opportunity just how far it can go without
being blocked by the opposition in the National Assembly or
by foreign leverage. Despite the warning signs, however,
opposition parties and civil society have yet to raise the
alarm, while much of the private sector does not appear
willing to challenge Ortega so long as he does not infringe
upon their business interests. While we can draw on legal
instruments and our assistance programs to attempt to check
Ortega's excesses, Nicaraguan political, civil, and private
sector opposition leaders must take ownership, set the
course, and speak out. We are examining ways to assist our
friends in this effort. We must also engage where
appropriate, Nicaragua's neighbors and other international
actors to encourage them to help keep Nicaragua on a
democratic, market economy path. Over the next weeks and
months, we will continue to engage the new government,
judiciously use our leverage, and encourage opposition
sectors to find common ground and purpose -- an essential
front to contain Ortega's inclinations towards
authoritarianism. We are forwarding a more detailed matrix
to the desk.
TRIVELLI