Identifier
Created
Classification
Origin
07MANAGUA426
2007-02-15 17:29:00
UNCLASSIFIED
Embassy Managua
Cable title:
NICARAGUA: BACKGROUND ON AMCIT PROPERTY CLAIMS
how-toVZCZCXYZ0027 RR RUEHWEB DE RUEHMU #0426/01 0461729 ZNR UUUUU ZZH R 151729Z FEB 07 FM AMEMBASSY MANAGUA TO RUEHC/SECSTATE WASHDC 9109 INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
UNCLAS MANAGUA 000426
SIPDIS
STATE FOR WHA/CEN GSCHIFFER, EB/IFD/OIA, L/CID AND WHA/EPSC
TREASURY FOR INL MDONOVAN AND GCHRISTOPOLUS, OWH/JHOEK
STATE PASS TO USTR
SIPDIS
E.O. 12958: N/A
TAGS: EINV ECON USTR KIDE NU
SUBJECT: NICARAGUA: BACKGROUND ON AMCIT PROPERTY CLAIMS
UNCLAS MANAGUA 000426
SIPDIS
STATE FOR WHA/CEN GSCHIFFER, EB/IFD/OIA, L/CID AND WHA/EPSC
TREASURY FOR INL MDONOVAN AND GCHRISTOPOLUS, OWH/JHOEK
STATE PASS TO USTR
SIPDIS
E.O. 12958: N/A
TAGS: EINV ECON USTR KIDE NU
SUBJECT: NICARAGUA: BACKGROUND ON AMCIT PROPERTY CLAIMS
1. (U) Summary: Current Nicaraguan property law affords U.S. claimants three administrative avenues to resolve their cases; claimants may also file in court. Since 1990, more than 1,130 U.S. citizens registered 3,193 claims with the Embassy in Managua. As of February 14, 2007, 298 U.S. citizens with 684 claims remained. These property disputes still figure prominently in our bilateral relations. Section 527 of the Foreign Relations Authorization Act prohibits U.S. economic assistance to or support in international financial institutions for any country where U.S. citizens do not receive adequate compensation for outstanding claims of confiscated property. Section 527 also authorizes an annual waiver if the Secretary of State determines that it is in the U.S. national interest to do so. End Summary.
Introduction
--------------
2. (U) Property disputes stemming from the 1980s Sandinista-era
confiscations figure prominently in our bilateral relations. U.S.
citizens still regularly seek assistance from the U.S Embassy in
recovering confiscated properties. The following cable outlines the
historical background of property cases and ties it to the situation
we find today.
Property Confiscations
--------------
3. (U) Between 1979 and 1982, the revolutionary Sandinista
government issued a series of decrees to create the legal basis for
the confiscation of private property. The GON seized nearly 20,000
properties (from cars and houses to bank accounts and farms)
including about 12% of total land available in the country. To
achieve its political goals, the revolutionary government first
targeted certain classes of owners, i.e., the Somoza family and
close political supporters, former government officials, members of
the armed forces, and then later private enterprises accused of
working against Sandinista economic policy and individuals
(including U.S. citizens) absent from the country for more than six
months. The Sandinista government also nationalized private banks,
insurance companies, and mines, often utilizing formal expropriation
decrees.
4. (U) In what devolved into a measure of revolutionary zeal and
chaos, the Office of the Attorney General, government ministries,
Sandinista Army, municipalities, individual Sandinista officials,
and even squatters simply assumed physical control of property
without going through a process to arrange for legal title. The
central government eventually registered titles on behalf of the
state for most of these properties, though many lacked any legal
justification for their transfer. The government rarely paid
compensation at the time of confiscation.
Legalities
--------------
5. (U) After the Sandinistas lost the February 1990 elections, they
hastily attempted to legitimize the confiscations before departing
office by transferring properties to private hands. Central to this
effort were three laws. "Pinata" Law 85 transferred
state-controlled urban houses to civic organizations and individuals
who owned no other house before February 25, 1990. "Pinata" Law 86
did the same for urban land lots. "Pinata" Law 88 granted legal
title to beneficiaries of Sandinista agrarian reform who held
provisional titles to rural property. Issuing permanent title to
the new owners allowed them to sell, transfer, and will such
properties to others, further complicating future property claims by
the original owners in the years that would follow.
6. (U) The government, Sandinista officials, and squatters also
confiscated and/or distributed land outside the legal framework of
the Pinata Laws. In later years, whether a confiscation "conformed"
with the Pinata laws would become the legal test for determining who
owned the property.
Attempts to Establish Resolution Procedures
--------------
7. (U) In 1992, the Chamorro government issued a series of decrees
to remedy Sandinista-era title and ownership problems via a hodge
podge of solutions, including compensation, return, and swap.
Subsequent decrees and regulations only further complicated the
resolution process. In 1997, the Aleman government passed Law 278
to correct many of the defects in the early compensation system.
This law reaffirmed the rights of those who received property under
Laws 85, 86, and 88, but required beneficiaries of larger properties
to pay all the taxes they owed.
Compensation
--------------
8. (U) Current property law affords original owners three
administrative avenues to resolve their claims: 1) the outright
return of their property, 2) a land swap, or 3) compensation through
low-interest 15-year term indemnification bonds issued by the
Government of Nicaragua. Claimants generally prefer to receive
land, but this solution is often difficult to achieve. Of 3,193
total claims registered with the U.S. Embassy since 1995, 443
properties, or about 14%, have been returned to their rightful
owners. Only six property claims have been resolved through land
swaps.
9. (U) Claimants usually settle for compensation via government
issued indemnification bonds. To initiate a property claim with
this goal in mind, a claimant must file a request with the National
Confiscations Review Commission (CNRC). The CNRC determines whether
the claim is valid. If valid, the claimant must request that the
Office of Indemnification Quantification (OCI) determine the value
of the property in question. The claimant may appeal this
determination twice. Once the value is determined, the government
issues indemnification bonds to compensate the claimant.
10. (U) Claimants also have the option to take their case to court,
if they believe that current occupants cannot prove the legal basis
for having assumed ownership. A successful lawsuit can result in
the return of property, but this is very rare. If the quest for
property is denied, claimants receive BPIs.
Indemnification Bonds
--------------
11. (U) Property indemnification bonds, also called compensation
bonds, reimburse former owners of confiscated properties through
payments funded out of future national budgets. The local currency
15-year bonds pay interest at the rate of 3% for the first two
years, 4.5% for the next five years, and 5% for the remaining eight
years. This interest rate is considerably below the average rate of
inflation in recent years (9% during 2004-2006). Principal is paid
only during the last four years.
12. (U) Many claimants are reluctant to accept bonds because
compensation is based on the taxable value of property -- a figure
considerably below market value -- and because the present value of
the bonds is a fraction of their face value. Additionally, bonds do
not compensate the original owner for damage to the property, or the
loss of income related to the property. On February 8, 2007, such
indemnification bonds sold for about 40% of face value.
13. (U) Since 1990, thousands of Nicaraguans and other nationals
filed property claims with the Nicaraguan government. Of these,
more than 1,130 U.S. citizens registered 3,193 claims with the
Embassy in Managua. As of February 14, 2007, 298 U.S. citizens with
684 claims remained.
Waiver
--------------
14. (U) Section 527 of the Foreign Relations Authorization Act
(Fiscal Years 1994 and 1995) prohibits U.S. economic assistance to
or support in international financial institutions for any country
where U.S. citizens have not received adequate or effective
compensation for outstanding claims against the government for
confiscated property. Section 527 also authorizes the issuance of a
waiver of the prohibition, on an annual basis, if the Secretary of
State determines that it is in the U.S. national interest to do so.
In July 2006, the Secretary of State decided to renew the waiver for
Nicaragua for the 13th year in a row based on the government's
overall progress in resolving U.S. citizen claims. The government
resolved 86 claims during the August 2005 to July 2006 waiver
period.
15. (U) In December 2004, the Nicaraguan legislature passed Law 512,
shifting responsibility for property claims from the Executive
(Ministry of Finance) to the new National Property Institute
(INPRUR). However, the legislature then decided to delay the launch
of INPRUR until January 2008. The Embassy expressed concern over
the potential effects of partisan interference and lack of executive
branch responsibility/accountability with the implementation of Law
512, emphasizing the importance of fair and transparent resolutions
to claims. The Embassy continues to work to expeditiously resolve
all outstanding claims.
TRIVELLI
SIPDIS
STATE FOR WHA/CEN GSCHIFFER, EB/IFD/OIA, L/CID AND WHA/EPSC
TREASURY FOR INL MDONOVAN AND GCHRISTOPOLUS, OWH/JHOEK
STATE PASS TO USTR
SIPDIS
E.O. 12958: N/A
TAGS: EINV ECON USTR KIDE NU
SUBJECT: NICARAGUA: BACKGROUND ON AMCIT PROPERTY CLAIMS
1. (U) Summary: Current Nicaraguan property law affords U.S. claimants three administrative avenues to resolve their cases; claimants may also file in court. Since 1990, more than 1,130 U.S. citizens registered 3,193 claims with the Embassy in Managua. As of February 14, 2007, 298 U.S. citizens with 684 claims remained. These property disputes still figure prominently in our bilateral relations. Section 527 of the Foreign Relations Authorization Act prohibits U.S. economic assistance to or support in international financial institutions for any country where U.S. citizens do not receive adequate compensation for outstanding claims of confiscated property. Section 527 also authorizes an annual waiver if the Secretary of State determines that it is in the U.S. national interest to do so. End Summary.
Introduction
--------------
2. (U) Property disputes stemming from the 1980s Sandinista-era
confiscations figure prominently in our bilateral relations. U.S.
citizens still regularly seek assistance from the U.S Embassy in
recovering confiscated properties. The following cable outlines the
historical background of property cases and ties it to the situation
we find today.
Property Confiscations
--------------
3. (U) Between 1979 and 1982, the revolutionary Sandinista
government issued a series of decrees to create the legal basis for
the confiscation of private property. The GON seized nearly 20,000
properties (from cars and houses to bank accounts and farms)
including about 12% of total land available in the country. To
achieve its political goals, the revolutionary government first
targeted certain classes of owners, i.e., the Somoza family and
close political supporters, former government officials, members of
the armed forces, and then later private enterprises accused of
working against Sandinista economic policy and individuals
(including U.S. citizens) absent from the country for more than six
months. The Sandinista government also nationalized private banks,
insurance companies, and mines, often utilizing formal expropriation
decrees.
4. (U) In what devolved into a measure of revolutionary zeal and
chaos, the Office of the Attorney General, government ministries,
Sandinista Army, municipalities, individual Sandinista officials,
and even squatters simply assumed physical control of property
without going through a process to arrange for legal title. The
central government eventually registered titles on behalf of the
state for most of these properties, though many lacked any legal
justification for their transfer. The government rarely paid
compensation at the time of confiscation.
Legalities
--------------
5. (U) After the Sandinistas lost the February 1990 elections, they
hastily attempted to legitimize the confiscations before departing
office by transferring properties to private hands. Central to this
effort were three laws. "Pinata" Law 85 transferred
state-controlled urban houses to civic organizations and individuals
who owned no other house before February 25, 1990. "Pinata" Law 86
did the same for urban land lots. "Pinata" Law 88 granted legal
title to beneficiaries of Sandinista agrarian reform who held
provisional titles to rural property. Issuing permanent title to
the new owners allowed them to sell, transfer, and will such
properties to others, further complicating future property claims by
the original owners in the years that would follow.
6. (U) The government, Sandinista officials, and squatters also
confiscated and/or distributed land outside the legal framework of
the Pinata Laws. In later years, whether a confiscation "conformed"
with the Pinata laws would become the legal test for determining who
owned the property.
Attempts to Establish Resolution Procedures
--------------
7. (U) In 1992, the Chamorro government issued a series of decrees
to remedy Sandinista-era title and ownership problems via a hodge
podge of solutions, including compensation, return, and swap.
Subsequent decrees and regulations only further complicated the
resolution process. In 1997, the Aleman government passed Law 278
to correct many of the defects in the early compensation system.
This law reaffirmed the rights of those who received property under
Laws 85, 86, and 88, but required beneficiaries of larger properties
to pay all the taxes they owed.
Compensation
--------------
8. (U) Current property law affords original owners three
administrative avenues to resolve their claims: 1) the outright
return of their property, 2) a land swap, or 3) compensation through
low-interest 15-year term indemnification bonds issued by the
Government of Nicaragua. Claimants generally prefer to receive
land, but this solution is often difficult to achieve. Of 3,193
total claims registered with the U.S. Embassy since 1995, 443
properties, or about 14%, have been returned to their rightful
owners. Only six property claims have been resolved through land
swaps.
9. (U) Claimants usually settle for compensation via government
issued indemnification bonds. To initiate a property claim with
this goal in mind, a claimant must file a request with the National
Confiscations Review Commission (CNRC). The CNRC determines whether
the claim is valid. If valid, the claimant must request that the
Office of Indemnification Quantification (OCI) determine the value
of the property in question. The claimant may appeal this
determination twice. Once the value is determined, the government
issues indemnification bonds to compensate the claimant.
10. (U) Claimants also have the option to take their case to court,
if they believe that current occupants cannot prove the legal basis
for having assumed ownership. A successful lawsuit can result in
the return of property, but this is very rare. If the quest for
property is denied, claimants receive BPIs.
Indemnification Bonds
--------------
11. (U) Property indemnification bonds, also called compensation
bonds, reimburse former owners of confiscated properties through
payments funded out of future national budgets. The local currency
15-year bonds pay interest at the rate of 3% for the first two
years, 4.5% for the next five years, and 5% for the remaining eight
years. This interest rate is considerably below the average rate of
inflation in recent years (9% during 2004-2006). Principal is paid
only during the last four years.
12. (U) Many claimants are reluctant to accept bonds because
compensation is based on the taxable value of property -- a figure
considerably below market value -- and because the present value of
the bonds is a fraction of their face value. Additionally, bonds do
not compensate the original owner for damage to the property, or the
loss of income related to the property. On February 8, 2007, such
indemnification bonds sold for about 40% of face value.
13. (U) Since 1990, thousands of Nicaraguans and other nationals
filed property claims with the Nicaraguan government. Of these,
more than 1,130 U.S. citizens registered 3,193 claims with the
Embassy in Managua. As of February 14, 2007, 298 U.S. citizens with
684 claims remained.
Waiver
--------------
14. (U) Section 527 of the Foreign Relations Authorization Act
(Fiscal Years 1994 and 1995) prohibits U.S. economic assistance to
or support in international financial institutions for any country
where U.S. citizens have not received adequate or effective
compensation for outstanding claims against the government for
confiscated property. Section 527 also authorizes the issuance of a
waiver of the prohibition, on an annual basis, if the Secretary of
State determines that it is in the U.S. national interest to do so.
In July 2006, the Secretary of State decided to renew the waiver for
Nicaragua for the 13th year in a row based on the government's
overall progress in resolving U.S. citizen claims. The government
resolved 86 claims during the August 2005 to July 2006 waiver
period.
15. (U) In December 2004, the Nicaraguan legislature passed Law 512,
shifting responsibility for property claims from the Executive
(Ministry of Finance) to the new National Property Institute
(INPRUR). However, the legislature then decided to delay the launch
of INPRUR until January 2008. The Embassy expressed concern over
the potential effects of partisan interference and lack of executive
branch responsibility/accountability with the implementation of Law
512, emphasizing the importance of fair and transparent resolutions
to claims. The Embassy continues to work to expeditiously resolve
all outstanding claims.
TRIVELLI