SCENESETTER FOR CODEL NELSON

UNCLAS MANAGUA 000436 SIPDIS SENSITIVE SIPDIS DEPT FOR WHA/CEN AND H FOR MIKE SMITH E.O. 12958: N/A TAGS: ECON KCRM KDEM PGOV PINR PREL PTER SMIG SNAR NU SUBJECT: SCENESETTER FOR CODEL NELSON ¶1. (U) SUMMARY: Post welcomes members of CODEL Nelson to Nicaragua February 18 to 20. With the return of Daniel Ortega to the presidency and changes in the National Assembly, your visit comes at a most propitious time. The United States remains committed to supporting Nicaragua's democratic and economic development by promoting good governance, strengthening civil society, encouraging a vibrant private sector, and implementing free market policies--including the advancement of CAFTA. You will have an opportunity to meet with members of the executive and legislative branches, leaders of the newly emerging democratic opposition, and representatives from the private sector. Although we will have the opportunity to discuss key challenges and opportunities in our relations with Nicaragua upon your arrival, we are providing the following highlights of the current political climate, economic background, social issues, and relevant USG assistance programs to help you prepare for your visit. END SUMMARY Political Background and Current Climate - - - - - - - - - - - - - - - - - - - - - ¶2. (U) Despite its considerable progress toward democratic consolidation and greater macroeconomic stability following the turmoil of the 1980's, Nicaragua's democratic development remains incomplete. Since the return of democratic rule in 1990, marked by the election of Violeta Chamorro to the presidency, political power has been contested between two majority forces: the Liberals on the right, and the Sandinistas on the left. After losing three separate races for president since 1990, FSLN candidate Daniel Ortega emerged the winner in his fourth run in the November 5, 2006 national election, with 38 percent of the vote. A confluence of events and sharp divisions among the Liberal forces created a perfect recipe for Ortega's victory. ¶3. (U) A unique feature of Nicaragua's political system is the existence of "el pacto" (the pact),a power sharing deal between the Liberal Constitutional Party (PLC),led by former President Arnoldo Aleman, and the FSLN, led by Daniel Ortega. The pact has enabled the two main parties to share control of the institutions of government and helped perpetuate an atavistic caudillo-style rule which has continued to the present time. A key provision of the pact changed the rules of the presidential game by lowering the requirement for a first-round victory to 35 percent of the popular vote with a five percent lead over the second place contender, one of the factors that paved the way for Ortega's comeback. ¶4. (U) Another significant factor in Nicaraguan politics is the continued influence of Aleman in the Liberal camp. As a result of President Bolanos' (2001-2006) anti-corruption campaign, Aleman was convicted of money laundering and fraud in 2003. This motion led to a split within the Liberal camp between Aleman loyalists, who remained with the PLC and viewed Bolanos as a traitor, and Liberals disillusioned with the PLC who, joining forces with some of the smaller democratic parties, coalesced into the Nicaraguan Liberal Alliance (ALN). Although sentenced to a 20 year prison sentence and ostensibly under house arrest, Aleman is currently on "medical parole" and moves freely about Managua, thanks in large part to the pact and Sandinista control of the judiciary. Aleman and his wife enjoyed front row seats alongside guests of honor at Ortega's inauguration on January 10 -- clear evidence that the pact continues. ¶5. (U) Five political parties participated in the November 2006 national election, and four of the parties won seats in the National Assembly. The ALN under the leadership of Eduardo Montealegre was a key contender in the 2006 race by capturing 28 percent of the vote, and represents one of the viable emerging democratic alternatives. While pre-election polls looked promising for Montealegre, who proved to be Ortega's leading challenger, the Ortega-Aleman pact prevented a second round showdown dealing a victory for the "35 win by 5" finisher. ¶6. (U) Meanwhile on the left, the FSLN breakaway party of the Sandinista Renovation Movement (MRS) fielded the charismatic former Mayor of Managua Herty Lewites to challenge Ortega, but his sudden death in July possibly took some wind out of the MRS' sails. His successor Edmundo Jarquin was not able to gain sufficient ground to compete with Ortega among the Sandinista faithful. Ortega benefited from both divisions: on the right among the Liberals, and his traditional hard-core support on the left. Campaign Promises and Social Issues - - - - - - - - - - - - - - - - - - ¶7. (U) Although the second poorest country in the Western Hemisphere, Nicaragua has made progress on the economic front in the past 16 years by achieving macroeconomic stability, greater social investment, and steady growth. UNESCO statistics show that 88% of primary school age children were enrolled in 2004, an increase from 73% in 1991. Most recent statistics from the Minister of Education reported 92% school enrollment in 2005. The infant mortality rate dropped from 52 deaths per live births in 1991 to 31 per 1000 in 2004. Nicaragua has also improved in prenatal care coverage, and made impressive gains in the United National Human Development Index (HDI). The average GDP growth rate for Nicaragua from 1980 to 1989 was a negative -0.78% and in 2006 it is expected to reach a positive 3.7%. Despite the statistical gains, however, the benefits of economic development have been uneven. Poverty, blackouts, water shortages, and high gasoline prices are a fact of Nicaraguan life. ¶8. (U) President Ortega's challenge will be to continue economic policies to sustain the momentum of progress made over the past 16 years, delivering on his sweeping campaign promises such as zero poverty and hunger, creating jobs, expanding access to education and healthcare, while also following through on his vision for a new Nicaraguan government of solidarity, peace, and reconciliation. ¶9. (U) According to a public opinion poll published on the eve of Ortega's inauguration, the Nicaraguan people expressed greater confidence in Ortega's ability to manage the economy than in his ability to govern the political arena. Six out of ten Nicaraguans polled for the survey were optimistic about an Ortega presidency, and expressed hope in terms of greater prosperity, social stability, and peace under his administration. Nevertheless, the survey also found that the same percentage of people believed that the government institutions would be weaker and the "pact" between the FSLN and PLC would be even stronger under an Ortega government, thus weakening democracy and undermining the rule of law. Indeed, during his first mandate in office, Ortega has moved to concentrate executive power in the Presidency. USG Assistance to Nicaragua - - - - - - - - - - - - - - ¶10. (U) The United States supports the economic development of Nicaragua and the prosperity of the Central American region as a whole. To build upon the achievements of the past 16 years, the Nicaraguan Government must maintain fiscal responsibility, generate greater investment (especially in the power and transportation sectors),educate more of its population, reform the judicial system, and regularize its land titling system and resolve 1980s property confiscation cases. ¶11. (U) As Nicaragua's largest trading partner, the United States is the source of roughly one-fifth of Nicaragua's imports and the destination for approximately one-third of its exports. CAFTA-DR plays an important role in generating economic prosperity for Nicaragua and other Central American countries. In 2006, bilateral trade with the United States, including free trade zone products, increased 29% over 2005 levels. Moreover, Nicaraguan exports of non free trade zone products surpassed $1 billion for the first time. As a result of CAFTA-DR, Nicaraguan exporters have begun to ship new agricultural and food products to the U.S. market. ¶12. (U) As one of the primary international donors working with the Nicaraguan government, the United States has contributed $1.7 billion since 1990 to Nicaragua's efforts to strengthen democracy, provide jobs and higher living standards for its people, and deliver quality healthcare and education to Nicaraguan families. The current USAID program is investing $250 million over five years in support of democracy, economic growth, health, and education. To give an example of some of the positive effects of U.S. assistance, this past year USAID launched an $8 million Family Health Project which will target 1,342 rural communities in 70 municipalities nationwide to improve health services for approximately 100,000 women and children. In 2006, 48,929 poor rural households received food security assistance. Activities focused on increasing the production and marketing of high-value, non-traditional crops to increase family incomes. Complementary feeding, maternal health and child survival activities improved health and nutrition in high-risk communities. 13.(U) Under the Millennium Challenge Corporation (MCC) Compact with Nicaragua, the United States is investing $175 million over five years to expand production, reduce poverty, and modernize Nicaragua's infrastructure in the departments of Leon and Chinandega. The Compact features $92.8 million to upgrade key roads and technical assistance to improve the road maintenance capabilities of the Ministry of Transportation. During the fall of 2006, the MCC held a conference to attract investment to the region and worked with the Nicaraguan Government to deliver the first 26 of 43,000 land titles to be issued under the property titling component of the program. New Horizons Humanitarian Assistance - - - - - - - - - - - - - - - - - - - ¶14. (U) The U.S. military is also playing a vital role in improving the quality of life for many Nicaraguans at the community level, currently through a $4.3 million humanitarian program financed by U.S. Southcom, executed with the assistance of the U.S. Embassy and Nicaraguan military forces. This New Horizons project includes the construction of a new school in the rural community of La Calera, in the department of Carazo, as well as improvements in the water quality, medical services, and veterinary services that will provide help to the communities of La Pita, El Sol, and Santa Teresa. Estimated U.S. military assistance from 2006 to 2007 totals $17 million. Security and Law Enforcement - - - - - - - - - - - - - - ¶15. (U) The United States must continue to encourage Nicaragua to strengthen its police and military capacity to cope with corruption; money laundering; and trafficking in narcotics, arms, and persons--illicit activities tied with terrorism, gangs, and transnational crime. A breakdown in law enforcement would pose not only a security threat, but would also alienate investors and impede economic growth. Consequently, sustained efforts to engage and promote professionalization of the Nicaraguan military and police forces, and increase civilian control of arms inventories, are integral to U.S. pro-democracy programs in Nicaragua. MANPADS - - - - ¶16. (U) The Nicaraguan Army currently holds 1,051 MANPADS in its official inventory. The Nicaraguan Government maintains that it needs the MANPADS to counter national security threats from neighboring countries. The United States has significantly upgraded security measures where the missiles are stored. We are working at all levels of government and with civil society to convince the Ortega Administration that the terrorist threat and maintenance/security costs posed by the MANPADS far outweighs any realistic military application. Combating Narcotics Trafficking - - - - - - - - - - - - - - - - ¶17. (U) Nicaragua is a major transit country for drugs moving northward to the United States by land, sea, and air. In the past, most of the drug movement has occurred on the Atlantic Coast, a region that has served as a haven for smugglers, but more recently, there has been increased air and maritime trafficking along the Pacific Coast of Nicaragua. Another area of concern is the Penas Blancas land crossing on the Costa Rican border to the south, where more than 200 trucks transit daily. Under an agreement with the Nicaraguan Government established in 1997, the State Department's Bureau of International Narcotics and Law Enforcement (INL) is providing assistance to improve Nicaragua's National Police (NNP) and naval interdiction capabilities. In addition to providing technical assistance and anti-narcotics training, the U.S. has helped recondition Nicaraguan Navy patrol craft, particularly for drug interdiction on the Atlantic Coast. Combating Trafficking in Persons - - - - - - - - - - - - - - - - - ¶18. (U) Nicaragua is a source country for women and children trafficked internally and across borders for the purpose of sexual exploitation, and is currently on Tier 2 of the State Department's trafficking in persons (TIP) watch list. The Nicaraguan government's protection efforts during the 2005 TIP reporting period showed improvements in its prevention efforts. Progress in bringing traffickers to justice, however, remained weak. The government needs to increase investigations, improve victim services, and work with the National Assembly to pass reforms that bring the penal code up to international anti-trafficking standards. The United States is encouraging the Nicaraguan government to improve its record on prevention, prosecution, and protection of victims, and is funding several pilot projects to assist non-governmental organizations and civil society in building capacity to help raise awareness of the trafficking phenomenon. Conclusion - - - - - - ¶19. (U) Given President Ortega's social agenda and theme of national reconciliation in addition to U.S. interests in encouraging democratic consolidation and economic prosperity, there is much common ground to discuss during your upcoming visit. Continued U.S. assistance, future trade, and investment in Nicaragua will be tied to continued progress in a number of key areas, such as continuing progress on property claims resolutions, reducing corruption, practicing good governance; cooperation in combating terrorism, narco-trafficking, and trafficking in persons; respect for intellectual property rights; and honoring CAFTA agreements. Your dialogue with Nicaraguan leaders, counterparts in the National Assembly, and private sector representatives will help demonstrate U.S. resolve in supporting peace, prosperity, and partnership in Nicaragua. TRIVELLI