NICARAGUA: PRIVATE SECTOR LEADERS CONTEMPLATE

1. (C) Summary. Prominent business leaders and economists
convened for the Ambassador's first economic roundtable of
the new year on January 28. The primary topic centered
squarely on the aftermath of the fraudulent November 9
municipal elections and the way forward for the Nicaraguan
private sector and civil society. Business leaders were
particularly concerned about the loss of international budget
support and a potential decrease in overall donor assistance,
including from the United States. Participants decided to
brainstorm among themselves and plan a possible forum to
broaden the national discussion beyond the parochial
interests of President Ortega's Sandinista National
Liberation Front (FSLN) and the Constitutional Liberal Party
(PLC). Attendees also discussed the negative effects of the
global financial crisis on Nicaragua in 2009, but differed on
the degree of severity. End Summary.

Municipal Elections


--------------------------





2. (C) The Ambassador reiterated the necessity of resolving
the flawed November 9 municipal election results to the
satisfaction of all parties as soon as possible. Alejandro
Martinez Cuenca (Ortega's FSLN Minister of the Economy in the
1980s, now a successful cigar exporter) said that while he
was personally offended by the electoral fraud perpetrated on
the Nicaraguan people, terminating the USG's Millennium
Challenge Compact (MCC) with Nicaragua would be a grave
mistake. The MCC has motivated hundreds of Nicaraguans to
climb out of the cycle of poverty and provides hope. Should
the USG terminate MCC, he argued, it would hand President
Ortega a golden opportunity to politically exploit his rescue
of the affected population, and further his political
objectives in the Leon and Chinandega departments.
Ultimately, Nicaraguans would blame the United States for
pulling out, and identify more closely with the FSLN and its
Bolivarian Alternative for Americas (ALBA) supporter
Venezuela.



3. (C) Ricardo Teran (who represents Kodak and Hewlett
Packard here) agreed, noting that somehow the private sector,
Nicaraguan civil society and the political opposition must
provide the "big picture" to the population to better
highlight the country,s precarious economic position.
Gabriel Solorzano (President BANEX, the nation's largest
microfinance institution) stated that to the common man, the
massive fraud perpetrated in the November 9 elections
represented Nicaragua,s "9-11," and that, as a result, two
possibilities exist: Machiavellian stability based on the
new "repacto" (a second pact) between the FSLN and former
President Arnoldo Aleman, and collapse into near anarchy.
Prominent economist and former Finance Minister Eduardo
Montiel told the Ambassador that various Nicaraguan
politicians favored the latter, as a necessary step to
finally uniting the fractured opposition. Solorzano compared
Nicaragua's current situation to the late 1980s, when gross
economic mismanagement combined with the collapse of the
Soviet Union (then Nicaragua,s primary economic patron) led
to a united opposition able to ultimately remove the
Sandinistas from power in 1990.

A National Forum?


--------------------------





4. (C) Julio Cardenas, General Manager of Bancentro, opined
that Ortega will never shift his position on the municipal
elections. However, the private sector could promote its
concerns via a national forum which would include
representatives from all segments of society including the
government. Another attendee observed that, in reality,
Nicaragua is ruled by what might be described as two mafia
groups (Ortega's FSLN and Aleman's Constitutional Liberal
Party). A national conference could be useful, especially if
it highlighted the broader interests of the Nicaraguan
citizenry. Participants debated whether or not such a forum
should include political parties. Martinez Cuenca added that
a key consideration was whether the Ortega regime would react

MANAGUA 00000133 002 OF 002


to such pressure in a rational way, a primary obstacle to
resolving the current crisis.



5. (C) Erwin Kruger, a former Minister of the Economy and
Development and President of business federation COSEP, urged
roundtable members to meet as soon as possible to iron out
the modalities of such a forum. Roundtable members held a
breakfast meeting on January 30, and planned to follow up in
early February.

Impact of Global Financial Crisis


--------------------------





6. (C) Kruger warned of an economic "tsunami" that would hit
Nicaragua in 2009 as a result of the international financial
crisis, a domestic political stalemate, and a lack of budget
support from foreign donors. When asked if he was predicting
an outright economic collapse, Kruger demurred, only replying
that Nicaragua,s economy would get worse before it gets
better. Eduardo Montiel stressed that Nicaraguans at the
municipal level do not yet grasp the magnitude of the world
crisis. Business leaders should work with more moderate
elements of the FSLN, such as Central Bank President Rosales
and Presidential Economic Advisor Bayardo Arce, to establish
a constructive dialogue.

COMMENT


--------------------------





7. (C) The notion of a national dialogue which includes
representatives not only from the private sector and civil
society, but also the Catholic Church, strikes us as a
worthwhile endeavor. Montiel's proposed strategy for the
private sector to work with the FSLN's more moderate Arce and
Rosales to counter the economic consequences of the
international financial crisis and the decision by donors to
suspend budget support in the wake of fraudulent elections
makes sense. Unfortunately, the private sector has already
reached out to the GON many times with minimal results.



8. (SBU) Roundtable Participants:

--Eduardo Montiel, Professor of Finance, INCAE
(the Central American Business School)

--Gabriel Solorzano, President BANEX (with 60,000 clients,
the nation's largest microfinance bank, formerly FINDESA)

--Roberto Bendana, former head of the Competitiveness
Commission and President of Cafe Don Paco, a coffee exporter.

--Alejandro Martinez Cuenca, President International
Foundation for Global Economic Challenge. Martinez is also
an economist, a businessman, an FSLN member, and was Ortega's
Minister of the Economy in 1980s.

--Ricardo Teran, President Corporacion Roberto Teran

--Rene Teran, General Manager, Casa Teran
(medical and agricultural equipment)

--Julio Cardenas, Executive Director, Bancentro (U.S.-
citizen owned bank)

--Joaquim de Magalhaes, General Manager Exxon Mobil

--Erwin Kruger, President, DRACMA
CALLAHAN