NICARAGUA: SCENE SETTER FOR USNS COMFORT VISIT

C O N F I D E N T I A L MANAGUA 000646

SIPDIS

FROM AMB CALLAHAN TO COMMODORE NEGUS
DEPT FOR WHA/CEN KRAAIMOORE

E.O. 12958: DECL: 06/25/2019
TAGS: PGOV PREL NU
SUBJECT: NICARAGUA: SCENE SETTER FOR USNS COMFORT VISIT

REF: A. MANAGUA 629 - H1N1 UPDATE

B. MANAGUA 626 - RADIO STATION JAMMING

C. MANAGUA 600 - CPC UPDATE

D. MANAGUA 599 - MCC REACTION

E. MANAGUA 580 - MCC CANCELATION

F. MANAGUA 541 - NGO MANUAL

G. MANAGUA 534 - NICARAGUAN ECONOMY OUTLOOK

H. MANAGUA 524 - TRIPARTITE WAGE AGREEMENT

I. MANAGUA 443 - CPC PRAYER CAMPAIGN

J. MANAGUA 415 - MISKITO INDEPENDENCE MOVEMENT

K. MANAGUA 258 - CAMPAIGN AGAINST OPPOSITION

L. 2008 MANAUGA 1392 - MUNICIPAL ELECTION FRAUD

M. 2008 MANAGUA 1240 - CONSTITUTIONAL REFORM

N. 2007 MANAGUA 1785 - 28TH ANNIVERSARY CELEBRATION

Classified By: Ambassador Robert J. Callahan for reasons 1.4 (b & d)


1. (C) Commodore Negus, your visit to Nicaragua on July 3
through 14 comes at an auspicious time and into a challenging
political environment with a government that is suspicious
and critical of the USG, even as the Nicaraguan public
remains fundamentally pro-US. Troubling phenomena include:
economic instability; political consolidation of party
control over national and local government; and an active
party-patronage system that rewards loyalty and punishes
opposition. Your visit also coincides with the 30-year
anniversary of the Sandinista-led victory over the Somoza
dictatorship, and follows the June 10 cancellation of the
Millennium Challenge Corporation (MCC) $62 million aid
program. We believe that the Nicaraguan people will welcome
the visit, but that there will be pressure by government
officials to create the public impression that the
Sandinistas planned, programmed and orchestrated the entire
COMFORT mission. We expect politically-appointed officials
in the Ministry of Defense and Health to be uncooperative,
while local mayors, doctors, nurses, and veterinarians will
fully support the mission.

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MISSION CONTEXT / PERFECT TIMING?
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2. (C) From a public diplomacy standpoint, the timing for the
COMFORT visit is perfect. The ship arrives three weeks after
the MCC board canceled approximately $62 million of USG
assistance because of election fraud (see reftel D, E, L).
Within five days of the COMFORT's departure, the ruling
party, the Sandinista National Liberation Front (FSLN),will
celebrate its 30-year anniversary of defeating the Somoza
dictatorship on July 19 (see reftel N). The confluence of
these events allows the visit to demonstrate the continuing
commitment of the US to the Nicaraguan people in a tangible
way, countering GON messages of hostility. In general,
Nicaraguans continue to have a very high opinion of the
United States and its people. This mission will certainly
reinforce that message.


3. (C) From a political standpoint, the timing for the visit
is challenging. The FSLN once again has control over all
four branches of government with the return of Daniel Ortega
to the Presidency in 2007 (with only 38% of the vote) and
through a "pacto" or alliance with the Constitutional Liberal
Party (PLC). National control combined with the FSLN's local
Citizen Power Councils (CPCs) actively restricts the ability
of civil society, NGOs, the media and the opposition to
exercise their civic rights (reftel B, C, F, K). The FSLN's
stated goal is to further consolidate power through
constitutional reform that would allow President Ortega to
remain in power beyond the end of his term in 2011.
Meanwhile, Nicaragua's economy is distressed - there is high
unemployment from maquila closings and budget shortfalls
because of donor nations cutting funds (see reftel G).
Social services, including healthcare and education, are
suffering from two rounds of 20% budget cuts and there are a
growing number of confirmed cases of H1N1 flu virus now in
the country, including one case within the US Embassy
community (patient has recovered). (see reftel A).

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MCC CANCELATION HURTS
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4. (C) The MCC board announced on June 10 the cancellation of
approximately $62 million of USG assistance as a consequence
of election fraud perpetrated by the GON during the November
2008 municipal contests (see reftel D, E, L). Government and
FSLN party leaders, including Ortega himself, claim that the
USG is interfering with Nicaragua's sovereignty and its
internal affairs by asking them to account for the electoral
fraud. The expected cancellation announcement came after six
months of diplomatic efforts urging the GON to address the
electoral fraud. Of the $175 million MCC Compact,
approximately $110 million had already been spent or
obligated. The loss of the remaining $62 million in aid is a
blow economically and politically to the Ortega government,
particularly since the impact will be felt acutely in the
FSLN's historical base of Leon and Chinandega - areas that
will be served by the COMFORT mission. Public reaction to
the MCC decision generally placed the blame on the Ortega
administration (see reftel D, E).

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30-YEAR FSLN ANIVERSARY
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5. (C) On July 19, five days after the COMFORT's departure
from Nicaragua, the FSLN will celebrate its 30-year
anniversary of defeating the Somoza dictatorship. At
previous celebrations (see reftel N),Ortega hosted
Venezuelan President Hugo Chavez and organized large public
demonstrations. This year's event is expected to be much
grander in scope. Preparations began in earnest after the
November 2008 municipal elections. Lighted Christmas trees,
topped with illuminated "30" cubes, remain installed in all
of Managua's major traffic roundabouts (see reftel I). Also
this year, the FSLN has staged dozens of party affiliation
meetings, primarily for public employees, to declare that
they are "militants" within the FSLN party (see reftel C).
The FSLN has already held small public rallies, and there are
television public service announcements and billboards about
the 30-year anniversary through the country. Nonetheless,
one large public rally was canceled in Masaya on June 21
because of public health fears about the spread of H1N1 flu.

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CONSTANT ATTACKS AGAINST NGOS, MEDIA & OPPOSITION
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6. (C) Since entering office in 2007, Ortega has consolidated
power across all levels of government. Perhaps the only
remaining independent institution is the professional
military. The FSLN's stated goal is constitutional reform
that will either allow President Ortega to be re-elected or
change the government structure into a parliamentary system
(see reftel M). The FSLN already controls the four branches
of the national government through a "pacto" or alliance with
the PLC. Ortega announced the creation of CPCs in 2007 as a
form of direct democracy independent of political
affiliation; however, by the end of 2008, CPCs were
overwhelmingly FSLN-controlled local organizations. One
national poll showed that less than 5 percent of Nicaraguans
participated in CPCs. The FSLN is actively limiting the
ability of civil society, NGOs and the media to exercise
their civic rights. A new NGO manual proposed by the
Ministry of Government, would restrict Nicaraguans' freedom
of association and influence on public policy (see reftel F).
In mid-June the GON arbitrarily blocked the signal and
confiscated the equipment of an opposition radio station (see
reftel B).


7. (C) In a February speech, Ortega declared the FSLN in a
permanent campaign against the political opposition (see
reftel K). Opposition leader and National Assembly Deputy
Eduardo Montealegre refused to appear before a judge on June
22 for politically motivated charges regarding the issuance
of government bonds (CENIS) while he served in the previous
administration. The FSLN has now threatened to strip
Montealegre of his immunity from prosecution in the National
Assembly (see septel).

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ECONOMY LOOKS BLEAK
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8. (U) With a per capita income of $1,140 and poverty rate of
46%, Nicaragua is the second-poorest country in the Western
Hemisphere. Official unemployment was 4.9% in 2007, but 60%
of all workers earn a living in the informal sector, where
underemployment is as high as 90%. The Central Bank
forecasts 0.5% economic growth in 2009, but independent
economists believe the economy may in fact contract by as
much as 1% this year. Exports to the United States, which
account for 59% of Nicaragua,s total exports, increased 45%
from 2005 to 2008, but they are down 14% so far in 2009.


9. (U) In the wake of fraudulent municipal elections, the
government has been unable to secure continued budget support
provided by European donors, resulting in a significant
fiscal deficit that led President Ortega to cut spending and
appeal to assistance from international financial
institutions and Venezuela. In 2008, Venezuela provided
about $326 million in assistance, all off-budget through
entities controlled by the FSLN. In 2008, Nicaraguans
received $818 million in remittances from abroad, most of
which came from the United States.


10. (U) President Ortega,s harsh rhetoric against the United
States, capitalism, and free trade has had a negative effect
on foreign investor attitudes and perceptions of country
risk. Since President Ortega took office, Nicaragua has
fallen in the World Economic Forum,s Competitive Index
Ranking from 95th place in 2006 to 120th in 2008.
Nonetheless, the government reports foreign investment
inflows of $626 million in 2008, mostly for
telecommunications infrastructure and electricity generation.
However, many companies in the textile/apparel sector,
including a $100 million U.S.-owned denim mill, have
shuttered during the past twelve months due to falling demand
for these goods in the United States.

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COMMENT
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11. (C) Many of the current circumstances Nicaragua faces at
the arrival of the USNS COMFORT recall the last time the FSLN
was in power in the 1980's: economic turmoil; overt efforts
to consolidate one-party control over both the national and
local government; active repression of civil society,
independent media and the opposition; and an active FSLN
propaganda machine to claim greater public support for the
party and its agenda. Unlike the 1980's however, Nicaragua
has made significant economic progress since the return of
democracy in 1990, and while its political institutions are
weak and easily manipulated, civil society, the Catholic
Church, the media, and more serious elements of the
opposition have in fact pushed back and restricted the GON,s
ability to pursue its authoritarian agenda.


12. (C) Ortega and his party need to create the impression
that they brought the COMFORT mission to Nicaragua to
ameliorate the enormous negative impact of the MCC
cancellation which has generally been blamed on his
administration despite rhetoric to the contrary. We believe
that there will be considerable pressure by the FSLN,
particularly through its CPCs, to manipulate public events in
order to cast the COMFORT visit as something planned,
programmed, and orchestrated solely by the FSLN. We are
taking all measures to minimize this. We also believe that
the FSLN may try to manipulate the patient selection process
for surgeries as much as possible in order to reward faithful
party members in the run-up to the 30-year anniversary. We
expect that senior-level FSLN-political appointees in the
Ministry of Defense and the Ministry of Health will be
hostile and generally uncooperative with the mission -- that
they will create unnecessary bureaucratic obstacles to a
smooth operation instead of the open cooperation COMFORT has
enjoyed in other countries. In fact, GON officials told us
privately that they would have preferred a visit by the
COMFORT earlier in its mission to avoid the proximity to the
FSLN 30-year anniversary. We also fully expect that the
GON's propaganda machine will work overtime to either
minimize media coverage of the mission or twist it to serve
FSLN purposes.


13. (C) Nonetheless, the Nicaraguan people will welcome the
mission. The uniformed Nicaraguan military, local mayors,
and the Nicaraguan doctors, nurses, vets, and school
directors will be helpful and supportive of the COMFORT
mission. They want the tremendous training benefits,
rehabilitation projects, and Handclasp donations, not to
mention the free medical attention that the mission will
bring to their communities. In brief, Nicaragua will be a
challenging political environment for this USG
humanitarian-military mission and there will be high stakes
in the public relations struggle for the "hearts and minds"
of the Nicaraguan people.

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CLOSING
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14. (U) Commodore Negus, on behalf of my embassy team, we
heartily welcome you and the COMFORT to Nicaragua. We pledge
our full support to the successful execution of this
wonderful humanitarian mission from the people of the United
States to the people of Nicaragua. And I personally look
forward to seeing a NWC alumnus again.
CALLAHAN