VZCZCXRO4096
RR RUEHLMC
DE RUEHMU #1396/01 3232058
ZNY CCCCC ZZH
R 182058Z NOV 08
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 3405
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHINGTON DC
RHEHNSC/NSC WASHINGTON DC
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUMIAAA/CDR USSOUTHCOM MIAMI FL
C O N F I D E N T I A L SECTION 01 OF 02 MANAGUA 001396
SIPDIS
STATE FOR WHA/CEN, WHA/EPSC AND EEB
TREASURY FOR SARA SENICH
USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN
E.O. 12958: DECL: 11/13/2028
TAGS: ECON EFIN ETRD NU PGOV PREL
SUBJECT: NICARAGUA: ECONOMIC ROUNDTABLE TALKS GLOBAL
FINANCIAL CRISIS AND MUNICIPAL ELECTIONS
Classified By: Amb Robert J. Callahan for reasons 1.4 b & d.
1. (C) Summary. Private sector leaders and economists at
the Ambassador's inaugural economic roundtable on November 4
focused on the impact of the global financial crisis and the
November 9 municipal elections. The main impact of the
global financial crisis in Nicaragua appears to be more
expensive credit, a slowdown in remittances, and a lower
demand for certain exports to the United States as a result
of recession. Participants also decried the effects of
Ortega's anti-U.S. rhetoric on foreign direct investment.
Most Nicaraguan elites will try to weather the Ortega
administration, shifting operations to neighboring countries
whenever possible. Most believed that voter turnout was
critical if the opposition were to have a chance at pulling
off key victories in the municipal elections, particularly in
Managua. End Summary.
Global Financial Crisis: Effects on Nicaragua
---------------------------------------------
2. (C) According to Luis Rivas of BANPRO, Nicaragua's
largest bank, the Nicaraguan economy was experiencing a
decline even before the financial crisis broke in the United
States. That Nicaragua's major trading partner is
experiencing recession can only negatively affect exports.
Other consequences yet to express themselves will be the lack
of liquidity, a slowdown in remittances, and more expensive
credit.
Investment and Rhetoric
-----------------------
3. (C) All participants agreed that President Ortega's
reckless anti-U.S. rhetoric negatively influences Nicaraguan
investment decisions. Regrettably, they also concurred that
the FSLN seems indifferent to world opinion-as long as it can
achieve its principal objective of consolidating power. A
finance professor at a prestigious local university even
suggested that Ortega feels uncomfortable when the economy is
doing well; he has one of those personalities that prefers
chaos. Ortega prefers to solve problems by depending upon
the largesse of his ALBA (Bolivarian Alternative for the
Americas) partner Hugo Chavez. During the 1980's Ortega's
main source of support was the Soviet Union. Chavez now
plays the role of the Soviets in a similar client-state
model.
4. (C) Mario Arana, head of a prominent think tank, stated
that the FSLN moderate group, led by Senior FSLN Economic
Advisor Bayardo Arce, has so far prevailed in terms of
economic policymaking. Although Ortega is much more radical
and prone to taking extreme positions, if politically
feasible, macroeconomic policymaking has not diverged much
from the previous administration. Nonetheless, for political
reasons, country risk has been rising by some (not
necessarily all) measures. Interest on short term dollar
deposits in Nicaragua has risen, but insurance rates have not
changed.
Nicaraguan Municipal Elections
------------------------------
5. (C) There was considerable discussion of municipal
elections then less than a week away. Mario Arana predicted
that if there were a large vote-count difference between the
opposition and the FSLN, it would be difficult for the
Sandinistas to commit fraud. If the difference were small,
it would be easier to manipulate the results. Comment:
Arana's prediction was prophetic. The vote difference was
too great to mask the wholesale fraud the FSLN appears to
have committed. End Comment.
6. (C) Participants thought that the primary motivation to
vote for the FSLN was personal economic gain from backing the
right political horse-property interests, business favors,
etc. Another participant, representing Nicaragua's largest
bank, opined that, with former President Arnoldo Aleman
involved, the municipal elections could well strengthen
MANAGUA 00001396 002 OF 002
relations between the Constitutional Liberal Party (PLC) and
the FSLN, through the infamous "Pacto" they share. One of
the other attendees concurred: if Montealegre loses, the
result will consolidate the "Pacto". Alternatively, if
Montealegre wins, it could usher in a new three-party power
structure in Nicaraguan politics (Vamos con Eduardo, the PLC,
and the FSLN).
The Nicaraguan Elites: Ready Refugees, Again?
--------------------------------------------- -
7. (C) The Ambassador asked roundtable participants whether
they were likely to leave Nicaragua should the FSLN pursue
1980s-style harassment tactics. Luis Rivas responded by
saying that when businesspeople returned to Nicaragua in the
1990s, they spread their operations throughout Central
America as a way of diversifying risk. This allows them to
relocate to El Salvador or Costa Rica, if the situation in
Nicaragua becomes untenable. Ramiro Ortiz of BANPRO observed
that Nicaraguan college students studying abroad are already
making the decision not to return. On the other hand, their
parents who are established here show no desire to leave,
some of them for a second time. It is, after all, not easy
to start over again in another country, another business, or
another culture. Moreover, the current global financial
crisis limits options.
COMMENT
-------
8. (C) The observation that the FSLN is indifferent to world
opinion seems spot-on following the apparent fraud and
aftermath surrounding the November 9 municipal elections
here. Most of these prominent figures in the business
community appear ready to ride out the rest of Ortega's
tenure. Those who can will likely continue to shift focus to
regional projects.
9. (SBU) Roundtable participants were the following:
--Duilio Baltodano, President Cisa Agro (a wholesaler)
--Luis Rivas, General Manager BANPRO (Nicaragua's largest
bank)
--Mario Salvo, Former Minister of Agriculture
and owner of Eskimo, the nation's largest dairy producer
--Mario Arana, Former Central Bank President and current
Executive Director FUNIDES (an economic think tank)
--Eduardo Montiel, Professor of Finance, INCAE
(Central American Business School)
--Gabriel Solorzano, President BANEX (with 60,000 clients,
the nation's largest microfinance bank, formerly FINDESA)
--Ramiro Ortiz, Director BANPRO (owner, second largest bank)
--Mario Alonso, Former President Central Bank
--Roberto Bendana, former head of the Competitiveness
Commission and President of Cafe Don Paco, a coffee exporter.
CALLAHAN