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Cablegate: Nicaragua: Ambassador Meets with President Ortega

VZCZCXRO4241
RR RUEHLMC
DE RUEHMU #0056/01 0162037
ZNY CCCCC ZZH
R 162037Z JAN 08
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 1930
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHDC
RHEHNSC/NSC WASHINGTON DC

C O N F I D E N T I A L SECTION 01 OF 03 MANAGUA 000056

SIPDIS

SIPDIS

MCC FOR CEO AMB. DANILOVICH AND MBOHN

E.O. 12958: DECL: 01/16/2018
TAGS: EAID PREL PGOV ECON NU
SUBJECT: NICARAGUA: AMBASSADOR MEETS WITH PRESIDENT ORTEGA
ON PROGRESS OF MCC PROGRAM

Classified By: Amb. Paul Trivelli for reasons 1.4 b&d.

-------
Summary
-------

1. (C) At a January 8 meeting with the Ambassador, Nicaraguan
President Daniel Ortega expressed his desire to better
understand the Millennium Challenge Account's Nicaragua
operations (MCA-N) ahead of the January 22-24 visit of MCC
CEO Ambassador John Danilovich. Ortega indicated that MCA is
important to his administration and he wanted to make sure
that the Danilovich visit was a success; however, his
ministers raised alleged slow implementation of MCA projects
and lack of GON involvement, in particular in the area of
road construction. The Ambassador responded, noting that MCA
has succeeded thus far at meeting programmed milestones in
general, and particularly for the road construction. MCA-N's
acting director provided detailed information on the range of
activities in the infrastructure, rural business and property
project. The Ambassador raised delays in certain key
decisions as a result of the loss of the GON chairman of
MCA-N's board. Ortega agreed to appoint an interim chairman
from among current GON board members. Ortega expressed his
intention to accompany Ambassador Danilovich on site visits
to MCA-N projects during his trip. End Summary.

------------
Participants
------------

2. (C) On January 8, the Ambassador met with President
Ortega, at the latter's request. During the meeting, which
took place at the Presidential offices/FSLN Party
headquarters, Ortega was accompanied by First
Lady/Presidential spokeswoman Rosario Murillo, Foreign
Minister Samuel Santos, Finance Minister Alberto Guevara,
Transport Minister Pablo Fernando Martinez, Presidential
Advisor Paul Oquist, Presidential Advisor Rodolfo Delgado,
and Nicaraguan Ambassador to the U.S. Arturo Cruz. The
Ambassador was accompanied by DCM and Millennium Challenge
Account-Nicaragua (MCA-N) Acting Director Eddy Jerez.

-------------------
GON Raises Concerns
-------------------

3. (C) Ortega led off, noting that he had wanted to discuss
the activities of MCA-N ahead of the &important8 visit of
MCC CEO President Ambassador John Danilovich. Ortega said
that MCA-N had created high expectations, but he had concerns
about the time frame of the implementation of projects and
the need for greater involvement by the GON. He then asked
Finance Minister Guevara to elaborate. Guevara asserted that
there was little &concrete8 to show from MCA-N,
particularly in supporting productive investment in rural
areas, and urged that funds be devoted to direct financing of
production, rather than merely in commercialization. Then,
Transport Minister Martinez intervened noting that the
agreement establishing MCA-N had been signed in July of 2005
and that it had a five year execution period that was not
subject to modification. He alleged that design process of
the roads had gone very slowly, abetted by a bidding process
which aggregated road segments into relatively large blocks
and did not give Nicaraguan contractors the opportunity to
successfully bid because of the large financial requirements.
He also wondered if administrative costs of MCA-N were above
the norm and required a close look.

---------------------------
Ambassador Details Progress
---------------------------

4. (C) The Ambassador responded by noting first that the
MCA-N agreement had been ratified in June of 2006 by the
National Assembly and that the five year time period in fact
ran from then, not July 2005. He challenged the assertion
that little had been done to support productive investment by
rural producers, noting that he personally had visited a
range of projects in the dairy, forestry and other
agricultural sectors. MCA-N projects, he noted, were largely
proceeding according to previously agreed time-frames and
within programmed budgets. The GON's desire for construction
of an additional stretch of road (Chinandega-Guasaule) had
been accommodated using funds obtained from administrative
savings from previous successful bidding processes. He
understood the GON's desire for rapid, visible action. At
the same time, it was undeniable that most of Nicaragua's
road network was in poor condition precisely because it had
been quickly and improperly built. MCA-N was looking to
construct roads that would last 20-30 years with normal
maintenance.

5. (C) The Ambassador asked MCA-N Acting Director Eddy Jerez
to brief President Ortega on further details of ongoing
activities. Jerez reviewed the road portfolio of both of
primary and secondary roads and he explained the dollar
amount, estimated kilometers to be built and the current
status on feasibility, design and construction bidding
process. He discussed bidding procedures on roads and noted
a recent case where a deadline had been in fact relaxed to
allow a Nicaraguan firm to bid. He reviewed the Rural
Business Project and described important investment promotion
activities of MCA-N, including the encouragement of an
apparel investment which now employed 250 women, and noted
the prospects for another which would employee up to 1,500
workers.

6. (C) He provided further examples of MCA-N efforts which
had allowed milk and bean producers to improve quality and
thus get better prices for their output as well as access to
export markets. He noted that MCA-N's rural development
activities were aimed not at the subsistence farmer but
rather at small and medium farmers who could take advantage
of injections of capital and technical assistance to make
their businesses profitable, for example milk producers with
seven cows or more. First Lady Rosario Murillo noted that
the GON's own programs were aimed at subsistence farmers and
that assisting this somewhat more sophisticated sector was
also important. Jerez admitted that there had been some
delay on implementing one main component of the Property
Project due to changes requested by the GON to the
procurement process and indicated that it was in the GON
hands to collaborate with MCA-N to bring this component up to
speed. (Note: The Ambassador noted that regardless of this
delay, some titles in fact have been given out and more will
be given out during the Danilovich visit. End Note.)

------------------------
Reconstituting the Board
------------------------

7. (C) The Ambassador raised the issue of delays in certain
decisions which only the MCA-N board could take. GON members
hold their board seats by virtue of the holding certain
government positions referred to in the MCA-N agreement.
With the abolition of the Technical Secretariat of the
Presidency, former board member Rodolfo Delgado (still a
Presidential Advisor and present at the meeting) no longer
held his position and the board could not be convened. As a
result, the board had not met since October. Among pending
decisions was the signing of the Modification Letter by the
GON chairman approving the decision to build the
Chinandega-Guasaule road section sought by the GON. The
Ambassador urged Ortega to name temporarily as board
President a current GON board member, which could be done
rapidly through an exchange of letters, leaving the naming of
a permanent member until later if required. Ortega readily
agreed, and said that Finance Minister Guevara, as current
voting GON member would be the interim chairman of the board,
and that he intended to upgrade Transport Minister to a
voting position on the board.

--------------
Looking Forward
--------------

8. (C) Ortega concluded discussion of these issues by noting
that there is pressure for visible signs of progress from
local mayors, particularly on roads, and a need for a
coherent position between the GON and MCC. He urged that
mechanisms be considered for rapid execution of short road
sections in sensitive zones which are particularly vulnerable
to damage from flooding, etc. The Ambassador responded that
these were issues which the board could now take up since it
could again meet. He then briefly reviewed plans for Amb.
Danilovich's visit. Ortega said he looked forward to a
successful visit, and that he wanted to join in Amb.
Danilovich's visit to MCA-N projects. He asked that the
Embassy coordinate with the First Lady in organizing his
participation in the visit.

-------
Comment
-------

9. (C) Despite his ministers carping about alleged
deficiencies in MCA-N's operations, Ortega maintained a
positive tone throughout the meeting, and received
information about the real state of affairs with interest.
He followed up with a letter formally naming an interim board
president, as promised, and we have been working with the
Presidency about Ortega's participation in Amb. Danilovich's
visit. Despite tensions in our overall bilateral
relationship, the Millennium Challenge Account's Nicaraguan
activities remain a stellar example of U.S. engagement here
working to the benefit of the Nicaraguan people, something
which, in the final analysis, the GON understands.
TRIVELLI

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