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Cablegate: Nicaragua: Ortega Says Venezuelan Assistance To

VZCZCXRO7584
PP RUEHLMC
DE RUEHMU #1436/01 3381527
ZNR UUUUU ZZH
P 031527Z DEC 08
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC PRIORITY 3453
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHCV/AMEMBASSY CARACAS 1329
RUEHLP/AMEMBASSY LA PAZ 0218
RUEHQT/AMEMBASSY QUITO 0482
RUEHBS/USEU BRUSSELS
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RHEHNSC/NSC WASHINGTON DC
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHDC

UNCLAS SECTION 01 OF 03 MANAGUA 001436

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EAID ECON EFIN PREL KMCA NU
SUBJECT: NICARAGUA: ORTEGA SAYS VENEZUELAN ASSISTANCE TO
REPLACE MCC AND OTHER DONOR PROGRAMS

Summary
-------

1. (SBU) In reaction to MCC's announcement to freeze
disbursements and review its program, President Ortega said
on December 1 that Venezuelan President Hugo Chavez had
promised to provide funds to continue the implementation of
MCC programs if they are canceled. Ortega claimed that U.S.
assistance to Nicaragua from 2001 to 2007, which he said
totaled $500 million, was nothing more than an installment
payment toward the $45 billion dollars that the United States
"owes" Nicaragua. That amount, he explained, includes
interest on the $17 billion in punitive damages the
International Court of Justice allegedly assessed the United
States in 1986. Some opposition politicians have asked the
USG to refrain from "punishing the people of Nicaragua for
the sins of the government." Others, including former
candidate for mayor of Managua Eduardo Montealegre, place the
blame for cancellation more squarely on President Ortega.
Business leaders have lamented the economic consequences of
the decision to freeze disbursements, while beneficiaries of
the MCC program in Leon and Chinandega have expressed their
concern for how the decision will affect them directly. End
summary.

Ortega: "We Feel Liberated"
----------------------------

2. (SBU) In a letter dated November 24, Millennium Challenge
Corporation (MCC) CEO John Danilovich informed Minister of
Finance Alberto Guevara that "As a result of the actions of
the Government of Nicaragua in connection with the (November
9 municipal) elections . . . MCC will not approve
disbursements for any projects or activities not already
contracted by MCA-Nicaragua until further notice." When news
of the MCC decision first reached President Ortega in Caracas
on November 25, where he was participating in an ALBA Summit,
he quipped, "We're not afraid, we're not going to back down .
. . in fact, we feel liberated every time they take away
aid." Ortega boasted that unlike U.S. assistance, Venezuelan
funds -- provided by a fellow revolutionary -- come with no
strings attached.

3. (SBU) In a nationally televised "Address to the Nation"
carried live by Nicaraguan television channels on December 1,
President Ortega responded more fully to the MCC
announcement. After delivering a tour d'horizon that
included a request that the opposition be "good losers" and
criticism of European donors, he recognized the importance of
MCC programs for Nicaragua, specifically mentioning road
construction and property titling. He told his audience,
however, that the decision to freeze disbursements would have
only a "minimal impact." Ortega claimed to have received
assurances directly from Hugo Chavez that Venezuela would
provide funds to continue the implementation of MCC programs
if they are canceled. "I want to tell the people of the West
(Leon and Chinandega) to relax and trust in God, thanks to
ALBA (the Bolivarian Alternative for the Americas) and the
people of Venezuela," he said.

4. (SBU) Ortega said Nicaragua is prepared to "sue" the
United States if MCC decides to follow through on its threat
to suspend its compact during its December 11 board meeting.
To the delight of an audience of party faithful, Ortega first
calculated U.S. assistance to Nicaragua from 2001 to 2007 at
$500 million. He then asserted that this was nothing more
than an installment toward the $45 billion dollars that the
United States owes Nicaragua. That amount, he explained,
includes interest on the $17 billion in punitive damages the
International Court of Justice (ICJ) assessed the United
States in 1986. Ortega urged Nicaraguan citizens to seek
collection of the balance -- $44.5 billion -- whenever they
come across a U.S. citizen. (Comment: The ICJ judgment is
something of an "urban legend" in Nicaragua. Our
understanding, based on information provided by the Office of
the Historian, is that (a) the USG never recognized the
court's jurisdiction; (b) the court, while finding for
Nicaragua, never imposed a specific monetary penalty; and (c)
the government of Violeta Chamorro withdrew the Nicaraguan
claim. End comment.)

5. (SBU) In the build up to Ortega's "Address to the Nation,"
other government officials offered more direct criticism.
Vice Minister of Foreign Affairs Manuel Coronel Kautz, who
was Acting Foreign Minister at the time, said, "If Mr.
Danilovich feels sorry for the Nicaraguans, maybe he should
think about the hundreds of thousands of deaths that the
(United States) causes in other countries." "(This decision)
is not going to change our way of thinking, who we are, how
we act," he added. Coronel Kautz concluded, "They have not
given us anything. They have come to kill Nicaraguans. We
have been invaded five times." Vice Minister of Foreign
Affairs Valdrack Jaentschke, who coordinates foreign
assistance for the government, complained that "It is
unacceptable and unethical to link assistance with internal
politics." "Freezing disbursements," he said, is "part of a
U.S. plot to destabilize the government." The action
violated the terms of the compact and in his view "could be
described as interference in domestic affairs."

The Democratic Opposition: Blame Ortega or Blame the USG?
--------------------------------------------- ------------

6. (SBU) Some opposition politicians expressed concern about
the impact the U.S. decision will have on rural poor in Leon
and Chinandega. Several members of former President Violeta
Chamorro's cabinet -- including Antonio Lacayo, former Chief
of Staff, and Enrique Dreyfus, former Foreign Minister --
wrote the Secretary of State and MCC CEO Danilovich on
November 28 expressing disagreement with the decision to
freeze MCC disbursements. While recognizing that "assistance
is more effective when it reinforces good governance," they
argued that a cut in assistance would only hurt the poor.

7. (SBU) In reference to the letter from Chamorro's cabinet,
PLC Deputy Francisco Aguirre Sacasa, Foreign Minister during
the Aleman administration, opined that MCC should refrain
from "punishing the people of Nicaragua for the sins of the
government." Later, Aguirre Sacasa blamed Ortega's verbal
assaults against foreign donors and attacks on democracy for
the freeze in disbursements. He has also argued that the MCC
program could be saved if President Ortega is willing to
solve the current political crisis by allowing for a fair and
transparent recount of the municipal elections.

8. (SBU) Other opposition leaders place the blame for
cancellation more squarely on President Ortega. Mario Arana,
a former Trade Minister under President Bolanos who now heads
the economic think tank FUNIDES, told econoff that with
President Ortega back in office, MCC's decision to freeze
disbursements was inevitable, as Ortega does not believe in
democracy. Former candidate for mayor of Managua Eduardo
Montealegre publicly blamed Ortega for the decision to freeze
disbursements. He added, "Our message is one of unity, only
if we are united will we defeat this dictatorship."

9. (SBU) Business leaders have lamented the economic
consequences of the decision to freeze disbursements. Jose
Adan Aguirri, President of a federation of business
associations known as COSEP, said the impact would be felt
directly by those employed in road building, but he also
noted the impact on the rural economy and regional economic
development. Nicaragua would "lose the MCC program for
political reasons," he lamented. President of the American
Chamber of Commerce of Nicaragua (AmCham) Cesar Zamora
seconded this view, adding that while the poor would bear the
consequences of cuts in assistance, "Politicians will not be
affected at all." AmCham Vice President Margarita Sevilla
voiced the same sentiment in a meeting with the Charge on
December 1, as part of an effort to enlist Embassy support
for opposition efforts to mount a legislative challenge to
the municipal elections results.

10. (SBU) Extensive press coverage has highlighted the
concerns MCC beneficiaries in Leon and Chinandega have for
how the decision will affect them directly. In an interview
with local media, a representative of an agricultural
cooperative in Chinandega that has received fruit trees and
other assistance from MCC called on the United States to
reverse its decision, saying "It isn't the government that is
being hurt." A plantain farmer from Chinandega who hopes to
receive an irrigation system from MCC called for the United
States to negotiate with President Ortega to resolve the
situation. Agrecio Osejo, who is Mayor of Somotillo,
Chinandega and also a member of the MCA-Nicaragua Board,
characterized the decision as a foreign policy issue and
called on President Ortega to help reinstate the program.
Summing up the views of those who stand to benefit from the
MCC program, one farmer said, "We are farmers . . . not
politicians, and it is sad that this program has been
suspended. We hope that the decision will be reversed."

Comment
-------

11. (SBU) With MCC assistance at stake, and other donors
heading for the door (septel), Ortega instinctively looks to
Hugo Chavez to fill the gap. Given falling oil prices,
however, there is much skepticism here as to what Chavez will
do (septel). Nonetheless, from a domestic perspective,
Ortega's grandstanding on December 1 makes political sense.
His pledge to keep assistance flowing to Leon and Chinandega
placates important FSLN constituencies there. He also seeks
to demonstrate to the opposition -- who seem unsure whether
to blame Ortega or us -- that he does not need U.S. or
European donors. By blaming donors for not caring about the
damage they do to Nicaragua when they withdraw assistance,
Ortega has managed to temporarily shift the focus away from
massive, systematic elections fraud to the supposed evils of
capitalism, imperialism, and interventionism.
SANDERS

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