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Cablegate: Private Sector Worried About Ortega Win, but Still

VZCZCXYZ0023
PP RUEHWEB

DE RUEHMU #2192/01 2771533
ZNY CCCCC ZZH
P 041533Z OCT 06
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC PRIORITY 7779
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHINGTON DC
RHEHNSC/NSC WASHINGTON DC

C O N F I D E N T I A L MANAGUA 002192

SIPDIS

SIPDIS

DEPARTMENT FOR WHA/CEN

E.O. 12958: DECL: 09/29/2026
TAGS: KDEM NU PGOV PINR PREL
SUBJECT: PRIVATE SECTOR WORRIED ABOUT ORTEGA WIN, BUT STILL
CONTINUE TO WAFFLE


1. (C) SUMMARY: The Nicaraguan private sector is in
general agreement that an Ortega presidency would have a
negative impact on the economy, but its attitude toward the
election and supporting the various candidates varies.
Individual businesspersons appear unwilling to risk
investing significant sums in a particular candidate given
tough campaign finance laws, a traditional 'hedging the
bets' mentality, and hesitance to avoid antagonizing
powerful Sandinista-dominated institutions. The largest
private sector organizations are taking a non-partisan
stance, but may assume other valuable roles. End Summary.

2. (C) Pol TDYer has met with several representatives from
the Nicaraguan private sector to gauge the attitude of the
business community toward the presidential elections,
supporting the various candidates, and assessing the
economic implications of a Sandinista government. The
results of the interviews varied depending on the source,
but there is general concern about Daniel Ortega's lead in
the polls and that the economy will take a turn for the
worse should he be elected in November.

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3. (C) Most of the below cable has been informed by the
perspectives of three sources:

--Margarita Sevilla Sarmiento: Sevilla is a member of the
Nicaraguan-American Chamber of Commerce (AMCHAM) and a
member of Foro Liberal, a fundraising group with ties to
the Liberal party. A fund-raiser, Sevilla's insights into
donor concerns and limitations of campaign fundraising help
explain why the ALN has yet to receive the financial
resources it thinks it needs.

--Jose Adan Aguerri: As a leader of an influential private
Sector organization - he is President of the Nicaraguan
Chamber of Commerce (CACONIC) - Aguerri maintained a
consciously non-partisan attitude in his conversation, but
made clear that the private sector is closely monitoring
the economic platforms of all candidates. He said that
groups such as his have no business backing a particular
candidate, but said that he is urging members of the
business community to encourage a high voter turnout -
which Aguerri said was necessary to ensuring an FSLN
defeat.

--Jorge Casa Mantica: The son of an Italian mother and
American father, Mantica's family owns a chain of local
grocery stores ('La Colonia') (COMMENT: Walmart recently
purchased a majority stake in La Colonia in a deal which
has not yet been published. END COMMENT.) and are also
distributors of computer, office ware, and air conditioner
products. Mantica made it clear to Pol TDYer that he is
one of the more openly partisan businessmen he knows.
Unabashedly pro-Montealegre, Mantica said that he has told
his employees to vote for Montealegre and also that if
Ortega wins, they could be out of a job because times would
be tough on business owners. He is also helping the ALN's
grassroots efforts by offering in-kind donations of office
supplies (i.e. computers, photocopiers), transportation of
campaign supporters/workers to rallies, and paying for
meals. Mantica said he plans on spending a lot of money on
election day helping to feed and transport ALN voters to
the polls.


MONTEALEGRE LOOKS GOOD ON PAPER, BUT NOT YET A SURE
INVESTMENT
- - - - - - - - - - - - - - - - - - - - - - - - - -

4. (C) The private sector is nearly as divided as the
center-right political parties. Aguerri said that most
businessmen privately back Montealegre, but will keep their
options open until it becomes clearer who has the best
chance of defeating Ortega. For this reason many continue
to eye the Liberal Constitutional Party (PLC), which is
more of a known commodity, while only a handful support
Edmundo Jarquin; he could think of only one or two
businessmen who wholeheartedly support Ortega. Sevilla
said that in 2005 Foro Liberal had 14 members, but that
today the group has largely disbanded because of the
division between the center-right parties. Sevilla said
that six of the group's former members support Rizo Because
they think it safer to stick with the PLC which has a
proven party infrastructure. Supporting any newcomer, in
their view, is risky business. Moreover, many Liberals
believe that Rizo and Alvarado are old and politically
experienced enough to consolidate their control over the

party after a victory and thus reduce Aleman's influence.
Nevertheless, Sevilla said that Montealegre's longstanding
dissent with PLC leadership has helped him to win the
backing of many former Liberals. For instance, she claimed
that those who supported Montealegre's unsuccessful bid to
become the PLC presidential candidate in 2001 were later
marginalized by Arnoldo Aleman. These people have remained
loyal to Montealegre and helped him to start his own
movement.

5. (C) Members of the business sector appear to regard
Jarquin's candidacy with mixed views. Sevilla was
sympathetic to Jarquin, admiring him for presenting a
detailed platform that is largely favorable to business
interests. Mantica, on the other hand, expressed
deep-seated reservations about the individuals surrounding
Jarquin. While he personally likes Jarquin, Mantica argued
that the candidate is surrounded by diehard radicals, such
as Victor Hugo Tinoco and Luis Carrion. Sevilla, however,
said Jarquin would be a weaker president than Montealegre
because he would probably have less backing in the National
Assembly. Montealegre would probably be stronger because he
would win more seats in the Assembly which, combined with
his defeat of Aleman-backed Rizo for the presidency, would
be enough to encourage additional PLC members to join his
side, reasoned Sevilla. Aguerri, Sevilla, and Mantica all
agreed that many voters Will hold off on making a firm
decision for whom they will vote until after the last poll
numbers are released.


PRIVATE SECTOR MOVING AHEAD WITH POLL
- - - - - - - - - - - - - - - - - - -

6. (C) President Bolanos' chief of staff Nayo Somarriba
told DCM and Polcouns on September 25 that despite PLC
candidate Jose Rizo's refusal to compete in a poll against
ALN candidate Eduardo Montealegre, Nicaragua's private
sector, the GON, and the Taiwanese will conduct the poll.
According to Somarriba, the poll will be conducted and
analyzed on October 9-23; prepared to print on October 24
and the results widely advertised October 25 - November 4.
Given its late date of slated publication, this poll could
go a long way toward determining which of the non-FSLN
candidates will get the most popular support to challenge
Ortega.


GENERALLY NEGATIVE VIEWS OF AN ORTEGA PRESIDENCY
- - - - - - - - - - - - - - - - - - - - - - - - -

7. (C) Most of the business community maintain strong
reservations about an Ortega victory, fearing that his
economic management could prompt a downturn in what has
been a relatively stable macroeconomic environment.
Sevilla and Mantica outlined the same general reactions to
an Ortega win. Both expect that domestic and foreign
investment would come to a near standstill as investors
wait to see how the FSLN behaves. A prolonged lull in
investment, however, could be sufficient to prompt a
moderate (1-2 years) recession. Sevilla pointed out that
construction would be one of the first sectors to be
affected, which could, in turn, have a negative impact on
employment figures. Mantica and Sevilla also expressed
concern that major international donors could freeze any
large projects or contributions as part of this 'wait and
see' period.

8. (C) Neither Sevilla, Mantica, nor Aguerri expect the
economic conditions to fall to their 1980-levels, but all
worry that FSLN mismanagement would hurt the overall
economy. Mantica said that excessive government subsidies
on education, gas, and electricity would necessitate higher
taxes, and that business would have to bear the brunt of
this policy. If that is the case, Mantica said that he
(and his colleagues) would first begin laying off members
of his workforce in order to stay afloat. Aguerri was
concerned that the Sandinistas would undermine the
independence of important financial sector groups by
appointing ideologues or party loyalists to key positions.
He noted that the government enjoys the right to appoint
persons to serve as administration representatives to
private sector organizations. Aguerri reported that while
the government cannot appoint the governing boards of these
bodies, their representatives could exert a negative
influence through the use of veto votes on committee
matters, or by exerting behind-the-scenes political

pressure.

9. (C) Sevilla, Aguerri, and Mantica all agreed, however,
that should the Sandinistas prove able to adhere to sound
principles of financial management the economy should
continue on as normal. Sevilla said that businesspeople
will continue to seek their profits in Nicaragua regardless
of the political ideology of the government so long as they
feel they are on a financially sound footing - "an
opportunity is an opportunity." Sevilla claimed that while
foreign investment during an Ortega presidency could
decline, this would not necessarily be long-lasting. She
pointed out that the French, Spanish, Italians would
probably continue to invest - as they do to Cuba.

10. (C) Sevilla noted that Nicaragua is unlikely to suffer
a debilitating capital flight simply in the event of an
Ortega win. She argued that about 90% of account holders
have less than $3,000 saved and that this money is likely
to stay put. Those who have more money in local banks will
have already moved their assets ahead of the election.
Mantica echoed Sevilla, saying that he has already
transferred most of his personal accounts outside of
Nicaragua, and that many of his friends were doing the
same. Sevilla claimed that Nicaragua's high international
reserves give it a certain cushion to withstand moves by
big account holders to transfer their money elsewhere. She
said that Nicaragua's financial and banking system could
survive a capital exodus of between 10 to 20%. Pointing to
the 2001 elections, Sevilla noted that approximately $200
million left the country around the election. She also
argued that while the largest banks may send assets outside
the country, most of them would simply transfer the funds
to their branches in nearby Panama where they would be
relatively safe. This transfer would bolster public
confidence in the viability of the banking sector and the
security of their own accounts.


WORRIED ABOUT CHAVEZ
- - - - - - - - - - -

11. (C) Sevilla and Mantica both said that concern is
running high in the private sector over Ortega's
connections to Chavez. Sevilla noted that a resurgence in
the ideological left in Latin America - what she termed a
"Renaissance of the leftist dialogue" - has helped Ortega
to sell a populist message on the campaign trail. With
strongly left-leaning administrations in Venezuela and
Bolivia, Ortega's message seems a bit less out of place
than it might have in the presidential elections in 1996 or
2001. Sevilla and Mantica said that what concerns them is
that Chavez will obviously wield a great deal of influence
over Ortega's actions in return for his contributions to
the FSLN campaign. (Comment: Anecdotal information from
discussions with Embassy contacts across the spectrum,
including taxi drivers, businessmen, politicians, and other
concerned citizens, suggests that the Ortega-Chavez
connection is well known, at least in Managua). Sevilla
suspects that Chavez will see Nicaragua as another stepping
stone for his Bolivarian revolution, and noted that
Venezuela's money could go a long way in impoverished
Nicaragua - "it does not take a lot of money to run things
here." Mantica claimed his sources have told him that the
FSLN is spending tremendous amounts of money on the
campaign, too much to have come from domestic sources. For
example, he said he has heard that the FSLN recently bought
100 brand new trucks to take supporters to the polls. He
has also heard that Sandinistas have been passing out 1,000
cordobas (about US $56) to families to buy their votes.


SPOOKED DONORS PROMPT POLITICAL BELT TIGHTENING
- - - - - - - - - - - - - - - - - - - - - - - -

12. (C) The concerns of the many donors have made it hard
for most of the political parties to acquire the resources
they deem necessary to run a strong campaign. Campaign
officers for the ALN and MRS have complained to the Embassy
that they are on a tight budget, and are constantly seeking
new contributions and donors. Sevilla said even the PLC is
having to tighten its belt. She said she has heard that
Jose Rizo has even mortgaged his house to pay for part of
the campaign. While Aleman no doubt has a huge fortune,
Sevilla said that he is not using much of his resources so
as not to call attention to his wealth during the legal
investigations against him in Panama.


13. (SBU) Sevilla explained that many in the private
sector hesitate to make significant contributions to the
candidates' campaigns for fear of incurring heavy penalties
and prompting political/economic retribution from a
victorious candidate that they did not support. A look at
the Electoral Code (Chapter IV of Title VII) shows what
might concern potential donors:

--Records of private donations are to be kept by the
political parties and turned in to the Comptroller
General's office.

--Political parties cannot receive anonymous donations.

--Those political parties who receive illegal contributions
are fined for double the amounts of the donation.

--Those who contribute illegally are eligible to be fined
for double the amount of the donation

14. (C) The only candidate with sufficient funding is
Ortega, as evidenced by the tremendous amount of FSLN
propaganda visible throughout Managua (NOTE: According to
NGO Etica y Transparencia, Ortega outspends all other
presidential candidates combined. END NOTE). While
Sevilla noted that much of Ortega's financial largesse has
no doubt been contributed by Chavez, much of it may also
come from domestic private sector sources. She argued that
Sandinista control over the judicial sector has prompted
many people to give to Ortega, or dissuaded others from
making large contributions to other candidates.
Businesspersons worry that if it becomes public knowledge
that they supported Montealegre, the Sandinistas, if
victorious, would exercise their muscle in the courts to
hurt their businesses (i.e. through fines, higher taxes,
etc).

15. (C) Sevilla also noted that the paucity of big-time
contributions has prompted the campaigns to rely on lesser
donations and engage in risky borrowing in the hopes of
receiving government reimbursement following the election.
Political parties are eligible to receive donations from
foreign and domestic private (i.e. non-governmental)
sources so long as they fall within the ranges of law.
(Note: Under these guidelines the government of Venezuela
could not provide funding to the FSLN, but ordinary
Venezuelan citizens could.) The government sets aside a
fund equal to 1% of the ordinary budget to distribute to
those political parties who gain more than 4% of the vote -
to be disbursed after the elections. These parties then
split this pot in amounts proportional to the number of
votes they received. The AMCHAM member said that this has
prompted the parties to approach banks for loans based on
how many votes they think they will be able to receive.
Montealegre and his advisers hinted during their
meeting with Congressman Burton that they were now having
trouble persuading banks to lend them more money.

16. (SBU) A quick look at the law also reveals potential
Achilles' heels for some of the campaigns. Article 177 of
the Electoral Code states that candidates found guilty of
violating finance-related rules laid out in Chapter 4
(articles 99-106) or any of the other electoral violations
cited in Title 14 (articles 173-178) are required to
renounce their candidacies and are prohibited from
exercising public functions for a period of between one and
three years. Should they be charged with having committed
these offenses during their campaigns after they have
already taken office, then they must step down. This
provides an obvious opening for the pactistas to use their
influence to hamstring opponents.


AGUERRI SEES IMPORTANT ROLE FOR PRIVATE SECTOR
ORGANIZATIONS
- - - - - - - - - - - - - - - - - - - - - - - -

17. (C) As CACONIC President, Aguerri sees private sector
organizations, such as CACONIC and COSEP (a larger umbrella
group of private sector organizations) as having to remain
nonpartisan. However, Aguerri admitted that most of the
private sector is extremely concerned over the specter of a
Sandinista government. Thus, members of the business
community are coming together to support various 'get out
the vote' initiatives. For example, he is in discussions
with movie theater and fast food chain owners to find a way

to offer discounts to citizens with proof of having voted.
By displaying ink-marked thumbs on voting day (all voters
must dip their thumbs in special ink after casting their
ballots to minimize the chances of a person attempting to
vote twice), voters could see a free movie or enjoy a
discounted meal at participating locations. Aguerri added
that CACONIC has offered the Supreme Electoral Council
(CSE) use of private sector vehicles to transport some
15,000 cedulas (voter IDs) that are sitting
in CSE holding facilities. He speculated that the
majority of these are probably for non-Sandinista voters,
noting that the CSE is considering the proposal, but has
not yet responded.

18. (C) Aguerri also mentioned that CACONIC has extended
an invitation to all of the presidential candidates to sign
a list of 10 basic points necessary for economic stability
and growth compiled by the organization. He said that
Montealegre has seen the list and expressed an interest in
signing. The Chamber was planning to meet with Jarquin the
first week of October. They expect Rizo will sign, and
have offered Ortega the opportunity as well -- though
Aguerri commented he would doubt the sincerity of an Ortega
signature. A summary of the 10 points:

--Improve the judicial sector

--guarantee a free market and the right of the private
sector to participate in economic policymaking

--employ a commercial strategy favorable to the
establishment of free trade agreements

--reduce state expenditures on an outdated bureaucracy

--promise to maintain public order and a stable investment
climate

--develop access to credit

--improve education

--expand the tax base to reduce the tax burden of the
private sector

--strengthen the system of doling out public contracts with
improved transparency

--economic policies that guarantee a free currency
exchange, inhibit excessive state controls, and the
implementation of a sound macroeconomic strategy.

19. (C) Comment: With only about a month until the
election, many in the private sector will continue to wait
until the final poll numbers become clear before deciding
to take a stronger stand in supporting the non-Ortega
candidate. Thus, the overall financial situation of these
parties is unlikely to change drastically. However, should
the contest move to a second round, Ortega's opponent will
probably find his coffers substantially enhanced. End
Comment.
TRIVELLI

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