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Cablegate: Energy Crisis Forces Government to Cut Work Week

VZCZCXRO8211
RR RUEHLMC
DE RUEHMU #1753/01 2011246
ZNR UUUUU ZZH
R 201246Z JUL 07
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 0837
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RHEHNSC/NSC WASHDC
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/USDOC WASHDC 0851
RHEBAAA/DEPT OF ENERGY WASHINGTON DC

UNCLAS SECTION 01 OF 02 MANAGUA 001753

SIPDIS

SIPDIS
SENSITIVE

STATE FOR WHA/CEN, WHA/EPSC, AND EEB
USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN
3134/ITA/USFCS/OIO/WH/MKESHISHIAN/BARTHUR

E.O. 12958: N/A
TAGS: ENRG ECON PGOV NU
SUBJECT: ENERGY CRISIS FORCES GOVERNMENT TO CUT WORK WEEK

REF: 06 MANAGUA 2051

1. (U) Summary: Nicaraguan President Daniel Ortega has mandated a
shortened workday for all executive branch offices in Managua in
accordance with a recent agreement establishing a nation-wide
blackout schedule. The agreement signed by the Nicaraguan Energy
Institute (INE) and Spanish-owned energy distributor Union Fenosa
guarantees power to the capital city from 7 AM and 2 PM. All other
departments will experience blackouts during these hours. Ortega
and other GON officials have publicly stressed that new generating
capacity will be installed shortly and that rationing is a temporary
measure. The bulk of the anticipated capacity will not become
operational until early 2008, however. While the shortened
government work week and scheduled blackouts reduce the chaos
brought on by this crisis, its impact on economic activity remains
significant. End summary.

Deal or No Deal
---------------

2. (U) On July 5, President Ortega announced a decree mandating a
shortened workday for all executive branch offices in Managua. The
decree is intended to better manage the country's ongoing energy
shortage, which has seemingly random blackouts of up to 12 hours a
day throughout the country in recent weeks. INE President David
Castillo proposed the reduced working hours in a letter to Ortega on
July 4.

3. (U) On July 10, government officials accused Fenosa of failing to
adhere to the agreed-upon blackout schedule and demanded a new
arrangement, which was signed on July 12. According to this
agreement, all departments outside Managua will lose power Monday
through Friday from 7 AM to 2 PM. Within Managua, power will be cut
from 2 - 6 PM for some areas and from 5 - 10 PM for others, on
alternating weeks. The arrangement was designed so that no
commercial sector would face outages of more than five hours in
duration, at least within the capital city. Fenosa will establish a
weekend blackout schedule, but thanks to lower energy demand on
those days outages will not be as severe.

The New Government Work Day - Earlier and Shorter
--------------------------------------------- ----

4. (U) According to the new arrangement, all executive branch
institutions in Managua will be open Monday through Friday from 7 AM
to 1 PM, with the exception of hospitals, health clinics, and
selected educational facilities. While Ortega lacks the authority
to mandate reduced hours for non-executive GON offices, he has
called upon the legislative and judicial branches, as well as all
independent institutions, to follow his lead. According to Ortega,
he and other GON representatives have been in close consultation
with members of the private sector and have agreed that it would be
preferable to guarantee power in Managua during the morning hours.
GON officials also announced that they have requested that the
International Monetary Fund (IMF) analyze the Nicaraguan electricity
sector to better understand the blackouts and their causes.

Help On the Horizon
-------------------

5. (U) On July 5, Castillo claimed the blackout schedule would
continue only until August while generator units that provide a
total of 60 MW are repaired. Yet according to Nicaraguan Chamber of
Commerce President Jose Adan Aguerri, the country's energy crisis
will not be fully resolved until new power generation plants are
installed in the coming months. The Nicaraguan power sector has an
installed generation capacity of around 700MW, but is currently
generating just 450MW, far less than average peak demand of about
600MW.

6. (U) With the backing of Ortega, the National Assembly passed a
bill on June 28 approving the purchase of another 120 megawatts of
generators, 60 of which have been secured from a French company and
60 of which remain unprocured. An additional 60 megawatts from
Venezuela and 30 megawatts from Taiwan, all bunker/diesel based, are
expected to become operational in the first trimester of 2008. On
July 17, press reports announced that Florida Light and Power and
Ashmore Energy (remnant of Enron's generating arm) are considering
making offers as well. Florida Light and Power has proposed a 150MW
plant that would burn bunker fuel, while Ashmore is considering a
450MW liquefied coal plant. According to Ortega, Nicaragua is also
pursuing long-term hydroelectric, biomass, geothermal, wind, and
solar energy projects.

Ortega's Message - The Private Sector Cheats
--------------------------------------------

7. (U) In recent press comments, Ortega confirmed that the GON will
continue subsidizing private energy use up to 150KW/month (about 60%
of consumers), but warned that individuals who consume above this
amount will have to pay accordingly. Ortega blamed the private
sector for the current energy shortage, claiming that many large
consumers and businesses have been obtaining energy through illicit
hook-ups or simple non-payment of utility bills. He encouraged the
National Assembly to pass a law cracking down on such practices.

Comment
-------

8. (SBU) The blackout schedule is a welcome measure for businesses
who have suffered large losses due to the unpredictable nature of
the power supply in recent weeks. Nevertheless, it is extremely
difficult to run a government and grow an economy with daily
five-hour blackouts, and even Ortega has acknowledged that this
arrangement is nothing more than a short-term measure designed to
address the symptoms of a much larger and long-term ailment.

TRIVELLI

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