Cablegate: Subject: Nicaragua: An Economic Perspective On

DE RUEHMU #2223/01 2712333
R 282333Z SEP 07





E.O. 12958: DECL: 09/27/2017

Classified By: Ambassador Paul Trivelli, Reason: E.O. 12958 1.4 (d)

1. (C) Summary: Eight months into Daniel Ortega's term as
president, his socialist rhetoric continues to worry
potential and current investors in Nicaragua. Beginning on
the day of his inauguration, Ortega launched into
anti-capitalist, anti-neoliberal, and increasingly
anti-American rhetoric, implying that what had transpired in
Nicaragua during the past sixteen years was all wrong. A
consistent economic theme has been the need for Nicaragua to
reduce its dependency on the United States and international
financial institutions. Ortega believes that this theme
provides him with the political cover he needs to forge
closer economic relations with the likes of Venezuela, Cuba,
Iran, Libya, and North Korea. When it comes to private
sector investment, Ortega seems to be of two minds. He
acknowledges the fundamental role that the private sector
plays in creating jobs, generating growth, and improving
social well-being, but in practice never really accepts that
this is true. One of Ortega's most palatable messages is
that capital investment in Nicaragua needs to incorporate
some social component. End summary.

2. (C) Eight months into Daniel Ortega's term as President,
his socialist rhetoric continues to worry current and
potential investors in Nicaragua. Ortega rarely misses an
opportunity to denounce "imperialism" and "savage
capitalism," although his tone and presentation often varies
with his audience. A review of Ortega's public discourse
since his inauguration on January 10, 2007, reveals a
worldview adorned with disdain for what he terms "global
capitalism" and its imperialist champion, the United States.
Ortega borrows heavily from Marx to explain the success of
capitalism, which he views as being fundamentally opposed to
the welfare of poor people throughout the world. Recently,
he has been focusing more on historical inequities, drawing a
causal relationship between the wealth of developed countries
and the poverty of underdeveloped countries.

3. (C) Ortega has avoided criticizing specific individuals or
businesses in Nicaragua, with a few exceptions in the energy
sector. He has forcefully criticized electricity distributor
Union Fenosa (Spain), liquid fuels importer and distributor
Glencore (Switzerland), geothermal power producer Polaris
(Canada), power producer Geosa (Nicaragua), and through his
tax and customs directors general and other party stalwarts,
refiner and liquid fuels distributor Esso (United States).
Every company that Ortega has criticized publicly has become
the object of state-led legal and tax challenges.

Out of the Starting Gate

4. (C) Beginning on the day of his inauguration attended by
Venezuelan and Bolivian Presidents Hugo Chavez and Evo
Morales, Ortega and his Communications Coordinator (wife
Rosario Murillo) launched a propaganda campaign to
reestablish socialist values in Nicaragua. The campaign
contrasts greatly with his election campaign, also managed by
Murillo, both in tone and content. Ortega's election
campaign was little more than the repeated play of a
Nicaraguan version of John Lennon's "Give Peace a Chance" as
a silent candidate waived to the masses from a slowly driven
vehicle. Ortega now makes great use of the bully pulpit to
constantly assert that Nicaragua's "neoliberal" experiment in
"global capitalism" the last sixteen years has failed.

5. (C) The day after his inauguration, Ortega signed onto the
Bolivarian Alternative for the Americas (ALBA), since
heralded as the centerpiece of Nicaragua's foreign economic
relations and the alternative to the Central American Free
Trade Agreement (CAFTA) and a Free Trade Agreement of the
Americas (FTAA). Ortega has consistently trumpeted economic
relations with ALBA countries (Venezuela, Cuba, and Bolivia)
at the expense of his relations with Central American
countries and as a substitute to economic relations with the
United States. His socialist fire only dimmed for his first

MANAGUA 00002223 002 OF 006

press conference in January, to calm nervous investors. By
May, his anti-capitalist, anti-neoliberal, and anti-American
rhetoric picked up another head of steam. This culminated in
20-minute inflammatory speech at the United Nations on
September 25 2007, in which Ortega railed against the United
States as the imperial power (septel).

America Is Bad

6. (C) An underlying theme for Ortega's speeches has been the
need for Nicaragua to reduce its political and economic
dependence on the United States, developed country donors,
and international financial institutions, which he believes
"are controlled by the United States." He argues that global
capitalism has enslaved the world by helping the rich get
richer at the expense of the poor, and exploiting natural
resources and polluting the world's environment. Further, he
argues that international financial institutions are the
tools of "yankee imperialism," that neoliberalism is a modern
version of imperialism, and that privatization and
neoliberalism in Nicaragua have failed to lift Nicaragua out
of poverty.

7. (C) A corollary to these arguments is that CAFTA should
never have been negotiated because of inherent and
insurmountable economic asymmetries between poor, small
Central American countries and the United States. Ortega
asserts that if such a trade agreement had to be negotiated,
then Central American countries should have negotiated it as
a single, unified entity to strike a more balanced deal.
Because this did not happen, CAFTA surely favors the United
States. Ortega further asserts that by definition small
agricultural producers cannot compete with large U.S.
producers who, he laments, receive state subsidies.
Therefore, he concludes, CAFTA is inherently unfair.

8. (C) Ortega often deploys this logic as political
justification for forging closer economic relations with
Venezuela, Cuba, Bolivia, Iran, Libya, and even North Korea.
For more political cover, he will elaborate on the historical
and lasting evil of "imperialism," "global capitalism," and
"the empire," all euphemisms for the United States. (Note:
In his speech before the United Nations on September 25 2007,
Ortega clearly tied the United States to these euphemisms).
Ortega compares these evils to honest and well-meaning
foreign assistance and commerce from and with ALBA countries
and Iran.

9. (C) Ortega's anti-American rhetoric often varies with the
occasion. He never used the word "empire," for example, to
refer to the United States in his public meeting with World
Bank Vice President Pamela Cox on February 1. However,
during his July 21 address to the Sao Paulo Forum, a
conference composed of leftist and nationalist political
parties and social movements in Latin America and the
Caribbean, Ortega bandied the term an astounding twenty-one
times. Left to his own resources, Ortega will almost always
weave in a few minutes of anti-American epithets into one of
his patented 100-minute speeches to loyal followers. The
rhetoric flows especially freely during visits from
Venezuelan President Hugo Chavez.

Capitalism Is Bad; Some Investment Might Be Good
--------------------------------------------- ---

10. (C) Ortega seems to be of two minds when it comes to
capital investment. He claims to welcome capital investment
on the one hand, but on the other decries the evils of
"global capitalism." He asserts that privatization has
failed in Nicaragua, that "neoliberalism" has corrupted
government to serve selfish interests "of those with family
names we all know," but claims to be open to dialogue with
business. He accepts the need to negotiate a new Poverty
Reduction Growth Facility with the IMF, but issues a blanket
condemnation of all international financial institutions as
being "the mere tools of capitalism." He acknowledges the

MANAGUA 00002223 003 OF 006

fundamental role that capital investment plays in creating
jobs, generating growth, and improving social wellbeing, but
never really accepts the notion that capitalism works. He
equates "global capitalism" with imperialism, vilifies the
United States as chief imperialist, and equates "original
capital" to original sin -) since, according to his
accounting of history, "original capital" was derived from
slavery and colonialism.

11. (C) Ortega repeatedly quotes Pope John Paul II to draw a
distinction between "savage capitalism" and presumably
"not-so-savage capitalism." This gives Ortega the pretext to
support some forms of capital investment, e.g., that which
"serves the interests of the people," especially the poor.
Clearly, Ortega feels better about an investment if there is
some form of social contribution included. He has repeatedly
referred to Cone Denim's $100 million investment in a textile
manufacturing plant near Managua as an example of the kind of
long-term, "non-maquila" investment that he welcomes. Cone
Denim (United States) makes some social contributions.
However, Cone Denim is a free trade zone investment like all
other Nicaraguan "maquilas," and will, in fact, employ fewer
people than most maquilas. The difference is that Cone Denim
will manufacture cloth rather than finished goods.

The A to (almost) Z of Ortega's Rhetoric

12. (SBU) Below are unofficial translations of statements
made by Ortega during his first eight months in office. They
identify the range of his economic thinking, and not just the
anti-American quality of his rhetoric.

a. "Every time that I speak about this issue with the same
representatives from the IMF, the World Bank, the European
Union, and representatives of the North American Government,
I say to them, 'What are the results of these policies that
His Holiness the Pope John Paul II called savage capitalism?'
That is what His Holiness called it! I ask them, and I say
to those who continue insisting that the neoliberal model is
the only way that our people can progress, I say to them, 'I
am going to put it to the test here in Nicaragua!'"
(Presidential Inauguration, January 10, 2007).

b. "This treaty with the United States, CAFTA, that was
approved a few years and months ago ...we said that, in all
clarity, this treaty was not thought out, not considered as
to the condition of a country like the United States with
great and enormous resources and economic subsidies versus
the economies of our countries. They had to understand this
(inequity) to negotiate. Finally they signed a treaty that
brings some benefits to some sectors, but not to others. We
have talked with North American representatives and told them
about the problem, that they have not taken into account
economic asymmetry with these countries. How can a small
Nicaraguan producer compete with a North American producer
who is subsidized?" (Presidential Inauguration, January 10,

c. "There does not exist, in these times, a situation that
signifies that economic activity in our country is paralyzed
or is decreasing. To the contrary, we feel that economic
activity is being maintained ...the year is beginning. There
have been the normal movements for the start of a year and a
dialogue has continued with the national businesses through
INCAE (the Central American Institute for Business
Administration). Vice President Jaime Morales is in charge
of working with them, that already is the commitment.... It
was a grave error to have negotiated CAFTA in bilateral form;
it put us in a weak situation." (Press Conference, January
22, 2007)

d. "This is a new government. We have a conception, a
philosophy that is very different from the governments that
preceded us. We are interested in developing, establishing,
consolidating good relationships with (international)
organizations, with the (World) Bank as well as with the

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(International Monetary) Fund." (Meeting with World Bank Vice
President Pamela Cox, February 1, 2007).

e. "We are meeting many businessmen, many investors,
capitalists who are ready, and in addition to their
(financial) investments, to make social investments. But
there are others in the minority, in the case of Nicaragua,
who bring an entirely selfish attitude, who want to
accumulate more riches each day and to whom it does not
matter if the people are in poverty, in misery." Sixteen
years of neoliberalism has passed in Nicaragua. And what do
we have? We have economic growth. Of course, we have
economic growth, but with whom does this wealth reside?
Where does wealth stop?" Celebration of the 29th Anniversary
of the Sandinista Insurrection in Monimbo February 24, 2007)

f. "What is the root of the problem (speaking of power
outages throughout the country)? It is in the deed of having
privatized. This was the original sin. Who privatized? The
democrats, those who say they are democrats. They privatized
the power plants, giving concessions (to the electricity
distributor). Thank God they did not sell it, because all
this involves corruption, selling (the power plants) for
pennies -- but what they did was to rent it." (Celebration
of the 29th Anniversary of the Sandinista Insurrection in
Monimbo February 24, 2007)

g. "We will have a world filled with justice, where all
families live in dignity, where hearts are filled with the
feeling of love, and where we will have buried forever
feelings of hatred, of selfishness, of individualism, of
'savage capitalism' that His Holiness Pope John Paul II
called by name ) 'savage capitalism'.... We are not
fighting with the Yankees. They are the ones who have been
fighting with the world. This is the history of the
imperialists." (Ortega with Hugo Chavez in Leon, March 11,

h. "We are against polluting the environment, a result that
must be viewed in the (context of) policies of consumption,
imposed by the capitalist model and that will not stop for
anything." (Ortega with members of his Cabinet, April 3, 2007)

i. "At the height of neoliberalism, with all the support that
is possible in terms of policies and capitalist material
wellbeing, capitalist countries, with all the support that
the Government of the United States had offered to previous
governments.... How much would it mean for the United States
to donate (a power plant) to Nicaragua? They did not donate
it ... It is neoliberal political nature to forget about the
people, about the poor, and simply do things every day to
become richer." (Inauguration of the Venezuelan Hugo Chavez
Power Plant at Las Brisas, Managua, April 17, 2007)

j. "During these sixteen years in which neoliberalism was
imposed on Nicaragua, what was considered the most important
was to maintain structural reforms -- the privatizations,
privatizing education, health -- all at a cost of greater
poverty for the Nicaraguan people." (Meeting with a Russian
Delegation, April 25, 2007)

k. "Never as today, has the world been so divided between the
minority that possess wealth and the immense majority
(living) in poverty. This has occurred at both the national
and international level. Here in Nicaragua, where the scheme
of world capitalist domination is replicated by the 'land
imperialists,' as our General Sandino called them, a few with
wealth and the majority in poverty.... Who is the
imperialist bourgeois? The one who is of 'savage
capitalism,' the imperialist who tries to break, to conquer
our people." (Labor Day, May 1, 2007)

l. "We have to liberate ourselves from this dependency on
external resources because of all the problems they bring,
the conditions that they put on us." (Cabinet Meeting on the
National Infrastructure Plan, May 3, 2007)

MANAGUA 00002223 005 OF 006

m. "Neoliberalism not only has meant denying education,
health, and work to the people, denying financing to the
farmers, but also it has meant the destruction of the
environment, of the forests.... This is where it is clear
that what the world is questioning is the model. There has
to be questioning, from all sides, of the model that savage
capitalism has imposed on the world and which is leading to
the destruction of the environment." Cabinet meeting on the
National Environment Plan, May 8, 2007)

n. "The greatest acts of violence, of barbarism, have been
committed by rich, developed countries. Violent crimes of
all kinds -- not for hunger, not for poverty, not for
unemployment. Simply put, what has provoked this kind of
situation has been the deformity, the destruction of the
human spirit by savage capitalism." (Appointment of Cardenal
Obando y Bravo as Chair of the Reconciliation Commission, May
9, 2007)

o. "In our attempt to generate quick employment, we can be
killing ourselves. This is the great problem: as we say,
bread for today, hunger for tomorrow. We cannot run that
risk... We want investment with a sense of respect, to the
workers and to the environment -- an investment that is
accompanied with social sense." (Institute of Social
Security Presentation, May 22, 2007)

p. "Our country, throughout its history, has suffered wars
imposed by the politics of imperial North America.... This
is what permits us to break with unipolar politics to
establish a new equilibrium in the world, where we transform
in a profound way the current world order, as much in the
areas of economics and commerce between counties as in the
area of law. What we will really achieve is to democratize
relations between people, between nations, by putting an end
to the dictatorship of the global capitalism of the empire.
And then we can ensure a world of peace, of justice, of
liberty.... And in the dialogue that we hold with the United
States, we have been clear to demonstrate our position
against imperialist policies, against the dictatorship of
global capitalism...." (Greeting Iranian President
Ahmadinejad, June 10, 2007)

q. "This is the greatest battle that escapes human history --
the concept that development policy has been in the hands of
global capitalism which sets the norms, imposes its economic
policy through blood and fire, and for which certain periods
and eras a conquered Africa, Asia, and American continent
submitted to colonization, responding to a development model
that was determined in the European metropolis, simply trying
to grow, but in these moments, the world population,
technological development, and pollution that was generated
in the form of epic exploitation, was brutal. It turned into
an economic policy that practiced systematic genocide in
order to steal natural resources." (Closing Remarks to the
Natural Resources and Environment Conference of Central
American Ministers, June 18, 2007)

r. "These gentlemen that today are the owners of the world
economy, who impose upon us schemes such as neoliberalism,
who wish to obligate us to accept the conditions of the
International Monetary Fund, they accumulated their wealth in
the most abject manner, the most brutal, shameful manner that
human history could have ever known." (Celebration of the
71st Anniversary of the Birth of Carlos Fonseca, founder of
the FSLN, June 23, 2007)

s. "The recent meeting of the Group of Seven plus one, in
Europe, once again provides evidence of the inflexibility of
those who continue defending an exhausted model ) a
developmentalist, consumerist (one) that goes against the
most vital interests of humanity. And the opposition, the
voice that raises concern, from countries belonging to the
same exhausted global capitalist scheme, (is against) global
capitalism that has imposed its rules throughout the years,
that has established norms, and that talks of democracy
without practicing democracy." (Inauguration of the Regional

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Conference on UN Coherence, June 25, 2007)

t. "I think that the moment has arrived that, above all the
countries of global capitalism, the empire (is the one who)
controls the (International Monetary) Fund. Really, the poor
(workers at) the Fund are no more than an instrument, because
we say here that the Fund is evil. No. What is evil is
world economic order imposed by the countries of global
capitalism, of the empire, which accumulate their capital at
the cost of enslaving Africans for more than 300 years (and)
exterminating indigenous people in Latin America. This is
the origin of their capital." (Ortega's arrival at the
airport on a state visit to Mexico, June 27, 2007)

u. "In the sixteen years that they governed quietly, the
model they imposed was global capitalism, the imperialist
model. What were the results? They said (that) the country
achieved take-off because a few became richer. Because of
this, they achieved take-off. Those that became richer took
off, but the immense majority of the people did not have any
take off. What they had was privatization of health care,
education, the democratization of hunger, of unemployment.
This is what they had. This is the reason why we have
(electricity) rationing )- our inheritance from
neoliberalism. To put it into simple language, the
inheritance of 'savage capitalism.' This is our
inheritance." (Inauguration of the Zero Hunger Initiative in
Estelli, July 7, 2007)

v. "This is what the Europeans did. All the Europeans who
today present themselves as saviors of the world, this is
what they did. The primary capital for capitalism has its
origins in these forms of exploitation, of theft, of plunder,
of corruption, that they established throughout the African
and American continent, and also in Asia. They were
accumulating this wealth which they later converted into
power." (Closing of the 15th Congress of the Nicaraguan
Student Union, July 18, 2007)

w. "The situation is very simple. Those that accumulated
this capital, this wealth, with the plunder, the
extermination, concentration camps, more than 300 years of
slavery of the African population, they are very united, and
they are searching a way to keep all of us divided, in order
to dominate us, to better oppress us. They practice this
policy throughout the world: to divide people, nations, (and)
governments. And, each time governments make an effort to
become closer, listening to the will of the people, the
threats come with sanctions and everything that we already
know. But the world lives in a new time. True that global
capitalism, headed by the yankee empire, has enormous
strength.... Global capitalism threatens destruction, not of
the small people because it has already destroyed them, but
rather of medium and large producers...." (Celebration of the
28th Anniversary of the Sandinista Revolution, July 19, 2007)

© Scoop Media

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