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Cablegate: With Forests Destroyed, Nicaraguan Government Frustrates

VZCZCXRO2511
RR RUEHLMC
DE RUEHMU #2655/01 3651724
ZNR UUUUU ZZH
R 311724Z DEC 07
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 1879
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHEHNSC/NSC WASHDC
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHDC

UNCLAS SECTION 01 OF 03 MANAGUA 002655

SIPDIS

SENSITIVE
SIPDIS

STATE FOR WHA/CEN, WHA/EPSC, AND OES
SAN JOSE FOR EST HUB
USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN
3134/ITA/USFCS/OIO/WH/MKESHISHIAN/BARTHUR

E.O. 12958: N/A
TAGS: SENV EINV ETRD EAGR PGOV NU
SUBJECT: WITH FORESTS DESTROYED, NICARAGUAN GOVERNMENT FRUSTRATES
FELIX SALVAGE EFFORTS

REF: A) MANAGUA 0405, B) MANAGUA 2325, C) MANAGUA 1747

1. (SBU) Summary: As part of its post-Hurricane Felix relief
efforts, the Government of Nicaragua (GON) suspended all commercial
extraction of timber in Nicaragua's North Atlantic Autonomous Region
(RAAN). This ban was enacted pursuant to presidential decree
92-2007, ratified by the National Assembly on September 21. The
decree directed that all existing wood products in industry
lumberyards be used for local indigenous community housing and
infrastructure reconstruction. Industry and opposition parties
decried the ban as "confiscatory." The GON has since developed an
action plan for post-hurricane forestry management and, on November
2, promulgated a "regulatory clarification" for salvage logging
operations. While the action plan contains positive, if ambitious,
survey, fire prevention, and environmental mitigation requirements,
the new regulations also serve to deepen commercial uncertainty.
While Hurricane Felix may open a window of opportunity to revisit
the poorly conceived June 2006 Veda Forestal forestry extraction and
export prohibition (Ref A), the situation for commercial loggers
remains unclear. Illegal logging and extraction of significant
timber resources felled by the hurricane continues unabated. End
Summary.

Hurricane Felix Damages Huge Swathes of Forest
--------------------------------------------- -

2. (U) Category Five Hurricane Felix slammed into the RAAN's
northeast coast on September 4, killing more than 130 people. (Some
indigenous groups claim that as many as 500 died.) Hurricane Felix
destroyed more than 20,450 homes along with 100 schools, clinics,
community centers, and churches. Based on aerial and terrestrial
surveys, the National Institute for Forestry (INAFOR) reports that
the storm ripped through 1,400,000 hectares of territory, causing
extensive damage to 560,000 hectares. INAFOR estimates that Felix
toppled as many as 11 million cubic meters of tropical forest
product and that the value of this timber may exceed $500 million.

Ortega Responds with a Decree Suspending Timber Trade
--------------------------------------------- --------

3. (U) On September 21, the National Assembly ratified a sweeping
presidential decree that suspends all commercial logging and timber
trade in the RAAN (Ref B). Article 5 of Presidential Decree 92-2007
requires that all lumberyards channel existing inventory to meet
demand for reconstruction and housing in the region--at no cost to
customers. However, the decree fails to specify how reconstruction
will by managed or by whom, and makes no distinction between timber
felled prior to Hurricane Felix and timber felled as a result of the
storm. Additionally, the decree contains no provision to compensate
companies for lawfully felled timber.

4. (U) Local timber operators have criticized the decree as an
"illegal and unconstitutional confiscation of private property."
National Assembly Deputy Wilfredo Navarro of the Liberal
Constitutionalist Party called the law an "imposition, a
confiscation, a taking, a sequestration, blackmail and wrong,"
adding, "if the President wants to do right for the people of the
Northern Caribbean, he should pay the owners for the timber."

5. (U) Unable to sell or export their timber, a number of logging
companies have suspended operations and laid off workers (200
reported for one company alone). As a consequence, twenty local
indigenous leaders from affected communities signed a declaration
demanding that all levels of government support and respect
commercial exploitation of timber felled by Hurricane Felix to
reactivate local economies. In response, the Vice President and the
Executive Director of INAFOR defended the September 21, 2007,
measure, declaring that the timber is a "donation," and that, "It
would be a crime NOT to use the wood for housing reconstruction."

The GON Drafts a Plan
----------------------

6. (U) Regional and Central Governments drafted a comprehensive
forestry management plan entitled "Action Plan for Assistance and
Restoration of Forest Ecosystems in the RAAN." Carrying a $67
million price tag, the plan incorporates forest protection,
harvesting, reforestation, research, monitoring, territorial zoning,
and regional capacity building. It calls for additional analyses,
including a timber inventory, reforestation and forest protection
plans, and a simplified plan for commercial harvesting at the
community level.

7. (U) On November 2, Administrative Resolution 75-2007 established
a legal framework to allow salvage logging, exports, and commercial
alliances with community groups. In essence, the resolution sets
forth regulations to implement Presidential Decree 92-2007 along the
following lines:

-- Private enterprise involvement will be approved
only for those that have "existing transparent
alliances" with local communities that have been
endorsed by the regional government. Timber must
be processed to meet community reconstruction
needs first, and for free. Only after "basic"
community needs for housing and infrastructure
have been met may surplus forestry resources be
sold and processed for resale at market prices.
However, any profits generated from such a sale
must be shared with affected communities.

-- Processed, value-added timber may be exported
only from the port city of Puerto Cabezas.

-- INAFOR, Ministry of Environment and Natural
Resources (MARENA) and Secretary of Natural
Resources (SERENA) technicians will supervise
extraction and issue non-commercial forestry
permits to meet local demand for home
reconstruction and infrastructure supplies.

-- After INAFOR technicians conduct field
inspections, commercial forestry permits may be
provided to indigenous communities and their
beneficiaries.

Analyzing the Law
-----------------

8. (SBU) The regulations to Presidential Decree 92-2007 have created
even more confusion for logging companies than the decree itself.
They severely limit and constrain the private sector, effectively
transforming logging companies into little more than unpaid agents
for community reconstruction. Under the new regulations, only local
commu&

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