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Cablegate: Massive Blaze Levels Heart of Managua Market, More Bad

VZCZCXRO9040
RR RUEHLMC
DE RUEHMU #1032 2252225
ZNR UUUUU ZZH
R 122225Z AUG 08
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 3018
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS MANAGUA 001032

SENSITIVE
SIPDIS

STATE PASS OPIC AND IAF

E.O. 12958: N/A
TAGS: EAID ECON PGOV PREL NU
SUBJECT: MASSIVE BLAZE LEVELS HEART OF MANAGUA MARKET, MORE BAD
NEWS FOR MICROFINANCE

REF: MANAGUA 932

1. (U) Summary and Introduction. On July 31 a massive fire
destroyed over one-third of Managua's Eastern Market, reportedly the
largest outdoor dry goods market in Central America. According to
media reports, over 1,500 small businesses were destroyed or
damaged. Many of these family-owned businesses depend on
microfinance institutions (MFI), which in turn have offered to
restructure debts, extend terms of payment, or to negotiate mutually
acceptable alternatives. The fire's timing is particularly
unfortunate given recent violent riots in northern Nicaragua against
microfinance institutions, which followed inflammatory rhetoric on
the part of President Ortega (reftel). End Summary and
Introduction.

2. (U) On July 31 a massive fire erupted in Managua's Eastern
Market center, home to its biggest distributors who also supply
other Nicaraguan markets. If normal operations are not quickly
resumed, the larger economy could experience distribution problems
and potential shortages. Politicians have sought to capitalize on
the disaster. President Ortega, FSLN-mayoral candidate Alexis
Arguello and Vamos Con Eduardo-Constitutional Liberal Party
(VCE-PLC) mayoral candidate Eduardo Montealegre made well-publicized
visits to the area, promising aid to the victims of the blaze.

3. (U) Total losses from this fire remain unclear, though a local
representative from a prominent MFI, Financiera Nicaraguense de
Desarrollo (FINDESA), told us they could well exceed $30 million.
FAMA, another large Nicaraguan MFI with numerous Eastern Market
clients, has begun to renegotiate debt so its clients can recover
from the disaster. Victor Telleria, FAMA General Manager, appeared
on Channel 2's morning news program on August 5 and stressed the
need to customize each solution according to the client. Some
businesspeople lost 100% of their merchandise, while others had
warehouses where they had stored a large part of their inventory.
Others were victims of looting during the chaos which ensued during
the blaze.

4. (U) Immediately following the fire, Telleria said FAMA decided
to freeze interest payments, which in many cases are due on a
monthly basis. Telleria said priority one is to reorganize the
market so that merchants can get back to business; financial
institutions will not be able to provide loans until shops are
physically relocated. FINDESA's representative said the GON's role,
along with the municipality of Managua, is pivotal to the
reconstruction of the Mercado infrastructure.

5. (U) FAMA will ask the GON to use a portion of the Nicaraguan
Investment Fund (FNI) to assist by subsidizing interest rates.
Telleria added that the GON's "Zero Usury" program can provide 0%
interest because it is subsidized, but this is not an option for
private institutions. He opined that President Ortega--along with
his advisors--have scant knowledge about microfinance markets.

6. (SBU) Comment: The damage to the Eastern Market and its
recovery is already becoming a political football. Merchants are
already vocally complaining that they have not received
reconstruction loans yet. At the same time, many are complaining
about plans by the Managua city government to push access roads into
the market to be able to deal better with any future fire (the roads
would come at the expense of some stall-holders' properties). In
this turbulent environment, we suspect that the GON's preference for
using its "Zero Usury" program for reconstruction may in part be
motivated by a desire to acquire closer political control of this
economically vital entity as it staggers back to its feet.

SANDERS

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