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Cablegate: Nicaragua: Ambassador Calls On Free Trade Zone

VZCZCXRO9316
RR RUEHLMC
DE RUEHMU #1374/01 3172117
ZNY CCCCC ZZH
R 122117Z NOV 08
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 3369
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RHEHNSC/NSC WASHINGTON DC
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHDC

C O N F I D E N T I A L SECTION 01 OF 02 MANAGUA 001374

SIPDIS

STATE PASS TO USTR/QUESENBERRY

E.O. 12958: DECL: 11/12/2018
TAGS: ECON EINV ETRD PREL NU
SUBJECT: NICARAGUA: AMBASSADOR CALLS ON FREE TRADE ZONE
COMMISSIONER

Classified By: Classified by Ambassador Robert J. Callahan, E.O. 12958,
1.4 (b)(d).

1. (C) Summary. The Ambassador met General (retired) Alvaro
Baltodano on November 3 to get acquainted and encourage
bilateral cooperation on bilateral trade and investment.
Baltodano assured the Ambassador that Nicaragua would
participate in the "Pathways to Prosperity" meeting to be
held in Panama in December, but did not know how the
delegation would be composed. Despite Ortega's calls to
renegotiate "asymmetries" in CAFTA, Baltodano believes that
Nicaragua should pursue improvements through the existing
framework of the agreement. He acknowledged the difficulties
caused by President Ortega's harsh rhetoric against the
United States and global capitalism, but asserted that Ortega
recognizes the value of foreign investment and support.
Baltodano outlined an economic development plan for Nicaragua
focusing on major infrastructure projects, but offered no
basis for how it would be implemented. End summary.

2. (C) The Ambassador met General (retired) Alvaro Baltodano
on November 3 to get acquainted and encourage bilateral
cooperation on bilateral trade and investment. Baltodano
heads the Free Trade Zone (FTZ) Commission. Nicaragua's FTZs
are populated primarily by apparel manufacturers who export
to the United States under CAFTA. Baltodano also heads
ProNicaragua, a quasi-government investment promotion agency.
His relationship with President Daniel Ortega dates to the
mid 1970s, after Ortega was released from prison. Baltodano
is known to have a close, personal relationship with Ortega;
he served as Ortega's campaign manager in the 2001
presidential election. Baltodano is able to reach Ortega on
the telephone on short notice, and has been known to
influence Ortega's thinking, at least on tactical issues.

Pathways to Prosperity
----------------------

3. (SBU) The Ambassador noted that Nicaragua was the only
country invited to the "Pathways to Prosperity" inaugural
event, held on the margins of the U.N. General Assembly
meeting in New York in September, which failed to
participate, and inquired as to Nicaragua's interest.
Baltodano assured the Ambassador that Nicaragua would
participate in the ministerial to be held in Panama in
December. He was not sure how the Nicaraguan delegation
would be composed, but said that he planned to go. He
requested a written invitation. (Note: The Ambassador had
already written to General Baltodano and Minister of Trade,
Industry, and Development Orlando Solorzano informing them
that the Government of Panama will send formal invitations.
We are following up to make sure this happens. End Note.)

CAFTA
-----

4. (C) Baltodano agreed with the Ambassador that Nicaragua
benefits greatly from CAFTA. He stated that he does not
believe that CAFTA needs to be renegotiated, despite Ortega's
calls to renegotiate "asymmetries." Baltodano does think,
however, that Nicaragua can improve its lot within the
framework of the agreement. In particular, he wants a
relaxation of the application of the one-for-one agreement
(allowing a set amount of third country fabric in apparel
exports to the United States) and, for what remains, he would
like to replicate the less generous two-for-one agreement
recently achieved by the Dominican Republic. He referred to
his October meeting to discuss these matters with U.S. Trade
Representative and Department of Commerce officials in
Washington, D.C.

Harsh Rhetoric
--------------

5. (C) Baltodano acknowledged the difficulties caused by
President Ortega's harsh rhetoric against the United States
and global capitalism, but asserted that Ortega recognizes
the value of foreign investment and foreign assistance. He
cited Ortega's supportive positions with respect to ITG/Cone
Denim's $100 million investment in a denim plant, the $175
million Millennium Corporation Account project in the
departments of Leon and Chinandega, and U.S. assistance to
the North Atlantic Autonomous Region (RAAN) in the aftermath
of Hurricane Felix. That said, Baltodano confessed that his
job is not to inform the President of his mistakes, but
rather to solve problems as they arise. In this vein, he
prefers to separate politics from trade and investment
matters as much as possible, but realizes that this is not
always possible. The Ambassador recognized Baltodano's
successful efforts to support ITG/Cone Denim, a satisfied
U.S. investor by all accounts.

6. (SBU) Baltodano asserted that Ortega afforded him the
political space he needed to attract foreign investors to
Nicaragua. At this time, Baltodano's greatest challenge is
replacing the recent loss of some apparel manufacturers. He
is talking to Benneton (U.S.) among other companies to fill
the void. (Note: For the first time since Nicaragua created
free trade zones in early 1990s, employment has dropped as a
result of companies departing for Southeast Asia. End Note.)

7. (C) The Ambassador noted ever growing concern in the
international community over narrowing political space in
Nicaragua and harassment of democracy oriented
non-governmental organizations. Baltodano told the
Ambassador that he thought President Ortega's meeting with
non-governmental organizations (NGOs) a few weeks previous
went well. There were no confrontations. (Comment: Our
assessment is a bit different. In the meeting, Ortega
essentially held court and the NGOs listened. Accused of
money laundering and political interference, donors country
NGOs relations with the government have deteriorated
significantly in recent months. End Comment.)

8. (C) EconOff commented that bilateral relations seemed to
be suffering from more than just harsh rhetoric. Relations
with individual ministries and agencies had deteriorated
across the board. Nicaraguan ministry and agency officials
often do not respond to our inquiries and initiatives, and
often erect barriers to cooperation. U.S. Department of
Agriculture, for example, had invited 42 Nicaraguan technical
staff to attend thirteen fully paid-for training events
dealing with sanitary and phytosanitary standards. None
received permission to travel. (Note: After considerable
lobbying on the part of the previous ambassador, two
individuals did receive permission at the last minute to
attend two training events in June and July. We received
calls from them over the weekend to make arrangements for
Monday travel. As a consequence, the participants missed at
least one day of their respective programs. End Note.)
Failure to attend such training events limits Nicaragua's
ability to take advantage of CAFTA and develop an
agricultural industry. Baltodano expressed an interest in
seeing the list of applicants who had been denied. The
following evening at the Embassy's U.S. election night
reception, the Ambassador handed the list to him; Baltodano
promised to follow up.

Economic Development Plan
-------------------------

9. (SBU) Baltodano outlined his economic development plan for
Nicaragua. The plan revolves around building infrastructure,
managing water resources, and promoting certain industries,
such as agriculture and tourism. The infrastructure portion
focuses on the construction of a deep water port on the
Atlantic at Monkey Point, investment in geothermal and hydro
power plants, and road construction. None of his ideas are
new, and he offered no reason as to why they would be
implemented, now.

Comment
-------

10. (C) Baltodano is a voice of reason within the Ortega
government, at least on economic issues; he guards engagement
with us on political matters.
CALLAHAN

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