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Viewing cable 08MANAGUA1546, NICARAGUA: GON PROMISES BETTER COOPERATION ON ADVANCING
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VZCZCXYZ0000
RR RUEHWEB
DE RUEHMU #1546/01 3661744
ZNR UUUUU ZZH
R 311744Z DEC 08
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 3572
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
UNCLAS MANAGUA 001546
STATE FOR WHA/CEN, EEB/IFD/OIA, AND L/CID
STATE ALSO FOR WHA/EPSC
STATE PASS TO USTR
TREASURY FOR INL AND OWH
SIPDIS
SENSITIVE
E.O. 12958: N/A
TAGS: EINV ECON USTR KIDE NU
SUBJECT: NICARAGUA: GON PROMISES BETTER COOPERATION ON ADVANCING
CASE RESOLUTION DURING BILATERAL PROPERTY CLAIMS REVIEW
REFS: A) SECSTATE 104850, B) MANAGUA 883, C) MANAGUA 1186, D) 02
MANAGUA 877, E) MANAGUA 830
SUMMARY
-------
¶1. (SBU) During the December 11-12 bilateral review of
the Government of Nicaragua's (GON) property claims resolution
process, Attorney General Hernan Estrada acknowledged that while the
U.S. Government (USG) would not accept dismissals of U.S. citizen
claims without a fair and transparent appeals process, it was
unfortunate that the USG and GON did not agree on the status of
these cases, asserting that it was "his responsibility to protect
the national interests, social stability, and sovereignty of the
country." On U.S. claims under GON control, the Attorney General
said the National Police and the National Corporations of the Public
Sector (CORNAP), a state holding company, will join a commission
already formed to deal with cases under the control of the
Nicaraguan Army to advance the resolution of all property claims
under possession of the government. With regard to the lack of
transparency in the GON's compensation offers, Estrada agreed to put
more information on the Attorney General Office's website about the
claims appraisal process, but remained non-committal regarding
providing detailed explanations on GON settlement proposals to
claimants. Estrada also announced the formation of a liaison office
to handle U.S. inquiries and a Nicaraguan Supreme Court commission
to review U.S. cases that languish in the courts.
¶2. (SBU) Although the bilateral review allowed the U.S. delegation
to express our concerns about the GON's claims resolutions process,
the GON did not make significant concessions on some important
issues, such as reversing Decree 3 (1979) and 38 (1979) dismissals
or providing detailed explanations of settlement offers. From the
GON's perspective, the bilateral review was an opportunity to stress
to Washington the importance it gives to the overall U.S.-Nicaragua
bilateral relationship. We believe that Estrada's full
participation in the bilateral review was a signal that the GON
wants to work with the USG on several important issues as much as
possible. We are cautiously optimistic that the GON will work with
us during the waiver year to resolve claims on all three Section 527
benchmarks (Ref A), and reduce the number of dismissed claims, if
only for the purpose of avoiding further tension in the overall
bilateral relationship. End Summary.
BILATERAL REVIEW PARTICIPANTS
-----------------------------
¶3. (U) Christopher Webster, Director of the Office of Central
American Affairs (WHA/CEN), led the U.S. delegation, which
included:
--Jeffrey D. Kovar, Assistant Legal Advisor for
International Claims and Investment Disputes (L/CID)
--Heather Goethert, Office of Investment Affairs
(EEB/IFD/OIA)
--Albert Kraaimoore, Nicaragua Desk Officer (WHA/CEN)
--Joe Ripley, Economic Counselor, U.S. Embassy
--Shante Moore, Property Officer, U.S. Embassy
--Leonidas Henriquez, Senior Property Officer Assistant,
U.S. Embassy
Note: U.S. Ambassador Robert Callahan opened the talks and Deputy
Chief of Mission Richard Sanders closed them.
¶4. (U) Attorney General Hernan Estrada led the Nicaraguan
delegation, which included:
--Yara Perez, Property Superintendent
--Ruth Zapata, Head, Office of Assessment and
Indemnification (OCI)
--Jeanette Garcia, President, National Confiscations Review
Commission (CNRC)
--Magally Bravo, Administrative Director for Property
Issues, Office of the Attorney General
--Bruno Gallardo, Senior Legal Advisor to the Minister of
Finance
--Dinorah Peugnet, Head of the Fiscal Cadastral Office,
National Institute for Territorial Surveying (INETER)
--Jose Zapata, Head, Office of Government Accounting
POLITICAL TENSION SURROUNDS BILATERAL REVIEW
--------------------------------------------
¶5. (U) The bilateral review was held amid tensions in the GON's
relations with the United States and the international community, as
well as local discontent with the government as a result of the
fraud that occurred during the municipal elections on November 9.
On November 24, Ambassador John Danilovich, CEO of the Millennium
Challenge Corporation (MCC), sent a letter to Alberto Guevara
Obregon, Nicaraguan Minister of Finance and Chairman of the Board of
Nicaragua's Millennium Challenge Account (MCA-Nicaragua), to
announce the suspension of disbursements for projects totaling $64
million. On December 8, four members of the U.S. House of
Representatives sent a bipartisan letter to the Secretary urging the
exclusion of Nicaragua from the Central America/Dominican
Republic/United States Free Trade Agreement (CAFTA-DR). On December
11, the MCC's Board of Directors decided to maintain the suspension
of its disbursements for an additional 90 days.
¶6. (U) European donors had announced the suspension of aid for the
remainder of 2008 and into 2009. In 2008, the Budget Support Group
disbursed only $15 million of $115 million in assistance to
Nicaragua because of concerns about the lack of budget transparency,
governance issues, and widespread fraud during the November 9
municipal elections. Opposition members would not allow legislation
to be considered until a recount had been conducted of the municipal
elections. The opposition sought a vote to annul the elections in
lieu of a recount. Nicaraguan citizens and civil society continued
to protest the elections. A paralyzed National Assembly could not
take action on a revised budget for 2008, or the government's budget
for 2009, causing the International Monetary Fund to hold off on the
third disbursal of its Poverty Reduction and Growth Facility to the
Nicaraguan Central Bank.
DAY I: U.S. DELEGATION SETS TONE
U.S. CLAIMS TO REMAIN A PRIORITY
--------------------------------
¶7. (SBU) On December 11, the Ambassador and Estrada opened the
talks. Ambassador Callahan acknowledged that the bilateral review
was taking place during a difficult period in the relationship and
there is increasing attention from the U.S. Congress vis-`-vis
Nicaragua. The Ambassador emphasized that U.S. citizen property
claims carry a high profile in the U.S. Congress and remain a
priority for the USG. Webster and Kovar pointed out Nicaragua's
Section 527 obligations [of the Foreign Relations Authorization Act
Fiscal Years 1994 and 1995] to show progress on the Secretary's
benchmarks to seek another annual waiver of Section 527.
¶8. (SBU) Webster and Kovar outlined the following USG concerns about
the GON's property resolution process: 1) U.S. claims dismissed for
administrative reasons (lack of paperwork and/or proof of
confiscation of the property in question) and under Decrees 3 (1979)
and 38 (1979) that mandated the confiscation of property of
individuals deemed Somoza family members or "allies" of the former
regime; 2) U.S. claims under control of the GON, including the
Nicaraguan Army; 3) the lack of transparency in appraising
settlement offers to claimants; 4) U.S. property cases that languish
in courts; and 5) cooperation between the Embassy Property Office
and the GON (Ref B). In fact, these topics constituted the agenda
for the bilateral review.
TOPIC I: DISMISSED CLAIMS: PROTECTING NAT'L INTERESTS
--------------------------------------------- --------
¶9. (SBU) Office Director Webster informed the GON delegation that
the USG does not recognize 146 claims administratively dismissed and
for reasons contained in Decrees 3 and 38, as resolved claims.
Webster reiterated that all U.S. claims should be subject to a fair
and transparent process. Kovar asserted that the Attorney General's
Office sudden dismissal of these claims that had been previously
accepted by the CNRC without prior notice, a hearing, or an adequate
explanation for the basis of the dismissal violated fundamental
notions of due process. Estrada acknowledged that the USG would not
recognize dismissals as "resolved." He argued, however, that the
Decrees 3 and 38 have the "force of law," and that "it was his
responsibility to protect the national interest, assure social
stability, and defend the sovereignty of the country." OCI Head
Zapata added that Law 411 (2001), which established the Office of
the Attorney General, provided the authority to review past actions
taken by previous governments, to protect the national interest and
conserve the national budget.
¶10. (SBU) Senior Legal Advisor to the Minister of Finance Gallardo
argued that the USG should respect Nicaraguan law. Without an
example, he claimed that there were several U.S. claimants who
worked for Somoza or former members of the National Guard. He added
that claimants subject to Decree 3 and 38 could go to court to
overturn these decisions. Assistant Legal Advisor Kovar pointed out
that the Nicaraguan Constitution forbids confiscation of property.
Even if Decrees 3 and 38 seizures were considered authorized under
Nicaraguan law, he added, compensation was required under
international law.
¶11. (SBU) Estrada asserted that the GON has demonstrated flexibility
on Decree 3 and 38 dismissals, and had compensated such claimants,
such as Leonidas Guadamuz, a U.S. claimant. Goethert asked whether
the process for reviewing and/or appealing these dismissals would
apply to other Decree 3 and 38 dismissals. Estrada and his
colleagues did not answer the question, but CNRC President Garcia
explained that all administrative dismissals could be overturned if
claimants provided necessary documentation. She added that
dismissals were not final until served on the claimants, and in most
cases the government had not been able to serve them. Once
notified, however, claimants had just 10 days to appeal. Kovar
welcomed the news that the dismissals were not final, but requested
that the GON show flexibility on the time allotted to file an
appeal. Ten days to appeal the sudden dismissal of a claim after
waiting years without a response does not seem fair. Garcia asked
whether the Embassy could act as the addressee to notify claimants.
Kovar replied that the Embassy could not accept official
notification on behalf of the claimants.
TOPIC II: CLAIMS UNDER GOVERNMENT CONTROL
-----------------------------------------
¶12. (SBU) Webster pressed Estrada to make significant progress on
U.S. claims for property under government control, noting that the
GON resolved only one claim under this Section 527 benchmark during
the 2007-08 waiver year, and the Nicaraguan Army had not resolved
any claims since the 2005-06 waiver period. OCI Head Zapata said
the GON is working diligently to resolve such claims. She
highlighted that the ad hoc committee established to deal with
claims for properties held by the Nicaraguan Army in August (Ref C)
is working with U.S. claimant Juan Barreto to resolve his 29 claims
(Refs D,E). Zapata said the Attorney General's Office is working
with government ministries and the Nicaraguan National Police to
compensate claimants or return their property, as in the case of
U.S. citizen Elmer Hidalgo, whose property is controlled by the
Jalapa Police (northern Nicaragua). Zapata asked the U.S.
delegation to urge claimants to accept indemnification bonds (BPIs)
for properties controlled by CORNAP, the government's property
management company, because several of the properties have multiple
claims against them.
TOPIC III: COMPENSATION
-----------------------
¶13. (SBU) Office Director Webster urged Estrada to develop a
transparent process to explain to U.S. claimants how the government
determines compensation and include improvements made to their
properties to increase the final settlements. Webster asked whether
the GON had a policy to use two cadastral tables, one to determine
compensation offers and the other to assess property taxes [Note:
The Property Office received a copy of a letter from Estrada dated
November 6, 2007, instructing the head of INETER to use one
cadastral table to determine compensation offers and another to
assess property taxes. Estrada justified using two cadastral tables
as a money saving measure for the government. End Note.] Peugnet
responded that the GON was not implementing this policy and used
only a single cadastral table. She provided a detailed PowerPoint
explanation of the method used to calculate the value of a property.
¶14. (SBU) OCI Head Zapata stated that Nicaraguan law does not
require the GON to negotiate with claimants. She explained that
claimants have two chances to appeal compensation offers, once with
OCI and once with the Office of the Property Superintendent. She
explained that the GON could not provide detailed explanations on
compensation offers until the software was upgraded to allow the
compilation of data in a comprehensible manner. Webster asked
Estrada to publish the information on the property claims
compensation process, including INETER's regulations for conducting
appraisals, on the Attorney General's website. Estrada agreed and
the information was placed on the website the following day,
December 12.
TOPIC IV: CASES IN COURT
------------------------
¶15. (SBU) Assistant Legal Advisor Kovar asked Estrada to do what he
could to help move forward U.S. citizens' cases languishing in the
courts. He noted that some claimants have waited 15 years for a
court decision. Estrada agreed that the judicial system was
inefficient, but noted that it functioned as an independent branch
of the government. Kovar also raised concerns about Estrada's
August 22 letter to the Embassy outlining the GON's policy of no
longer pursuing cases in court to recover property on behalf of
claimants, and protecting individuals who illegally controlled these
properties. Estrada responded that his policy of completing the
property transfers under Laws 85 (1990), 86 (1990), and 88 (1990),
also known as the "Pinata Laws," was developed to maintain social
peace and stability, and promote national security [Note: These laws
were passed on the eve of the first Sandinista government to legally
transfer property to supporters of the National Sandinista
Liberation Front. End Note.] He told us that this policy affected
six U.S. cases in the courts and he planned to petition the courts
to rule in favor of the occupants. He added that U.S. claimants
should either accept BPIs or file their own lawsuit to recover the
property.
¶16. (SBU) Webster challenged the policy, arguing that the
unwillingness to pursue court cases filed on behalf of claimants
created economic and social insecurity and instability, and
undermined the rule of law. Foreign and local entrepreneurs would
be reluctant to invest in Nicaragua if the government did not
fulfill its legal obligations and defend the rule of law. Director
for Property Issues Bravo proceeded to defend the GON's policy under
the precept that Nicaraguans had a right to a decent life. In her
presentation, she omitted a discussion of Articles 27 and 44 of the
Nicaraguan Constitution. Article 27 grants equal protection under
the law and the right to due process to foreigners in Nicaragua.
Article 44 states that the confiscation of property is forbidden;
any expropriation of property requires cash compensation in advance.
TOPIC V: COOPERATION
--------------------
¶17. (SBU) Webster pressed Estrada to improve cooperation at the
working level to advance the resolution of claims. He argued that
the Property Office should be able to call or e-mail its GON
counterparts to follow up on claims. Webster underscored that
formal communication between only the Ambassador and Attorney
General on property claims limits case resolution. Estrada was
non-committal, but announced that he was considering appointing a
liaison within the Office of the Attorney General to answer
inquiries from U.S. claimants and the U.S. Embassy, pending
budgetary approval by the National Assembly. Estrada asserted that
it was important to maintain a buffer to allow his limited staff
time to focus on the work of the Office and remove the temptation of
corruption. He presented six U.S. claims in which he alleged past
irregularities in their resolutions. Webster commented that more
communication between the Property Office and GON is needed not only
to resolve claims, but also to address these concerns. Webster
emphasized that the USG does not condone corruption, noting that if
the GON has credible evidence of illicit activity by U.S. claimants,
the Attorney General's Office should pass the information to the
Embassy to take appropriate action.
DAY II CLOSING SESSION: SOME CONCESSIONS
GON SEEKS UNDERSTANDING ON DISMISSALS
--------------------------------------
¶18. (SBU) The second day of the bilateral review focused on a way
forward to resolve claims. Before Estrada spoke, Gallardo gave an
incoherent explanation as to why the USG should not have a "black
and white vision of the property situation." He asked the U.S.
delegation to consider Nicaragua's growing public debt as a result
of property compensations, and alleged that some U.S. citizens were
either involved in bribing GON officials in previous governments to
receive disproportionate compensations, or they did not pay taxes or
service their debt obligations to banks and other financial
institutions. Gallardo stated that the GON should review all claims
that have been previously settled to ensure that the government's
national and budgetary interests are protected.
¶19. (SBU) Estrada aggressively defended his Decree 3 and 38
dismissals. It appeared he received instructions from President
Daniel Ortega on the GON's response to USG concerns. Estrada argued
that Decree 3 and 38 dismissals are sensitive issues for the
government. He asserted that President Ortega wanted to resolve
U.S. claims but the GON must also protect Nicaraguan national
interests and enforce the law. He acknowledged, however, that the
USG had clearly conveyed that it would not accept dismissals and
that, for reasons of workload, he did not plan to review previously
settled cases.
NICARAGUAN PROPOSALS
--------------------
¶20. (SBU) Estrada proposed the following measures to advance the
resolution of U.S. claims:
--Establishment of a liaison to handle U.S. Claims Inquiries
[provided that the National Assembly approves funding]: the liaison
will handle inquiries on U.S. citizen claims. U.S. citizen
claimants and the Property Office could routinely contact the
liaison to inquire about the status of pending claims, and report
directly to Estrada on a daily basis.
--Establishment of a Commission to Review U.S. Claims Languishing in
the Courts: the Nicaraguan Supreme Court and the Attorney General's
Office will form a commission to address U.S. citizen property cases
that languish in the courts, particularly the National Property
Appeals Court. The Property Office and the Attorney General's
Office will identify U.S. citizen court cases to determine if the
Supreme Court could advance their adjudication.
--Updating Attorney General's Webpage with Information about the
Claims Resolutions Process: Estrada agreed to add information
regarding Government of Nicaragua's claims resolution process,
including a flow chart of the offices involved in determining
compensation offers. This information was uploaded to the website
on December 12.
--National Police and CORNAP to Join "Ad Hoc" Commission to Resolve
Claims under Government Control: the National Police and CORNAP will
be invited to join the existing "ad hoc" commission that deals with
claims under control of the Nicaraguan Army to advance the
resolution of all private properties taken by the GON without
payment of compensation to claimants.
¶21. (SBU) Office Director Webster welcomed these initiatives as
positive steps to advance the resolution of claims, but reiterated
that the GON must show progress on the three benchmarks outlined by
the Secretary in her letter dated July 29, 2008 (Ref A). He
announced that the Embassy would share its list of pending claims
with the GON to identify discrepancies. The Property Office and the
GON will review their perspective lists during the next Working
Group meeting on December 18 (septel).
FOREIGN MINISTER SANTOS: SOME DISMISSALS JUSTIFIABLE
--------------------------------------------- -------
¶22. (SBU) The U.S. delegation accompanied by Ambassador Callahan met
with Foreign Minister Samuel Santos on December 12 after the
conclusion of the bilateral review to reiterate USG concerns about
the GON claims resolution process and to provide an assessment of
the bilateral review. Estrada attended. Office Director Webster
said the bilateral review was productive in that there were frank
discussions concerning the GON's property claims resolution process.
He added that he hoped that the new proposals suggested by Estrada
would accelerate the resolution of claims. Santos expressed his
satisfaction with the results of the bilateral review and reassured
the U.S. delegation that the GON is committed to resolving U.S.
citizen claims. He explained that Decree 3 and 38 dismissals are
sensitive issues for the GON, alleging that one of our claimants who
was a member of the National Guard during the Somoza dictatorship
had physically tortured him [Note: Post is investigating Santos'
allegation. End Note.] Santos said there are two or three U.S.
citizen claims that the USG should investigate to fully understand
the background of their cases.
¶23. (SBU) At the conclusion of the meeting, Estrada pulled Webster
aside to say that he occupied an influential position in the State
Department vis-`-vis the U.S.-Nicaraguan bilateral relationship.
Estrada told Webster that President Ortega had instructed him to
underscore the importance of the bilateral relationship and that the
GON wanted to continue working together in areas of mutual interest.
COMMENT
-------
¶24. (SBU) Although the bilateral review allowed the USG to express
concern about the GON's claims process, the GON did not make
significant concessions on important issues, such as reversing
Decrees 3 and 38 dismissals or providing detailed explanations of
settlement offers. From the GON's perspective, the bilateral review
was an opportunity to stress the importance it places on the overall
U.S.-Nicaragua bilateral relationship. We believe that President
Ortega ordered Estrada's full participation in the bilateral review
to signal that the GON wants to work with the USG as much as
possible.
¶25. (SBU) We are cautiously optimistic that the GON will meet all
three Section 527 benchmarks this waiver year, and reduce the number
of dismissed claims, if only to avoid increasing bilateral tension.
The Ambassador plans to conduct a mid-year review of the Section 527
process with Attorney General Estrada in March. By then, we should
be able to judge whether the GON's newfound spirit of cooperation is
legitimate.
¶26. (U) This cable has been cleared by WHA/CEN Director Christopher
Webster.
SANDERS