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Viewing cable 07MANAGUA1689, NICARAGUA: SECTION 527 WAIVER OBSERVATIONS
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Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
07MANAGUA1689 | 2007-07-10 16:37 | 2011-06-21 08:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Managua |
VZCZCXYZ0000
RR RUEHWEB
DE RUEHMU #1689/01 1911637
ZNR UUUUU ZZH
R 101637Z JUL 07
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 0763
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
UNCLAS MANAGUA 001689
SIPDIS
STATE FOR WHA/CEN GSCHIFFER & RGREENE, EB/IFD/OIA, PBROWN & NHATCHER
& JFEELEY, L/CID EDAUGHTRY AND WHA/EPSC
TREASURY FOR INL MDONOVAN AND GCHRISTOPOLUS, OWH/MSHWARZMAN
STATE PASS TO USTR
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: EINV ECON USTR KIDE NU
SUBJECT: NICARAGUA: SECTION 527 WAIVER OBSERVATIONS
REF: MANAGUA 00626
Sensitive But Unclassified - Please Handle Accordingly
¶1. (SBU) Summary: Post recommends that the Secretary of State issue
an annual waiver to Section 527 of the Foreign Relations
Authorization Act of FY 1994/1995. Between August 1, 2006, and June
30, 2007, the Government of Nicaragua resolved 34 Embassy-registered
claims for 18 U.S. citizens. While this number is below that of
previous years, we recognize that the transition in administrations
during the second half of the waiver year disrupted the normal pace
of resolutions, which should resume during the 2007-2008 waiver
year. In addition, we have been making progress toward establishing
working relations across the spectrum of bilateral cooperation,
including trade and investment under CAFTA-DR, judicial reform,
ensuring professional military and police forces, and the war on
drugs and terrorism. We believe that these factors justify a waiver
to Section 527 this year based on U.S. national interest. We
recommend retaining last year's benchmarks, but calling for more
rapid progress in achieving resolutions for U.S. citizen claims.
End Summary.
2006-2007 Waiver Year Benchmarks
--------------------------------
¶2. (SBU) In her July 28, 2006, letter to then Foreign Minister
Norman Caldera, the Secretary enumerated three benchmarks for
granting a waiver in July 2007: 1) successful resolution of a
significant number of Embassy-registered claims; 2) resolution of
property claims held or controlled by the Government of Nicaragua,
including the "Corporacion Nacional del Sector Publico" (i.e.,
CORNAP, the government's asset holding company); and 3) resolution
of property claims controlled by the Nicaraguan Army. While the
Government of Nicaragua made some progress on the first benchmark
during this waiver year, it made no progress on the second or third.
In particular, approximately 37 properties claimed by U.S citizens
continue to be under the control of either the Army or the Army
Social Security Institute (IPSM). High-ranking military officials
continue to occupy some residences.
Waiver Year Progress Spans Two Administrations
--------------------------------------------- -
¶3. (SBU) In equal measure, this waiver year spanned two
administrations, i.e., the end of the Bolanos Administration and the
beginning of the Ortega Administration. During the period between
August 1, 2006, and January 9, 2006, the Administration of President
Enrique Bolanos resolved 29 American citizen property claims. Of
the 17 U.S. citizens compensated, two were U.S. citizens at the time
of confiscation. The face value of property bonds issued to the
entire group was approximately $2,378,851.12, with a current market
value of approximately $1,058,588.75.
¶4. (SBU) On January 10, 2007, Daniel Ortega was inaugurated
president and quickly moved to install Sandinista party officials in
positions of responsibility, including the Property
Superintendent(Reftel)and the Attorney General. They in turn hired
new staff and embarked on a legal review of all settlements
accomplished in the six months prior to assuming office. The result
was that the Ortega Administration made little or no progress in
resolving claims through June 30, 2007.
¶5. (SBU) Beginning in March, post sought to raise the awareness of
the new government on the importance of resolving claims. This
resulted in the government declaring resolutions for dozens of
claims for which it provided no evidence. In one interview in May,
Vice President Jaime Morales Carazo incorrectly told CNN that the
Ortega Administration had resolved more claims in the short time it
had been in office than the Bolanos Administration had ever resolved
during the course of one full year. While we were heartened to
learn of the government's renewed interest and supposed effort, we
informed the responsible officials that there was no proof of final
resolution.
¶6. (SBU) In May, the Ambassador reminded the Attorney General of the
procedures that needed to be undertaken before a claim could be
considered resolved. On June 29, the Government of Nicaragua
delivered to the Embassy final documents for 5 settlements awarded
to a single U.S. claimant for more than 2,000 acres of premium
coastal real estate in the Department of Rivas. Post considers
these resolutions significant because they lend some credence to the
Ortega Administration's behind the scenes quiet efforts and provide
evidence that the Ortega Administration may be ready to resume a
more normal pace in resolving U.S. citizen claims.
¶7. (SBU) Taken together with the 29 resolutions from the Bolanos
Administration, the Ortega Administration's 5 resolutions bring the
total for the waiver year to 34 claims resolved for 18 U.S.
citizens, with a total face value of property bonds in the amount of
$3,664,319.94. The current market value of these claims is
approximately $1,696,580.14.
Property Indemnification Bonds (BPIs)
-------------------------------------
¶8. (SBU) The Government of Nicaragua typically compensates
expropriated or confiscated property of American citizens via
low-interest, long-term property indemnification bonds (BPIs).
While rare, the return of property, cash payments, and landswaps are
not unknown. In December 2004, the Nicaraguan National Assembly
authorized adding an independent Property Institute (INPRUR) to a
complex mix of property resolution entities. While legislation
supporting the controversial institute is still on the books, INPRUR
has never become operational.
Selected Case Highlights
------------------------
¶9. (SBU) While we are encouraging the government to settle further
claims during the month of July 2007, the cut-off date for
submission is June 30, 2007. Cases listed below represent a sample
of resolutions achieved between August 1, 2006, and June 30, 2007.
Their full documentation confirms eligibility for Section 527
consideration for waiver year August 1, 2006, to July 31, 2007. All
dollar figures have been calculated using the official exchange rate
on the date of settlement.
A) Becklin/Gonzalez Family: Claimant received compensation for 108
shares of the 1979-nationalized "La Protectora" insurance company in
the form of property bonds $219,842.
B) Collado, Alma: Final resolution was accomplished via the rare
recovery of an urban lot in Managua through the local courts.
C) Dubon, Oscar: Claimant received property bonds with a face value
of $52,178 for an upscale Managua residence. Note: Occupant Ivan
Antonio Garcia Cortez was the subject of a 2004 Section 2225 request
resulting in a 2006 visa denial.
D) Fortunato, Gloria: Claimant received property bonds with a face
value of $834,833.45 for six houses in the Department of Matagalpa.
E) Gonzalez, Amelia: Claimant received property bonds with a face
value of $630,524 for seven houses in Managua.
F) Vallejos, Francisco: Claimant agreed to a landswap worth less
than his original property along with property bonds with a face
value of $61,465.51 to make up the difference.
G) Pinkes, Gyula: Claimant received property bonds with a face
value of $1,285,468.82 for approximately 2,300 acres of prime
coastal property in the Department of Rivas. [Note: This case was
resolved during the Ortega Administration. End note.]
Section 527
-----------
¶10. (SBU) Section 527 of the Foreign Relations Authorization Act of
Fiscal Years 1994 and 1995 prohibits U.S. economic assistance or
support in international financial institutions to any country in
which U.S. citizens have not received adequate and effective
compensation for confiscated property. The prohibition can include
all U.S. assistance through USAID, the Millennium Challenge
Corporation (MCC), and our votes at the IMF and World Bank. Section
527 also authorizes the Secretary of State, as delegated by the
President, to waive the prohibition on an annual basis if she
determines that it would be in the national interest of the United
States to do so.
¶11. (SBU) Section 527 was amended on December 8, 2004, to base the
waiver decision only on claims registered at the Embassy before
August 1, 2005. No new claims can be considered in determining
waiver eligibility. A separate database lists 17 property claims
from 11 U.S. claimants registered at the Embassy after August 1,
¶2005. [Note: In 1998, the Government of Nicaragua announced that
claimants of any nationality had to file new claims before December
2000 to be considered for compensation. End note.]
Waiver Recommendation
---------------------
¶12. (SBU) The primary consideration in deciding to issue a waiver
each July is whether it is in U.S. national interest. In the case
of Nicaragua, we have been working toward establishing working
relations with the Ortega Administration across the spectrum of
bilateral cooperation, including trade and investment under
CAFTA-DR, judicial reform, ensuring professional military and police
forces, and the war on drugs and terrorism. We believe that we are
making progress toward achieving our goals.
¶13. (SBU) Another consideration is the effort put forth by the
Government of Nicaragua to resolve outstanding claims and the
prospect of resolving more claims in future. While the break in
progress surrounding the transition between administrations is
lamentable, it is to a certain extent understandable. We believe
that our counterparts in the Nicaraguan Government now understand
the importance of making more rapid progress in resolving U.S.
claims, have come to terms with their responsibilities, and are
better prepared to work with us in future.
Suggested Points for 2007-2008 Waiver Letter
--------------------------------------------
¶14. (SBU) We recommend retaining last year's benchmarks for the
2007-2008 waiver year as follows: 1) successful resolution of a
significant number of Embassy-registered claims, with particular
attention to longstanding, complex cases; 2) resolution of property
claims held or controlled by the GON, including CORNAP and the
Police; and 3) resolution of property claims controlled by the Army.
While achieving all three benchmarks in any given period is
unlikely, retaining them underscores our commitment to achieving
resolutions in all categories of U.S. citizen claims. In addition,
we recommend adding that while the number of settlements this year
was significantly below that of previous years, we understand that
the transition in administrations disrupted the pace of progress
during this waiver year. We hope that the pace of progress resumes
in the 2007-2008 waiver year, and look forward to working closely
with the Government of Nicaragua to help make this happen.
TRIVELLI