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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

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