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### Viewing cable 07MANAGUA453, NICARAGUA: AMBASSADOR CALLS ON NEW MINISTER OF

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
07MANAGUA453 | 2007-02-20 21:54 | 2011-06-21 08:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Managua

`

    VZCZCXYZ0005
    RR RUEHWEB

    DE RUEHMU #0453/01 0512154
    ZNR UUUUU ZZH
    R 202154Z FEB 07
    FM AMEMBASSY MANAGUA
    TO RUEHC/SECSTATE WASHDC 9159
    INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
    RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC
    RUEATRS/DEPT OF TREASURY WASHINGTON DC
    RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

` `

    UNCLAS MANAGUA 000453

    SIPDIS

    SENSITIVE
    SIPDIS

    STATE FOR WHA/CEN, WHA/EPSC, EB/TRA
    PLEASE PASS TO USTDA FOR KMALONEY
    COMMERCE FOR ITA/MSIEGELMAN
    TRANSPORTATION FOR FEDERAL HIGHWAY ADMINISTRATION

    E.O. 12958: N/A
    TAGS: ELTN EWWT EAIR EIND EPET ECON ETRD PINR NU
    SUBJECT: NICARAGUA: AMBASSADOR CALLS ON NEW MINISTER OF
    TRANSPORTATION AND INFRASTRUCTURE

    REF: A. MANAGUA 0384
         ¶B. 06 MANAGUA 2587

    ¶1. (SBU) Summary.   The Ambassador called on the new Minister
    of Transportation and Infrastructure Pablo Fernando Martinez
    Espinoza on February 7 to introduce himself and discuss
    transportation and infrastructure issues in Nicaragua.  The
    Ambassador explained that the Millennium Challenge
    Corporation (MCC) is spending $92.8 million on building roads
    in the Departments of Leon and Chinandega, and that the
    United States Trade and Development Agency (USTDA) is funding
    $750,000 worth of feasibility studies on the expansion of sea
    and air cargo facilities.  Martinez suggested that USTDA
    might also want to look at funding a feasibility study on a
    second runway at the airport, and that the MCC should
    consider investing in the Port of Corinto.

    ¶2. (SBU) Martinez outlined the government's policy
    priorities: fighting poverty, combating corruption,
    developing democracy, and fostering the private sector.  He
    believes that the government sorely needs to establish a
    policy on investment -- first defining objectives, then
    setting investment criteria and establishing priorities.
    Decrying a ministry and a sector in disarray, Martinez said
    he wants to develop institutions and industry capacity, and
    to attract people to the ministry who want to achieve
    results, are not corrupt, and are willing to learn.  End
    Summary.

    ¶3. (U) The Ambassador called on new Minister of
    Transportation and Infrastructure Pablo Fernando Martinez
    Espinoza on February 7 to introduce himself and discuss
    transportation and infrastructure issues, especially roads,
    in Nicaragua.  Martinez was joined by Vice Minister Fernando
    Valle.  DCM and Econoff accompanied the Ambassador.

    Millennium Challenge Corporation
    --------------------------------

    ¶4. (U) The Ambassador opened the meeting by acknowledging
    that in recent years the U.S. mission had not been very
    active in areas related to infrastructure.  However, this was
    changing now that the MCC is building roads in the
    Departments of Leon and Chinandega.  MCC road project tenders
    are starting to flow.  Over half of MCC's $175 million
    program is funding the construction of primary and secondary
    roads.  The Ambassador underscored that as a member of the
    MCC Board of Directors, the Minister of Transportation and
    Infrastructure is an integral part of what the MCC
    accomplishes.

    ¶5. (SBU) Martinez commented that he is interested in
    replicating the MCC model in other areas because it keeps
    programs off budget, therefore avoiding distortions related
    to legislative and constitutional earmarks for education, the
    judicial system, and municipal government. (Note: there is no
    small irony in Martinez's comments, since the Sandinistas
    imposed most of these earmarks.)  Additionally, the model
    involves the private sector in the development of public
    infrastructure.  Martinez believed that the model might be
    applied to the construction of a Pacific coast highway
    between San Juan del Sur and the border of Costa Rica.  The
    Ambassador pointed out that along with a coastal road, one
    would want to make sure that there is adequate water and
    power supply to support increased regional development.

    Coastal Highway
    ---------------

    ¶6. (SBU) Martinez estimated that a new coastal road along the
    Pacific Ocean would cost on average about $1 million per
    kilometer, versus the $200,000 cost of rehabilitating an
    existing road, given the need to build the foundation,
    drainage systems, bridgework, among other requirements.
    Because the objective of the road was to hasten tourism,
    economic benefits would accrue to a different measure -- a
    different kind of traffic.

    Expanding Cargo Capacity Under CAFTA-DR
    ---------------------------------------

    ¶7. (SBU) The Ambassador informed Martinez that the United
    States Trade and Development Agency (USTDA) is providing a
    total of $750,000 to fund feasibility studies on the
    expansion of cargo facilities at the Port of Corinto and
    Managua International Airport.  Trade under CAFTA-DR had
    risen to the point where both the port and the airport needed
    to expand.  A lack of adequate infrastructure could adversely
    affect the country's international competitiveness.  To
    facilitate private sector investment in the ports, the
    Ambassador noted, USTDA will fund an advisory to help the
    government draft a ports law.  Currently, the ports are
    relegated to applying general procurement law, which
    precludes public-private partnerships such as joint ventures,
    build-operate-transfer projects, and concessioning terminals.
     Martinez suggested that USTDA might also want to look at
    funding a feasibility study on a second runway at the
    airport, and added that the MCC might want to consider
    investing in the Port of Corinto.

    Policy Priorities and Investment Objectives
    -------------------------------------------

    ¶8. (SBU) Martinez outlined the government's policy
    priorities: fighting poverty, combating corruption,
    developing democracy, and fostering the private sector.  He
    believes that the government sorely needs to establish a
    policy on investment -- first defining objectives, then
    setting investment criteria and establishing priorities.
    Until now, he commented, Nicaraguan governments have lacked
    the vision to do this.  One of the problems, he mused, is
    that Nicaraguans want to do everything at once, when it would
    be better to do things gradually, but well.  As an example,
    he pointed out that sometimes emergency repair done the wrong
    way actually destroys a road over the medium term.

    ¶9. (SBU) Martinez added that the government has to start
    counting all of the economic costs of having roads in poor
    condition including, for example, the cost of killed cattle,
    road accidents, and the value lost by taking too much time in
    getting perishable goods like seafood and fruit to market.
    Taking into account all of these economic costs will help him
    justify funding road construction.

    Sector in Disarray
    ------------------

    ¶10. (U) Referring to recent negative newspaper articles about
    the transport sector, Martinez decried what he saw at his
    ministry as well as in the construction industry.  There had
    been a lack of transparency at the ministry.  Contracts had
    not been drawn correctly.  Costs had been exaggerated.
    Planning had been ignored.  Ministry officials often lacked
    education and training.  Coordination with the municipalities
    had been poor.  Institutions had grown weak.  Moreover, the
    ministry had ignored the health of the construction industry
    and taken no steps to foster greater capacity, e.g.,
    Nicaragua has no laboratory with which to test construction
    materials or the quality of road construction.  Even
    engineering professors are teaching old technology, Martinez
    said.

    Developing Institutions and Industry Capacity
    ---------------------------------------------

    ¶11. (SBU) Martinez said that he wants to develop institutions
    and industry capacity.  He wants to attract people to the
    ministry who want to achieve results, are not corrupt, and
    willing to learn.  The most important thing, he asserted, is
    to instill a sense of professionalism.  He would like to
    provide incentives to construction companies to invest in
    themselves and build capacity in the industry.  He hopes to
    re-establish a testing laboratory at a local university, and
    work with universities to improve the quality of education
    for civil engineers.

    ¶12. (U) The Ambassador wondered if the United States could
    assist in some way.  Could we put together a three-week
    training program in contract law for the ministry?  Could we
    bring a Fulbright scholar to teach at a local university or
    some other sort of professional exchange?  There seemed to be
    two immediate needs: construction science and contract law.
    Martinez showed interest in the possibility of putting
    together seminars on contract law for officials at his
    ministry, and perhaps officials from other ministries as
    well.  (Note: the Embassy and USAID are reviewing ideas along
    these lines.)

    Large Projects
    --------------

    ¶13. (SBU) The Ambassador asked about some of the large
    projects reported in the press, such as a canal across the
    isthmus that would compete with the Panama Canal (Ref B).
    Martinez quietly indicated his view that it is unlikely that
    these projects would materialize, but he did say that if a
    China or a Brazil were interested, it could happen.  He
    admitted that local industry is unprepared for such a large
    project.  Salinas added that a transisthmus oil pipeline
    might be viable in the medium term.

    Biography: Pablo Fernando Martinez Espinoza
    -------------------------------------------

    ¶14. (SBU) Pablo Fernando Martinez Espinoza is well known to
    Nicaraguan construction and engineering circles.  From 1984
    to 1990, he was a member of President Daniel Ortega's first
    administration, serving as Vice Ministry of Construction.  In
    the early 1990s, Martinez founded CEICO SA, a construction
    company that has received a number of government contracts to
    build roads and bridges, as well as a dock at the Port of
    Corinto and an airport on Corn Island.  CEICO has also won
    contracts to maintain and rehabilitate national roads from
    the government's Roadway Maintenance Fund (FOMAV).

    ¶15. (SBU) Martinez has already appeared before the National
    Assembly Committee on Infrastructure and Public Services to
    discuss the state of the ministry.  He claimed that the
    ministry is bloated and suffers from corruption.  He pointed
    to the fact that contractors regularly go over budget on
    projects they never finish, while ministry officials ran up
    large bills on things like personal gasoline allowances.
    Such finger pointing sessions at the National Assembly have
    included his predecessors Ricardo Vega Jackson, Ariel Lopez,
    and Pedro Solorzano.  (Note: Vega Jackson resigned under a
    cloud of corruption in the fall of 2006, but then promptly
    pointed the finger at Solorzano, his predecessor and then
    advisor to President Bolanos (Ref A).)

    ¶16. (SBU) Martinez has been a member of the Executive Council
    of the Nicaraguan Chamber of Construction.  He holds a degree
    from the Central American University in Civil Engineering,
    and has worked as the Dean of the College of Engineering at
    the same institution.  He is one of the founders of the
    National Engineering University.

    ¶17. (SBU) Martinez was recommended for the job by the
    Nicaraguan Construction Chamber and the Architects and
    Engineers Association.  Before becoming Vice Minister of
    Transportation and Infrastructure, Fernando Valle was the
    General Manager of the Nicaraguan Construction Chamber.
    TRIVELLI

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