Nicaragua: The Election of Daniel Ortega and Issues in U.S. Relations

Nicaragua: The Election of Daniel Ortega
and Issues in U.S. Relations
April 19, 2007
Maureen Taft-Morales
Specialist in Latin American Affairs
Foreign Affairs, Defense, and Trade Division

Nicaragua: The Election of Daniel Ortega
and Issues in U.S. Relations
Summary
Sandinista leader and former President Daniel Ortega was inaugurated to a five-
year term as President on January 10, 2007. Three elements were key to Ortega’s
victory in the November 2006 presidential election: a change in Nicaraguan electoral
law, an effective political machine, and a divided opposition. Ortega won only
37.9% of the vote, but was able to avoid a run-off vote because he was ahead of the
next closest candidate, Eduardo Montealegre of the Nicaraguan Liberal Alliance
(ALN), by more than the 5% required by law. Montealegre, who gained 28.3% of
the vote, was regarded by many as the U.S.-favored candidate. His second place
position garnered him a seat in the legislature. The Liberal Constitutional party
(PLC) then came in third place with 26.2% for candidate José Rizo, an ally of the
corrupt former President, Arnoldo Alemán. Critics accused both U.S. officials and
Venezuelan President Hugo Chávez of trying to influence the election’s outcome.
Ortega was a leader of the Sandinista National Liberation Front (FSLN) when
it overthrew the Somoza family dictatorship in 1979. When the pro-Soviet
Sandinistas gained control of the government the United States backed opposition
“contras” who launched an eight-year war (1982-1990) against the government.
Ortega’s government agreed to democratic elections in February 1990, which he lost.
Since 1990 Nicaragua has developed democratic institutions and a framework for
economic development. Nonetheless, significant challenges remain: Nicaragua is
still very poor, the second poorest nation in the western hemisphere. Its institutions
are weak and widely viewed as corrupt.
In his first three months in office, Ortega has continued to vacillate between
anti-U.S. rhetoric and pragmatic reassurances that his second administration will
respect private property and pursue free-trade policies, as he did during his campaign.
Ortega and U.S. officials have indicated that both sides are seeking a cooperative
relationship, however.
There is debate among some Members and the Administration over what the
appropriate level and focus of U.S. aid to Nicaragua should be. The Administration
says its top priority in Nicaragua is consolidating democratic processes, including
reforming the judicial system, implementing good governance, and combating
corruption. Another issue is promoting development and poverty reduction; the
Millennium Challenge Account compact between the two countries focuses on
reducing rural poverty through road-building, increased wages, and strengthening
property rights. Supporting the U.S.-Central America-Dominican Republic Free
Trade Agreement (CAFTA-DR) is the dominant trade issue; President Ortega has
said he will honor the agreement. Resolution of property claims by U.S. citizens and
immigration are contentious areas in U.S.-Nicaraguan relations. Other issues in U.S.-
Nicaraguan relations include improving respect for human rights, improving civilian
control over defense policy, the state of Nicaraguan missiles, and increasing
Nicaragua’s capacity to combat transnational crimes such as narcotics trafficking.
This report will not be updated.

Contents
Background ......................................................1
Recent Political Developments.......................................2
2006 Elections................................................2
The Ortega Presidency..........................................5
Issues in U.S.-Nicaraguan Relations...................................6
Level and Focus of U.S. Assistance................................6
Development and Poverty Reduction ..............................7
Consolidation of Democratic Processes ............................8
Human Rights................................................8
Trade .......................................................9
Immigration ..................................................9
Property Claims..............................................10
Security, Missiles, and Military Assistance ........................10
Counternarcotics Efforts.......................................10
List of Figures
Figure 1. Map of Nicaragua........................................11

Nicaragua: The Election of Daniel Ortega
and Issues in U.S. Relations
Background
Daniel Ortega was a leader of the Sandinista National Liberation Front (FSLN)
when it overthrew the corrupt and repressive Somoza family dictatorship in 1979.
When the pro-Soviet Sandinistas gained control of the government and pursued
increasingly radical social policies, including redistribution of land and wealth, the
United States backed opposition “contras” who launched an eight-year war (1982-
1990) against the government. About 30,000 Nicaraguans died in the war.¹ As
President from 1985-1990, Ortega’s administration was marked by improved
education and healthcare on the one hand, and charges of corruption and authoritarian
tendencies on the other. As part of the Central American Peace Plan, Ortega’s
Sandinista government agreed to internationally monitored democratic elections in
February 1990, which he lost and peacefully ceded to Violeta Chamorro. Ortega also
ran for President and lost in 1996 and 2001. Because he came in second place,
however, Nicaraguan law gave him a seat in the National Assembly, where he has
served as an opposition leader. He ran for President again in 2006 and won.
Since 1990 Nicaragua has developed democratic institutions and a framework
for economic development. Progress has been made in social and economic reforms.
Nonetheless, significant challenges remain: Nicaragua is still very poor, the second
poorest nation in the western hemisphere. Its institutions are weak and often corrupt.
In 2003, former President Arnoldo Alemán (1997-2002) was prosecuted by the
Administration of President Enrique Bolaños (2002-2007) for embezzling about $100
million in public funds while in office. The effort was particularly notable because
Bolaños and Alemán not only belonged to the same political party, the conservative
Liberal Constitutional party (PLC), but Bolaños also served as Alemán’s Vice-
President until he stepped down to run for President. Alemán was sentenced to 20
years in prison for fraud and money-laundering. In December 2006 U.S. federal
officials seized $700,000 in certificates of deposit they said were bought for Alemán²
with Nicaraguan government funds. Nonetheless, Alemán continues to control the
Liberal party. His supporters have tried continually to secure his release and an
amnesty. He has served his term under increasingly lax terms, and was released
under very broad terms in March 2007 after Ortega took office.

¹ “Nicaragua’s Ortega says US Should Aid Ex-Contras,” Reuters News, March 14, 2007.
² “VOA News: U.S. Seizes Certificates Bought by Former Nicaraguan President Aleman,”
US Fed News, December 28, 2006.

The 2006 elections followed more than a year of political tensions among then-
President Bolaños, the leftist Sandinista party, and allies of rightist former President
Alemán. Alemán and Ortega, once longtime political foes, negotiated a power-
sharing pact (“El Pacto”) in 1998 that has since defined national politics. Their
parties passed laws making it difficult for other parties to participate in elections, and
otherwise facilitated an alternating of terms between their two parties. Their ongoing
influence made governing increasingly difficult for President Bolaños, who had
limited legislative support. In 2004, renegotiation of the pact included a demand for
Alemán’s release. In October 2004 the Organization of American States (OAS) sent
a special mission to Nicaragua to encourage all parties to preserve and follow
democratic order there. In January 2005, the two parties adopted a series of
constitutional amendments that transferred presidential powers to the legislature, and
further divided up government institutions as political patronage, moves the Central
American Court of Justice ruled illegal.
During the height of tensions, President Bolaños invoked the OAS Inter-
American Democratic Charter, and the OAS sent several high-level delegations to
help negotiate a solution. Negotiations in October 2005 considerably reduced
tensions and provided for President Bolaños, who had been isolated by his anti-
corruption efforts against Alemán, to serve the remainder of his term, which expired
in January 2007. Ortega announced he was breaking the power-sharing pact between
his party and the PLC that had hampered Bolaños’ ability to govern. After Ortega’s
announcement, the legislature passed reforms such as the passage of the 2006 budget,
the first-ever tax code, local government transfers, and financial administration
reforms. Ortega and Bolaños then agreed to postpone the implementation of the
constitutional amendments at the root of the tensions.
Politics remained volatile in 2006, but for a different reason, as attention shifted
to national elections held on November 5, 2006. The FSLN and PLC still control
many state institutions, however, including the electoral authority, and opposition
parties and others expressed concern that the two parties would use those posts to
manipulate the electoral outcome. Concerns remain that the two parties will use their
dominance of state institutions to manipulate state power in their favor.
Recent Political Developments

2006 Elections³

Three elements were key to Ortega’s victory: a change in Nicaraguan electoral
law, an effective political machine, and a divided opposition. The Sandinistas
negotiated a change in the electoral law with then-President Alemán’s party
eliminating the requirement that a candidate gain 45% of the vote to avoid a run-off
election. The new law requires that a presidential candidate win either 40% of valid

³ Sources include news articles from various U.S. sources, broadcast and print news and
analysis in Nicaragua, and the author’s experience as an Observer with the Organization of
American States Electoral Observation Mission in Nicaragua, October 17-November 8,

2006.

votes, or 35% of the vote plus at least 5% more votes than the second-place candidate
in order to win in a first round. Failing that, a run-off vote between the top two
candidates is held. Many observers saw this lowering of the threshold as part of the
Pact alternating power between the PLC and FSLN. The lower percentage required
to win in the first round facilitated the election of Ortega, whose support in the
previous three presidential elections had hovered around 40%. Analysts believed
Ortega felt it was critical he win in a first round, because the opposition would unite
against him in a second round. Ortega won only 37.9% of the vote, but was able to
avoid a run-off vote because he was 9.6% ahead of the next closest candidate,
Eduardo Montealegre of the Nicaraguan Liberal Alliance (ALN).
Ortega also had the advantage of an extremely well-disciplined party. Critics
say he forced out members seeking reform, and made the party into a platform for his
personal ambitions. In addition, Ortega ensured through his position as opposition
leader in the legislature and through the Pact that FSLN loyalists were firmly
entrenched throughout various government agencies.
According to polls prior to the vote, about 60% of voters said they would not
vote for Ortega. This held true in the final vote, but the opposition was divided in

2006 among four candidates. In the 2001 presidential elections, Ortega received 40%

of the vote, but faced a united opposition and lost.
Montealegre, who gained 28.3% of the vote, is a Harvard-educated banker and
former finance minister. He says he offered to run as the vice presidential candidate
for the conservative Constitutional Liberal party (PLC) party to prevent further
splintering of the opposition. When Alemán refused to remove himself from the
political scene, however, Montealegre split from the PLC, formed the ALN, and
advocated continued political reform. He was regarded by many as the U.S.-favored
candidate. Montealegre’s second place position garnered him a seat in the
legislature. The PLC then came in third place with 26.2% for candidate José Rizo,
an ally of Alemán and critic of President Bolaños.
Edmundo Jarquín registered a distant fourth place at 6.4%. Jarquín, an
economist who worked at the Inter-American Development Bank, became the
presidential candidate of the center-left Sandinista Renewal Movement (MRS) when
nominee Herty Lewites died suddenly in July 2006. The son-in-law of former
President Violeta Chamorro (1990-1997), Jarquín chose popular singer and composer
Carlos Mejia Godoy as his running mate. The two candidates are prominent former
Sandinistas who left the FSLN in opposition to Ortega and in favor of political
reform, joining other like-minded former Sandinistas in the splinter party, the MRS.
Edén Pastora, another disaffected one-time Sandinista leader, won less than half a
percent of the vote as head of the Alternative for Change (AC) party.
The 90-member National Assembly was also elected. No party won an outright
majority. The FSLN has 38 seats, the PLC 25, the ALN 22, and the MRS 5.
Pastora’s AC won no seats. Voters also chose 20 members of the Central American
parliament in the November 5 elections.
The United States provided $15.3 million to support the 2006 elections in
Nicaragua. Critics accused both U.S. officials and Venezuelan President Hugo

Chávez of trying to influence the election’s outcome. The U.S. embassy was
criticized for making critical remarks, such as alluding to Ortega and Rizo as “two
corrupt bosses.” After U.S. officials voiced their opposition to Ortega, support for
him increased. U.S. Ambassador Paul Trivelli, asserting a right to express his
opinion, rejected calls to stop commenting on the elections.⁴
A prominent figure in the Iran-Contra scandal was also accused of interfering
in the elections. Oliver North, a former Reagan Administration aide who
manipulated the funding of the Nicaraguan contras by selling arms to Iran, appeared
in Nicaragua to support Rizo’s candidacy. Ambassador Trivelli, who has criticized
Rizo’s PLC as undemocratic and corrupt, publicly distanced himself from North,
saying North spoke only as a private citizen, not for the U.S. government. Other
analysts were baffled by North’s position: while condemning Ortega as the worst
thing that could happen to Nicaragua, he backed the candidate whose party was
essentially governing with Ortega through a political pact.⁵
Critics say Chávez was indirectly supporting Ortega’s campaign by providing
fertilizer and oil to certain municipalities under favorable terms through Sandinista-
dominated organizations. The Venezuelan state oil company signed the agreement
to supply oil at preferential rates and with a deferred payment schedule, for example,
with the Nicaraguan Association of Municipalities, a predominantly Sandinista
association of mayors, rather than with the Nicaraguan government.⁶
Regional elections were held on the Atlantic Coast earlier in the year, on March
5, 2006. According to the State Department, problems there included voter
identification card distribution, errors in the voter registry, lack of voter education,
inadequate voting materials, and poorly trained electoral officials. Domestic and
international observation groups were seen as essential to ensuring the transparency
and credibility of the regional elections, and later, for the national elections as well.
Most of the problems experienced at the regional level were evident at the
national level. A non-governmental group providing electoral support expressed
concern that more than a third of Nicaraguans could have been disenfranchised in the
November elections, a number that could have affected the outcome of the elections.
An audit by a Nicaraguan election observation group, Ethics and Transparency,
revealed a high rate of errors on voter registry lists, and only about 28% of voters
participated in a drive to verify and correct the lists.

⁴ Filadelfo Alemán, “U.S. Official: Nicaraguan Voters Face Stark Choices in November
Election,” Associated Press, April 27, 2006; “With U.S. Opposition at his Back, Ortega
Surges in Nicaragua Presidential Race,” Noticen, April 6, 2006.
⁵ Catherine Bremer, “Oliver North Back in Nicaragua as Old Foe Leads,” Reuters News,
October 23, 2006; José de Cordoba, “A Cold War Ghost Haunts Elections in Nicaragua —
As Sandinistas’ Ortega Gains, U.S. Diplomat Gets Tough; a Cameo by Oliver North,” Wall
Street Journal, November 3, 2006.
⁶ “PDVSA, Municipalities Create Fuel Distribution JV,” Business News Americas, April

27, 2006, printed April 12, 2007.

Concern over the elections was due in large part to the fact that the FSLN and
PLC controlled many state institutions, including the electoral authority. As a result
of the 2000 power-sharing pact, the electoral council in charge of running the
elections consisted of three PLC members, three FSLN members, and a consensus
president chosen by the two parties. International and domestic observation groups
pressed the government to address problems during the pre-election process such as
a high rate of errors on voter registry lists, and difficulty getting voter identification
cards needed to vote. The OAS found that 200,000 citizens still did not have the
cards less than a month before the elections, and told the government to issue them.⁷
Some 18,000 observers monitored the elections. International observer
missions, such as those from the OAS and the European Union, concluded that the
irregularities that occurred did not affect the outcome. The observer missions
generally agreed with the conclusion reached by the OAS electoral observer mission,
that the election was “peaceful and orderly, had a massive turnout and took place in
accordance with the law.”⁸
The Ortega Presidency
FSLN leader Daniel Ortega was inaugurated President on January 10, 2007 for
a five-year term Over the years, Ortega has changed his image from Marxist
revolutionary and protagonist in a proxy Cold War battle with the United States to
a practicing Catholic preaching peace and reconciliation. The other candidates
presented themselves as a vote against Ortega, and some warned of a return to forced
conscription and food shortages if he were re-elected. Although the opposition
together garnered over 60% of the vote, it was divided among four candidates, and
Ortega was able to win with less than 40% of ballots cast.
What Ortega’s government positions on many issues will be is unclear, as he
still has not provided coordinated policy plans for major areas such as the economy,
energy, or poverty reduction. Conversations between Ortega and U.S. officials,
including President Bush, indicate both sides are seeking a cooperative relationship.
Nonetheless, since taking office, Ortega has continued to vacillate between populist,
anti-U.S. rhetoric, and pragmatic reassurances that his second administration will
respect private property and pursue free-trade policies. His cabinet appointments
include both Sandinista loyalists and supporters of a free market economy. He has
close ties with Venezuelan President Hugo Chávez, who advocates a leftist, populist
alliance in the Americas to counter U.S. influence in the region. Venezuela is
reportedly providing Nicaragua with energy assistance — including research into
constructing an oil refinery in Nicaragua — and promising sizeable development
assistance. But Ortega’s Vice President Jaime Morales, spokesman for the anti-
Sandinista contras during the 1980s, has resumed talks with the International
Monetary Fund, of which Chávez is highly critical, regarding a new Poverty

⁷ National Democratic Institute, “Field Report: Nicaragua,” June 1-30, 2006; “Nicaragua:
OAS Reprimands Electoral Authority,” Latinnews Daily, October 13. 2006.
⁸ “Elections in Nicaragua Peaceful and Orderly,” OAS press release NI-EL-6, November 6,

2006.

Reduction and Growth Facility plan. The Ortega Administration says it seeks a plan
which will place greater emphasis on social priorities than previous plans.
The amendments passed and then postponed by the previous legislature, in
which Ortega was opposition leader of the FSLN, would have transferred significant
executive powers, including controlling Cabinet appointments, to the legislature in
February 2007. The new legislature voted in January 2007 to postpone them again,
however, for another year, until January 2008. Montealegre, now serving as head of
the opposition, said he advocated postponing them in part because implementing
them as they are now would give control of new institutions and more patronage jobs
to the FSLN and the PLC. The legislature established a commission for
constitutional reforms that will look at the reforms currently on hold, plus others
being proposed. The ALN is advocating a provision barring presidential reelection.
The FSLN says it supports unlimited presidential re-election.
The Ortega Administration also proposed in January a bill that would create
“people’s councils” and give direct control of the police to the President. The
National Assembly approved the bill, but weakened Ortega’s proposals. Critics
feared the people’s councils resembled defense committees that operated during the
1980s Sandinista government and reportedly acted as spies and enforcers of FSLN
doctrine. The new councils will have less power and more of a consulting role under
the new law. The bill that passed gave Ortega greater control over the police, but not
as much as he had proposed.
In March 2007 the Ortega government released former President Alemán from
the conditions of his parole, allowing him to travel freely throughout the country.
Many critics see this as evidence that he still operates under the power-sharing pact
with Ortega, and believe that his release was a reward for contributing to the split in
his party and facilitating Ortega’s election. Alemán said he would like to be
president again.⁹
Issues in U.S.-Nicaraguan Relations
Level and Focus of U.S. Assistance
Some Members of Congress have criticized the Administration’s reduced levels
of some funding to Latin America, including to Nicaragua. The Administration
proposes to reduce aid to Nicaragua by 40%, from $47.583 million in FY2006 to
$29.375 million in 2008, a decrease of $18.2 million.¹⁰ The Administration notes,
however, that it has supported forgiveness of Nicaraguan debts, and is providing
significant amounts of aid through the Millennium Challenge Account (MCA) (see
“Development and Poverty Reduction,” below). The Administration’s five-year
MCA agreement of $175 million represents $35 million per year. Some analysts

⁹ “Nicaragua Opposition Slams Parole Deal,” Associated Press, March 17, 2007.
¹⁰ Funding for FY2007 is being provided through continuing resolutions, and figures are not
yet available.

argue that the Administration had said MCA funds would be in addition to traditional
aid provided mostly through the U.S. Agency for International Development
(USAID), not instead of it.
In its Congressional Budget Justification for FY2008, the Administration
describes 2008 as a “critical year for Nicaragua,” as Ortega — who the
Administration says still controls the “anti-democratic ‘pact’” with former President
Alemán — completes his first year in office and the implementation of CAFTA-DR
“hopefully hits its stride.” Programs seeking to promote good governance and
maximize the benefits of the U.S.-Dominican Republic-Central America Free Trade
Agreement (CAFTA-DR) would be significantly reduced under this proposal.
Programs to promote “Governing Justly and Democratically” would be cut by more
than 50%, from $10 million to $4 million. Programs promoting “Economic Growth”
would be reduced by about a third, from $17.3 million to $11.3 million. “Investing
in People” programs, focusing on education, and environmental protection and social
safety nets related to CAFTA-DR, would be cut by a third, from $18.6 million to
$11.7 million.
Aid under two smaller groups of programs would increase. Peace and security
programs would increase from $1.3 million to $2.2 million. These programs would
include reducing the threat posed by excess weapons and improving civilian control
over the military. Humanitarian assistance to improve disaster preparedness and
mitigation would increase from $0.0 to $200,000.
Between 1990 and August 2006, the United States forgave $389.7 million in
Nicaraguan debt. As of December 31, 2005, Nicaragua owed the U.S. $20.5 million.
In March 2007, the Inter-American Development Bank approved 100% debt relief
for several countries, including $984 million in debt relief for Nicaragua. The Bush
Administration supported the decision.
Development and Poverty Reduction
Nicaragua is the second poorest nation in the hemisphere, rating only above
Haiti. Nicaragua’s poverty is widespread and acute. Some social indicators have
shown little or no improvement since 1993. According to a recent World Bank
report, overall poverty declined in Nicaragua between 1993 and 2001, but more than
two-thirds of the rural population continue to live in poverty. The official
unemployment rate is about 12%, with another 35% underemployed, though
estimates vary.¹¹ In 2005, the Bush Administration signed a five-year, $175 million
agreement with Nicaragua under the Millennium Challenge Account to promote rural
development. The programs are focusing on the regions of León and Chinandega.
According to the Bush Administration, the MCA projects will reduce poverty and
spur economic growth by reducing transportation costs and improving access to

¹¹ U.S. Department of State, Background Note: Nicaragua, p.4, January 2007. Central
Intelligence Agency World Factbook cites unemployment at 3.8%, underemployment at

46.5%, updated March 15, 2007, available online at [https://www.cia.gov/cia/publications/

factbook/print/nu.html ].

markets for rural communities; increasing wages and profits from farming and related
enterprises in the region; and increasing investment by strengthening property rights.
Ortega has not yet stated the policies his government proposes to achieve his
stated goal of ending poverty. He did, however, say that the United States should pay
at least $300 million to support former “contras” whom the Reagan Administration
funded to fight Ortega’s first government in the 1980s. The rebels seek housing,
land, and credits.
Consolidation of Democratic Processes
The top U.S. priority in Nicaragua, according to the Administration’s FY2008
budget request, is “strengthening and consolidating democracy.” U.S. programs in
the requested “Governing Justly and Democratically” component of U.S. aid would
support the structural reform of government institutions to make them more
transparent, accountable and professional; combat corruption; and promote the rule
of law. They also aim to increase citizen advocacy and the role of the media in order
to “blunt” Nicaragua’s caudillo-style political practices.
In January 2007, the legislature passed a bill proposed by President Ortega
concentrating political power in the executive branch and another delaying
implementation of constitutional changes which would have given more power to the
legislature until January 2008. A commission for constitutional reforms will
reexamine the passed package and look at new reform proposals from all the parties.
The FSLN has suggested it will propose a reform to allow unlimited presidential re-
elections. Current law allows re-election, but only in non-consecutive terms.
Human Rights¹²
U.S. officials have also expressed concern regarding improving respect for
human rights. According to the State Department’s 2006 Human Rights report,
released in March 2007, civilian authorities generally maintained effective control
of security forces, but there were some reports of human rights abuses involving the
police. The most significant human rights abuses included harsh prison conditions;
widespread corruption in and politicization of government entities, including the
Office of Human Rights Ombudsman, the judiciary, and the Supreme Electoral
Council. According to Amnesty International, the inadequate response by authorities
to high levels of violence against women was a major concern. Violence against
children was also a concern expressed by human rights reports. Journalists were
harassed and abused. Human rights problems related to labor issues include
widespread child labor and violation of worker rights in free trade zones.
Human rights and other groups expressed concern over the National Assembly’s
passage of a law in October 2006 that made abortion illegal and punishable by

¹² U.S. Department of State, Country Reports on Human Rights Practices 2006: Nicaragua,
March 6, 2007; Amnesty International Report 2006: Nicaragua; Human Rights Watch,
“Nicaragua: Penal Reform Constitutes an Assault on Human Rights,” October 26, 2006;
“Nicaraguan Activists try to Block Abortion Bill,” Reuters Health E-Line, January 9, 2007.

imprisonment even when done to save a pregnant woman’s life, or the pregnancy is
a result of rape or incest, conditions under which abortion had been legal since 1893.
International organizations, including the UN, criticized the legislature for passing
the bill during the highly politicized period just before the presidential elections. The
Sandinistas, who had previously supported a woman’s right to abortion, supported
the penalization of abortion. Many observers saw the move as an effort by the party
to garner Catholic votes for Ortega. In January human rights activists asked the
Supreme Court to declare the law unconstitutional on grounds that it violates
fundamental rights and principles.
Trade
The National Assembly approved the U.S.-Dominican Republic-Central
America Free Trade Agreement (CAFTA-DR) in October 2005 and passed related
intellectual property and other reforms in March 2006. It went into effect on April

1, 2006. CAFTA-DR supporters say the agreement will promote economic growth,

create jobs, and increase exports to the United States. In 2005, Nicaraguan exports
to the United States were $275 million; they increased almost 40 percent in the
second quarter of 2006 following the introduction of CAFTA-DR-related tariff
reductions.¹³ U.S. imports to Nicaragua totaled $522 million, and also are expected
to increase under the pact. President Ortega has said he will honor the CAFTA-DR
agreement.
Immigration¹⁴
Immigration is a contentious area in U.S.-Nicaraguan relations. In December
2005, the U.S. House of Representatives passed a bill (H.R. 4437) that would make
unlawful presence in the United States a criminal, rather than a civil offense. In
January 2006, Nicaragua joined the Mexican and other Central American
governments in criticizing such efforts to toughen immigration laws and in
demanding guest-worker programs and other immigration reforms. The 2000 U.S.
census reported about 220,000 Nicaraguans living in the United States. Of those,
21,000 were estimated to be “unauthorized.” In late February 2006, the Department
of Homeland Security extended Temporary Protected Status (TPS) for about 4,000
eligible Nicaraguans living in the United States until July 5, 2007. During his March
2007 trip to Latin America, President Bush said he would support new legislation to
give legal status to millions of undocumented immigrants through temporary worker
programs, and said he would seek its passage through Congress by August 2007.

¹³ Richard Feinberg, “Nicaragua Elections: Too Close to Call,” Latin Business Chronicle,
October 16, 2006.
¹⁴ U.S. Census Bureau, Census 2000 Special Tabulations, Table FBP-1; U.S. Immigration
and Naturalization Service, “Estimates of the Unauthorized Immigrant Population Residing
in the United States: 1990 to 2000,” 2000 [http://www.dhs.gov/xlibrary/assets/statistics/
publications/Ill_Report_1211.pdf].

Property Claims
Resolution of property claims by U.S. citizens has been a contentious area in
U.S.-Nicaraguan relations for decades, since the Sandinista regime expropriated
property in the 1980s. The Nicaraguan government has gradually settled many
claims through compensation since 1995, including the claims of 4,400 U.S. citizens.
About 760 claims registered with the U.S. embassy remain unresolved. Nicaragua
passed a law creating a new Property Institute that could lead to the dismissal of
property claim lawsuits arising from Sandinista-era expropriations. The law is part
of the constitutional reform package now on hold until January 2008.
Security, Missiles, and Military Assistance
The Bush Administration suspended military assistance to Nicaragua in March
2005. It resumed providing assistance in October 2005 after an agreement was
reached to destroy an arsenal of anti-aircraft missiles the Administration says
constitutes a possible terrorist threat. The National Assembly also promised to
schedule debate on a law authorizing the missiles’ destruction. After being held up
for many months, the bill was suddenly brought up for a vote on July 13, 2006.
Sandinista legislators walked out in protest. PLC and ALN legislators passed a bill
lowering the threshold needed to approve the destruction of weaponry to a simple
majority. They did not, according to the U.S. embassy, vote on the destruction of the
missiles, which the current government will not consider unless it is linked to a
reduction of military strength throughout Central America.
Nicaragua and the United States are participating in regional security efforts.
Nicaragua hosted a meeting of hemispheric defense chiefs in October 2006; then-
U.S. Secretary of Defense Donald Rumsfeld participated. Defense officials at the
Eighth Central American Security Conference held in April 2007 discussed regional
initiatives regarding security issues such as organized crime and transnational
trafficking in small arms, drugs, and humans. Congress has also expressed concern
over improving civilian control over defense policy. USAID peace and security
programs include efforts to reduce the threat posed by excess weapons and improve
civilian control over the military.
Counternarcotics Efforts¹⁵
Nicaragua is a significant sea and land transshipment point for cocaine and
heroin being shipped from South America primarily to the United States and Canada,
according to the State Department’s 2007 Narcotics Control Report. Trafficking has
been mostly through the Atlantic coast, which is geographically and culturally
isolated from the rest of the country. In response to increased law enforcement
efforts there, however, traffickers shifted their operations in 2006 to the Pacific coast,
where the State Department estimates that three-fourths of drug trafficking now
occurs. Its report said the Nicaraguan government “is making a determined effort to

¹⁵ U.S. Department Of State, International Narcotics Control Strategy Report 2007, March
2007; BBC Monitoring Americas, “Nicaragua’s Ortega Criticizes Bush’s Latin American
Tour,” March 16, 2007.

fight both domestic drug abuse and the international narcotics trade, despite an
ineffectual, corrupt, and politicized judicial system.” The Ortega Administration has
promised to participate in counternarcotics efforts, and called on the United States
to do more to combat trafficking.
Figure 1. Map of Nicaragua