On October 24, the White House announced that President Biden signed Executive Order (EO) 14088 (amending EO 13851) which substantially expands the Nicaragua sanctions program with sectoral sanctions authorities, exposing individuals and entities operating in identified sectors to blocking sanctions. Specifically, the amended EO identifies the gold sector, which affects about $900 million of exports, most of it to the United States. Entities and individuals that operate or have operated in that sector are now at risk of US blocking sanctions. The EO also allows for the future identification of additional sectors that could become subject to sanctions, if warranted.
The amended EO also provides new authority to designate any individual or entity found to be responsible for or complicit in the arrest or persecution of persons exercising the freedom of expression or the freedom of assembly (presumably in Nicaragua, although this is not specified in the text of the amended EO).
In addition, the amended EO adds new authorities to allow for the imposition of restrictions on certain trade and new investment with Nicaragua. These include the authority to specify Nicaraguan-origin products that are prohibited for importation into the United States; the authority to specify items that are prohibited for export to Nicaragua from the United States or by US persons; and the authority to specify sectors of the Nicaraguan economy in which new investment by US persons is prohibited. This action builds on the July 2022 reallocation of Nicaragua’s sugar quota by the Office of the US Trade Representative (USTR). Specifically, the USTR removed Nicaragua from the list of countries that can export sugar to the United States with reduced import tariffs.
The expansion of the Nicaragua sanctions program is an acknowledgment by the Biden Administration that the gradual ramping up of the program over the past several years has not achieved its objectives, as the Ortega-Murillo regime continues to cling to power while engaging in conduct that threatens democratic values and human rights. The move also stands in contrast to current US sanctions policy in Latin America and the Caribbean, namely with regard to Cuba and Venezuela, which has remained relatively static during the Biden Administration and, if anything, has stood firm in the face of rumored sanctions relief, most recently in connection with Venezuela and the global oil shortage. Companies and individuals with ties to Nicaragua should expect sanctions compliance burdens to increase in the near term and should consider assessing the scope of their risk in light of the reach of the amended EO and possible future designations and enforcement actions that may be pursued by the US Department of the Treasury’s Office of Foreign Assets Control (OFAC).
New Designations and General License
Acting pursuant to EO 13851, OFAC also designated the Nicaraguan mining authority General Directorate of Mines (DGM) and Reinaldo Gregorio Lenin Cerna Juarez (Cerna).
DGM, a subordinate office within the Nicaraguan Ministry of Energy and Mines (MEM), was designated for being owned or controlled by, or having acted or purported to act for or on behalf of, directly or indirectly, Salvador Mansell Castrillo, who is the Nicaraguan Minister of Energy and Mines and whose property and interests in property were blocked pursuant to EO 13851 on November 15, 2021. Treasury alleges that proceeds from the Nicaraguan gold trade are used by the Ortega regime to maintain power, eliminate political opposition, and fund Russia’s invasion of Ukraine.
Cerna is allegedly a close confidant of Nicaraguan President Daniel Ortega. He was head of state security under the first Ortega presidency in the 1970s and 1980s and was reportedly involved in numerous incidents of violence.
OFAC also issued Nicaragua General License (GL) 4, which provides authorization for US persons to wind down transactions involving DGM through 12:01 a.m. eastern standard time, November 23, 2022, provided that any payment to a blocked person is made into a blocked account in accordance with the Nicaragua Sanctions Regulations (NSR), 31 CFR Part 582.
Finally, the US State Department (State) announced visa restrictions on over 500 Nicaraguan individuals and their family members. These individuals included members of Nicaraguan security services, such as the Nicaraguan National Police, penitentiary officials, judges, prosecutors, higher education officials, and non-government actors who allegedly enable Ortega regime repression and corruption, as well as their family members.