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  Number 207 | Octubre 1998
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Nicaragua

The Paths to Corruption

A report written at the end of the Chamorro government by Dora María Téllez, former National Assembly epresentative (1990-1997) and current president of the Sandinista Renovation Movement (MRS). Corruption does not depend only on the attitudes of persons or groups. It is made possible by cultural factors, institutions, legal frameworks, economic conditions, lack of norms, political practices ... What made corruption possible during the government of Violeta Chamorro? It is impossible to measure the magnitude of institutional corruption between 1990 and 1996, and it must be admitted that, in the face of it, Nicaraguan society show a high degree of tolerance.

Dora María Téllez

Accusations of acts of corruption committed by officials in Violeta Chamorro's government made the front pages of the national papers both during and after her term in office, and in fact continue to do so. Nonetheless, this was not a key or decisive issue either in the 1996 electoral campaign or in the election results, even though the majority of the population was convinced at the time that administrative corruption had increased at all levels. The accusations of corruption against certain candidates ruined no one's career. Not even the substantial charges leveled at Alvaro Robelo, founder of the new Up with Nicaragua party (Arriba Nicaragua) had any significantly negative effect on his popularity.

It is important to evaluate and summarize what happened during the Chamorro administration in order to see if anything has really changed with the current administration, if there is more or less corruption, and whether the population is more or less aware of the problem

Constitutional reforms: a big step forward

There is always a risk in any administrative machinery that its material resources will be inadequately or badly managed. In Nicaragua, due to the small size of the economy, the state controls a considerable share of the country's resources. Many economic agents compete to participate in the activities generated by state funds and obtain from the state better possibilities of starting up new business ventures or expanding already existing ones. Although all of this should not necessarily encourage administrative corruption, it does facilitate it in countries like Nicaragua, which have very low levels of institutional development and limited participation by civil society.

It should not be forgotten, however, that some progress was made in combating corruption during the Chamorro administration: government information was opened up to the media and some efforts were made to develop the systems used for administering state resources as part of the public sector reform program. Violeta Chamorro's administration was also witness to a package of constitutional reforms, a crucial step in the country's institutional development. Due to the executive branch's refusal to accept these reforms, however, they could not be fully applied until January 10, 1997, when the Chamorro government left office. Many of the reforms were drawn up with the aim of creating greater transparency and democracy within public administration, decentralizing and reducing the concentration of political power and allowing civil society more participation in state decisions, all in the firm conviction that this was the way to tackle corruption.

An incipient institutional framework

Most Nicaraguans are convinced that the government is free to ignore all restrictions in all areas of the country's political, economic and social life. This means that when government actions affect them as citizens or as members of social associations, they see the prospect of going through legal channels as either inadvisable or very difficult.

This perception is based on historical experience. Throughout this century, regardless of the different nuances or changes in the various Constitutions and other legal regulations, every government—including the one that took office in 1990—has for one reason or another exercised virtually absolute power. The Conservative governments that ruled between 1909 and 1928 are the exceptions to this rule, because the United States, which ruled the country under military occupation, made state decisions during that period.

In Nicaraguan public administration, the armed forces (police and army), the judicial system, the legislative branch, the supervision of public administration, the state financial system and the organization of elections have historically and almost invariably depended directly or indirectly on the political force holding executive power.

The prospect of alternating the exercise of political power with the corresponding staging of periodical, clean and orderly elections; a peaceful transfer of power at the different levels; a separation of the various state branches and the municipalities; the existence of an institutionally autonomous regime on the Caribbean Coast; and a professional and non-partisan army and police are all too recent and insufficiently established in Nicaragua to be essential components of the national institutional framework. These incipient institutions have not yet found a suitable balance among the different expressions of public power.

The constitutional reforms promulgated in 1995 and put into effect in 1997 restrict the state's power over the management of public finances, eliminate the possibility of dictating decrees with the force of law, establish guidelines for the management of state assets and define the mandate of public officials and their responsibility in the administration of state resources. The reforms also strengthened the independence of the judicial and electoral branches, conferred autonomy on the Comptroller General's Office and constitutionally established the independence and autonomy of the Banks Superintendent's Office and other financial institutions.

Despite all of this, the Liberal government, which started its term of office as the reformed Constitution came into force, continues to display the same historical tendency: concentrating all power in the hands of the executive. This tendency naturally increases the sense of impunity felt by public officials and leaves society defenseless, especially those sectors left outside the governmental circles of power or those who display their opposition to the government.

A very weak rule of law

Very many Nicaraguans believe that state institutions or public officials can violate the Constitution and the established laws with little risk of being duly impeded or sanctioned. Just one of the many lamentable examples of this during the Chamorro government happened when the National Assembly passed a law benefiting pensioners. Although the law was put into effect, the minister of the Social Security and Welfare Institute, who was responsible for seeing that it was properly implemented, declared to a plenary session of the National Assembly that he would not enforce it because it was inappropriate and too costly. Although public opinion and parliamentary representatives protested this illegality, the official remained in his post until the government left office without ever implementing the law or even changing his position. Cases such as this, which abounded during the Chamorro government, heighten the lack of belief and confidence in the effective and just application of the laws, especially when it comes to punishing corruption cases.

Immunity is a privilege enjoyed by certain officials and is used to protect them from being accused for political reasons during their time in office. Although immunity obviously makes it more difficult for a complaint about abuses committed by a public official to proceed, the biggest source of impunity in corruption cases has rather proved to be the degree of influence and political power the official wields.

During the Chamorro government, no accusation of corruption at the highest level of public administration ever produced a satisfactory result and in some cases no investigation even took place, even though there was enough evidence for one to be ordered. This general rule meant that the officials involved had few problems in evading their responsibilities. Often they stayed in their posts or were transferred to others of equal or even greater importance. Very rarely was anyone actually dismissed.

An underdeveloped public opinion

It is obvious that a society that decidedly and vigorously expresses its rejection of corruption is in a better position to fight it than one that allows it to go by unchallenged. Although the Nicaraguan people's critical awareness of administrative corruption has been growing in recent years, this has still not generated enough systematic social action to promote a determined rejection of such practices.

The freedom of expression guaranteed to the media by the Chamorro administration allowed a notable increase in knowledge of and information about the most diverse acts of administrative corruption. Nonetheless, the idea that the problem of corruption is very difficult, if not practically impossible, to combat still prevails in Nicaraguan political culture. It is even considered to be an inherent characteristic of public office.

In a survey conducted by the Central American University in September 1995 among young people from five of the country's departments, 74.5% ranked "administrative corruption" as the third most important cause of national problems, after "government policies" and "political instability." In the same survey, 75% of the participants replied to a question about the conduct of those governing the country that they "abused resources" and 65.5% said that they "are corrupt." Only 13.2% of those polled considered them to be "honest." Not much has changed since then. The majority of the population tends to believe, as a matter of course, that many of the country's judges, politicians and public officials—both elected and non-elected—are corrupt.

A private survey done by Mitchell Seligson between July and August 1996 revealed another worrying trend. It indicated a high tolerance for this corruption within Nicaraguan society, a characteristic that greatly undermines the potential power of national public opinion. This social tolerance is a complex phenomenon. It starts with small-scale problems where certain acts of corruption have come to be regarded as an accepted cost on the individual and social levels, where we are all prepared to pay small bribes to grease the wheels of bureaucracy. On a larger scale, corruption tends to be tolerated if the official concerned gets things done. Most symptomatic of this was the case of Arnoldo Alemán when he was mayor of Managua, before running for President. If anyone brought up the constant accusations of corruption made against him, his supporters would wheel out the same old phrase: "So he robs, but at least he gets things done."
Seligson's survey also showed that most Nicaraguans support any action aimed at promoting civic education, the open and transparent management of funds and the investigation into and severe sanction of acts of corruption. But apart from accusations in the media and in other arenas, the political parties, the private sector and the unions and social organizations have yet to come up with any initiatives that really get to grips with corruption.

Facilitators of corruption

Among the main deficiencies in public administration that facilitated corruption were:
• A lack of transparency in the formulation, approval and implementation of policies, plans and projects, and in the use of government funds.
• The absence of rules, or ambiguity in existing ones.
• A high degree of discretion in officials' specific or institutional authority.

• The inefficient provision of services to the population.

• The existence of weak regulatory and auditing mechanisms for the management of government assets and funds.

• The absence of a civil service and administrative career structure when it came to naming and promoting officials.

Lack of transparency in state administration

Transparency in public administration implies providing sufficient and timely information so that citizens can express their views and actively participate in the decision-making processes that concern them. Generally speaking, the information provided by state institutions during the Chamorro administration was too little, too late, and was almost always aimed at explaining some decision that had already been made or publicizing some project that generated a positive image of the official or political force in control of the institution.

Some institutions, among them the National Assembly, acted in a way that was more open to the public due to their very natures. However, the information supplied on their activities invariably depended on the focus and interest of the media. The legislative body itself had no institutional policy or program to provide information to the public or to receive its input and recommendations.

Institutional policies and programs were not made publicly available and many important decisions were handed down without previous debate and with little explanation of the government's conduct. Even institutions such as the Municipal Councils kept a notable distance from their electors, and town hall meetings were rarely used to promote an organized and useful participation by the various social sectors in community affairs.

A high degree of discretion

In the regulations governing state procedures, institutions and officials were often granted a decision-making power that depended exclusively on the application of their own criteria, without having to submit to any specific norms or conform to any previously-established requirement or procedure. The limited development of the national institutions also meant that there were very few "rules of the game," while those that did exist in various areas of national life were ambiguous. This discretionary latitude was also displayed when those with political or economic influence in some area of political power violated the existing rules.

During the Chamorro government, the executive branch most frequently employed the greatest degree of discretion in the authority attributed for granting tax exonerations, the proceedings employed for the privatization of state businesses and the administrative and judicial management of the property problem.

Although the 1995 constitutional reforms clearly established that decisions concerning taxes would henceforward be the National Assembly's responsibility, the executive continued granting exonerations to individuals and to businesses. Meanwhile, the regulations governing the granting of exemptions were hardly specific, leaving their application entirely in executive hands. This discretion in tax matters was used—as has traditionally been the case in Nicaragua—to reward or punish particular businesses, companies or entities, depending on whether they were viewed as the government's friends or adversaries.

In the process of privatizing state companies, which began as soon as the Chamorro government took office in 1990, three different methods were used to decide how state assets would be sold or returned to their former owners: allocation of properties—which was done with the majority of properties, especially agricultural ones that were leased or sold to the workers; direct negotiation; and public tender among the interested parties.

In all privatization cases, once the study and appraisal of each company had been done, the final decision was left up to a board of the National Public Sector Corporation (CORNAP). In particularly important transactions the considerations of a privatization committee made up of CORNAP officials were taken into account alongside the proposals of the bidders. Several sugar mills were privatized employing that process, which President Alemán has consistently questioned since coming to power.

To decide on the privatizations, the CORNAP board used a number of criteria, which varied according to the particular case, as CORNAP director Dayton Caldera openly admitted in the courts in March 1997. These different criteria ranged from those born out of political accords and decisions to those linked to the prices offered, the conditions of payment or the treatment of the company's debts. It also took into account the economic advantages offered to the state and to the country. A good example of this was the privatization of the Montelimar tourist complex, which was sold to a Spanish business consortium for a little over US$5 million, well under the real value of the beaches, land and existing installations. According to Caldera's official report to the National Assembly, the main criterion considered in this case was that the buyers could have a determining influence in turning Nicaragua into a tourist spot.

The widest degree of discretion was applied in resolving certain property conflicts. A series of presidential decrees granted the executive branch the authority to review the allocations made by the former government under laws 85 (housing), 86 (urban lots) and 88 (rural properties). This essentially administrative process left it to the discretion of certain officials to determine the legality or illegality of a given property acquisition. If one checks over the results of this process, it is not unusual to find that different resolutions were made in similar cases. In the courts, the application of the various property laws has depended on the will or the criteria of the judge or tribunal involved. Given the interests involved in such conflicts and the economic resources mobilized to win certain cases, one of the widest, tightest webs of corruption was woven around the administrative and judicial decisions on property issues during the Chamorro years.

An inefficient administration

It was impossible during the Chamorro government to overcome the problem of inefficient administration, which is one factor that leads to corruption in Nicaragua. One of the clearest examples of this is found in the services that many governmental organizations offer the public. Some of these services are in great demand, such as the issuing of driving licenses, birth certificates or proof of fiscal or municipal solvency, of cadastral or registry certificates, judicial notifications, customs or migration procedures and municipal construction permits.

Many of the offices responsible for these services have limited personnel and resources for the work they carry out, are poorly organized and employ time-consuming procedures. In many cases the paperwork requirements demanded in these offices are neither necessary nor useful to the institution. They only overburden the public and increase the demand for services in other state dependencies.

All of this helps make the attention offered to the public very slow, and everyone agrees on the need to streamline things. In this context, officials frequently offer citizens the possibility of accelerating the procedures in return for a backhander. If it is rare for anyone needing a service quickly to refuse to pay the amount asked, it is even rarer for anyone to actually denounce this type of corruption.

Funds handled without controls

The programming, implementation, registration and auditing of the revenue and spending of government and other state institutions was highly deficient during the Chamorro government. The nation's budget contained notable omissions in registering the different incomes: those obtained from privatizing state assets, providing certain services to the public and making transfers from state companies. Funds provided by foreign aid were also omitted.

In March 1995, CORNAP published a report revealing that up to December 1994 it had transferred 195.8 million córdobas to the Ministry of Finance in bonds that the government never registered in its budgeted revenue during that period. In the 1997 budget, the Comptroller General's Office also discovered a total of 116.7 million córdobas in funds transferred from various ministries that had not been duly registered.

The Chamorro government also projected additional revenue with no legal basis and whose collection was therefore highly doubtful. Thus the 1997 budget was approved with an increase in revenue of 670.2 million córdobas, allowing for income from a tax law that did not exist at the time.

What most commonly happened in the implementation of the budget in those years was that money was spent that had not been authorized or duly approved expenditures were never made. For such reasons the revenue could be either greater or less than forecasted. Before the constitutional reforms, the executive was authorized to adjust the budget as it liked and as it went along. The reforms established that modifications to the budget could only be made with authorization of the legislative branch.

Institutional development in terms of monitoring budget implementation was even weaker in those years, both in directly registering costs and providing timely information and in supervising the institutions involved. The Ministry of Finance was the only institution responsible for this since, at that time, the Comptroller General's Office and the National Assembly still had no system for overseeing and following up the budget implementation.

Absence of a civil service

The Chamorro administration suspended for almost seven years the application of the civil service law passed in the first months of 1990, during the period of transition between governments. The virtual absence of a civil service career structure turned the possibility of working in a public institution or eventually being promoted within those institutions into a strictly political matter. This meant that quality, experience, specialization in a certain area and professional training were not the main criteria considered.

Nepotism and political patronage, which have long traditions in national political life, were common practices in allocating public administration posts. Such practices have serious consequences, because when a public official is designated through nepotism or clientelism it creates conditions that favor and facilitate corruption. Those designated in this way are only there because of family ties or political or personal loyalty to the person who named them and to whom they are indebted for the favor received.

In Nicaragua, the most costly form of political patronage for the state is the paying back of economic favors conceded during the election campaign to the party that ended up victorious. Favoritism in the granting of posts, the control of institutions, the definition of policies, the establishment of exemptions and the application of administrative norms is used to strengthen the economic groups linked to the government and weaken the ones outside that circle of power.

Such practices, which were commonplace during the Chamorro government, have a high cost because they create a permanent atmosphere of labor instability. Officials know that keeping their posts does not depend on their professional qualities, their experience or the length of time they have been doing the job, but rather exclusively on the will of higher authorities. In such an atmosphere, many officials seek to please and to aid and abet their superiors in order to keep their job or be promoted. Others apply governmental norms and regulations flexibly or negligently when these affect private-sector companies or entities for which they hope to work or on which they planned to depend economically when they leave government.

Weak internal auditing

The instability in public administration, the limited resources available to the Comptroller General's Office and the lack of qualifications and training of many officials impeded the establishment of policies, norms and procedures for internally supervising state resource management. Although there was a body of laws, regulations and norms governing internal auditing, they were not well enough known or applied by the officials of each institution. Inadequate organization, the delegation of functions and underdeveloped accounting systems also impeded the establishment of periodic audits and the submission of clear and appropriate accounts.

The validity of legal regulations and norms of internal supervision depend above all on their becoming daily practices in public administration, a task corresponding to the main officials of each state branch, institution and public enterprise. When there are deficiencies in this area, the work of the internal auditors and of the Comptroller General's Office itself is of little use as it is limited to certifying the absence of controls and systems without being able to thoroughly investigate the use of the funds.

The illegal issuing of bonds by Ministry of Finance officials during the Chamorro government—a practice that started to be aired in the courts at the beginning of the Liberal government—demonstrated just how difficult it was to enforce internal controls in the government institutions. The case also illustrated the concentration of responsibilities and the degree of discretion that existed, which translated into internal control problems that favored corruption. The Ministry of Finance was also responsible for evaluating properties in order to compensate former owners, establishing how much to pay in each case, and issuing and certifying compensation bonds and using them to compensate those with property claims. Many accusations were made of corruption along the various links of this chain, the most common being the overvaluing of certain properties and the negotiation of payments for others that ended up disadvantageous for the state.

The most serious forms of corruption

It is difficult to say exactly which forms of corruption were most common and had the most impact, but it can be stated that some were particularly serious given the scale of practice, the level of the officials involved and the damage they caused to the country's institutional framework. These were influence peddling, the creation of crime networks, illegal use of state resources and illegal charges, commissions or "incentives."

Influence peddling

Influence peddling took place, as is normally the case, at the highest decision-making levels of the institutions. This crime involves using government information and decision-making processes to draw up, approve and implement policies and measures aimed at favoring some business venture that benefits the economic groups linked to those in control of the government.

There are many different expressions of influence peddling, the most common ones employed during the Chamorro administration being the fraudulent granting of concessions, tenders or contracts; certain decisions concerning the importation and exportation of products; the granting of state bank financing to borrowers who did not fulfill the established requirements or of special terms to certain individuals; the granting of tax exemptions and exonerations; the canceling or renegotiating of debts owed to the state; and the failure to apply state regulations in some economic activities. In all of these cases, the officials involved in the trafficking of influences obtained important benefits, such as launching business ventures with guaranteed profits; establishing or increasing their participation in other corporations and businesses; or receiving direct cash commissions in return for their favors.

One of the most famous of the many examples of this during the Chamorro government was the granting in 1990 of some ten concessions to Diego Lacayo, brother of then Minister of the Presidency Antonio Lacayo. A few years later Minister of the Economy Pablo Pereira granted a concession for operating free trade zones to a corporation of which he was president, which generated a great deal of publicity. As far as tenders were concerned, the Comptroller General's Office issued a resolution in March 1997 affirming that former CORNAP financial director Orlando Argüello Downing was a key and determining factor in the appraisal, negotiation, awarding and sale of the Benjamin Zeledón sugar mill" to the Cuadra Schultz brothers. Argüello Downing was surely paid a commission for this favor.

With respect to the exceptional treatment of certain powerful state bank clients, the Banks Superintendent's Office revealed in the final months of the Chamorro government that the acting National Development Bank (BANADES) president had approved a credit to Orlando Murillo that violated internal regulations on collateral and lending limits. During the administration of the previous BANADES president, Juan Alvaro Munguía, various credits were approved to businesses in which the president, and/or his wife or his partners in other businesses held shares.

Munguía was also accused of blocking credit to peanut farmers who refused to market their harvest through his company or who represented a possible threat to him in the sale and processing of the product. During the Chamorro years, then, influence peddling was also frequently used–as it has been throughout Nicaraguan history—to affect rival businesses or companies.

Participation in crime networks

The establishment of crime networks in state institutions originated mainly in the trafficking of contraband, drugs and stolen vehicles and in money laundering operations. Those trafficking such goods have an enormous capacity to pay off officials at the different levels.

Throughout the Chamorro government the Atlantic Coast was the area with the worst drug trafficking and money laundering problems. Although no specific investigation was carried out then, or is planned at the moment, and despite the fact that media denunciations were particularly vague, by the early 1990s various sectors of the public were already accusing officials of various institutions of being involved in these illegal activities. Such officials included figures from the central government and the regional autonomous governments, as well as members of the police and armed forces.

The growing problem of trafficking stolen vehicles was particularly aided by corruption among police officers, especially those working in the motor vehicle department. When the National Police was forced to close down the motor vehicle department offices in Managua in 1997, it came to light that many officers in that department were involved in various crimes, particularly the trafficking of stolen vehicles.

Illegal use of state resources

Using the state's political power and its financial resources, machinery, equipment, materials, supplies and services for private ends was another common form of government corruption facilitated by the weak supervision of resource administration and by the political clientelism that determined the naming of many officials. This was the form of corruption most denounced in the press during the nearly seven years of Chamorro government. Despite the large number of accusations, there was almost total impunity in such cases.

Commissions, bribes and "greasing the palm"

Illegal payments are those used to obtain contracts for buying or selling assets in the state's name; acquiring equipment, machinery, materials and supplies; ensuring that certain negotiations take place and services are provided under special conditions; obtaining the concessions, licenses or permits with which to establish some form of economic exploitation; lifting requirements and controls on certain procedures; or avoiding the imposition of a sanction. All these forms of corruption are as widespread as they are difficult to prove, and all of them took place during Violeta Chamorro's years in office.

Illegal payments or charges range from small amounts slipped to an official to obtain a driving license more quickly or avoid a transport fine, to larger sums paid with an eye to altering the tax assessment on some property or the results of a company's fiscal audit. Charging commissions or other "incentives" under the table for granting concessions and permits for certain exploitations, resolving property matters, privatizing state assets or contracting services or supplies became a serious and habitual problem.

Autonomy for the comptroller general

The state institutions that intervene most directly to prevent and control administrative corruption have varying degrees of development in Nicaragua. Although the reformed Constitution and the law guarantee them different levels of autonomy, they all suffered, and still suffer, from a lack of financial resources with which to develop a truly independent line of work.

It is the responsibility of the Comptroller General's Office to play a dynamic role in preventing, detecting and monitoring corruption in state institutions. According to the Constitution, the Comptroller General's Office enjoys administrative and operational autonomy. The constitutional reforms made this institution responsible for establishing a supervision system that guarantees the appropriate use of state funds, goods and resources. With this objective, the Comptroller's Office was authorized to continuously oversee the management of the national budget and to oversee, audit and evaluate the administrative and financial management of state entities, state-subsidized entities and joint public and private ventures in which public capital is involved.

It is also up to the Comptroller's Office to determine the responsibility of individual officials, based on its audits or investigations. Once it indicates their administrative or civil responsibility or absolves them, it must notify the executive branch, which is then responsible for applying any corresponding sanctions—although, as has been demonstrated by several cases during the Alemán government, this does not always happen. The Comptroller General's Office can also establish presumption of penal responsibility and send the case to the courts.

Up until 1996, the President named the comptroller and deputy comptroller. The constitutional reforms established that the National Assembly was responsible for their appointment, which requires the support of 60% of the representatives. The comptroller and deputy comptroller hold office for six years and can only be dismissed, following the procedures established in a specific law, if the proper authorities determine that there has been some irregularity
The Comptroller General's Office saw out Violeta Chamorro's term in office with a set of legal instruments that still require reforms to adjust them to the country's new circumstances. As part of its institutional development program, the Comptroller's Office set about drafting a new organizational law for its own functioning, a contracting law and a law governing the moral integrity of public officials starting in 1996 when part of the constitutional reforms came into effect. It undertook these important tasks hampered by serious financial restraints.

The budgetary allocation to the Comptroller General's Office depends on the predominant political disposition of the National Assembly and then on whether the Ministry of Finance hands over the funds at the right time. During the Chamorro years, before it became autonomous, there was a general tendency to increase the Comptroller's budget.

The ongoing work of the Comptroller General's Office as an institution responsible for preventing corruption and establishing a system for overseeing the administration of public funds requires more human and material resources than it has traditionally received. It also requires a favorable political disposition in all of the other state institutions. Internal audits of these institutions, as well as the Attorney General's Office and the whole judicial system are indispensable to the Comptroller's Office's work. Unless all of these links function properly, its work becomes very difficult or of very little social use.

There is an internal auditing office in each state institution, which acts as an instrument of internal supervision and a posteriori evaluation of resource administration. The head of each institution is responsible for the personnel and functioning of these auditing offices, which are all regulated by the technical norms set out by the Comptroller General's Office to whom they also report. None of the officials belonging to these auditing teams can be dismissed without the comptroller's authorization. Although legally they have extensive powers and possibilities, the institutional auditors played no active role during the Chamorro government and both the will of the main officials of each institution and the limited resources powerfully affected the way they operated.

It was also quite common for state institutions to contract private national and foreign auditors. Although perhaps necessary for certain specific jobs, their habitual use was a drain on resources that could have been used to strengthen the permanent national auditing bodies whose mission it really was to carry out such auditing work.

The Attorney General's Office was not independent

The Attorney General's Office is by definition the legal representative of the state's interests, but being dependent on the executive branch, subordinated to the President of the Republic who names the attorney general and the deputy attorney, restricts the independence it needs to promote investigations and sanctions in cases of corruption among government officials.

During the Chamorro government, the Attorney General's Office played a significant role in only very few cases of corruption involving public officials, although it was active in the process of returning properties, privatizing state assets and other cases related to property conflicts. Several officials from this institution were also accused of involvement in acts of corruption, although such charges never came to anything.

In an attempt to overcome the failure of the Attorney General's Office to act and its lack of independence, as well as to strengthen its capacity for dealing with administrative corruption, we passed legislation in the National Assembly at the end of the Chamorro years aimed at turning it into a truly autonomous institution. The new law, however, was suspended by an unexpected resolution from the Nicaraguan Supreme Court in January 1998, which annulled everything the National Assembly approved between the official end of Violeta Chamorro's term and the inauguration of Arnoldo Alemán's government.

The Ministry of Finance had other priorities

The Ministry of Finance is responsible for collecting all state revenue, making the payments set out in the general budget and controlling the budgetary expenditure of all state institutions. Although these are its main tasks, the institutional emphasis of this ministry under the Chamorro government was the administration of the government's available liquid assets and the overall control of public expenditure, though not exactly the detailed control of how this expenditure was used.

In terms of supervision, the Ministry of Finance was responsible for standardizing and regulating the acquisition and supply of the central government's consumer goods and the inspection and supervision of state assets. During the Chamorro years, however, it was impossible to establish an ongoing system for inspecting and supervising state goods, so the institutions' inventories remained incomplete or out of date. At that time a program involving the National Assembly and the Comptroller General's Office was started, aimed at organizing a system of administrative financial management and state auditing; it is still being developed.

National Police without resources

It is the police's role to prevent and pursue crime. Although this institution does have teams devoted to investigating economic, fiscal and customs-related crimes, money laundering and drug trafficking, its capacity was and continues to be affected by the rapid increase in crimes committed against private property and against individuals and by the lack of material resources with which to combat them.

Judicial system under pressure

The role that the judicial system could play in fighting corruption is intimately linked to its autonomy and financial independence. Unlike the Comptroller General's Office, which has no fixed budget, the 1995 constitutional reforms stipulate that the judicial branch must receive at least 4% of the general budget. The Liberal government has not been honored this disposition, thus undermining the independence of the judicial branch, particularly relative to the executive branch.

Very few accusations of corruption against state officials reached the judicial branch during the Chamorro government and most of the cases that were sent to the courts involved former officials. A good number of these cases came to nothing due to lack of evidence and proof, while others were rapidly resolved without clear explanations and political interests influenced still others.

The judicial system was not isolated from the corruption manifest in other state institutions. It could even be said that the corruption there was even greater given that the judicial branch is responsible for the final decisions concerning conflicts between individuals or between individuals and the state. The use of bribes or influence peddling as pressure mechanisms to influence judicial decisions was very high. Problems related to property put the judicial system under extreme pressure, and the payment of commissions, bribes and other types of incentives at various levels of the system effectively decided many property conflicts in blatant violation of the law. Trials involving economic or labor matters also tended to be resolved through commissions, bribes, influence peddling or other kinds of payment. In this climate, several former judicial branch officials charged that these practices were even quite common among some magistrates.

During the Chamorro years, the judicial system was regulated by an obsolete law so it operated at an incredibly slow pace. Furthermore, despite the fact that the administration of justice is free, in practice it continued to be a very expensive business for those who risked taking a case to court. Also the absence of a judicial career ladder as such seriously affected the judges' training, qualification, efficiency and independence.

The population has serious doubts about the judicial branch's fairness and impartiality. In the Seligson survey, 21% of those interviewed said they had heard of cases in which "payoffs" had been made in the courts.

A weakened National Assembly

Among the National Assembly's responsibilities is approving the general budget and its subsequent modifications as well as overseeing how the approved budget is implemented. The Assembly did have a small auxiliary structure—the Public Expenditure Control and Analysis Office—with minimum human resources, almost no technical capacity and little access to periodic information about government expenditure. But apart from that, the National Assembly lacked the capacity to fulfill its obligation to follow up and oversee the state budget in conjunction with the Comptroller General's Office and the executive branch.

In addition, the executive invariably sent the Assembly late or incomplete information. For example, when the Assembly's Economic Affairs Committee asked the Finance Ministry for details of the annual tax exonerations, it received no reply. For the approval of the annual budget it also asked the Ministry for details of the domestic public debt, and again received no answer.

Several sectors managed to ensure the political loyalties of certain representatives during the Chamorro administration. Some parliamentarians charged "incentives" in return for voting for pardons, introducing or supporting specific requests by organizations for legal status, and speeding up and approving bills that benefited the interests of particular individuals. These were just some of the most frequent acts of corruption that took place in the National Assembly.

It is possible to promote transparency in public administration and to investigate accusations of corruption from the National Assembly, but for this to happen the political forces represented there have to be receptive to the public's accusations and proposals. It also requires reforming the Assembly's internal functioning to really open the institution up to its electors.

Banks Superintendent's Office lacked legal clout

The Banks Superintendent's Office was created in 1991 with the responsibility for authorizing and supervising the operations of both private and state financial institutions. It played an important role in putting the state banks in order and establishing their basic operating rules with the aim of correcting and preventing inappropriate use of those banks by the officials responsible for running and administering them.

The Banks Superintendent's Office had its own material resources provided by quotas from the financial institutions operating in the country, but it lacked the necessary legal instruments to take on corruption problems such as money laundering or influence peddling, especially the kind that has traditionally taken place within the state banks.

Corruption: just one rule

Corruption directly damages the credibility of the country's institutional framework and undermines the legitimacy of its political system. As a result, it affects the political and social stability that Nicaragua has been making such an effort to establish. In the midst of such a serious economic and social crisis, many people and groups could feel tempted to act outside of institutional channels if the rules of the game are drawn up to accommodate the economic possibilities of the corrupt and the rule of law doesn't operate the same for everybody. This contradiction takes on particularly dramatic proportions in Nicaragua due to its violent past and the precarious nature of its current political stability.

Besides its political and social impact, corruption also conspires against the priorities established in state policies and considerably reduces the efficiency and effectiveness of institutional management. The limited state revenue becomes even more limited and with time corruption progressively establishes a single rule: when it comes to determining that decisions are made that further your interests, using any institutional shortcuts necessary, everything depends on the extent of your economic resources or how important a political position you hold.

Those most affected by this single rule are those with the fewest economic resources and no access to the decision-making forums. The result is a vicious circle: the promotion of impunity in the circles of power increases the feeling of defenselessness among common citizens, which in turn generates a growing feeling that they owe the state nothing.

The participation of state officials in criminal networks linked to drug trafficking and money laundering is particularly dangerous. It helps destroy institutional responsibilities as those involved start serving a hidden and powerful nucleus of power that progressively penetrates all of the institutional fabric and all political processes until it comes to form a parallel state with its own parallel institutions, judges, police and even laws.

An association not normally made

According to the Seligson survey, the Nicaraguan population regarded the following officials as corrupt, in descending order: customs officials, ministers, parliamentary representatives, mayors, party leaders, judges, business leaders, municipal councilors, police officers and union leaders. When most citizens believe that a bribe is part of the price to pay in any procedure, it is a sign that social disintegration has set in. In a climate of high tolerance to administrative corruption despite the widespread knowledge of the problem, many Nicaraguans state that corruption affects them, but do not go on to associate how they are affected with the significant amount of revenue the state receives through their taxes. In Nicaragua, 81% of the state's internal revenue is provided by indirect taxes collected through the consumption of goods and services. The population still doesn't see a direct link between the illegal appropriation or loss of state resources and the double loss they suffer as a result. Not only do they end up paying more taxes to the state; they also lose an investment that could have benefited them, their families or their communities.

The media, which are being called upon to play an active role in denouncing corruption and educating the population, have been a traditional target of the corrupt activities of state officials who seek to control them with flattery or by channeling state publicity to selected media. Despite this, the supply of information on cases of corruption rose considerably during the Chamorro government, although the predominant tendency was to denounce past cases.

State corruption is not isolated from corruption in society, as it always presupposes the existence of people in society who induce, sustain or promote the growth of institutional corruption. Although it is difficult, if not impossible, to measure the extent of institutional corruption that accompanied the Chamorro government, we are obliged to suppose that if public administration was more corrupt during those years it was because society was more tolerant of it and was suffering a greater level of disintegration.


Bishops Speak Out Against Corruption


On the occasion of Nicaragua's Independence Day celebrations, the eight bishops of the country's Catholic Church issued a Message to the nation. The prelates referred to the country's crisis social injustice, crime, the rising cost of public services, drug trafficking and social insensitivity. With respect to corruption and honesty, they said, "Grave is the risk that democracy runs given the corruption in public life, the superfluous spending of those who have great wealth or exercise public power, the lack of an ethical sense in the fields of justice, politics, economy, culture. The vice of corruption undermines the social, economic and political development of any people.

"Those who are governing should respond with justice to the mission they have received from society. Honesty, veracity, thirst for justice, renunciation of personal or group interests, a search for the common good and concern for the weakest should be habitual attitudes that show people the value of public authority. Authorities need to have a real desire to totally eradicate desire corruption. And, in speaking of authority, we refer to all authority, whether it comes from popular election, is military or political, is judicial or ministerial of any kind.

"We Nicaraguans should be ever vigilant that the limited resources destined for the public good do not end up serving other interests, whether private, party or transnational."

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