|Central American University - UCA
Number 225 | Abril 2000
The Alemán government has faced many difficult moments
in its four years, but this one is unquestionably the worst. The international community is calling the President to task for the tide of corruption inundating his administration; even the US is upset. About the only port in Alemán’s storm is the FSLN.
With the municipal elections only six months away,
what do these two conspirators have in mind?
The election countdown has begun, and the political runners are warming up for the race. But are they in shape, and do they have their strategies clear? Is the track ready and will the public even turn out for the event?
The answers so far are not very encouraging. The budget is inadequate; a number of voters are still without registration cards; and most parties have yet to agree on their candidates, much less their strategies. In Managua polls, abstention is running a close third while a poll in Granada shows that no less than 71% of voters are inclined not to vote. Distrust of the whole genus politicus is spreading, justified by the endless chain of corrupt acts detected at all levels of government and in that outsize link of the chain known as the PLC-FSLN pact.
A late February poll financed by the Swedish International Development Agency and done by the Institute of Nicaraguan Studies showed that 89% of those interviewed see government ministers, legislators and political leaders as corrupt. The presidency itself ranked highest on the corruption scale (88%), while the army ranked lowest (69.4%). In view no doubt of public officials’ disproportionate salaries and ostentatious lifestyles and the influence peddling in which they are visibly engaged, 86.5% of those polled believe themselves to be directly affected by the corruption and 79.3% think mafias exist in Nicaragua. Meanwhile, 61.4% disapprove of the way the Alemán-Ortega pact has changed the Office of Comptroller General and only 7.5% feel that any attempt is being made to address the problem of corruption.
A plebiscite on the pact?If in fact the municipal elections are held in November as scheduled—and it is still an open question—they will surely be a measure of the population’s apathy toward politics and politicians in general, but they may also turn into a plebiscite on the pact itself. If, however, Nicaraguans take advantage of this mechanism of formal democracy and vote in greater numbers than generally predicted, the elections could turn out to be a general expression of people’s repudiation of the current murky political situation. They may end up demonstrating that the pact has boomeranged against its own designers, seriously depreciating the intangible assets of two parties that have ignored grassroots interests at best and systematically trod on them at worst.
If each party was aiming to undermine the other through the pact, each has succeeded. The governing Constitutionalist Liberal Party (PLC) and the Sandinista National Liberation Front (FSLN) have both lost ground. Growing numbers of distinguished FSLN members are either deserting the party or are in open dissent with its political course, while international agencies working in Nicaragua have seriously called the Liberal government to account. Privately and sometimes even publicly, these agencies have lamented the changes in the Office of Comptroller General, the Supreme Electoral Council and the Supreme Court of Justice. Some have even gone to the extreme of freezing funds already in the pipeline, thus endangering Nicaragua’s entry into the Highly Indebted Poor Countries (HIPC) initiative, set up to pardon part of such countries’ foreign debts.
The PLC-FSLN pact, that two-headed hydra poised to devour Nicaragua, is doing a good job of convincing people that while some politicians are more corrupt than others, they’re all basically a pack of thieves. Except for the inarticulate and unorganized expression of youth gangs and occasional flare-ups from unions, producer associations and veterans’ groups, however, most people are not rebelling against the situation. They feel helpless, and the FSLN and the PLC have been adept at exploiting this feeling and developing it into generalized political apathy.
How long will this lethargy last? The pact’s authors suffer from excessive shortsightedness—as does the pact itself—but the recent polls are opening their eyes to the possibility that Nicaraguan voters could take their revenge at the ballot box, making the elections a dangerous business.
In this confusing panorama, the most compelling reason for these two parties to postpone, suspend or replace the elections is that both have so discredited themselves that they desperately need to clean up their act. "Politician laundering," however, is not a technology as familiar to them as money laundering. The most important input needed for this operation is time: time for people to forget about the pact, and time to apply new political "marketing" gimmicks. Can they spruce up their respective images in the few months left before the elections, or will they decide to buy more time by not holding them this year?
Who will foot the election bill?There are few clear signs of movement even though the elections are only six months away. The parties in the race have been engaging in a certain level of political campaigning in various municipalities, but have not yet rolled out their heavy guns. The Supreme Electoral Council has set up booths in local markets where people can pick up or inquire about their voter registration/ID cards, and has written up a new set of regulations concerning electoral ethics. But very few people are seen at the booths and the regulations sparked little controversy other than the question of whether electoral campaigning will be prohibited at private schools as well as public ones (voting age in Nicaragua is 16).
One argument that could be used for putting off the elections is that there is still insufficient financing. The executive branch sent the National Assembly a bill to create a national counterpart fund to external resources earmarked for the election. The nucleus of the bill involves increasing "vice" taxes (those on beer, rum, soft drinks and cigarettes) by at least 5% to generate a 100-million-córdoba election purse (12.53 córdobas = US$1).
Private enterprise reacted immediately, showing that this increase would in fact generate at least 300 million córdobas. The TANIC Tobacco Company calculated that applying the increase to its sales volume alone would contribute 80 million. Nicaraguan Development Institute president William Báez tossed out a counterproposal: cut the budgetary "fat" represented by the President’s confidential expenditures, the luxury "official" trips he and his family and friends constantly take and the cost of his appointed departmental governors. Báez argued that the amount of the savings made on these expenses, viewed by many as superfluous, would ensure an adequate electoral budget.
Despite all the hue and cry, however, the National Assembly passed the President’s proposal. Not for the first or last time, the majority of Sandinista legislators neither voted against it nor abstained; they simply stayed away in silent complicity. Yet again, the government and the FSLN opted for the easy way out, burdening the population with spending that should have been foreseen in the national budget. And no one knows whether this will even be enough to cover the election costs, as the government has been suspiciously silent about the amount of international assistance pledged.
Are the technical aspects ready?Those who want to postpone the elections could also make technical arguments for doing so. María Teresa Alemán, former director of the Supreme Electoral Council’s voter card department, says, for example, that the CSE has no system to authenticate the signatures that new political parties and alliances must collect from the citizenry in order to register under the Electoral Law reforms resulting from the pact. Since the CSE has only one optical disk to store information, each of the tens of thousands of signatures collected since March would have to be manually checked.
And that’s the least of the problems. As of the beginning of March, 215,462 voters still had not picked up their new voter cards. Another sign of voter apathy? For political, financial and technical reasons, then, there is a possibility that the municipal elections will be temporarily suspended. Two very different approaches lie behind that possibility. The benign one would be simply to combine them with next year’s presidential elections. The more Machiavellian one would be to scrap both and hold elections for representatives to a Constituent Assembly. Those who negotiated the pact are keeping this card in reserve to be produced in case of emergency, but President Alemán has referred to it at various calculated moments and retired army head General Humberto Ortega, an FSLN strategist, publicly endorsed the idea in July 1999. For now, each of the hydra’s heads is sniffing things out, making calculations, measuring its strength, weighing the pros and cons of the different options.
The FSLN’s erosion: Is it time to jettison Daniel?The FSLN’s pros and cons are complicated. The party’s weakness and the growing distrust of and antipathy toward its controversial secretary general, Daniel Ortega, is working in an ambiguous way. It could swing the party either toward taking time to get its house in order or toward pressuring to close the electoral process before the aversion worsens. In this context, the FSLN might "concede" postponement of the elections to Alemán, should he be leaning toward this solution, on the assumption that it would erode the PLC’s image with public opinion and the international donor community more than its own. The FSLN might even try to wring other perks out of the pact in exchange for such a "sacrifice."
While Ortega is starting to make campaign trips to endorse his candidates for mayor and councilors in various municipalities, public opinion polls reveal that only 27.4% of Managuans view him favorably. His image has been eroding slowly but steadily in polls for well over a year.
This erosion has gone unnoticed by even his closest supporters in the party’s upper echelons. They remain loyal less because of his political draw than because they have been unable to find another leader so easy to mold to their own interests and at the same time sell as a revolutionary symbol to a relatively ingenuous political clientele devoted to old icons.
Revolutionary symbols and old icons aside, the pact has eroded the support of a broad segment of the FSLN’s historical grassroots base. The complicit absence of the bulk of Sandinista legislators when the unpopular bill to privatize state workers’ pensions came up for voting triggered a bitter confrontation between the parliamentarians and the union members they claim to represent. One can only abuse even the willfully trusting with crude maneuvers for so long.
Three main FSLN fragmentsMany such factors have made the FSLN’s fragmentation virtually irreparable. Three main fragments can be distinguished at a glance: the Sandinista business sector, discomfited grassroots militants and the party’s unapologetic left wing.
The business group is the part of the upper echelon that scrambled to pick up candies in the various "piñatas" of the past decade: the first and most publicized when the Sandinistas left office, the second when the Chamorro government privatized state companies for a song; and the latest one the pact. They now have Daniel Ortega at their service. So far, this pro-Daniel elite has successfully manipulated a "religious" vision of politics that feeds on symbols, rites and myths, is propped up by a party discipline based on hierarchy, devours the unconditionally faithful and sees any deviation from orthodox dogma as heresy. It is an obsolete political style that has not only greatly undermined the FSLN but has also done tremendous damage to Nicaragua.
A sizable and growing sector of militants is disconcerted by the thought of a pact with the enemy but they remain cautious and moderate in their criticisms because the time is not ripe for them to emerge with greater belligerence. For now they are conspiring silently, making informal alliances that are not and cannot be visible. Some members of this sector have middle-level posts in the party structures and in one or two cases even high ones. One of the most distinguished Sandinistas identified with this sector is National Assembly representative Víctor Hugo Tinoco, who was deputy foreign minister during the Sandinista government. Described by some as the "Kruschev" of the party, waiting and watching for the "death of Stalin," he survives thanks to a relatively low, some would say chameleon-like, profile. The nucleus around Ortega views Tinoco with distrust, even though he is not heading any visible movement. In fact, more than one movement could emerge from the shadows when "Stalin dies"; that’s when we will learn who’s who, though the party could be irretrievably damaged by that time.
Several dissident leftwing groupings in the FSLN have recently identified themselves by name. The one that calls itself the Sandinista Left has 4 of the 36 FSLN representatives in the National Assembly on its side. Even more interestingly, it claims that 40% of the party’s current mayoral candidates represent a more revolutionary current, which presumably means that, despite their left line, they pulled enough votes in the party primary in their respective municipalities that the leadership could not override the results.
The members of this current openly opposed the pact from the outset and have more recently announced their opposition to Ortega’s presidential candidacy in 2001. They work actively at the grassroots level, and have made their strength felt by mobilizing and consolidating the discontent in various working-class and poor neighborhoods around Managua that distinguished themselves in the 1978-79 insurrection against Somoza, such as San Judas, Monseñor Lezcano, Batahola and Colonia Nicarao. They hold that some of the party’s historic leaders—led by Daniel Ortega, Tomás Borge and Bayardo Arce—have betrayed the FSLN’s revolutionary ideals and dragged the party well to the right without any legitimate mandate. There is also growing grassroots opposition to the party leaders for their lack of ethics.
The Sandinista Left admits that it has not yet found the alternative model it is searching for, but does claim to have a candidate to oppose Ortega: Sandinista intellectual Orlando Núñez, who heads an activist rural research and development organization called CIPRES. A year ago Núñez himself identified three slightly different tendencies or fractions in the FSLN: the business sector, within which he spotlighted former army chief Humberto Ortega; the sector backing Humberto’s brother Daniel; and the Left. The first two have since closed ranks to seal the pact with Alemán, while the third has begun to acknowledge that its own ranks are a minority within the party structures. In a new move, the leftists still inside the party are beginning to mend fences with like-minded Sandinistas who have left, ranging from the majority of inactive and apathetic Sandinistas to others who are active in different organizations such as NGOs and—encouragingly—the breakaway Sandinista Renovation Movement (MRS).
The Sandinista Left’s ambition of uniting and re-energizing all these forces is a little utopian, however, since it has not yet managed to unite the two or three other "left" groupings within the party. It is also utopian because its members have not shaken off their rancor toward those who left—particularly those in the MRS—and because their project is more geared to rescuing the FSLN than the country. Radio director and radical political commentator William Grigsby, the most accomplished communicator from this tendency, discusses all of these issues in a separate article in this issue of envío.
Expulsions and desertions: More Sandinistas outsideThe FSLN’s crisis is an open book, and new chapters keep on being written. The expulsion in December of Daniel Ortega’s most unconditional supporter, Carlos Guadamuz, who used Radio YA for years as a pulpit to rail against any Sandinista who wavered from Ortega’s positions, still has the FSLN grassroots disconcerted. In March, another grassroots favorite, Assemblies of God pastor Miguel Angel Casco, resigned from his post on the FSLN National Directorate and from the party itself. Like Tinoco, Casco seldom aired his criticisms in public, instead swallowing them like a good and disciplined party militant, but also like Tinoco, he was beginning to be viewed as a threat for the few times he did speak out. When Guadamuz was thrown out of the party, a very infrequent measure in the FSLN, Casco declared that "there is a danger that the FSLN will fall into the hands of mafiosos," accusing the party elite of defending its own economic interests. Only in his last days did he publicly criticize the pact. In fact, as a National Directorate member he had actively participated in its culmination and was one of its most consistent defenders for months.
When Casco officially announced his resignation on March 24, he declared that he had only known about the pact’s public-level content, explaining that various levels existed and only Ortega and Alemán knew what was being discussed in the uppermost one. He also said he would continue to occupy his National Assembly seat, now representing a new Sandinista political grouping. His departure thus leaves the FSLN bench with one less vote.
Casco warned that the four other anti-pact legislators on the FSLN bench—Mónica Baltodano, Carlos Fonseca, José González and Angela Ríos—would soon be expelled. That has not yet happened but at the time, González, who is also party political chief for the department of Matagalpa, acknowledged that "we are running risks, and not only of being expelled. We hold Daniel Ortega, Humberto Ortega, Tomás Borge and Lenín Cerna responsible for whatever might happen to us. I know them and I know what they’re capable of when they get infected by avarice, thirst for power and the presidentialitis bug." When Casco resigned, Cerna, who was in charge of state security in the 1980s and is now head of the FSLN’s electoral "commando unit," dismissed him as a "deficient child whose entry into Sandinismo was unfortunate."
The departure of these two important party militants, Guadamuz by expulsion and Casco by resignation, added to the estrangement of several other distinguished FSLN figures: Comandante of the Revolution Henry Ruiz, retired Army Chief General Joaquín Cuadra and former Supreme Electoral Council president Mariano Fiallos. The latter joined the ranks of the MDN (the new "third way," discussed in last month’s issue) as its Executive Secretary without formalizing his resignation from the FSLN. The cheap and disparaging rhetoric employed by Cerna and Borge does not go very far to explain these desertions. Cerna brushed them off as "insignificant" losses while Borge referred to Sandinistas who dissent from the official party position as "idiots." According to him, the FSLN has a monopoly on the left in Nicaragua.
Comandante of the Revolution Víctor Tirado López, currently an FSLN representative in the Central American Parliament, views these departures differently. He holds that they are having "a very strong moral impact," and invited Daniel Ortega to rethink his role in the party. Tirado charged that the FSLN, lacking a defined strategy and new values to attract all its former militants back into the party ranks, has made common cause with the PLC. Meanwhile, former FSLN guerrilla commander Raúl Venerio sharply called to task Tomás Borge and all those FSLN leaders "who need a propaganda apparatus and our silent complicity to fashion themselves a spot that is not rightfully theirs and that they do not deserve."
The upshot of all of this is an FSLN scandalously open to deals with the Liberals—some as damaging to popular interests as the law to privatize workers’ pensions—but closed to dialogue with any of its own militants who show any signs of independent thinking, much less dissident ideas. Dominated by its business elite, the FSLN has the public image of a political business that has lost all its best managers, administrators and public relations experts.
Will those discredited upper echelons maintain a stranglehold on the red&black "brand name" and "logo" or will the Left be able to gather enough forces around it to reclaim them? If the latter happens, will the identification be too discredited to matter by then? With the elections looming, however, the FSLN’s erosion poses a much more immediate dilemma for the elite who still control those symbols and images. Do they wait with the elections to get their house in order or do they go in and push their weight around, renovating themselves based on the dose of power they can pull by demanding unconditional party discipline at the ballot box, which even the party’s left wing still appears willing to offer them?
Friction in the PLC, tooThe PLC appears to have even more reasons not to hold the municipal elections. In the first place, their proximity has not only aggravated internal party squabbles but has brought them into the open in a startling way. The candidacy for municipal mayor of the country’s capital city —a post as politically emblematic in Nicaragua as in any other Latin American country—has become the main apple of discord. Although various Liberal leaders opposed Alemán’s hand-picked choice (no primary nominations for his party!), the unpopular former labor minister Wilfredo Navarro ended up the PLC candidate for Managua anyway.
Navarro hitched his wagon to the PLC’s fast-rising star only a few years ago. He was previously in Virgilio Godoy’s Independent Liberal Party (PLI), where he spent much of his time ranting about then-Managua Mayor Alemán to his mentor Godoy, who was Violeta Chamorro’s Vice-President at the time. Godoy’s current appraisal of his old pupil is more than a little skeptical. He sees Navarro as an upstart within the PLC who has done little to dissipate the mistrust that Liberals in that party feel toward him; in fact, powerful groups within its upper echelons look down on him as a "bastard brother."
Such feelings notwithstanding, the PLC is of the same caudillo school of politics as the FSLN, and their two political bosses share common political rules: what they say is gospel and they smash dissidents and laud unconditional militants. Thus, when Eddy Gómez, a PLC legislator in the Central American Parliament and brother-in law of Alemán, vehemently questioned Navarro’s appropriateness, even he felt the fear that prevents anyone in his party from so much as dreaming of contradicting Alemán. "There’s a horrible coercion within the party!" he cried. Nonetheless, Gómez denounced Navarro’s candidacy as being imposed by Alemán, and claimed it would lead to the inevitable loss of Managua. He then immediately signed into a hospital because his diabetes had taken a serious turn for the worse.
Giving the candidacy to Navarro, which may possibly be Alemán’s way of paying off a political debt to his former minister, has unleashed ongoing controversy in PLC ranks. A number of its leaders agree with Gómez in predicting that the Liberals will be defeated in Managua and view the rightwing governing party’s loss of San Salvador in last month’s Salvadoran municipal elections as a chilling omen (see article on El Salvador in this month’s envío.)
Recent polls justify their fears; Navarro makes a poor showing in all of them. The latest one puts Managua municipal councilor Pedro Solórzano, promoter of the highly popular Ben Hur chariot races, in the lead with 35% of the votes, even though the PLC claims he is technically ineligible to run in Managua. (When the PLC divided Managua into three municipalities several months ago, it gerrymandered his residence into the new municipality of Crucero, making him ineligible to run in Managua; Solórzano is appealing the decision). Navarro came in fourth, with just over 11%. Even among those polled who admit to being PLC sympathizers, Navarro did no better than Solórzano.
Some think that this adverse context could persuade the PLC to put off the elections, though a different hypothesis has been making the rounds in Managua for several weeks now. According to the rumors, Alemán selected Navarro with the express intention of losing Managua and handing victory to FSLN candidate Herty Lewites as part of the pact. Dare one ask, in exchange for what? For calling a Constituent Assembly, so the hypothesis goes, instead of holding presidential elections.
Privatizing pensions; socializing insecurityThe government’s unpopular policies have created an even more adverse political context for the PLC. The rises in fuel prices and subsequently in bus fares and electricity rates, with their chain reaction on industrial production, have triggered reactions, though these have been more virulent among private enterprise than the population in general.
Finance Minister Esteban Duquestrada brushed off a proposal by business leaders in the Superior Council of Private Enterprise (COSEP) to reduce fuel taxes by 20%, arguing that it would simply force a compensatory sales tax increase from its current 15% to 20%. He would not even discuss the alternative of cutting state spending, claiming that much of it is national counterpart spending to foreign aid being invested in infrastructure.
Another new measure so unpopular that it brought opponents out into the streets was passage of a law to privatize the social security pension system. Emulating a model applied in Chile 18 years ago, the new scheme abolished the previous system managed by the state’s social security institute (INSS) and will turn the administration of workers’ contributions over to various private companies known as pension fund administrators (AFPs) to invest according to their own criteria.
This mechanism is rooted in the opening up of capital markets and its effectiveness will be determined by the competition among the companies to get the best return on their investments. A Superintendence of Pension Fund Administrators will be created to monitor the AFPs’ performances, made up of a superintendent and representatives of the Ministry of the Treasury and Public Credit, the Ministry of Economy, the private sector, the contributors themselves and the official opposition party.
The long and at times tense debate about privatizing state pensions centered on two issues. The first is the increase of the portion of workers’ wages withheld as monthly contributions from 1.75% to 4%. The second is the fact that the AFPs will charge a 3% commission (reducible to 2.5% in three years) for providing administrative services and purchasing disability and life insurance policies. In an attempt to appear "popular," the Sandinista legislators focused their negotiations on reducing these percentages and lowering retirement age from 65 to 60, except for mineworkers, for whom they proposed retirement at 55. Private enterprise mainly fought to prevent a jump in employers’ contributions from 3.5% to 6.5%.
There are suspicions that Sandinista capital will participate in the new AFPs, and in fact the Sandinista bench, with businessman Bayardo Arce at its head, first excoriated the model then embraced it. With the exception of the four representatives opposed to the pact, the FSLN legislators let the bill go through despite the fact that it will do nothing to resolve the old system’s main weakness: that it only covers 13.3% of the economically active population. They did not even mention article 105 of the Constitution, which establishes that it is the state’s responsibility to guarantee social security to the whole population. The only ones to protest were the unions, but their demonstration in front of the National Assembly was halted with police repression firm enough to put three people in the hospital and six in jail.
The Liberal bench pushed through this new law, one of the most anti-social yet in this period of structural adjustment and one that unquestionably creates more insecurity in the population, with only 45 of the 93 representatives voting in favor (7 voted, 1 abstained and 40 were missing in action. Those who opposed it failed to establish a quorum that would stop a simple majority from being enough to pass the legislation, so the Sandinista bench again withdrew from the hall to minimize the political cost to the FSLN in public opinion without affecting the bill’s passage. They pulled off this increasingly familiar stunt so poorly this time, however, that no one was fooled into doubting their complicity. For all that, the political cost to the PLC of actually championing such an unpopular law was greater, but then so are its potential benefits to the party’s leaders.
"Petty theft" and its pack of petty thievesSuch unpopular government measures, however, do not represent the PLC’s real Achilles Heel; that honor belongs to the corruption scandals in which its functionaries are constantly entangling themselves. The party’s attempt to dissipate the bad press is hindered by the fact that it has only the single state radio station—which is admittedly a popular one but is toeing the party line with an increasingly heavy hand—and a newspaper with very low circulation. With their belligerent investigative charges, the independent media are trying to snap the population out of its apparent apathy and mobilize consciousness around the damage being done to it by what President Alemán dismissed as "petty theft" when the scandals first started hitting the news in 1997.
Despite its serious nature, the murky narcojet scandal of April 1998 is now history, but the Alemán administration keeps coming up with audacious new efforts to remain at the top of the Central American corruption charts. Thieving rats keep on popping up from the Cabinet’s sewers. Finance Minister Duquestrada justifies the top Liberal government officials’ sumptuous salaries and trumped-up additional fees—the highest anywhere in Central America—as the only way to attract the country’s best professionals. But this doesn’t square with the scandalous bankruptcies of so many state enterprises—the BANADES and BANIC banks, INSS and others—that were immediately used to argue for the need to privatize these institutions.
Alemán’s continuous international trips with his eternal entourage are a huge drain on public finances, and set a terrible example. In March the President traveled to Thailand and Paris with a retinue of 57 people. "Paris is well worth a Mass," said Henry VII. For the Nicaraguan people, it would appear to be a funeral Mass. To continue his grand tour, Alemán reprogrammed the next meeting of the Consultative Group, which should have been held in Managua in March, for May in Washington, where he will be accompanied by no less than 25 of his followers.
The President’s "economic miracle"Even assuming they do not reveal all his holdings, the President’s probity declarations have scandalized just about everyone except the new handpicked directors of the Office of Comptroller General (CGR). His latest declaration, which he showed to Cardinal Obando before turning it in to the CGR in February, indicates a sustained increase in his holdings from 743,059 córdobas in 1995, when he was mayor of Managua, to nearly 9.5 million in 1997, when he became President. That increase of well over a thousand percent has continued climbing, to more than 15.4 million córdobas in 2000—and that’s without including his 1,000 acres of farmland in Tola or the even larger La Chinampa farm, whose ownership Alemán has publicly acknowledged more than once. La Chinampa became the subject of serious controversy last year when investigations by then-Comptroller General Agustín Jarquín discovered that state companies had provided multiple free services, including the installation of wells, electricity and roads, on Alemán’s new farm.
The CGR’s five-person Superior Council has already officially closed Jarquín’s investigations of President Alemán for acts of corruption, particularly such abuse of public goods to the benefit of his family and himself. Current CGR president Guillermo Argüello Poessy declared that no proof had been found to back up the charges, even in the case of La Chinampa. According to Argüello Poessy, who served for many years as a judge during the Somoza period, the comptroller’s office lacks the personnel to review the whole property registry so there is no way to verify whether Alemán has undeclared possessions.
The CGR sent the National Assembly the dossier on President Alemán’s increased holdings so legislators could decide for themselves whether to strip his immunity so he can face a summary administrative hearing, as Jarquín had planned. This maneuver may well have been Alemán’s own choice as the best way out of the thorny case, on the understanding that the National Assembly board will shelve it just as it did the sexual abuse charge against legislator Daniel Ortega. Assuming that it will, however, does not end the President’s travails. An initiative to impeach him on the grounds of his notorious inability to govern the country was also presented to the Assembly recently by four legislators and a group of jurists—headed by dissident PLC representative to the Central American Parliament Sergio García Quintero.
Jerez and the check scam—just the tip of the icebergAll these governmental corruption cases, some proven over the years by the Office of Comptroller General under Jarquín but none ever sanctioned, pale before the recent revelations of deals made by Byron Jerez, director of the government’s Department of General Income (DGI). The research team at the conservative news daily La Prensa have dug up enough material to fill several detective novels in an investigation they began in early March and have published in installments over the course of the month.
The first revelation centered on a check for over 2 million córdobas that the DGI requested PETRONIC, the state petroleum company, to make out to the state insurance company INISER and/or one Juan Alberto Gómez. As it turns out, there is no such person. The check appears to have been received by Jerez’s assistant Ligia Segovia, and cashed the day it was received, but the money never showed up in either the DGI account or that of INISER.
The issuing of this check was plagued with irregularities. For one, INISER’s accounting system only accepts checks issued in the name of its institution, not individuals. Furthermore, INISER seems to have had no knowledge that the DGI was even ordering the now famous check 479 to be issued in its favor. For years, the DGI has typically paid for services from state and private institutions through "credit notes" for the amount owed. When making their tax declaration to the DGI, the institutions attach these non-cashable notes as deductions from their obligations.
In the case that has come to be known as the "check scam," PETRO-NIC seems to have agreed to purchase a credit note by paying a DGI debt to INISER. This practice of juggling credit notes, which ignores the most elemental accounting norms, was introduced in the mid-eighties, when Nicaragua’s currency was devaluing at a ferocious rate, but it makes no sense now, when exchange rates are effectively regulated. This check, itself only a "venial" sin in the current hell of official corruption, was just the first link found in a long chain of irregularities and other check gimmicks, all carefully documented in La Prensa.
The paper next discovered that the DGI made seven purchases of air conditioners, computer parts and office supplies totaling $93,457 between July 1997 and December 1998, all backed by formal estimates and invoices, but from companies in Miami that did not exist at the time of the transaction. Four of these purchases were from Miami Delivery and Cargo, which had once belonged to Byron Jerez’s brother Gerold, arrested and tried in August 1985 in the United States for possession of cocaine, marijuana, opium and weapons. The invoice for the air conditioner acquisition appeared under the name of Miami Delivery & Courier Service Inc., inactive since 1989, as were all the companies from which other estimates had been requested in accordance with Nicaragua’s Contractions Law.
As the evidence continued to mount, check after check, the DGI’s own investigators finally threw in their bit. They made public a list of 14 more checks totaling 6.3 million córdobas, all with the same "MO": they were issued by PETRONIC at the DGI’s request to various companies as payment for credit notes. The businesses include the apparently non-existent Industrias El Cortijo and Business Express; the address and telephone number of the latter coincide with those of Gerold Jerez, who received five of these checks worth a total of 946,880 córdobas. To pull off this operation, another "ghost"—Mauricio Gómez—was created to endorse them. Modultecsa, a Nicaraguan construction company financed largely with Cuban-Miami capital whose stockholders include Alemán’s son-in-law Jerónimo Gadea, received two of the checks totaling 528,030 córdobas, which were endorsed by two more ghosts.
La Prensa was not the first to discover the embezzlers’ total lack of imagination, worthy of a bookkeeper at a neighborhood grocery. The private auditing firm Artiles & Assoc. had detected it in as early as April 1999, when it audited the DGI’s internal control systems at Finance Minister Esteban Duquestrada’s request, but that audit remained in Byron Jerez’s own files. In light of the La Prensa reports, the CGR Superior Council has just agreed that this document should be turned over "immediately," but CGR President Guillermo Argüello Poessy overrode that decision, unilaterally giving Jerez ten days to do so.
The scandal seems to have no end. While the population waits expectantly for each new chapter, the conviction is growing that even all these check scams are barely the tip of the iceberg. This conviction was further fueled on April 9, when an engineer who had worked for the Modultecsa construction company, already implicated in the scam, offered yet another scandalous revelation. According to the engineer, the company’s machinery, contracted by the Ministry of Construction and Transport after Hurricane Mitch devastated Nicaragua in late October 1998, was pulled off the task of rehabilitating the washed-out roads in December of that same year. Where was it sent? For the next three months it was used to build the foundations for the showy new beach house in Old Pochomil belonging to none other than DGI director Byron Jerez. The cost of this work was included among the "emergency projects" that received financing after Mitch.
Although the DGI scandal may not be the most lucrative example of corruption, it is more than just another case on the long and ever-growing list of "petty thievery." Its importance has to do with the moment at which it surfaced—going into an electoral period and with new comptrollers taking office amid major doubts about the wisdom of the changes made to the CGR—and with the figure at the core of the scam. The scheming and all-powerful Byron Jerez is closely linked to the President—he is Alemán’s clone, his right and left hand ever since Alemán was mayor of Managua, and he presumably knows all the skeletons in the government’s closet. This pillar of morality is also treasurer of the governing party.
Might someone finally be punished?How might this new crisis unfold? It would be fitting for the government to offer Jerez’s head as a long-awaited sign that it is prepared to punish corruption. Such a decision would earn the new comptroller’s office a much needed but thus far undeserved gold star. It could be sold for some time as a sign that this institution can function independently, which might thaw foreign cooperation’s pipelines to the CGR and the government as a whole.
Finance Minister Duquestrada has obligingly insisted on a new audit of the DGI, which is surprising as he utterly ignored a report on the DGI’s administrative anomalies submitted to him last year by Comptroller General Jarquín. That report stressed the discretionary issuance of and trading in tax credit notes whose collection—not reported as income—was administered with total liberty off the books, and recommended that this practice be curtailed. Jarquín continued his attempts to investigate the DGI over the course of last year, but with no success because President Alemán was by then waging his personal and institutional battle to get rid of Jarquín and de-fang the CGR.
At the time of Jarquín’s report, Duquestrada circled the wagons around Jerez. What accounts for his change of heart? Is he confident that the new CGR audit will produce the desired results or does he no longer have any reason to save Jerez’s head? Since some PLC sectors would like to see it roll, doing so could reduce the volume of the party’s infighting by several decibels.
The Alemán administration has so far emerged unscathed from all of its corruption scandals, at most allowing a symbolic sanction. Alemán’s classic method of insulting the media and slandering his detractors tends to deflate any outrage the population might permit itself if it felt less powerless. His message is the cynical adage that "good guys finish last." He has convinced people that we simply live in times of petty thievery, when some are more corrupt than others, but everyone’s on the take. This message reached its obscene apex last November, when Comptroller General Jarquín was jailed for alleged corruption. It is to be expected that Alemán will not abandon his buddy Jerez and will make use of any legal stratagem that will buy time for the waters to settle. After all, a hydra has the ability to make its heads grow back.
International cooperation recoilsOn April 5, hounded by the information published in La Prensa, Byron Jerez visited Luigi Travaglino, the Vatican’s Papal Nuncio in Nicaragua, to ask for his prayers and offer his explanation of the corruption scandal in which he is so deeply implicated. The next day US Ambassador to Nicaragua Oliver Garza, who refused to receive Jerez with the argument that he is not a "confessor," requested that President Alemán explain the case. The day after that, Monsignor Travaglino, in his role as dean of the diplomatic corps, invited the 36 ambassadors accredited in Managua to the Nunciature at Jerez’s request so he could offer his explanation. Before making his appearance, Jerez visited Cardinal Obando to ask for his blessing.
United Nations resident representative Carmelo Angulo, the ambassadors of the Scandinavian countries and Garza himself were conspicuously absent from the meeting, which went on for two hours. These diplomats have all repeatedly stated publicly and with increasing firmness that they are worried about the lack of transparency and good governance in Nicaragua, and the siege by the foreign sector is getting stronger. Several months ago, Sweden, Norway, Finland and Denmark put a one-year freeze on the remaining $3 million it had earmarked for the CGR’s institutional strengthening, and now the Inter-American Development Bank has suspended a US$10 million loan to the DGI. Although IDB representative David Atkinson emphasized that the delayed signing is only due to a technicality, the context is so eloquent that the interpretation speaks for itself.
Ironically, on March 9, just before the scandal began to break, the Liberal legislators and their allies in the National Assembly approved a law that grants both the DGI and the General Department of Customs (DGA) complete financial autonomy and discretionary administration of a percentage of the revenue they generate. The fact that the DGI is headed by PLC Treasurer Byron Jerez and the DGA by Marco Aurelio Sánchez, another Liberal leader close to President Alemán, gave rise immediately to the suspicion that both state dependencies could begin functioning as "petty cash" drawers to finance the governing party’s electoral campaign. The irony lies in the fact that the law is one of the commitments acquired by Nicaragua as part of its Enhanced Structural Adjustment Facility (ESAF). But while these institutions are pushing to ensure the creation of new laws or reforms to existing ones as a way to provide more efficient revenue collection instruments, they seem to be ignoring the existence of legal loopholes and deep-rooted political styles that bear the unmistakable stamp of corruption.
The most negative impact that the Alemán-Ortega pact has had on foreign cooperation has been its decision to restructure the CGR, the Supreme Court, the Superintendence of Banks and the Supreme Electoral Council. The Scandinavian countries said they would release the suspended aid to the CGR once they have verified that the state institution is performing professionally and independently of the two political parties in the pact. They therefore intend to evaluate the Strategic Program of Institutional Strengthening, for which the aid was originally issued, until the end of 2000. They also took advantage of the 41st Annual Assembly of IDB governors to denounce the lack of governance and transparency in Nicaragua, which means there is no guarantee that "the funds will get to their destinations." The accusation is a weighty one and should alarm the Nicaraguan government. Support from these four countries represents a full third of Nicaragua’s bilateral (government to government) aid.
Four days after these countries announced the suspension of the aid, Jan Cedergren, General Director of Cooperation for Sweden’s Foreign Affairs Ministry, visited Managua to follow up the Stockholm accords. He declared that his government respects Nicaragua’s sovereign right to make the recent constitutional reforms, but at the same time reserved "the right to our own opinion once the changes have occurred and to consider the effects of these changes on the cooperation between our countries."
In the opinion of this high-level Swedish official, the changes "had an effect on the status of the comptroller general’s office which in turn changes the basic conditions of our cooperation. We have thus decided, in accord with the agreement, to wait a while to see the consequences of these changes." According to Cedergren, the new balance of power produced by the constitutional reforms could have problematic consequences.
The US reaction: Where there’s smoke, there’s fireEven more clinching was US Ambassador Garza’s crescendo of unusually critical declarations. On the first occasion he said, "There are many rumors and a lot of gossip in this country, but we know that where there’s smoke there is always a little fire. The stories we are reading in the newspapers these days give us reason for concern. We want to see an aggressive government, one that takes the responsibility a government should take, that makes an effort to be transparent and checks to see that there is no fire beneath this smoke." He confirmed that various donor countries have chosen to postpone aid to Nicaragua until they are completely sure that the new comptroller’s office will seriously monitor the use of state goods.
On March 23, he added the following: "Although the doors to investment, the formalities for investment, have opened in Nicaragua, this country still lacks a judicial system that provides investors with enough confidence to come in the numbers needed. Many think that the playing field is not level, that those willing to comply with unstated requisites will be given better opportunities." He did not stop there: "Comptroller Argüello Poessy has come up with a better version of the problems of his office, saying that it has no teeth, no genuine authority. We have spoken frankly with them and they are prepared to put more work into the institution’s Organizational Law so it will give them the authority they need. No one has gone to jail for corruption in this country. Now, does that mean that there is no corruption here? Or just that there are no laws that can put the corrupt in jail?"
In other declarations related to the new CGR structure, Garza offered the following opinion: "A comptroller’s office can be headed by an individual, as it was before, or it can be collegial. I’m still not passing judgment because one has to see how they’re going to work. Will they be more able to carry out all the work needed to assure that corruption is ineffective in the government institutions? I don’t know; I have no answer. They say that they’re going to do it, but so far that hasn’t happened."
Garza also pointed out that the changes in the Supreme Court—increasing the number of justices to 15, adding alternates for each of them and appointing the new officials according to the pact—will increase state expenses considerably. He added, "A country has the sovereign right to make these kinds of changes, even if they cost more, and even if it costs money that the country doesn’t have. But in practice, one says, ‘Damn! We’re helping the country and they’re adding more employees, with more cars and more salaries. Where’s the benefit here?’ Maybe if they said to me that this way they can move the cases through the court faster, then fine! But we have cases of citizens who have been there for four years!"
The bribery and influence peddling in the government, the still-unsolved property claims and the annual movement of at least a hundred tons of cocaine through Nicaraguan territory are also concerns of the United States. Nicaraguans whose properties were confiscated by the Sandinista government in the eighties are continuing to acquire US citizenship, which means the caseload of property claims that Garza has to defend in Managua will continue to multiply. The PLC-FSLN pact does not allow a legal and transparent solution to many of these claims, nor does it expedite investment. In this respect, Garza said, "I am seldom told that the investment game is really good here. In fact, I’ve never heard that said in the six months that I’ve been here. But I sure have been getting complaints—that they changed the rules on me, that they asked for this from me, that somebody bribed somebody from the government and that’s why they won [the bid]…" While investors in a free and open market are cutting a wide path around Nicaragua, the dirty deals in a closed and pacted market seem to be growing.
Ambassador Garza is a shrewd observer; it is no accident that he was previously an expert in drug trafficking. There are increasing signs that the United States has concluded there can be no such thing as good governance with Alemán and his Liberals. If Franklin Delano Roosevelt referred to the first Somoza as "our son of a bitch," his successors sixty years later have decided not to claim such parentage of Alemán, today’s equivalent. This distancing is a very weighty new factor for the PLC Liberals. They urgently need a shift, a truce to rejuvenate their image. All these negative indicators must make them fear the convening of municipal elections.
Delays in the HIPC initiativeFrom the very beginning of his term in office, President Alemán has presented Nicaragua’s entry into the HIPC Initiative as the crowning achievement of his economic administration. The peak of this hype came last September, when he celebrated with balloons and firecrackers what was supposedly the formal green light into the initiative’s "waiting room" from the World Bank and International Monetary Fund.
Alemán’s glorious discourse, however, was first toned down then dropped altogether when these multilateral financial institutions started adding other conditionalities to their traditional macroeconomic indicators. Now they are also demanding the reduction of poverty and progress in transparency and good governance. These new requirements were included in the wake of a significant convergence of the IMF, World Bank and IDB positions with those of the European Union, which have always had a social and political aspect. As a result of this novel and positive convergence of visions within the international community, not another triumphal peep has been heard in Nicaragua on the subject of the HIPC for months.
We are instead seeing the "Taiwanization" of foreign support to the Nicaraguan government. The Taiwanese government has financed the construction of the costly and rather gaudy new presidential palace and the new Supreme Court headquarters, among other symbolic trousseau gifts.
Consultative Group in the driver’s seatAlthough the HIPC is on the back burner, however, reduction of the foreign debt and future disbursements from foreign cooperation are still vitally important for the country. And they are linked to the annual meetings of what is known as the Consultative Group of representatives of the multilateral agencies and bilateral cooperation and to the results of its evaluations.
Last year the Consultative Group agreed with an IMF mission on the urgent need to put an end to Nicaragua’s institutional crisis (at that time the CGR-Jarquín problem) and clear up all doubts about the country’s governance. It put particular emphasis on building apolitical and professional institutions. Its latest report underscores that "the doubts among some donors about the repercussions of the constitutional reforms on cooperation schemes with the affected institutions and clashes between the government and certain sectors of civil society generate a climate of uncertainty."
In compliance with the agreements made at the May 1999 Consultative Group meeting in Stockholm, the government must approve a series of laws aimed at ensuring governance and transparency by the next meeting. But so far, it has only approved and put into effect the law of administrative contracting. The following are still in bill form pending submission: the administrative career law, the civil service law and the law of access to public information. Three others have made it as far as their respective National Assembly committee for study: one that would grant citizens the right to sue the state, one regulating the Office of Attorney General and a Public Ministry, and one on citizen participation. The only piece of legislation from the list that is currently on the agenda for floor debate is one containing reforms to the penal procedures code, and strong controversy is expected around some of its articles.
Laws are only part of the conditions being made by those who are propping up an economy as dependent as Nicaragua’s, and they relate only to the first two of three larger and more intense demands: transparency, democratic governance and poverty reduction. As for poverty reduction, the government will be submitting a base document it is working on titled "The Development of Dialogue and the Dialogue of Development" to the Consultative Group meeting in Washington on May 24.
The international community will scrutinize the evidence of Nicaragua’s compliance with all these conditions in the upcoming meeting, and the DGI check scam is one of a number of things that will not look at all good under their microscope. Would firing Byron Jerez dissipate some of the doubts? Even if it would, it is unlikely that Alemán would let the guillotine fall on the head of a man who knows so much about his chief and the workings of his administration. The government will be going to the next Consultative Group meeting in May with its hands tied.
If the doubts harbored by foreign cooperation drag on, it could go as far as suspending support to the trust fund created to help pay the service on Nicaragua’s foreign debt. Since the moratorium on the Paris Club debt payments is programmed to end in 2001, that could make the situation even worse. Debt service payments would climb back up to $230 million a year, which represents 25% of the value of Nicaragua’s exports in goods and services and 28% of the government’s tax income. This vicious circle would further deteriorate the image of the PLC administration since it would have to compensate for the suspension of disbursements from abroad by further increasing taxes and reducing social investment.
The PLC’s skewed and schematic application of the ESAF has not generated the popular applause that Central Bank president Noel Ramírez repeatedly claims its administration merits. The government insists it is on the right path, and it is true that the application of the ESAF has forced macroeconomic balances with moderate inflation and a regulated exchange rate, but the productive apparatus is in crisis. Exports continue to drop while imports keep on rising.
Most state channels for credit to agricultural producers have been closed as part of the ESAF conditions, and private banks have not filled the vacuum, preferring to make more profitable loans to middle-class consumers interested in adding a new floor to their home or buying a second car for their teenager. The government’s Peasant Credit Fund represents nothing more than a "drop of water on a clay brick," as vice president of the Union of Farmers and Ranchers (UNAG) Alvaro Fiallos graphically put it.
Nicaragua is the least competitive country in Central America and is not attracting productive foreign investment. Its gross domestic product has only grown 2% more than the population. The country has 2.3 million citizens who receive no more than $0.92 in daily income and an unemployment and underemployment rate totaling 45% of the economically active population. Inflation is "controlled" by increasing taxes rather than controlling state expenditures. Imports exceed exports by a billion dollars a year, a gap only covered by family remittances from emigrants, foreign aid and probably a significant amount of drug money.
The problems with foreign aid could thus create many new domestic cracks, and the government’s increased vulnerability could also heat up Nicaragua’s ongoing border conflicts with both Honduras and Costa Rica. To a certain degree, the conflict with Honduras is not explained exclusively by Honduran and Colombian avarice, but also by the Nicaraguan government’s notorious incoherence and weaknesses.
The strength of Nicaragua’s third wayOne last factor that could affect the decision of both the FSLN and the PLC to hold municipal elections on the date set is the strength that a "third way," in opposition to the pact, could gather and the weight of the personalities that climb on board. Once banker-politician Haroldo Montealegre, presidential pre-candidate of the incipient "new" party, Arriba la República (née Arriba Nicaragua for the 1996 presidential elections), pulled out claiming he had learned that Alvaro Robelo had traveled to Libya and negotiated behind his back, only two options remained in the anti-pact political "center." One is the Nicaraguan Democratic Movement (MDN) and the other is a coalition headed by the Conservative Party.
The PLC and its government have engaged in an institutionalized mudslinging campaign against "third way" leaders. The DGI kept the name of Conservative leader Noel Vidaurre, one of Nicaragua’s few anti-corruption crusaders, in the media for days accusing him of tax evasion. Then an illegal audit ordered by the National Assembly board "discovered" irregularities in Agustín Jarquín’s administration of the comptroller general’s office. For his part, Pedro Solórzano risks being prevented from running on the Conservative ticket for mayor of Managua because of the government’s gerrymandering.
These campaigns have not had the effect the PLC wanted. Out of 19 political personalities tested by the M&R polling firm, those linked to the two third-way groupings (MDN and Conservatives) received the highest favorable public opinion rankings: Violeta Barrios de Chamorro (73.8%), Pedro Solórzano (72%), Vivian Pellas (65.8%), Agustín Jarquín (57.1%) and Joaquín Cuadra (50.9%). Because this poll was only done in Managua, it reflects the opinions of citizens who are most exposed to media influence and thereby more informed about the pact and more opposed to it.
The parties banded together in the MDN have made a creative and hopeful gesture to foil the FSLN-PLC efforts to make it too difficult and costly either to build a coalition or to form a new party. To eliminate some of these costs, they all agreed to give up their own legal status and unite under that of one of their members, the Nicaraguan Democratic Movement. This self-sacrificing move reflects a nascent consciousness that Nicaragua’s fundamental contradiction at this time is not left vs. right, but democracy vs. caudillo pact, transparency vs. corruption, national interests vs. party interests. Such a move was unimaginable as recently as the 1996 presidential elections, when all attempts at a center coalition collapsed because no party leader would stand down even in favor of another who was more qualified and had a better chance at winning.
There is still a long way to go to consolidate the public awareness that this contradiction is creating. Among other things, the "third way" lacks an economic program that could shatter the political skepticism of Nicaraguans whose consciousness is dominated by their survival needs. Opposing the pact is far from enough. The big and justifiable question being posed by skeptics is: who can guarantee that a new "third way" government will really bring in honest and honorable people with a vocation of public service in the interests of the poor who will not just repeat history by viewing the state as their personal booty?
The fact that there is no single third way yet—just two coalitions fighting over the same segment of the electoral market—is their greatest handicap. Eliminating the bad sign sent by a "two-lane" third way could shake up potential abstainers and a majority of those who remain apathetic. Abstentionism favors the PLC-FSLN hydra while the third way needs to guarantee a big turnout. Faith that this abstentionist apathy will hold up is most likely what will incline the PLC and FSLN to respect the electoral calendar.
The hydra’s heads will grow back unless all are lopped off at one blow. Doing so will largely depend on defeating the abstentionism that, according to the polls, is slowly but surely shrinking in favor of the third way.