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| Central American University - UCA |
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Number 298 | Mayo 2006 |
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Nicaragua
NICARAGUA BRIEFS
Envío team
THE CENI BONDS: A MAMMOTH FRAUD?In early April, the Comptroller General’s Office (CGR) opened an investigation into the domestic debt dragging down Nicaragua’s economy, whose principal alone stands at over US$500 million. The CGR is particularly interested in government payments to three private banks that gobbled up the Negotiable Investment Certificates (CENIs) issued by the Central Bank to cover the collapse of several banks in 2000, during the Alemán government. The CENIs were negotiated at interest rates of up to 21%.
The state had already paid the three banks over $285 million as of October 2005 and and will pay another $326 million in the next seven years. So far the evidence shows that the bankrupt banks’ portfolios didn’t exceed $100 million, which suggests collusion between the Central Bank authorities and the owners of the banks that benefited from the CENI bonds to fraudulently reclassify the portfolios.
By mid-April, the CGR charged that its investigation had come up against a “state wall” raised by the Central Bank, the Liquidation Boards of the collapsed banks and even the Superintendence of Banks, all of which refused to provide information to the CGR on grounds of bank secrecy. On April 27, the Attorney General’s Office ordered the secrecy lifted.
For over a year the Civil Coordinator, together with independent economists Néstor Avendaño and Adolfo Acevedo, have been demanding that the CENI debt be annulled, then legalized and restructured with a longer-term payment schedule at lower interest rates. They even introduced a bill to that effect in the National Assembly. Avendaño is now providing pro bono assistance to the CGR investigation.
Those mainly responsible for the irregular issue of these bonds include former President Alemán and several of the top officials during his administration: Central Bank President Noel Ramírez, Treasury Minister Esteban Duquestrada and Banking Superintendent Noel Sacasa. Alemán has since been convicted of embezzling and laundering state funds and is serving a prison sentence pending appeal; Rámirez was a PLC presidential aspirant before José Rizo was finally chosen; and both Duquestrada and Sacasa are fugitives of justice for their alleged involvement in other cases involving Alemán and his tax director Byron Jerez.
President Bolaños, who considers the domestic debt’s payment an indisputable government priority, renegotiated the CENI portion of it with the banks in 2003, but the CGR investigation indicates that this too was irregular, keeping the debt at very high interests and again disproportionately benefiting the same banks through new illegal operations. Those directly responsible for this new round were President Bolaños himself, then-Central Bank manager Mario Alonso and then-Treasury Minister Eduardo Montealegre. The latter is now the ALN-PC’s presidential candidate, the US favorite and a major stockholder in Bancentro, one of the three banks benefited by the murky operations—which he dismisses as “financial engineering.”
According to independent economists, the issue, circulation and cashing in of the CENI bonds constitutes the hugest fraud in Nicaraguan history.
FOREST EMERGENCYOn May 3, President Bolaños decreed a 180-day State of Economic Emergency prohibiting the felling, transporting, handling, processing, storing, possession, export and sale of forest resources in the two Caribbean autonomous regions and the departments of Río San Juan and Nueva Segovia. The constitutional guarantees of anyone linked to these activities were suspended and the Army was charged with monitoring 28 strategic points in these zones.
The President’s justification was an Army report that thousands of felled trees were spotted in a two-kilometer length of one river in the South Caribbean. Two days later it was confirmed: the log jam involved over 7,000 trunks of mahogany, a species in danger of extinction in Nicaragua. The “emergency” revealed the total disorder and general institutionalized corruption which unless checked could leave the entire country without forest cover in just a few years. It has already generated a plethora of lumber mafias in which local political and economic power groups are participating, according to some official sources. The Office of the Environmental Defense Attorney claims that 80% of Nicaraguan lumber extractions are illegal and the wood is then exported with no value-added treatment of any kind.
Environmentalist and human rights groups criticized the Emergency for being too little too late, arguing that it will not resolve the underlying problem. Political leaders have simply rejected it, revealing their own interests in this multi-million dollar business. The decree could provide the opportunity for a serious forestry planning effort, which would be the first of its kind in Nicaragua, but many forces are against the idea.
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a monthly magazine of analysis on Central America