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  Number 425 | Febrero 2017
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Nicaragua

Nica-US relations in the Era of Trump

This Nicaraguan economist, who worked for the World Bank for 28 years and has held multiple high-level diplomatic posts throughout his career, outlines the new US context following Donald Trump’s election and reflects on what it could mean for Nicaragua.

Francisco Aguirre Sacasa

We’ve been observing Donald Trump for over 18 months as a pre-candidate then candidate for the US Presidency, almost three months as President-elect and now as President. Yet, despite all we’ve seen, we still don’t know for sure where we’re going with him as US President. However, I’d like to share some insights and thoughts that might enable us to outline the US relationship with Nicaragua in what’s being called “the era of Trump.”

If Hillary Clinton had won…


This would have been easier to talk about if Hillary Clinton had won because she’s a conventional career politician. As the senator for New York and as secretary of State, she left a public record that would have served as a guideline for predicting her actions as President.

For example, she had a clear commitment to democracy in Nicaragua, which she demonstrated after the rigged municipal elections of 2008 by canceling the remaining $60 million from the Millennium Challenge Account, which had benefited Nicaragua with donations. One of the results is that we now have a good two-lane road between Nejapa and León made with a loan rather than a four-lane highway without incurring debts to anyone.

Donald Trump is uncharted territory


What we’re facing with Mr. Trump at this stage of the game is uncharted territory. He doesn’t have a record as a public political or military figure for us to study. He’s been an outstanding entrepreneur in real estate and casinos, as well as in other areas such as airlines and education where his performance has been mixed and, in some cases, extremely private. For example, he’s the first US President in modern times to refuse to disclose his tax returns during the political campaign and still refuses to make them public.

Donald Trump inherits a relationship with Nicaragua that is asymmetrical, but crucial to us for geopolitical reasons and also because of the US economy’s clout in the region and globally. Handling this relationship well is a top priority for Nicaragua and maintaining relations with the US that are at least correct is a precondition for our achieving sufficiently rapid growth to be able to break away both from poverty—we’re the second poorest country in Latin America—and from having the smallest economy on the subcontinent.

Why we need good US relations


The United States is our most important trading partner. Ten years ago, Nicaragua joined the Central America and Dominican Republic Free Trade Agreement (CAFTA-DR) with the United States. The sum of our exports to and imports from that country is now approximately US$4 billion a year, which is a lot for an economy as small as ours. More importantly, this trade relationship brings a surplus of $2 billion in our favor. Nicaragua, which has a high global trade deficit, would be in difficult straits without CAFTA.

Besides being our main trading partner, the United States is the main source of family remittances coming into Nicaragua. In the first 11 months of 2016 we received $650 million from our compatriots living there, a tremendous sacrifice. It’s because of this generosity that I argue that the Nicaraguan government should, at the very least, recognize the right to vote for all Nicaraguans living abroad.

In addition to the positive trade relationship and volume of remittances, US private investment in Nicaragua amounts to about $250 million and the seal of approval from the United States, the largest shareholder in the Inter-American Development Bank (IDB), World Bank and International Monetary Fund (IMF), contributes to our receiving about $300 million in annual disbursements from those international financial institutions.

Adding all these figures together we’re talking about 40-45% of our economy’s Gross Domestic Product. No other country comes close to this amount. In its heyday, Venezuelan aid was around $500 million a year. But now that Venezuela is a collapsed State, we no longer receive those resources. In the light of all the above, Nicaragua simply cannot maintain its economic and social growth rate without the United States. Period!


What does Nicaragua offer Washington?


One of our assets is that we’re a safe country, especially compared to Central America’s three Northern Triangle countries: El Salvador, Guatemala and Honduras. Another is that we don’t currently represent a migration problem: we’re not a massive source of illegal immigrants, unlike our three Northern neighbors, which in some years have had more than 50,000 unaccompanied minors trying to enter the United States illegally, causing a bona fide humanitarian crisis. We’re also seen as a country that collaborates with the US in the fight against international organized crime. Furthermore, it’s acknowledged that Nicaragua has performed well economically and socially in the Latin American context and the alliance between our private sector and government is regarded as a model to be replicated in other countries. For all these reasons, Washington has kept cooperation with our country open on all issues, even removing the Damocles’ sword of whether or not it would approve the property waiver each year.

This is the positive side of Daniel Ortega’s Nicaragua that Washington has worked with for some years… and is still working with so far. But now a negative side has been brought to Washington’s attention: the serious setback or erosion of Nicaragua’s political governance, particularly on electoral issues.

On a scale ranging from very good to hostile, relations between Nicaragua and Washington fluctuated around “correct but not cordial” from 2007 until mid-2016. Since mid-2016, however, I’d say they’ve dropped to “correct but tense,” due to a series of measures taken by Comandante Ortega (zero electoral observation, expulsion of US officials, cancelation of the chief opposition, etc.).

I was in Washington over the end-of-year holidays and met with people from important political NGOs, think tanks, international organizations and the Latin American community who influence policy towards our sub-continent. All these people expressed concern about the erosion of Nicaragua’s political governance. That confirmed for me that Daniel no longer has friends in Washington. Moreover, the think tanks and leftist NGOs, which viewed Daniel Ortega as a hero and unconditionally supported Sandinismo in the 1980s, seeing it as a romantic, revolutionary and democratic movement, are his most virulent critics today. With the passage of time they’ve seen that present-day Sandinismo has lost its revolutionary mystique and view Daniel as just another authoritarian Latin American dictator who has consolidated absolute family-based power.

Will the Nica Act be passed as a rifle or a shotgun?


In Washington I also met with members of both the Senate and House of Representatives, and with their staffers or advisers. I met with them because, although there was the usual vacuum in the White House during the interregnum between the departure of one President and entrance of another, there was none of that in Congress. There was continuity. For example, all of the representatives who sponsored the Nica Act passed last September to sanction President Ortega were reelected. After exchanging views with them, I can assure you that these Congress members, both Democrats and Republicans, are all set to revive that legislation and push it through given the setback democracy has experienced in Nicaragua.

Arturo Cruz, Ortega’s former Nicaraguan ambassador to the United States, doesn’t think it will be passed in 2017. He doesn’t exclude it being passed, but not until 2018. I disagree with that timetable. I think it could come out this year, and soon, as everything is now being done quickly in the United States.

Nicaragua is now back on Washington’s radar screen in a negative sense. That’s why I believe it’s highly likely the Senate will pass the Nica Act this year. And if so, I think Donald Trump will sign it because he likes to project himself through both his actions and his rhetoric as a strong leader to those he perceives as US enemies. Obama wouldn’t have signed it as he firmly believed in what Harvard University’s Joseph Nye called “soft power.”

For me, what’s still up for debate is only whether the Nica Act’s sponsors will revive it with the same contents as when they presented it in 2016. I say this because the idea is being floated in Washington of preventing it from destroying the Nicaraguan economy or punishing the Nicaraguan people. To avoid this happening, they are very actively considering using this tool as a rifle, directing it at very specific targets, and not as a shotgun, avoiding the collateral damage that a broader-based policy would cause.

Some Nicas are downplaying the Nica Act’s potential damage


I’m struck by the fact that some influential Nicaraguans think the Nica Act is manageable and underestimate the damage it could do to Nicaragua. They believe that funds from the Central American Bank for Economic Integration (CABEI) and the issuance of government bonds will cover any gap this law may cause.

I think they’re incorrectly appraising the Nica Act’s threat and I hope the day doesn’t come when we see who was right. The CABEI’s resources carry higher interest rates than the quasi-concessions we get from the IDB, which are the ones the Nica Act would cut. As for issuing bonds, that depends on our credit rating. We currently have a B2 rating, considered of little value in the financial world. This means Nicaragua would have to pay 6-7% interest in order to issue bonds and once the Nica Act goes into effect we’d lose even that credit rating. In financial terms, we would have a “mark of Cain” on our forehead. Who would then give us acceptable terms for a loan? The answer’s easy: no one!

Corruption and democracy


What’s on the table for those who design a second version of the Nica Act is sanctioning what Washington sees as corruption in Nicaragua. They are aware of what’s been achieved in Guatemala and Honduras with the creation of supranational powers such as the International Commission against Corruption and Impunity in Guatemala (CICIG), a United Nations agency that doesn’t respond to national political controls and was instrumental in landing both President Otto Pérez Molina and Vice President Roxana Baldetti in prison. Something similar exists in Honduras, the Support Mission against Corruption and Impunity in Honduras (MACCIH), an agency of the Organization of American States (OAS). There’s also an anti-corruption struggle going on in El Salvador that has already affected three former Presidents, all of them accused of corruption: Francisco Flores, who died; Mauricio Funes, who came to Nicaragua; and Antonio Saca, who’s incarcerated in an ordinary prison.

Transparency International has just ranked Nicaragua as the country with the fourth greatest perceived corruption in Latin America, only surpassed by Venezuela, Haiti and Paraguay. This is the argument being promoted by those in the US Congress who are looking to put pressure on Comandante Daniel Ortega.

The current US ambassador to Nicaragua, Laura Dogu, has always insisted that US policy towards Nicaragua has three pillars: to support prosperity, security and democracy. But I’ve noticed that, since winning the elections, Mr. Trump has very subtly begun to put more emphasis on the democracy pillar, as well as on more respect being expressed for his country. What happened on January 10, when the ambassador walked off the stage during Daniel’s inauguration as he launched into a strong criticism of the United States as part of his revolutionary rhetoric, suggests that change. I don’t know if she did it on her own initiative or following State Department instructions, but I do know that no one in the State Department called her on the carpet for it.

What are Trump’s priorities?


So far Mr. Trump hasn’t spoken about Nicaragua and, to be honest, his main focus so far has been on domestic problems, although some of them do have international ramifications. His first priority has been his promise to his voter base to “Make America Great Again,” a slogan printed on the millions of caps he sold, many of them—of course—made in China… His other priority is to defeat the domestic “resistance” that his first decisions—among them the suspension of the entry of immigrants and refugees and putting pressure on large corporations to relocate back in the United States—have triggered in sectors of the population and also in the Republican Party.

He received harsh criticism from many quarters, including important US companies such as Apple, Amazon, Coca Cola, Ford, Mastercard, Citibank, J.P. Morgan, Goldman Sachs and Starbucks for his executive order banning entry to the United States of people with valid visas from seven Islamic countries. Presidents of prominent universities have spoken out against the new President, as have important national media including The New York Times, Wall Street Journal and Washington Post and international ones such as El País, Le Monde, The Financial Times and The Economist. I don’t write off big capital uniting against Trump, given time, which in turn would affect his support in the Republican Party.

Putting the Trump factor in context


In the first place, we need to remember that a minority of the electorate put Mr. Trump in the White House. Although he had the majority of the Electoral College votes, he won almost three million fewer votes than Mrs. Clinton, and won three key states—Michigan, Pennsylvania and Wisconsin—by fewer than 100,000 votes. Mrs. Clinton lost those three states because she didn’t campaign well in them.

This doesn’t constitute an electoral mandate to proceed with the kind of political changes President Trump promised in his campaign. It may, however, explain why he’s so sensitive to Democrat accusations that his government is illegitimate and why he spends so much time exaggerating the size of the crowd he drew for his inauguration and alleging, offering no evidence, that Mrs. Clinton defeated him in the popular vote only because there was massive electoral fraud with millions of illegal voters.

Articulating poor people’s discontent and discomfort


Donald Trump came to power as the first President in US history with no prior experience in either public office or the armed forces. He’s a child of the private sector who was shrewd enough to capitalize on the resentment of white, low-income US Americans with little schooling about the effects on them of the 2007-2009 Great Recession. Mr. Trump became the champion for the disdain these groups felt not just from the political elites of both parties but also from the academic world, the media, the private sector and the big banks. Many Trump supporters are ordinary people made to feel by his campaign advisers that they were included in what Mrs. Clinton, in a moment of candor she surely regrets today, called a “basket of deplorables” supporting him for holding “homophobic, sexist, xenophobic, Islamaphobic and racist” views.

With his aggressive political and rhetorical style, Mr. Trump has become the most polarizing President since Lincoln’s times. He has managed to reach out to his supporters through the social networks and Fox News TV network, a very powerful sounding board. It must be acknowledged that President Trump had the ability to capture and articulate the discontent and discomfort of these sectors of society, something none of his 16 opponents in the Republican primaries or Secretary Clinton were able to do successfully.

Donald Trump doesn’t have a discernible ideology. What he does have is a highly protectionist, populist, nationalist, aggressive and—it must said—narcissistic discourse. He’s not very realistic in the sense that he ignores reality and lives in another political dimension, one Kellyanne Conway, his campaign chief, described as his own “alternate reality.”

What’s his economic policy?


Trump’s firmest promise is to end unfair competition brought about by the free trade agreements that he claims were badly negotiated, insisting that they must all now be renegotiated or cancelled. For Trump everything should be “Made in the USA,” basing his argument on the fact that the United States has an annual trade deficit of $500 billion, which sounds huge but is less than 5% of the country’s GDP.

He argues that the US has been de-industrialized by unfair competition resulting from the North American Free Trade Agreement (NAFTA) and what would have resulted from the Trans-Pacific Agreement (TPP). The latter, by the way, was defunct from the moment both Secretary Clinton and Senator Sanders rejected it when Mr. Trump made free trade agreements an important electoral campaign issue.

One of the biggest mistakes the Trump administration could make would be to pass a modern version of the Tariff Act of 1930, known as the Smoot-Hawley Tariff. This law increased tariffs on the products of all US trading partners to “protect” US jobs—hence the word “protectionism.” Other countries then began to raise their own tariffs on US exports and for many economists that trade war is what triggered the Great Depression, which began in 1929 and didn’t end until 1940 when the US industrial sector was shifted to producing weapons for the Allies fighting the Axis Powers in World War II and for its own armed forces once the US joined the war at the end of 1941. That massive production of weaponry was what rescued the US from the Great Depression, not President Franklin Roosevelt’s well-intentioned programs.

…and its likely consequences?


If President Trump follows the Smoot-Hawley route and begins to dismantle or renegotiate trade agreements (and if he does it with NAFTA, I don’t rule out him also doing it with CAFTA-DR, which concerns Nicaragua), the world will hardly stand by with its arms crossed. We in Nicaragua won’t be able to do anything about it but countries that have a large trade surplus with the US, such as Germany, will react. China, India and Vietnam will as well and they have the critical mass to damage the US economy and the millions of jobs in both the industrial and rural sectors that directly depend on US exports today. US consumers will end up reacting as well because anyone visiting the US knows that the biggest beneficiary of the free trade agreements is the US consumer, who benefits from the very low prices of large quantities of “foreign” products, not just clothes and electronic devices but also Japanese, German or Korean cars, in many cases manufactured in modern US plants. And to a large extent, it’s the consumers who drive the US economy.

Reading between the lines of what the IMF says in its periodic reports about the world economy, we understand that Mr. Trump’s attack on global free trade would be devastating for the whole world. If the affected countries begin to retaliate against the US we would fall into what we’ve seen for some years: world trade growth below the level of world economic growth. The opposite occurred from the late 1940s until a few years ago. Put another way, the growth of international trade gave an impetus to the extraordinary world growth that occurred between 1950 and 2005. Now, with President Trump’s proposed protectionism, world trade would cease being the agent catalyzing growth, as it has been for over half a century.

Trump’s foreign policy


Mr. Trump appears to see himself as some kind of “town sheriff.” His foreign policy will be more nationalistic, more aggressive and more unpredictable than at any other time in US history.

Latin America: Since the beginning of his pre-campaign Trump’s main Latin American target has been Mexico, the United States’ third most important trading partner. For over seventy years, US policy towards Mexico has been to help its neighbor be a stable, peaceful country allied to the US. It’s ironic that President Trump, perhaps unconsciously, is discarding this policy, which has been so useful to both countries. Because of his lack of experience and knowledge, he may not realize that the policy he’s pursuing, which consists of building a “big, beautiful” wall along the border and passing the bill to Mexico by applying high tariffs for its exports to the US or taxing remittances from Mexicans, will destabilize Mexico. With that policy he’s ditching what both Republicans and Democrats have done for decades.

Unlike George W. Bush, Trump has said he won’t promote regime changes, but he has made clear that he isn’t satisfied with the deal Obama gave Cuba; he has criticized it as the result of a bad negotiation in which the US gave away everything and the Castro brothers yielded nothing on human rights and democracy. It isn’t ruled out that some of the measures favoring Cuba could be reversed.

Middle East: In addition to his misguided policy against Mexico, other stated objectives of Trump’s foreign policy are to prevent the immigration of Muslims, put an end to the Islamic State and dismantle the nuclear agreement with Iran negotiated by his predecessor, President Obama. He also believes, and has so stated, that a country that goes to war with another country has the right to the “spoils of war.” No President in US history has explicitly said this but every time he talks about Iraq President Trump repeats that if the US goes to war there it will keep that country’s oil.

Multinational Organizations: Trump’s perception of international political institutions is very negative. Immediately upon taking office as his new ambassador to the UN, Nikki Haley criticized that organization’s huge bureaucracy, reminding everyone that the US provides 22% of the UN’s resources and even more to finance Blue Helmet missions. She announced that she would be watching to ensure that UN actions benefit US geopolitical interests. Moreover, she said she would be carefully checking and analyzing how countries vote on issues of interest to the United States, insinuating that her government would punish those that don’t back those interests.

Nobody, it would seem, is safe from Mr. Trump, as he has threatened to cut off funding to the UN, the OAS and all international financing institutions. He has also questioned the North Atlantic Treaty Organization (NATO) as obsolete, even though it has been one of the fundamental pillars since the end of World War II and is considered a successful force by Western civilians and military alike, providing stability not only to Europe but also to Middle Eastern countries. President Trump has also applauded the United Kingdom for leaving the European Union, which he has criticized on various occasions.

Russian Federation: Perhaps one of the most interesting developments in the new President’s foreign policy is his attempt at a rapprochement with the Russian Federation. Personally, I think this is positive. Both President George W. Bush and President Obama tried to improve relations with the Kremlin, but both failed and that’s why a consensus has been formed in both the Republican and Democrat political establishment that trying for a rapprochement is naive and doomed to failure. This feeling is especially noticeable among Democrats, who are convinced President Putin tried to influence the outcome of the elections to benefit Donald Trump.

I suspect the policy towards Russia is important to Daniel because he may believe his own friendship with the Russian leader Vladimir Putin could protect him from Trump. It’s natural for Daniel to see things this way but he shouldn’t forget the lesson of the 1980s, when one bright day Eduard Shevardnadze came to Nicaragua to tell him the Cold War was over and Nicaragua should come to an understanding with the US because it would no longer have Soviet support.

And Nicaragua…?


Although President Trump hasn’t yet said anything about Nicaragua, some of his plans could affect it by ricochet, as it’s an open secret that Cuban-American politicians are calling the shots with the new President and will have enormous influence on US policies towards Central America. Coman¬dante Ortega must understand that things have changed in the United States in an unimaginable way, including Mr. Trump’s governing style of judging others by their rhetoric as well as their actions. Nicaragua’s close relations to Cuba, Russia and Iran could hurt it in the Trump era, and if we add to this list Nicaragua’s recent relations with North Korea demonstrated by the presence of its third-in-command at Comandante Ortega’s inauguration, the situation obviously could become complicated for us as Mr. Trump is also taking a hard line on both Iran and North Korea, two countries where consensus in Washington is that they pose a clear global danger. I’m sure these friendships have been carefully noted in Washington’s Latin American circles and among those in the US government who don’t sympathize with Daniel, and will be inputs if the Nica Act is revived.

One of the Trump administration’s big challenges in its policy towards Nicaragua is that there’s no institutional memory in its upper echelons except for Mr. Thomas Shannon, who ran the State Department during the interregnum between Obama and Trump and who I know enjoys the total confidence of the new Secretary of State, Rex Tillerson. Shannon is known in the State Department as a Foggy Bottom veteran and has spent a good part of his long and brilliant career working in Latin America.

Anti-Ortega hawks in Washington and Mesoamerica


Despite this unfamiliarity with Nicaragua, I know that a group of “hawks,” some with posts dating back to the global Cold War and the hot wars in Central America, are seeking positions in the new administration. They do have a good institutional memory and could formulate a hemispheric agenda, not to apply Obama’s “soft power” but the hard coercive power that apparently seems to be in vogue in the White House. All of them remember Daniel well, which is very dangerous for his government because they’ll be the ones formulating policy on Nicaragua if they’re given important positions in the new administration.

We must also know that important groups in neighboring Mesoamerican countries are actively lobbying in Washington against Daniel Ortega and they have people with good lobbying skills and deep pockets with which to do it. They label the Comandante as anti-Israel, pro-Russia, pro-Iran, pro-Cuba, pro-Venezuela and now pro-North Korea. They say they’re worried about Nicaragua’s rearmament and point to the tanks, boats and even fighter aircraft Russia has sent Nicaragua. Believe me, this is a very sensitive issue to the anti-Ortega hawks. Furthermore, they are undoubtedly commenting that Nicaragua is the only country in Latin America today where elections are allowed but the votes aren’t counted, emphasizing that this doesn’t happen even in Venezuela, as was shown in the latest parliamentary elections where the opposition won an overwhelming majority against Nicolás Maduro.

What should Daniel do in the era of Trump?


What should Ortega’s position be towards the new administration’s unpredictable behavior, which has the potential to be very aggressive with countries it considers enemies? I think he should take a very cautious stance, keeping a low profile in both actions and rhetoric, because Trump not only notices what his adversaries do but also what they say. Daniel should constantly monitor everything that’s happening in Washington, absorbing it like a sponge and processing it. And, despite what those who underestimate the Nica Act are saying, he should try to avoid this law being passed.

I don’t doubt that Comandante Ortega already understands all this and surely agreed to negotiate with the OAS to arm himself. He’s obviously playing for time. The first joint report resulting from his talks with the OAS mentioned a process that could last three years. Based on my contacts in Washington, I don’t think anybody in Congress is going to swallow that time scale. Three years isn’t acceptable to either Republican or Democratic hawks, among them New Jersey Democratic Senator Bob Menéndez, until recently chair of the Senate Committee on Foreign Relations. Menéndez has his sights set on Nicaragua and is joined in this by Senator Ted Cruz and Senator Marco Rubio, the latter now chair of the Senate Foreign Relations Subcommittee on Western Hemisphere Affairs.

Daniel’s best shield is to rapidly take credible steps to return to the path of political governance, especially in the electoral system. I emphasize that these steps have to be genuine. To change something so that nothing changes, according to the formula of Italian writer Guiseppe Tomassi de Lampedusa, won’t work. Believing that there’s a multipolar world and that Russia and Putin can protect his government would be a huge mistake.

The past is no longer a prologue and nothing is written


Daniel has to realize that, in the best of cases, Nicaragua is just a pawn in a chess game between Washington and Moscow. We all need to be clear that there are certain realities in the era of Trump, where the past is no longer a prologue and nothing is written down. One of those realities is that Russia is a very economically vulnerable Euro-Asiatic regional power, and another is that the United States continues to be the planet’s only economic and military super-power.

In his world of alternate realities, President Trump never tires of saying the US military apparatus is badly depleted after eight years of President Obama, but all military experts agree that the United States spends more on its increasingly sophisticated military force than all nine countries combined that follow it on the “top ten” Military Strength Index. Among these nine powers are China, Russia and India…

On this point I’ll end this sketch of what already exists for Nicaragua in its relations with the United States in the Era of Trump and what may lie ahead.


Francisco Aguirre Sacasa served as President Arnoldo Alemán’s ambassador to the United States and Canada, foreign minister and permanent representative to the Organization of American States. He was elected a Constitutionalist Liberal Party (PLC) representative to the National Assembly in 2006, chairing its Foreign Affairs Commission in 2009-2011, then ran as the PLC’s vice presidential candidate in 2011, but resigned from the party the following year.

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