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  Number 449 | Diciembre 2018
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Nicaragua

In the lead-up to the insurrection the country was in a “betting mode”

Envío team

Tension was already in the air for the Ortega–Murillo government as we entered 2018. All through 2017 the economy had begun to chafe with the drop in Venezuelan aid, then in November came the municipal elections.

The collapsed electoral system lent itself yet again to fraudulent scheming in response to people’s silent rejection of the governing couple. In the Pacific and northwest regions, Nicaragua’s most urban areas, people again expressed their repudiation of the electoral system through massive abstention.

In the countryside, Nicaraguans rejected the government by voting against the FSLN. And in the Caribbean side of Nicaragua, the election sparked violence. The Supreme Electoral Tribunal (CSE) had to change the results in all three Nicaraguas to make them look good.

Government and business
place their bets


Coming up to Christmas, Washington took a clear stand against the Nicaraguan government in the span of just 72 hours. It began by declaring that November’s municipal elections had been “marred” by irregularities and violence against those in the Caribbean and areas of the countryside that had voted against the FSLN (six dead and dozens wounded, injured, mistreated, detained, disappeared or on the run).

The following day, it applied the Global Magnitsky Act against CSE president Roberto Rivas, the first Nicaraguan to be included on this US list of super-corrupt individuals and human rights violators. The day after that, with a bipartisan support rarely seen in the Trump era, a number of Republican and Democratic senators endorsed the Nicaraguan Investment Conditionality (NICA) Act, passed by the House two months earlier, and introduced it into the Senate for its approval. The bill would affect loans to Nicaragua from multilateral financial institutions.

With Washington’s ante on the table, the Nicaraguan government and big business sector—at that time still close allies in the corporatist model—swung into a “betting mode.”

In its eleven years in power, Daniel Ortega’s government had never felt so much tension in its relationship with the US government as was present at the end of 2017. The alliance of Ortega and the Superior Council of Private Enterprise, the umbrella business organization better known as COSEP, had never been so on edge.

Sanctioning PDVSA was a
major shot across the bow


The deepening of Venezuela’s political and economic crisis had also begun to be directly felt in Nicaragua. Less oil was coming and with a less favorable payment deal, and in August 2017 the US had sanctioned Petróleos de Venezuela (PDVSA), the state-owned oil company, for fraud and money laundering. It served as a warning shot across the bow of ALBA de Nicaragua, S.A. (Albanisa) the Venezuelan-Nicaraguan joint venture in which PDVSA has 51% of the stock. That flourishing consortium had been created soon after Ortega took office to manage the distribution of Venezuelan oil inside Nicaragua and invest the profits.

The next month the Trump administration had warned that any Nicaraguan banks with financial ties to Albanisa could also be sanctioned. The shock waves shook the Nicaraguan financial system. All money from Albanisa businesses deposited in three private Nicaraguan banks was quickly transferred into Banco Corporativo (Bancorp), itself an Albanisa entity until the government changed the composition of its board to distance it from the consortium. The money transfer was remarkable: official statistics showed Bancorp’s deposits increasing by 236.5% in 2017, with its coffers swelling by nearly half a million US dollars a day, including holidays, in December 2017 alone.

In addition to the financial problems stemming from the fear of sanctions, exports to Venezuela by large and medium Nicaraguan businesspeople were also being affected. Because it had been agreed that Nicaragua would pay for the oil in part with these exports, the Ortega government had decided that they would all go through ALBA Alimentos (Albalinisa), one of the many businesses run by Albanisa. At the time Albalinisa’s vice president was Francisco López, also vice president of Albanisa itself, a member of Bancorp’s board and the governing party’s treasurer, not to mention holding several top positions in governmental ministries and utilities institutions until July 2018, when he and two others who were part of Ortega’s inner circle also made it onto the Magnitsky sanctions list. Venezuela had become Nicaragua’s second largest exports market, but after the sanctions on its government, exports to that country fell to virtually nothing by early 2018 as no Nicaraguan exporter wanted to risk being linked to the sanctions.

Washington’s gamble


Although Ortega had enjoyed non-conflictual relations with the Obama administration due to his willingness to work with the US Drug Enforcement Administration and the US Immigration and Customs Enforcement on issues seen as being of “national security” to Washington and had made Nicaragua safe for US investments, the US Congress and State Depaertment were displeased with Ortega’s absolute control of state institutions (including the military), democratic failings and close relationship with Putin’s Russia. They appeared to be gambling on chipping away at Ortega by fracturing his alliance with the business elite, his main pillar of support affter Venezuela.

When Senators Ted Cruz (R-TX), Patrick Leahy (D-Vt.) and five others introduced the Nica Act into the Senate, the highly-respected Senator Leahy said the law’s intent was “to send a message not just to the Nicaraguan government but also to the Nicaraguan business community. And that message is that corruption and impunity come with a price tag.”

Congress seemed to be taking a firmer stand on achieving non-fraudulent elections than Organization of American States (OAS) Secretary General Luis Almagro, who ws still betting that Ortega would comply with their early-2017 agreement to accept a transformation of the Nicaraguan electoral system so the 2021 presidential elections could be free and fair. For that reason he was still more accommodating of Ortega.

The business sector’s gamble


President Ortega reacted only with silence to the avalanche of signals sent by Washington as 2017 ended. Was it confusion, wariness or a lack of trustworthy, capable counsel?

The business leaders allied with him didn’t know how to respond either, as they feared finding their names on the sanctions list. In early 2018 they continued to lobby against the Nica Act with a positive “narrative” to members of Congress: the government’s alliance with private enterprise was ongoing and yielded both stability and economic growth. Destabilizing Nicaragua with sanctions would only harm those achievements and spur greater emigration. Although they portrayed a calm demeanor, the business elite were skittish.

They entered 2018 hoping to be key negotiators in the discussion on reforming the electoral system, a first step toward changing the already fragile national situation. They gambled on assuring this central role in both Washington and Managua.

Ortega’s gamble


Ortega seemed to be betting on Nicaragua’s insignificance, calculating that political and economic sanctions from the US would be slow to arrive and wouldn’t have a significant impact on the investment climate. He trusted that the advantages of investing in Nicaragua, based on low labor and land costs, and the comparatively greater security that contrasted with the violence found in the rest of Central America would more than compensate for the political disaffection with his model. As late as March 2018, while some US government officials constantly railed about the region’s “dictatorships,” they were still specifically mentioning only Cuba and Venezuela.

Even if his gamble had been premised on a correct analysis of the new Trump administration, the discontinuation of Venezuelan aid and the spending cuts the government was obliged to enact presaged a difficult 2018 in his attempt to achieve his goal of staying in power in 2021... and “ever beyond,” to quote one of his slogans. The most urgent financial adjustment was to put the brakes on the Social Security Institute’s anticipated bankruptcy. An increase in unemployment was on the horizon, along with a drop in income fot the sprawling informal sector in which 8 of every 10 Nicaraguans have survived the Ortega decade. Ortega figured any popular unrest could be mitigated with a few social programs. His government had taken out a number of new loans from the international financing institutions as insurance against passage of the Nica Act.

This was the “betting mode” in which the two main power brokers—the regime and the big business sector—came to April. They both counted on the population continuing to bear the weight and conform to the reality of the last decade...

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