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  Number 226 | Mayo 2000
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Nicaragua

Destination: Washington Baggage: Overweight

Nicaragua’s crisis of governance has metastasized to many parts of the body politic, and is particularly eating away at the two major parties. Nonetheless, the municipal elections are going ahead, albeit on shaky ground.

Nitlápan-Envío team

Arnoldo Alemán’s government was looking to buy political and economic time when it decided both to postpone its scheduled annual meeting with the international community’s Consultative Group and to change its venue, even though this would—and in fact did—irritate the participating donors. Originally set for February in Managua, it is now firmly fixed for May 23-24 in Washington, D.C. It was a miscalculation, but one typical of the government’s habitual shortsightedness.
President Alemán will now be going to that meeting, so important to Nicaragua’s funding, in worse shape than he was in three months ago. The time bought has reported no earnings for the quarter.

The government will be presenting a new document to the Consultative Group formed by the most powerful countries of the international community following the Hurricane Mitch tragedy. The one it had prepared for February was called "The Development of Dialogue and the Dialogue of Development." The new one is titled "One Nation, Many Voices: Society, Government and Economy in the New Millennium."
Both are voluminous, full of promises and projects, but to borrow a US campaign challenge from several years back, where’s the beef? All these promises and projects do little if anything to deal with the country’s long-standing problems and a significant number of newer ones—excess baggage that does not presage a very smooth landing for the government in Washington.

The scent of confrontation

The international community has been explicitly setting new conditions to buttress Nicaragua’s structural adjustment program in exchange for its continued financial support, on which the country is almost totally dependent. Macroeconomic conditions are no longer enough; they are now being accompanied by socio-political ones. Nicaragua is asked to demonstrate "good governance," a quasi-magical term that quickly climbed to the top of the political argot charts over the past decade. It has multiple interpretations. It means solid, efficient and democratic institutions. It means civil society’s participation in government decision-making and laws that ensure such democratic participation. It means transparency and accountability in governmental financial management. It means respect for human rights. It means agreements that guarantee the country’s stability.

The FSLN and the governing Constitutionalist Liberal Party (PLC) hammered out their pact over the course of last year in the name of good governance. In so doing, they were echoing a certain national consensus on the need for a new social pact in Nicaragua. But the pact between FSLN leader Daniel Ortega and President Alemán, its two chief architects, is not a social pact. It is a political one fundamentally geared to narrow electoral and party interests to the detriment of broad national ones. Among its concrete expressions are legislative—even constitutional—reforms assuring these two parties control over state institutions that only a short time ago got the constitutional green light to exercise some measure of control over the previously unbridled executive power.
The PLC-FSLN pact does not violate the existing legal framework, but legal is not the same as legitimate, and governance must also be based on legitimacy. The now-consummated legislative part of the pact has further discredited both the politicians involved and the state institutions affected. The pact has also pulled society further apart and aggravated its already heightened feelings of powerlessness. Yet another product of the pact has been bipartisan approval of the controversial "modernizing" laws required by ESAF (the IMF-World Bank’s Enhanced Structural Adjustment Facility). Some of these new laws will adversely affect the population (the one privatizing social security pensions) and others bear no relation to the country’s political culture (the one regulating contracts).

All these elements of the pact were finally wrapped up just before the originally scheduled meeting with the Consultative Group. But since the constitutional reforms were triggering debates in informed public opinion that smelled of confrontation, especially in Managua, Alemán decided to buy time by putting off the meeting.
But why? To do what? There is no single clear answer; in fact there are no clear answers at all given that this is a government with no national vision run by top officials drunk with power. Three months after the delay, the scent of confrontation is still in the air.

Paradoxical national dialogue

The country so reeks of poor governance that in April Daniel Ortega and Arnoldo Alemán proposed a "national dialogue"—presumably more just to clear the air a bit than to achieve any social consensus.

The idea of a genuine national dialogue to deal with Nicaragua’s economic, social and political crisis—a variant on the new social pact so many were once demanding—did not emanate from either of the pact’s instigators. It was first proposed on April 12 in the annual assembly of the Nicaraguan Business Development Institute (INDE), an organization openly opposed to both the government’s economic policy and the political pact. INDE president William Báez presented the idea together with a very concrete initial agenda: the creation of a private development bank, support to small producers, a check on rising taxes, an energy program… For each of these ideas, INDE presented specific proposals buttressed with facts and figures.

Daniel Ortega immediately climbed on board, but branded the proposal with his own traditionally confrontational political rhetoric. According to Ortega, the country was on the brink of disaster and facing a tough choice: it could either bring down the government by taking to the streets (who exactly would take to them?) or all sectors would have to come to an agreement (around what? the pact?). Without dialogue, he claimed, the only other alternative would be to wait for the FSLN to return to power and solve the problems.
That galvanized President Alemán to second Ortega’s proposal—already shunt of Báez’s specific economic proposals—but he in turn obliterated Ortega’s brand with a more formal design. He spoke of convoking a "concordat" (a rather archaic term usually reserved for covenants between a pope and a sovereign regulating ecclesiastical matters, but never mind) and added that he would invite all of the country’s active forces to speak unconditionally as Nicaraguans for the good of the country.

Few reacted to any of these initiatives, particularly since they were floated just before Holy Week, which some spend at church and others spend at the beach but none spend thinking about concordats.
Furthermore, the paradox was too mind-boggling: after an exclusionary pact that significantly changed the face of government, its two protagonists were calling for come one, come all dialogue. To anyone who gave it any thought at all, this succession of unseasonable proposals appeared on the face of it to be yet another index of the government’s failure in the field of governance.

Alemán was clearly in need of a couple of attractive governance baubles to whip out of the official briefcase if the mood around the negotiating table in Washington threatened to turn sour. This dialogue proposal by Ortega and Alemán, which so quickly overshadowed Báez’s more serious initiative, seemed perfect.

The most interesting of the few reactions to it came from the Democratic Movement and the Conservative Party, which are vying with each other for the "third way" slot yet made the unexpected move of putting forward a joint position. The three political preconditions they established for participation in any kind of dialogue went straight to the heart of the pact: 1) a commitment to the nation to respect the constitutional order to hold municipal elections in 2000 and national ones in 2001, thus guaranteeing that there will be no Constituent elections; 2) a guarantee of equal opportunities for candidates and of the citizenry’s right to participate in the electoral processes, which necessarily includes revising the current Electoral Law’s exclusion of non-party candidates and favoritism toward the two major parties; and 3) clarification and immediate punishment in the corruption cases involving top public administration officials.

In the land of the ephemeral

However, not even this bauble designed to show off in Washington was consistent. It only took ten days for it to lose its glitter. First Ortega backtracked, announcing that the FSLN would not go to any dialogue before the Washington meeting because it had no intention of helping clean up the government’s image. Then President Alemán, after throwing a few customary insults at those who wanted to impose conditions on his dialogue, backtracked down the very same path saying he didn’t want anyone to think he was looking to prop up his image... What was cobbled together with no serious intent was just as flippantly dismantled. The prevalence of such inconsistent, here-today-gone-tomorrow proposals is yet another index of the dominance of bad governance and the ephemeral nature of Nicaragua’s national politics.

So many things come and go in Nicaragua, most of them only feeding the confusion and pain, that that it takes effort to remember what happened only a month ago. Longer-term memory, particularly for the painful lessons, is a bit easier, so it was not too hard to remember the National Dialogue that President Alemán called for in his first months in office, following nationwide demonstrations by agricultural producers and transport workers. That dialogue was held with pomp and circumstance in June 1997 and the participants reached 112 agreements with the government. The memorable part is that none of them was ever fulfilled. The only political force that did not attend such a charade was the FSLN, and not for the belligerent reasons it offered—that the government was Somocista, that allegedly fraudulent elections meant it was illegitimate, etc.—but because it was already engaging in discreet, bilateral talks with that government. The country’s new Property Law, some of whose central aspects have in fact been fulfilled, came directly out of that dialogue, ignoring all input from the formal one taking place simultaneously. Those government-FSLN talks were a major paving stone to the pact of 2000.
Will some national dialogue be proposed again after the Washington meeting? It would be a real shame if this were one of the "recommendations" proposed by the international community to lighten the government’s load.

The stench of corruption

In the May 1999 Consultative Group meeting in Stockholm, held after Mitch had ironically opened new opportunities for Nicaragua and the rest of Central America, the international community conditioned its support to the Nicaraguan government on the guarantee of transparent administration, and the official delegation duly agreed to fight corruption.

Another reason the Alemán government decided to delay its meeting with the international community, then, was that it was hoping to fan away yet another disagreeable smell permeating the country, a whiff of rot. In February, President Alemán’s scandalous two-month imprisonment of Comptroller General Agustín Jarquín was still fresh in everyone’s mind. In addition, both the international community and Nicaragua’s civil society were still waiting for some minimal clarification of the corruption cases on which Jarquín had filed resolutions. Last but not least, the President himself was being investigated for the ostentatious increase in his personal wealth.

When it was announced that the meeting would be set back, Central Bank president Noel Ramírez claimed that the government wanted to clear up some irritating corruption charges so the results could be presented to the meeting. Among the cases he mentioned was an audit, underway at the time, of the privatization of the state commercial bank BANIC, an operation Jarquín’s office had reported as containing anomalies and signs of corruption. The postponement would allow the government to present a better file on the transparency issue and demonstrate that there was no evidence to back up the other cases brought to light by the media. Is Ramírez that ingenuous or was his blindness just another consequence of the intoxication of power?

The check scam as yardstick

Then in March the "check scam" case blew up, providing a staggering amount of precise evidence of embezzlement taking place within Nicaragua’s General Department of Income (DGI)—equivalent to the IRS in the United States. The daily La Prensa has demonstrated not only courage but also exemplary professionalism and consistency in revealing an unprecedented volume of documents to support its corruption claims. "It’s as if we were in some first world country," said one impressed journalist.

La Prensa investigators began to unravel the case by pulling on the threads of credit notes issued by the DGI to other state institutions. The labyrinthine scam involved checks to "redeem" these notes made out to "ghosts" who had nothing to do with the institutions in question, as well as other checks for fictitious purchases made out to "ghost" companies in Miami that just happened to have once existed and belonged to the DGI director’s brother.

This isn’t just any embezzlement case; rather it is symptomatic of the spreading rot. For one thing, it involves a very special person: the DGI director alleged to have masterminded the scam is none other than Byron Jerez, President Alemán’s closest confidant (some rather unfairly say "clone" given their similarly corpulent appearance) since the years when Alemán was mayor of Managua. The case is also special because although the comptroller’s office, still directed by Jarquín at the time, had begun investigating the DGI last year, Jerez created so many obstacles that the investigation never got anywhere. These new revelations thus more clearly identify the essence of Alemán’s conflict with Jarquín and his institution, and will now act as a yardstick of how well the new and seriously questioned collegial comptroller’s office that emerged from the pact will handle its responsibilities.

After a two-month avalanche of evidence against Jerez, he has neither cleared up what happened, convinced anyone impartial of his innocence, or been removed from his post. He was summoned to the National Assembly’s Anti-Corruption Commission on April 26 for a hearing, but did nothing other than show how generalized the use of credit notes is by state institutions. He made no attempt to clarify any of the multiple accusations of irregularities or to present documents that could exonerate him or show where any of the 2.16 million córdobas from the first credit note alone ended up. Days later, Jerez made two separate declarations to the new comptroller’s office, behind closed doors, about which no information has been released. Some legislators have asked for Jerez’s immediate dismissal, but the only person to be axed so far has been Rafael Córdova, who headed the Jarquín administration’s investigation of the DGI in 1999 and was the first to pick up the scent of the check scam.

Anywhere else in the world, Jerez would have resigned by now, prompted by a minimum sense of dignity. Lacking this impulse, any other President in the world would have at least suspended if not dismissed him, prompted by a minimum sense of what is politic. But in today’s Nicaragua, such minimum impulses are dulled in those drunk on power. The worst that will probably happen to Jerez will be a fine for his "administrative error" ("Only God doesn’t make mistakes," says Jerez, unflustered and clearly unrepentant). But what will probably happen is that he will leave his post unscathed when Alemán reshuffles his Cabinet in June for electoral reasons and will run for a National Assembly seat, as he has already announced. Meanwhile, he will remain as PLC treasure, a key position in retooling the Party-State model and refining the State-Booty model that Nicaragua has suffered for so long.

The FSLN’s complicity

The FSLN, not too surprisingly, has reacted ambiguously to such scandalous events, reflecting less Ortega’s own calculatedly schizophrenic behavior in this case and more the fragmented efforts of those who remain in this once-revolutionary party. Some FSLN legislators participating in investigations into the Jerez case have consistently called for his removal from his government post while a sizable number of their comrades on the FSLN bench have remained silent. Meanwhile, many middle-level party leaders have revealed their increasing cynicism by shrugging the whole scandal off as "just one more case" and insisting that "nobody here has the right to cast the first stone."
In Daniel Ortega’s case the discourse is more twisted. He has not concretely referred to the case, but rather criticizes the international community’s public concern about governmental corruption as "political interference." He also gives the corruption issue an ideological veneer: it cannot be resolved by changing officials, he argues, but only by changing the system that generates corruption, which he insists is nothing more than the neoliberal system Nicaragua has endured since 1990. But that system will be changed with the FSLN’s victory in the next elections, according to Ortega. With that simplistic discourse, music to the ears of the party’s humble and trusting grassroots base, he dispenses with Jerez’s corruption and that of the FSLN elite as well. Governmental corruption currently enjoys no better support than the complicity of those in the FSLN leadership that made their pact with that government.

The ubiquitous smell of crisis

If the government would have already been taking excess corruption baggage to the meeting in February, how overweight is it now with the Jerez case? But this and other unresolved corruption cases aren’t even the most serious problem, nor is the obvious lack of governance.
Even more worrying is that warning lights are beginning to blink regarding the macroeconomic situation. This is caused in part by the very fact that our economy is not self-sustaining, but the pact itself has to share the blame, because it promotes corruption instead of governance and the price tag for this is starting to be felt in the economic terrain. In the first quarter of 2000 less than $10 million came into the country as foreign aid in hard currency to sustain the balance of payments, compared to three times that amount in the first quarter of 1999. In addition, the country is still making high interest payments on its foreign debt also in hard currency.
With international reserves down to a record peacetime low for the above reasons, the Central Bank has had to pressure the private banks to buy CENI bonds, which has helped bring in millions of dollars and pull the reserve levels back up. But in economics, you can’t pull in one place without it tugging in another. In this case, the banks now have less money available for loans, especially those whose clients are merchants and urban consumers.
The private sector is openly speaking of "recession." The inflation level, according to official data, is exceeding the forecast.
Little money is circulating due to the lack of liquidity. The micro-financiers that lend to small urban industry and commerce report arrears problems. There is not enough movement in an already very fragile economy.

Unstated political punishment

The origin of the reserves crisis is not economic, however, it is political, and the government is exclusively to blame. According to what was originally programmed in the international debt reduction initiative known as HIPC (for Highly Indebted Poor Countries), Nicaragua should now have more reserves and be paying less interest on its foreign debt. What happened?
The international community had been warning for some time about the Nicaraguan government’s reiterated and even swaggering failure to comply with the governance and transparency issues agreed to in Stockholm last year. What happened is that the unheeded warnings crystallized into undeclared punishment.
For starters, entry into the HIPC initiative has been pushed back, but that is not the only sign. The Scandinavian countries publicly announced that they were suspending aid in the pipeline to the comptroller’s office until they were satisfied that its new collegial model is serious and functional. Various other countries, while announcing no suspensions, have simply dragged their feet in disbursing committed funds, offering some technical justification, which is more discreet, more diplomatic and avoids a great deal of media fuss.
Intentionally or not, the media have been inducing the false idea in public opinion that pressure on the government by the international community can substitute for internal organization and civic opposition. Despite some resurgence triggered first by the corruption issue embodied in the government’s abuse of Comptroller General Jarquín and more recently by the pact, organized opposition has been extremely weakened by years of risk-taking, confusion, manipulation by leaders and the lack of any clear alternative hope that might make it all seem worthwhile.

Serious crisis in rural Nicaragua

The government is thus going to Washington with a shaky economic balance sheet in hand to face an international community that has not only given it warning signs, but low performance marks. And because that balance sheet has even more problems that are deepening the nation’s poverty, a plan to effectively combat poverty was another of the central commitments the government assumed in the Stockholm meeting.

The crisis in Nicaragua’s forgotten rural area is very serious, particularly after Hurricane Mitch, and is triggering massive emigration to Costa Rica in many poor municipalities, even those at the other extreme of the country. Prices have fallen for all agricultural products for both export and domestic consumption. For the second consecutive year, Nicaragua closed 1999 with a drop in all of its exports, traditional and nontraditional. The fall in coffee prices has seriously affected the traditional coffee culture in the mountains, which is essential in stabilizing the peasant economy and had been slowly recovering from the war of the 1980s. The chains of coffee dealers and small and medium growers—who help sustain so many local economies—are facing such serious problems that processing installations are beginning to be embargoed because they cannot cancel their debts.

The record fall in beef prices has seriously hit small and medium cattle ranchers. And if that weren’t enough, the conflict with Honduras over rights to the continental shelf has affected mountain cheese production, which had found a reliable nearby market in El Salvador. Salvadoran importers have lowered the price they are willing to pay Nicas for their cheese, partly for hygiene reasons but mainly because they have to set some extra aside to bribe Honduran customs officials to avoid the border taxes the Nicaraguan government imposed in response to the conflict.

UNAG and UPANIC: Yet another warning light

All these problems over the recent months are being played out against a transitory backdrop in which post-Mitch reconstruction is not yet visible in a number of disaster zones. The more structural backdrop is that the peasant economy has largely lacked attention, credits and technical support for many years now.
Small and medium rural producers are not the only ones feeling the pinch of the crisis, however. Due to the international drop in tobacco prices, big producers in Estelí and further north are warehousing their surplus tobacco and have temporarily closed their cigar plants. This is generating unemployment and frustration in a zone where only a couple of years ago revitalized tobacco growing and processing had finally begun to bring some economic relief to an area particularly hard-hit by the war.
Sorghum growers are also stockpiling any part of their crop they don’t have to sell. In their case they are being undercut—and in some cases bankrupted—by US growers of yellow corn, which is so abundant they dump part of it in Nicaragua at extremely low prices to supply the nation’s big chicken farmers. There are also problems in soy production and the local manufacture of cooking oil.

Prospects for the upcoming agricultural cycle look so grim that the presidents of the National Union of Farmers and Ranchers (UNAG) and the Nicaraguan Union of Agricultural Producers (UPANIC) held a joint press conference—itself a novelty since their organizations are ideologically hostile—to warn of possible disaster in the countryside. These two huge organizations of rural producers made extensive reference to the shrinkage of planting areas and to debts, but also spoke of corruption and sloth in the Agricultural and Forestry Ministry.

The disagreeable aroma of more unemployment

Given such a fragile economic context and the general lack of confidence in institutions, officials or even the future, the government displayed a complete lack of sensitivity by introducing a new privatized social security model. We will only highlight the political ramifications of the new system here, since the reforms to the workers’ pensions are discussed in detail in the article in this issue titled "Pensions System Reforms: Three in One."
From the very first day the new model went into effect, the increase set for employers’ contributions sparked legal challenges and protests on the grounds that the method and calendar for starting the new system is unconstitutional. Far more importantly, it is generating more unemployment.

The social security system historically has covered only a small percentage of the economically active population, just salaried workers in the formal sector, leaving unprotected the huge mass of unemployed and those in the informal sector, who are for the most part under-employed. Now both the private sector and NGOs argue that they will have to cut personnel to deal with the abrupt rise in employer contributions. The businesses buttress their argument with other worrisome figures: in the past year, industry has registered zero growth while production costs have increased by 55% in all economic sectors. Since the Liberal government took office in January 1997, water rates have gone up 121%, the average price of electricity 52% and local telephone calls 173%.

Despite this bleak picture, which begs for a genuine social pact, the government’s power drunkenness persists. Despite all the evidence to the contrary, Central Bank president Noel Ramírez maintains his triumphal stance regarding the economy. He not only continues to insist, as any good dogmatic neoliberal does, that things are going in the right direction, but that we are actually doing well.

INDE president William Báez has criticized Ramírez for using computer figures to try to dissemble reality. Báez is particularly critical of Ramírez’s monopoly over those figures. He points out that Ramírez has dismantled the analysis and statistics units of the ministries and is housing them in his Central Bank, thus controlling all statistical information on the country; he also keeps it under lock and key on the grounds of "bank confidentiality." Báez also criticizes the fact that the Central Bank president is also a board member of the governing party. Báez rightly laments Ramírez’s open commitment to the PLC as "inconceivable, unheard of, extremely unusual in any country, in fact the only case of its kind in the whole continent."

Against the two-caudillo system

The Party-State model made flesh in Noel Ramírez—as well as many other top officials—has begun to be questioned even within PLC ranks. One such critic is none other than Defense Minister José Antonio Alvarado, one of the party’s founders and long viewed as an attractive presidential contender for the Liberals.

Following a controversial PLC convention on April 30, in which Alemán hand selected his candidates for this year’s municipal elections after successfully sidestepping both debate and a proposal that candidates be selected by secret vote, Alvarado made a surprise announcement. He said he was resigning his post as defense minister to head a "re-examination" process within the PLC aimed at adjusting its obsolete forms of doing politics to the new world reality and Nicaragua’s own complex reality. Alvarado’s "dissidence" is such an important new political element that he has since come under a lot of pressure from both the presidential circle and Alemán himself.

Given that the pact aims to force a two-party PLC-FSLN system every way it can, it is important to follow the "currents" within those two parties opposed to their respective party bosses (caudillos) as they could prove important in predicting, or at least imagining, possible ways out of the crisis. On the PLC side, Alvarado’s current is challenging caudillismo by publicly rejecting the idea of replacing the presidential elections in 2001 with constituent elections. An elected constituent assembly would have the power to create a government and even a whole new Constitution, and thus appears to be Arnoldo Alemán’s preferred way of perpetuating himself in power. On the FSLN side, both Víctor Hugo Tinoco and the current headed the Sandinista Left challenge it by publicly expressing their opposition to Daniel Ortega’s fourth presidential candidacy.

Sandinismo: Party or nation?

Other currents within the broader Sandinista population, including some former FSLN leaders, are going beyond that. They are beginning to encourage Sandinistas to support the efforts of the "third way." Such is the case of Henry Ruiz, Comandante Modesto, who offers his views in this issue of envío.
Some awareness is beginning to emerge within Sandinismo that the nation must come before the party. Sandinistas grouped in the still fragile "Carlos Fonseca Amador" Sandinista Unity Movement put it this way in a recent and lucid position paper: "We must not remain trapped in an erosive dynamic of repairing the current FSLN while ending up without a country. We are obliged to find transitory forms of insertion that allow us to make a decided contribution to solving Nicaragua’s grave problems while providing us the space and time needed to reorganize ourselves into a broad and worthy political movement, capable of transmitting the best values and traditions of Sandinismo, which must present the country with a nation-building project."

The elections are going ahead

Despite all this turbulence on Nicaragua’s mainland, not to mention the offshore turbulence caused by Honduras and Colombia’s claim to a piece of the continental shelf, municipal elections will evidently be held as constitutionally established, in November of this year.
If the elections are definitely set, little else seems to be. The two parties in the pact are still jockeying candidates around and selecting new ones, and even seem unsure of their strategies. It is beginning to look as though the holding of presidential elections next year will depend on both the real results and the image effects resulting from this year’s municipal ones. There will be many telltale signs: who wins Managua, how many municipal governments the "third way" takes, how sizable the abstention rate is…. Former Supreme Electoral Council president Mariano Fiallos, a Sandinista now working with the Democratic Movement, believes that "the pact seeks to create a coup de theâtre in the municipal elections, and if it achieves that, their next step will be Constituent elections. The danger of a Constituent Assembly is that we know where it begins, but not where might end."
These past weeks have seen ferocious fights over candidacies in the FSLN, the PLC and even the other parties, and it’s not over yet. Despite the captive votes that both the FSLN and the PLC have, neither party is strong, and both know it. The "third way" is not strong either, and it too knows it. The combined atmosphere of decomposition and electioneering could mean the shifting of any chip to any other number at any time and in the blink of an eye. Candidates from the third way or other parties could end up running for the PLC or FSLN and vice versa. Almost anything goes.
Even municipal elections themselves are going, but the ground beneath them is very shaky. While that shakiness is yet another expression of the corruption and lack of governance that have riddled Nicaragua, we must all place our bets with a firm hand and dare to take risks if we are to begin to heal.

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