Envío Digital
Central American University - UCA  
  Number 229 | Agosto 2000



The Air is Thick With Electoral Fraud

The political atmosphere is getting murkier by the day. It was already hard enough to breathe before the Interbank crisis, an unexpected "settling of accounts" between pact makers, contaminated the air even more.

Nitlápan-Envío team

In Managua and the other municipalities on the Pacific side of the country, voters who turn out on Sunday, November 5, will be given two ballots, one to elect the mayor and deputy mayor and the other for the members of their Municipal Council. The new look for the ballots this year is their size: they are not the yard-long scrolls that squeezed in nearly two-dozen presidential candidates in 1996. If nothing else good comes out of the new Electoral Law, reformed by the PLC-FSLN pact to exclude most other options, it will at least save on paper.

On the night of July 18, with anti-riot police guarding the Supreme Electoral Council building against hostile reactions, CSE president Roberto Rivas announced that only four national parties passed muster to be on the municipal ballots: the incumbent Constitutionalist Liberal Party (PLC), the FSLN, the Christian Way and the Conservative Party. The autonomous Atlantic regions will have two additional local choices, since the Coast Unity Party (PAMUC) and the Multi-ethnic Indigenous Party (PIM) will also be included.

Verification—the "cutting" edge

The exclusion of other parties and candidates was by political decisions that were not based on technical criteria or any interpretation of the law aimed at favoring democratic pluralism. For example, the possibility of independent municipal candidates being able to run through the democratic formula of popular petition associations had been eliminated at a single stroke when the Electoral Law was reformed at the beginning of this year.
A number of small parties threw in the towel soon afterward, overwhelmed by the new requisites to participate in the elections. The toughest of these was the stipulation that each party had to gather signatures of 3% of the names on the national electoral rolls to support their registration, while alliances were required to collect the same percentage multiplied by the number of parties in the alliance.
The fact that the reformed law includes no verification procedure for these signatures suggests that the drafters of this condition assumed the number to be so excessive and the time to gather them so short that no small parties would succeed. In fact, several did, which meant that the newly elected CSE authorities had to find a "legal cutting edge" with which to trim away the options that the two leading parties found objectionable.

The FSLN leadership wanted to see the Sandinista Renovation Movement (MRS) and its Third Way alliance on the cutting-room floor in order to run unchallenged as the "left" option. The Christian Way felt the same about the Christian Unity Movement (MUC) with respect to evangelical voters. The PLC wanted the Liberal Salvation Movement (MSL) plus the alliance of the Nationalist Liberal Party (mainly former Somocistas) and National Resistance Party (mainly former contras) out for the very same reason vis-à-vis the "right" option. The CSE disqualified them all by annulling the bulk of their 75,000 signatures.
The excluded parties all reacted differently. The MUC claimed that it had sure-fire winning candidates in 40 municipalities and on that basis began negotiating first with the Conservatives then with the FSLN for a future presidential alliance. The Resistance Party broke off from the excluded PLN without defining its plan. The PLC tried to attract the Liberals of the PLN and MSL, while both of those parties initiated talks with José Antonio Alvarado, who has left the ruling party to create his own Liberal Democratic Party and thus compete in the presidential elections. The MRS decided not to ally with any party on the municipal ballot because it believes that the whole process is already too fraudulent. It will instead start making contacts in search of a broader convergence for "the future."
The "third-way" alliance, made up of the MRS and four other parties that remained together following the break up of the Nicaraguan Democratic Movement several months ago, was the only group to publish a detailed report on how the CSE annulled its signatures. According to its July 21 document, 25,981 were eliminated because they also appeared on other parties’ lists (the CSE never explicitly prohibited signing for two parties nor did it give the MRS details on which other parties had already collected the signatures or from what polling areas). Another 31,829 were annulled for supposedly invalid identification numbers (the CSE did not permit the MRS to compare them with the data on the electoral rolls). Yet another 9,115 were annulled because they were said to have appeared on the MRS list twice (the CSE never demonstrated which ones were repeated).
The MRS asked the CSE to provide details of all of these irregularities, but received no response, leading it to condemn the whole electoral process as "corrupted, null, illegal, partial and fraudulent." Five days after releasing its statement, the MRS filed suit against the CSE magistrates in the Appeals Court of Managua for having eliminated its alliance from the race, thereby de facto stripping this Sandinista party of its legal status.
This shady CSE behavior illustrates the determination of the FSLN and the PLC to clear the track of bothersome dark horses by whatever means, including new models of thinly veiled fraud and exclusion. Such mutually beneficial collusion apart, however, the battle between the two front-runners gives no quarter.

International interference?

As the MRS report illustrates, the signature verification was done with no transparency whatever. When the objectives of the process could no longer be denied, the parties that felt the knife met with representatives of the international community to denounce the fraud being cooked up. On July 11, the five countries (United States, Canada, Spain, Sweden and Germany) originally assigned to follow up the post-Mitch Stockholm agreements, now joined by Japan, issued a statement about the course of the electoral process. In an unusually harsh version of their ever-diplomatic language, they expressed confidence that "concrete steps will be taken to mitigate the growing perception that the two main parties in the CSE are limiting the participation of others."
Three days later, President Alemán reacted. In a pompous television appearance flanked by the presidents of the three other branches of state (legislative, judicial and electoral), he solemnly read his own harsh declaration, in which he ratified "the determination not to discuss with the international community themes that are within the province of national sovereignty." The assertion, he declared, "based on perceptions of influence, that the CSE is limiting the participation of political groups, issuing a priori opinions when we are still in the process of organizing the municipal elections, merits special rejection."
The previous day, the CSE president had reported that no country in the original Group of Five or Japan or any other country had donated a single dollar to the CSE for the municipal elections so far. When questioned by journalists he stated that it would be "a breach of trust" for him to reveal whether the government had requested such support.

The confrontation revealed yet again, perhaps even more patently than previously given the tough language both sides used, how little space is left for positive shifts that could pump a little fresh air into the atmosphere. On the few occasions that the country’s suffocating population tries to apply any pressure, the government systematically ridicules it and continues along the same authoritarian path with accustomed impunity. And when international actors get involved, diplomatically expressing their displeasure, Alemán quickly neutralizes their comments by defending his government’s sovereignty and debatable legality. It also helps him that the diplomats too are choking for breath in Nicaragua’s contaminated political scene. As one Nicaraguan politician commented, "No one fully understands what’s going on, what is precisely ‘the bad part’ of the pact; there’s no one who isn’t fed up with so much commotion and ridicule. We Nicas have gotten bored with it and foreigners can’t be more Nica than us. They can hardly put up with us anymore."

There were nearly only three

Right up to July 18, President Alemán repeated several times in interviews and declarations that there would only be three options: his PLC, the FSLN and the Christian Way. In fact, he often rudely ignored his loyal legislative ally, the Christian Way, in his enthusiasm to emphasize the fundamental choice between "darkness and light" (the FSLN and the PLC, respectively, in Alemán’s view of things.)
Having three choices on the ballot, particularly for Managua’s critical mayoral race, suited the PLC very well indeed. The popular-populist Sandinista radio commentator Carlos Guadamuz, who is running on the Christian Way ticket after being expelled from the FSLN, is expected to pull votes away from business magnate Herty Lewites, the FSLN candidate, despite the latter’s own considerable draw. In a hardly subtle move to achieve this, Liberal legislators granted Guadamuz a last-minute amnesty that expunges from his record a pending trial for a violent dispute he headed up in the mayor’s office some months ago that would have left him ineligible to run for office. A whole other question is what motivated Guadamuz to go with the sell-out Christian Way and what prompted that party to let him.

One international actor seems not to have been content with just issuing declarations about all the cuts of the verification knife. Many believe that the US Embassy, which has decisive influence in the international financial institutions, in fact pressured President Alemán and his four CSE magistrates to let the Conservative Party onto the ballot. The US government and a sector of other donor countries would very much like to see this anti-Alemán, anti-Sandinista, big business option in the new pumpkin-colored presidential palace after next year’s elections.
Alemán’s campaign team, on the other hand, particularly wanted to see this traditional oligarchic party eliminated, fearing that it would pull more anti-Sandinista votes from the PLC than anti-Liberal votes from the FSLN. For that very reason, one can assume that Daniel Ortega’s three CSE magistrates collaborated to assure its inclusion from their managerial posts in the computerized information process, where the signatures are "verified." It was the perfect opportunity to get even with the PLC for the Guadamuz maneuver.

Some analysts have a different thesis. While not utterly downplaying the outside pressure, they do not believe that Alemán gave in without extracting his pound of flesh. Their guess is that he got Ortega to pledge his support for the option of a constituent election next year.

In any event, having four choices on the ballot shattered Alemán’s calculations, jeopardizing his strategy to extend his ten-year control of the Managua mayor’s office, which is viewed as a stepping stone to the presidency. His solution came as no surprise: he gave the CSE the order to confirm Conservative candidate Pedro Solórzano’s "legal" disqualification from running in Managua. In doing so, Alemán showed himself impervious to the candidate’s legal arguments and independent experts’ opinions on electoral legalities, as well as street protests and even demonstrations by the cargo cart drivers who traditionally participate in the Ben Hur races Solórzano instituted in the nineties. Not even declarations by Cardinal Obando made him waver. On the night of August 8, with all the pomp and circumstance that the presidential will can bring to bear, the CSE president announced that, by the unanimous decision of all seven magistrates, Solórzano had been found ineligible to run for mayor of Managua.
Closing the doors to his candidacy sealed the electoral fraud, and not because, as his campaign slogan would have it, "If Pedrito runs, Pedrito wins," since predictable fraud at the moment of the vote count would never have permitted that. The point is rather that if the two lead parties can get away with such arbitrary and dirty decisions now, how can anyone expect clean results at the end?
The Conservative Party should have reacted differently than it did. After the obligatory initial outrage, it simply switched candidates—to the plodding and uncharismatic William Báez, head of the Chamorro government’s Social Action Ministry and until recently president of the Nicaraguan Development Institute—and continued to claim that it represents the electorate’s only democratic, anti-pact and anti-corruption choice. That response came across as an irresponsible expression of the political myopia and arrogance of the social class this party has historically represented. But then again, it might just be a tactic to avoid losing the slot, gambling that the contaminated municipal elections will so taint the lead parties that the Conservatives can then head up the only genuine patriotic alliance in the presidential race, attracting all the dispersed and excluded energies. Is such a miracle even conceivable?

"What began with fraud..."

All parties excluded from the race lost not only the possibility of participating in the elections but also their legal status as parties precisely because they are not participating. Those eliminated by this arbitrary "legality" did not live up to their promise to demonstrate their support by bringing those who had signed for them into the streets, though such a protest would not have changed the course of events in any event. Dora María Téllez, who was to have run for mayor of Managua under the MRS "Third Way" banner, struck the most realistic yet visionary note when she declared that "the signature verification process has marked the first electronic fraud in Nicaraguan history. And what began with fraud will end with fraud. Given this reality, the only thing we can do is start reversing the whole electoral process."
Téllez mentioned several elements indicating electronic fraud in the verification process headed up by the technicians who take their orders from the FSLN magistrates in the CSE. Among them is the fact that the computerized electoral rolls database that the CSE used for the verification does not match the data on the printed electoral rolls. This makes it likely that there will be electronic fraud in the vote count as well, with results fabricated by two lead parties only interested in beating each other out by whatever means at their disposal.


Once the Alemán-Ortega pact—which among many other things transformed the CSE structures—was consummated, every step, declaration or decision made by the CSE has obliged it to reveal another of the pact’s marked cards. And each new card turned face up on the game table discredits it more in public opinion.

Throughout July, the CSE engaged in a festive but confusing campaign to get voters to their local polling station sometime over the course of three days to verify that their voting cards were correctly registered. The campaign did not get the expected turnout. The CSE declared that 45% of total registered voters were verified, but some suspect that even that figure is exaggerated. It did not proffer any figure for the percentage of errors found. Although many reasons could explain the population’s lethargy, one of them is surely the lack of legitimacy that some voters already sense about the electoral process in view of the CSE’s declarations and behavior. It is certainly possible that the perception of pre-fraud is already inducing pre-abstention.

In search of breathing space

The specter of next year’s presidential elections has been hovering over all reactions and decisions being made in response to the shrunken electoral ballot. In the past month, three new political initiatives have tried to carve out some maneuvering room. But the national reality has left barely enough space to breathe, much less maneuver.

The first initiative—utterly fanciful albeit not without its attraction—was put forward by some dissident Liberals to force a change even before the elections by removing President Alemán from his post on grounds of mental incapacity or stripping him of his immunity to drag him through the courts. It was the President’s own erratic declarations over the course of the past month that inspired this exceptional expedient. For example, Alemán claimed that Nicaragua’s entry into the foreign-debt pardoning initiative known as HIPC was "no longer a priority" of his government. That remark, which he rectified days later, left the high-level International Monetary Fund officials visiting the country right then rather perplexed. Around the same time, Alemán told foreign journalists that to save money it would be best to drop the territorial limits suit Nicaragua initiated against Honduras in the International Court of The Hague. His alternative? That the two countries "split up" any fish and petroleum they find in the disputed waters of the Caribbean. Hours later, the Foreign Ministry was found doing some energetic backpedaling on the President’s behalf.

The second initiative, which also came from Liberal ranks, better expresses the depth of the crisis riddling Liberalism. This was the decision by José Antonio Alvarado, PLC founder and secretary general and successively head of three different ministries in the current government, to resign and form his own party. His avowed aim is to unify all Liberal tendencies and small party fractions opposed to Alemán, seek alliances with other parties and compete in the elections in 2001. In announcing his decision, Alvarado stated that "Arnoldo Alemán has kidnapped the PLC, anointed himself as its only voice and, sheltering behind the authority and perks of office, has sacrificed Liberal principles." He predicted that in 2002 a new victorious Liberalism, totally different from the one the country is suffering today, would take office.
Alvarado added that "we have someone governing us who lacks the sensibility to understand people’s needs, who seems increasingly like the dusk, prelude to the dark night, who only rejects with words, not with works." In that last remark, he got in a potshot at both Alemán’s ubiquitous billboards around the country advertising his government’s "works, not words" and his repeated claim that he represents the light and the Sandinistas the "dark night."
In the days leading up to Alvarado’s announcement, 123 public employees were fired on presidential order for sympathizing with him. Two weeks before actually leaving the PLC, he and several other Liberal leaders had announced the creation of a current within the party called "Liberals for Change." But on July 14, President Alemán effectively slammed the door in his face by ratifying the Ministry of Government’s arbitrary decision on May 15 to annul Alvarado’s 1990 recovery of his Nicaraguan nationality, which, unless overturned, prevents him from running for high office.

The third initiative, which is the most disconcerting of all, is the possibility of former Comptroller General Agustín Jarquín accepting Daniel Ortega’s invitation to ally with the FSLN. This initiative grew out of two convictions gaining currency in the FSLN structures and in the country itself. One is that next year’s presidential elections could conceivably return the FSLN to power, and the other is that Ortega’s candidacy could destroy that chance.

The FSLN has the edge, but…

Among the publicly known aspects of the PLC-FSLN pact—only a small circle knows the secret, central ones—is that Daniel Ortega’s main demand was to lower the percentage needed to win on the first round to 35% of the valid votes. This, along with the reformed Electoral Law’s bipartisan exclusion of other options and the addition of the Conservatives to this year’s ballot, could make that percentage more attainable. And it certainly does not hurt the FSLN’s chances that the luster has worn off of the PLC government, tarnished by its President’s growing unpopularity and now bereft of one of the few presidential prospects that would have been attractive to the Liberal grass roots.

The context is still more favorable to the FSLN because it has more experience in using political weapons and stratagems in the context of a pact that is anything but "gentlemanly." And finally, having "militarized" its campaign structures, the FSLN is assured a discipline and order that the Liberals lack.

The problem is that the FSLN’s captive vote, surely the most solid within the overall electorate, does not go beyond 20% in the best of cases. Stretching that 20% even to 35% is a tough task after the "piñata" and other economic scandals involving known FSLN leaders, after so many years of double-speak and double-act regarding the unjust neoliberal economic model, after the pact and after the accusation of incest against Ortega that his whole party conspired to cover up. Winning on the first round will not be easy, and FSLN leaders know that if they fall short, they have no chance whatever on the second one.

The first thing required is a good clean-up job, and the best "soap" available in Nicaragua’s limited electoral market is Agustín Jarquín. Comptroller General of the Republic from April 1996 to February 2000, when the government auditing institution he headed went collegial (five comptrollers) as a result of the pact, Jarquín resigned his post as "fifth" among supposed equals on July 15. He has maintained his national prestige as a crusader against corruption despite—or perhaps in part because of—the long campaign Alemán unleashed against him, and he still gets high popularity ratings as a presidential possibility. This makes him the perfect "Mr. Clean" to launch Ortega’s presidential candidacy and give it credibility.

Ortega’s team has a lot to offer an alliance, because the FSLN may have lost the government in 1990, but it never really lost its power. It went fishing for other leaders of Jarquín’s Social Christian Unity (USC) with the bait of a decent quota of winnable legislative posts on the FSLN slate, and seems to have hooked its limit. The weakness of Christian Democracy in Nicaragua today, as mainly represented by the USC, makes it easy for the FSLN. Despite a 40-year history in Nicaragua, the Christian Democrats split in the seventies, temporarily reunifying in the early nineties under the name Christian Democratic Union (UDC). As has happened with so many ideological currents in this country, it has fractured again, and is today reduced to emblems, a paltry and scattered grassroots base and a handful of seasoned national politicians. Some of those politicians who gained greater recognition as legislators during the Chamorro government—and not always for the most honorable reasons—apparently see the FSLN’s offer of an alliance as the only way to get back the privileges that a seat in the National Assembly offers. Their ideology has become sufficiently watered down that it could blend in with any banner that guarantees them political survival, following the old principle, so abused in Nicaragua, that "the end justifies the means."
Dividing and conquering these secondary leaders was easier than hooking Jarquín himself, the big catch. On July 23, a week after his departure with honor from the Office of Comptroller General, USC leaders paid homage to Jarquín as a way of spotlighting him as a potential candidate for the 2001 elections. In a speech in which he abandoned his usual measured tone, Jarquín broached the subject of his month-long conversations with Daniel Ortega and the FSLN leadership. He justified his efforts to nail down an alliance he could live with on his desire to "return hope to the people."
There are those who indeed see Jarquín as the last hope left for Nicaragua, the only politician who combines the integrity, the intelligence and the independence required to hold out for nothing less than an alliance whose elements would pull the country back from the abyss. Others do not trust that such elements—transparent governance, a genuine fight against corruption, etc. would be of genuine interest to the FSLN and thus enforceable.

Jarquín does bring several negotiating chips to the talks, however. He is not only attractive to the FSLN for his thus-far impeccable image. He also has great contacts with the Christian Democratic International and with all the countries in the donor community. On August 4, Vinicio Cerezo, former Guatemalan President and now secretary general of the Christian Democratic Organization of America, which was the main promoter of the 1988 Esquipulas peace accords, visited Nicaragua to give the CD International’s blessing to the FSLN-USC alliance.

Not all Christian Democrats are lining up behind the idea, however. On July 26, what is left of the UDC took out a paid ad in local newspapers disassociating itself from former leaders—naming Azucena Ferrey, Erick Ramírez, Luis Humberto Guzmán and Adán Fletes, among others—who have now joined the USC and support the alliance with the FSLN.
The UDC claims to oppose it because the FSLN maintains "anti-democratic political positions" and is still in cahoots with Alemán’s PLC.

Shock and disappointment

The negotiations between Jarquín and Ortega have quite reasonably triggered concern, skepticism, stupor and disillusionment among many observers. The concern is that the ethical capital accumulated by Jarquín, which is fundamental to any attempt to forge a genuine patriotic alliance, could be squandered away on what are probably doomed negotiations with the FSLN before this much-needed patriotic alliance has even shaped up. The skepticism is born of the fact that Ortega and his FSLN cohorts are continuing to take all the anti-democratic steps decided in the pact with Alemán, giving no sign of any commitment to fight corruption, even though this critical issue is Jarquín’s main claim to fame. The stupor comes from recalling how recently the FSLN-PLC pact destroyed the credibility and independence of the Comptroller General’s office and even jailed Jarquín, its titular head. Was the idea of this alliance already germinating in Ortega’s head as he joined Alemán in calling Jarquín an "enemy"? And as for disillusionment, it is mainly affecting those who still dared believe in honest and courageous heroes and now find their faith wracked by doubts yet again.

Although both men insist that they are not discussing presidential candidacies for 2001, the possibility of Jarquín joining the ticket as Ortega’s vice-presidential running mate appears to be an inevitable agenda point.

Alemán decides to play hardball

There is growing fear in Liberal circles that "the wolf is at the door!" Every day brings new indications that the FSLN could topple the Liberals: the four-way ballot, a growing awareness that the municipal government races in Managua and who knows how many other municipalities are swinging towards the FSLN and thus could even give it a leg up in next year’s presidential race, fear that the Constituent idea could go up in smoke, the niche that the FSLN is opening with the Christian Democratic International, the sense that the PLC’s traditional anti-Sandinista discourse is no longer enough... This nightmare led President Alemán and his closest advisers to make the unanticipated switch to a desperation-driven "hardball" strategy. The fall in international coffee prices and the over-extension of Interbank—which along with the Banco de Finanzas is one of two Sandinista banks and thus a visible expression of the capital accumulation achieved by the economic group behind today’s top FSLN leaders—gave Alemán the opportunity to throw a pitch with an extremely dangerous spin.

The drop in coffee prices created an unexpected liquidity crisis for an export company called AGRESAMI (Agropecuaria Renacer de San Miguel), in turn part of the CONAGRA agroindustrial conglomerate. For years, AGRESAMI has been a vital credit source for thousands of small and medium growers in the country’s coffee-rich northern region. It encompasses a lot and tries to squeeze all it can, granting the growers credit against their commitment to sell their harvest through AGRESAMI, establishing the price in advance. Such "futures" pricing is a standard mechanism imposed by agricultural usurers to maximize returns and minimize risks, since it almost inevitably involves buying below market prices. In Nicaragua, growers have no choice but to accept it as an additional cost given the particularly serious shortage of other credit sources. When international coffee prices go up, as they did a few years ago, AGRESAMI bats a home run with the bases loaded. But in times of crisis, like now, it can strike out, which is just what happened.

Facing what appears to have been a massive liquidity crisis after the harvest, the three Centeno brothers—CONAGRA’s on-record controlling shareholders—turned to Interbank, where they have a lot of influence. There they pulled off a loan operation of over US$50 million, which exceeded by eightfold the legal percentage of stockholder capital (30%) that can be loaned to a single debtor. In other words, the move, which went against all financial wisdom as well as a banking law or two, involved loaning out 250% of the bank’s own patrimony and thus dipping quite heavily into savers’ deposits, exposing Interbank’s future to grave risk. In April, the Superintendence of Banks discovered what was going on and began to take precautionary measures. With AGRE-SAMI unable to pay the money back in the short term, the bank’s own ensuing liquidity crisis amounted to technical bankruptcy.

Enter President Alemán and his campaign team, who transformed what was at first a financial crisis not un-heard of in the banking world into a major political scandal. With little institutional prudence and even less respect for national stability, Alemán gleefully announced via Radio Corporación on August 7 that the Superintendence of Banks had intervened in Interbank. The bank’s crisis, which was real, serious and self-inflicted, merited the intervention, which the IDB and the World Bank later publicly supported. "The bank is so far in hock that it has no salvation," one economist told envío. But what otherwise would have been a behind-the-scenes process of discovering its scope and determining how to save the investments of stockholders and depositors alike turned into an hysterical run on the bank and renewed old fears of bank insecurity in general in Nicaragua.

The Centeno empire

With Interbank’s technical bankruptcy now out in the open, the dimensions of the Centeno brothers’ multi-million dollar economic empire is itself becoming public information. In less than ten years these three siblings from a family of very humble origins—it made clay roof tiles and sold firewood in Quilalí—have been stockpiling properties and other commercial activities in key agroexport sectors. The speed and geographic reach of this greed for land accumulation may well match or even surpass the records set by the Somozas and by Alemán.

CONAGRA owns sesame production in Chinandega, coffee plantations and processing operations in Jinotega and Matagalpa, sugar refineries, cattle ranches, shrimp farms and transport businesses. The Centeno brothers have created a spectacular genetic improvement center for livestock in Rivas called the "Cañas Gordas." They are into ginger; in fact, they are into everything; they even sponsor the north’s baseball team. Their tentacles have shown a particular predilection for the Area of Workers’ Property, state holdings privatized in the worker’s favor during the nineties.

They have also bought huge extensions of land, like that of Apacunca in Somotillo, for cash, with capital of unexplained origins, leading to all kinds of speculations about the brothers being front men for others. If so, whom?

There’s not enough money for so many banks

The Interbank crisis also revealed the fragility of the whole national financial system. Some time ago, a study by the Inter-American Development Bank indicated that only four of the eleven private banks in Nicaragua would be able to survive; the others were too small and notably inefficient. Another piece of information appearing in the same study clearly indicated the weakness of Nicaraguan capital compared with that of other countries in the region. The reprivatizing of the banking system began simultaneously in Nicaragua and El Salvador in 1991. Four years later, by which time the 11 private banks in Nicaragua were all in operation, only the Banco de América Central (BAC), belonging to the powerful Pellas group, had a patrimony greater than $5 million. In El Salvador, several of the banks already had over $40 million of their own capital.

The disproportionate number of national banks with respect to the size of Nicaragua’s economy is explained by the fact that the banks form part of different economic groups and are used to channel credits preferentially to allied businesses. This is why there is such resistance to mergers, apparently against all market logic. It is the "capital sin" of the nation’s financial system. The chain of bankruptcies—Banco Europeo de Centroamérica (BECA), Banco del Campo, Banco Sur and now Interbank—has corroborated the IDB study’s prophecy.

Even now, Interbank is not alone in its crisis, though the spotlight is firmly concentrated on it for malicious political reasons. The Banco del Café has also been semi-intervened by the Superintendence of Banks for months for providing loans of dubious recovery to business belonging to some of its main stockholders. That intervention, however, was managed discretely, as the Superintendence of Banks would have also preferred in the Interbank case. The Banco Mercantil (BAMER) is also in crisis in the wake of the political conflict between its director Haroldo Montealegre and the president of the Nicaraguan Social Security Institute (INSS), Martín Aguado. To get back at Montealegre for publicly questioning Aguado’s business ethics when he worked at BA-MER, Aguado withdrew all of the INSS deposits and put them in other banks, leaving BAMER on the brink. Rumors of a possible BAMER-BANCAFE merger make sense, whether true or not, since it would help both banks out of serious difficulties. Other small banks—Caley Dagnall and the newest addition, PRIBANCO-—are also riddled with problems.

People in glass houses…

President Alemán’s well-known style is to throw the stone…and NOT hide the hand. It is the same style he uses to present his pact with Ortega to the public. The stone he just threw at the rival "gang," however, was so big, so unexpected, so public and so aimed at the heart of its economic territory, however, that it may have unanticipated repercussions.

Alemán not only usurped the ban-king superintendent’s terrain with his announcement, he publicly chortled about the bankruptcy, taking obvious pleasure in Interbank’s "corruption" and errors. Whatever he may feel privately, such a public attitude is irresponsible and petty for the head of a rival political party much less for a supposed statesman. As on many previous occasions, the Office of Attorney General was also used in the PLC’s strategy shift: with unprecedented celerity, this representative of the state filed a case with the courts against the Interbank directors and the Centeno brothers.

When the Superintendence of Banks tried to recover some of the prudence required for this type of financial problem, it was too late. And because this is not the kind of thing proponents of the capitalist way of life like to see happen, Alemán’s ex abruptus earned the enmity of financial professionals of all stripes. It will also cost the Central Bank, the financial system, the country as a whole and its image abroad, and of course foreign investment, very dearly.

But for Alemán, all that is a small price to pay for the joy of exhibiting the corruption of the Sandinista business class to the nation and the world—and to the Christian Democratic International. In the mind of a man like Alemán, it was tit-for-tat vengeance: the Centeno brothers’ fundless checks against Byron Jerez’s checks for so many funds. It is more than worth it if only to give more financial grief to major Interbank stockholder and depositor Humberto Ortega, currently recovering from triple bypass surgery following a heart attack—caused by the announcement?—and to liquidate one of the two Sandinista banks, which were beginning to pull in funds for the FSLN’s election campaign.

With or without this politicization of the crisis, however, Sandinista capital finds itself in an extremely difficult situation. Perhaps only the FSLN’s return to power can save it.

With the electoral atmosphere already thick with such contamination, yet another toxic financial fight is brewing. This one is between the traditional oligarchic capital associated with the Conservative party and grouped around the Pellas family (BAC) and the capital behind BANIC, the state bank fraudulently privatized in an operation that was never fully uncovered due to the pact-induced changes in the Office of Comptroller General.

Big questions still in the air

Many questions are still floating in the putrid air. The results of the municipal elections, particularly the already fraudulent Managua race, will both decide the make-up of the municipal governments and influence the course of next year’s general elections. Will the latter be held on the date established or will they be substituted—or perhaps even followed—by a Constituent? Alemán continues to favor this formula because he is desperate to hold onto power somehow during the term of government that must intervene before he can run for reelection. Ortega also appears to favor it. The reason he gave after his first public encounter with Agustín Jarquín was that it would allow for "another revolution," which this time would consist of changing the political system from an excessively presidential one to a parliament- based one. He did not explain what inspired this about-face in his historic preference for the locus of power.
Will there be more than just four options on the ballot for the general elections? The formation of a patriotic alliance between all anti-pact groups that are also genuinely willing to embark on a new way of engaging in politics is vital. What will the CSE do to National Unity, the new formation headed by former army chief Joaquín Cuadra, which has already fulfilled the requirements necessary to register and compete in the presidential elections? What will it do with José Antonio Alvarado’s new PLD, which also aspires to compete in the general elections? And even if these two options are not decapitated by the CSE guillotine, will they—either separately or united—have the capacity to pull together and represent a pluralist national coalition?
If, on the other hand, only four options remain in 2001, what role will the Conservative Party, now publicly and openly supported by Pellas capital, end up playing in those elections? Will the country’s old oligarchy understand that it is not enough to oppose the pact but that a pluralist national unity—a genuine patriotic alliance—is needed? Will it be up to the challenge of assuming the mantle of that alliance, making space for all who support it? Will it be able to comprehend that pluralist means it must embrace all the currently dispersed energies of Sandinistas and Liberals who are not currently in either the FSLN or the PLC precisely because they have an ethical code and a nationalist vision?

Will we ever be able to breathe again?

The answers to all these questions overlap the questions and answers generated by the already discredited municipal elections. Both these and the general elections will decide Nicaragua’s future. Barring the unpredictable, which one should never do in this country, that statement is so obvious as to appear silly, but it begs a more essential question that is far from silly and whose answer is not yet obvious: how will that future be defined? Will the FSLN, if it wins, suddenly recover the ethical principles, the social concerns and the economic wherewithal to act on them, as so many of its loyal grassroots followers blindly believe? Or will the elections "legitimize" this year’s bipartisan divvying up of the country, closing the door for a long time to other ways of thinking that refuse to be constrained by this political straightjacket? Or will society and the forces not involved in the pact succeed in putting a halt to this destructive and archaic trend, offering Nicaragua a much-needed breath of fresh air?

Jarquín’s Dilemma in His Own Words

Most observers were assailed by an array of strong and in some cases very contradictory sentiments from the first moment, without knowing Jarquín’s own views. So what is he saying? Jarquín spent nearly two hours with envío, analyzing the national situation and the reasons he is even considering the idea of an alliance with the FSLN. We would like to give him the chance to explain his quandary in his own words.

On the national situation:
"Nicaragua urgently needs an agreement on governability, although naturally not at any cost. The Nicaraguan Democratic Movement, which brought together a representative conglomerate of the political spectrum and had a chance to offer the country something different and more attractive than what the FSLN and PLC are offering, was irresponsibly destroyed by a sector of the Conservative Party and people at the service of the presidency. We now have an electoral process with a very rigid and restrictive law, which may possibly generate major abstention and hand the victory to one of the two lead parties, the PLC and FSLN. Then come the presidential elections.
"My fear is that a Liberal triumph will enable the apparatus of dictatorial power being nurtured by President Alemán and his closest circle to take root. In my judgment, the Conservative Party is still closed to making common cause with sectors of the Left, which limits the possibility of presenting a genuine national alternative. I do not doubt that a Conservative Party government would be extremely different from the current one, but would it even have any possibility of coming to power given the current state of affairs? Being closed to the Left also implies having no real commitment to social concerns. That leaves very little room for maneuver, assuming that there is any room at all."

On his personal situation:
"When I resigned from the Office of Comptroller General, my project for the next six months was to focus almost exclusively on gathering documentation to prepare a proposal for the nation we need to build. That was my personal situation when the FSLN offer came up. It arose out of the weight of their own reality, which they also feel limits their chances of survival.
"The first thing it triggered in me was skepticism and even rejection. But then I began to think it over and to realize that I would have to open myself up at least to talk, so I could see what the offer really consists of and what possibilities exist for effectively building an agreement that will contribute to good governance in the country."

On why the FSLN sought out Christian Democracy:
"In organizational terms, Nicaragua’s Social Christians are very disjointed, with a very negligent political organization and a frankly poor structure. But they have important international links with the Christian Democratic Organization of America, to which Eduardo Frei’s Christian Democratic Party, which is governing Chile in a coalition with the Socialist Party, belongs. They also have strong ties with Mexico’s National Action Party, which just won the presidential elections there and is a full member of the Christian Democratic International, and with the governing party in Costa Rica. All that has a lot of weight. Nicaragua is a very dependent country and its relationship with the international community is strategic. It needs strong sponsorship to increase its resources and guarantee projects. The Christian Democratic International has decided to accompany us in this effort."
Jarquín hopes that the FSLN will give its backing to a nation-building project with very concrete measures: financial discipline, "healthy" national and foreign investment rather than "money laundering," a disciplined budget without discretionary spending, austerity in the salaries of public officials, strengthening of decentralization with support to local governments, etc. He emphasized one point that he considers central to deciding the future presidential candidates in this alliance:
"The standard bearers of this project must be men and women who enjoy reasonable trust and credibility outside their particular sphere of loyal supporters. And frankly, I do not see myself on a ticket with Daniel Ortega, not because I have anything personal against him, but simply because that candidacy has no possibility of victory."

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