Envío Digital
Central American University - UCA  
  Number 254 | Septiembre 2002



A Prolonged Duel Between Legitimacy and Legality

President Bolaños and most of civil society have the egitimacy. But the legality belongs to a political society trapped by two caudillos who control officials, institutions and the nterpretation of law. The resulting duel thus promises to be a long one.

Nitlápan-Envío team

By accepting the challenge of an historically unprecedented political conflict—the war against corruption—Nicaragua’s new President let himself in for a duel in which he must clash swords with two opponents at the same time: Arnoldo Alemán and Daniel Ortega, the respective caudillos of the PLC and the FSLN.

On August 7, over a nationwide TV and radio hook-up that received ample advance publicity, President Enrique Bolaños passed the point of no return. Engaging the battle to the finish, he unveiled the discovery of what he presumes to be only the first huge stash of state funds embezzled by his predecessor, Arnoldo Alemán, aided, among others, by Alemán’s close friend and partner in crime, Byron Jerez.

This first presentation of evidence of what Bolaños has dubbed Alemán’s guaca—an ancient Nahuatl word denoting, among other things, a hidden treasure trove—was skillfully stage managed. Bolaños was accompanied by acting Attorney General Francisco Fiallos, who graphically illustrated how Alemán laundered roughly US$100 million then siphoned off portions to government officials, relatives and friends, their private businesses and the political activities of his Constitutionalist Liberal Party—the most profitable business of all.

Even after this staggering revelation, the crime’s mastermind demonstrated his boundless sense of impunity yet again. Alemán made it clear that he intends to go right on being a major player on the political stage, and hasn’t the slightest intention of answering for his crimes.

Two pillars of Nicaragua’s
political culture under attack

Bolaños has shaken the two most solid pillars of the political culture that underpin the nation’s institutional corruption: impunity and the conception of state-as-booty. It is the first time this has ever been done in Nicaragua from the highest state office. It is a worthy cause, and one that is earning the new President a colossal guaca of legitimacy.
It is becoming increasingly evident that the duel is not just between politicians, but is more fundamentally between the legitimacy of a new and much-needed cause and the current legality within institutions dominated by a political culture that refuses to be buried. Crises always ensue when something is struggling to be born and something else refuses to die.

How long will the resistance last? The two pillars are still standing, but fissures are showing and rubble is beginning to accumulate around their base. We are still learning new lessons.

Alemán employs a
"spatter-down" strategy

The same day as Bolaños’ presentation, the Office of Attorney General filed suit in a Managua criminal court against 14 people, Alemán and Jerez at the head, for money laundering, fraud, embezzlement of public funds and a raft of related lesser charges such as illicit association to commit a crime. Ten of the accused are abroad either for legitimate reasons or to evade justice, while Alemán and his daughter are protected by parliamentary immunity—he as a member of the National Assembly and she as an alternate legislator—and Alemán’s sister Amelia is hospitalized with cancer. The only one eminently available for questioning was Byron Jerez, in prison since April on two other related convictions—one involving the misuse of credit orders for luxury vehicles and the other the embezzling of money through ENITEL, the state telecommunications institution.

The next day, August 8, Alemán launched his "spatter-down" strategy: muddied himself, he would muddy everyone around him. With Bolaños accusing him and his own of embezzling and laundering money, he would get Jerez to accuse Bolaños and those around him of benefiting from such activities. He would demonstrate that out of the guaca came irregular salary bonuses for Bolaños—then his Vice President—and other officials who subsequently "betrayed" him by staying on in the Bolaños government. He would even accuse them of committing electoral crimes given that Bolaños’ campaign chest supposedly came from the stash of ill-gotten gains.

Jerez played his part well. When he was ushered into the courtroom to testify on August 8, he used the opportunity, as would any skilled politician, to impose his own agenda. Avoiding all questions from the judge’s bench, Jerez delivered a sentimental and political speech in which he accused a long list of officials in the Bolaños government of having received the allegedly laundered funds. He then requested that presiding Judge Juana Méndez, a close ally of the current FSLN leaders, call them all to testify. This was within her powers because Nicaragua’s traditional judicial system, soon to be changed, gives judges strong inquisitive and investigative powers rather than leaving this process exclusively in the hands of prosecuting attorneys. In addition, a new law dealing with accusations of money laundering stipulates that, rather than being heard by a jury, such cases are processed by the judge alone, who also determines guilt and imposes the penalty. Jerez capped his speech by arguing that President Bolaños, Vice President Rizo and all the other officials he listed should actually be tried.

Judge Méndez, who supposedly received the case through a new random assignment system, fell for the diversionary tactic and called the named officials to testify, both dragging out and diluting the investigative part of the suit. In a population totally unfamiliar with legal proceedings, the ploy produced confusion and the intended perception that "everybody here is corrupt." This potentially damaging and demoralizing feeling twisted its way through social awareness, planting doubts regarding the new government’s image and threatening to undermine the recently created climate of hope and reawaken the old conviction that there will always be impunity so "we might as well accept it."
Alemán thus succeeded not only in diverting the trial but also muddying the legitimacy of Bolaños’ cause. He attacked it even further from the "legality" flank by introducing controversial interpretations of the procedures for stripping immunity and the scope of the relevant law, the power of the National Assembly and the Central American Parliament, etc. (see this month’s Speaking Up article for a discussion of the debate on removing Alemán’s immunity).

Polemic about the new
money laundering law

The sentence, handed down the night of September 10, was preceded by yet another diversionary and potentially harmful controversy, this time regarding the new crime of money laundering. The PGR had based its primary charge on the "Law of Narcotics, Psychotropics and Other Controlled Substances" (Law 285), whose articles 61 and 62 deal with the "crime of laundering money and assets from illicit activities." Alemán’s stable of defense attorneys argued that according to this law money laundering only applies to money from drug trafficking. A week before the sentence, the new Public Ministry, product of the Alemán-Ortega pact, sided with the defense attorneys’ interpretation, concluding that none of the accused had committed the crime of money laundering. It further declared that 6 of the 14 accused—Alemán’s sister, brother, nephew and sister-in-law and Jerez’s wife and daughter—should also be exonerated of any responsibility in the other crimes.

In its concluding report, the Office of Attorney General (PGR) termed this position "inadmissible" because it "contributes to destabilizing the penal judicial order." The PGR lawyers, jurists and other experts insisted that the law does not distinguish any specific illicit activity, drug-related or otherwise.

The verdict some call historic

In the end, Judge Méndez did not buy the Public Ministry’s argument about money laundering or—at least so far—Jerez’s about who had committed electoral crimes. In the country’s first conviction for money laundering, she found Jerez, former minister of the treasury Esteban Duquestrada and former ENITEL director Jorge Solís guilty of both money and asset laundering, as well as fraud, embezzlement, association and instigation to commit crimes and electoral crimes. Alemán’s brother, sister-in-law and nephew, and Jerez’s wife and daughter were found guilty of embezzlement, and association and instigation to commit crimes, as was Alemán’s former presidential secretary and personal associate Alfredo Fernández García, despite having sent the court a sworn statement that he was only following orders. Méndez, who detailed the crimes for each of those convicted, said that all had participated in the formation of businesses for which they were the legal signatories in order to transfer and conceal money embezzled from the state. The only 2 of the 14 found innocent were assistants in the government tax office Jerez headed, who were indeed deemed to be innocently following orders.

The judge ordered that the sentences be remitted to the National Assembly with a renewed request that Alemán be relieved of his immunity, since all evidence in the case points to him as the intellectual author of each of the crimes, thus formally leaving the case open. She also ordered the arrest of all those who are fugitives, and asked for international assistance in their capture. Duquestrada and Jerez’s wife are reportedly in the United States and Solís was last seen in Guatemala. All will receive prison sentences except for Alemán’s sister Amelia, who will remain under house arrest because she is suffering from cancer. The judge ordered round-the-clock police guards for her home. Last but far from least, Méndez ordered that all frozen assets of those sentenced be embargoed and that all officials in the Alemán government return to the state the under-the-table salary bonuses and stipends they received, which one top official from the Office of Comptroller General estimates could amount to some US$70 million.

As the next step, Judge Méndez ordered the investigation of Arnoldo Alemán, his son-in-law, several bankers and other businessmen, the former PLC treasurer, its current president and another PLC legislator for a series of crimes including electoral ones. It would therefore appear that Alemán’s strategy has backfired on him. Political analyst Carlos Tünnerman considered it correct that the current elected and other government officials "not be included in further investigation of possible electoral crimes through the use of donations and illicit funds since their declarations demonstrated that they were unaware of the origin of the money."
It is not yet over for Jerez, however. On August 26, the Office of Attorney General opened a fifth fraud case against him and nine others for irregular purchases with funds from a rural development project.

Milking the conflict
for political revenue

Although Arnoldo Alemán’s image erodes more with each day that the duel goes on, he has been able to squeeze a fair amount of political revenue out of the prolongation of the conflict. Digging in behind his immunity to avoid answering in court gives Alemán constant media publicity. Embracing the philosophy of that surly old US southern senator who argued that "bad publicity is better than no publicity at all," Alemán is using this coverage to show the humble, mainly isolated rural population that admires him and the close circles that fear him that he can "tough it out." Flaunting his quarrelsome macho arrogance in the limelight of this daily publicity gives him another opportunity to consolidate the very political culture that Bolaños is trying to put behind us.
Insisting that the whole thing is a "show trial," Alemán has put on his own show, pooh-poohing evidence of his crimes as a "hate campaign" while buying time to decide which solution will benefit him most personally and ensure him the greatest control of the PLC. Persisting in his immunity-impunity, favored by a judicial system with serious investigative limitations and age-old habits of bribery, he has been able to move records, transfer money, cover his tracks, change ac-counts...and thus protect a large part of his stash.

These would not be such serious advantages if Alemán did not also have authentic leadership within the Liberal camp, based on loyalties rooted in our obsolete political culture, or if key posts in the "legal" sphere were not held by people loyal to either Alemán or FSLN caudillo Daniel Ortega. In other words, Alemán would be less cocky today if their pact had not contaminated the institutions, not to mention giving Alemán a lifetime National Assembly seat and the accompanying parliamentary immunity—at least until the correlation of legislative forces changes enough to strip him of it. All those pact-induced benefits conceded to Alemán by the FSLN add up to a present-day nightmare for the new government and society as a whole. One pundit described the situation as a fight between "free-swinging mafiosos and hobbled legitimacy."

Bolaños says no
to a "Fujimorazo"

The duel is being prolonged by Bolaños’ unwillingness to subvert this current legality, illegitimate as it may be, by declaring an emergency, dissolving the National Assembly as Fujimori did in Peru or instigating any other such "technical coup" within the Assembly where Alemán and his pact partners are entrenched. On September 2, at the celebration of Army Day, President Bolaños rejected any possibility of rupturing the constitutional and institutional order as a quick fix for the crisis generated by the anti-corruption struggle. "Some would like to see Enrique Bolaños promote a coup, as has been done in the past," he stated. "They are categorically mistaken. I am democratic and civilist." In the same speech, he referred to Nicaragua’s historical political problem: "Politics was all about shouting slogans, erecting statues, calling demonstrations of support. Everything revolved around the general, the comandante, the party or the leader’s family. We have also had problems caused by political pacts, which over time have done little other than perpetuate a caudillo, a family or a party." He also stressed that he would continue his anti-corruption fight: "Enrique Bolaños, President of all Nicaraguans, is tenacious and does not give up easily." Protocol aside, there was a notable coldness between Alemán and Bolaños during the speech.

Also responding to speculation about a Fujimori-style solution, the Army reiterated its obedience to civilian power. In previous days, however, Army Chief Javier Carrión announced that he had recommended to the President and all branches of the state involved in the crisis that every effort should be made to resolve it quickly.

Nicaraguan society could find Alemán’s prolongation of the duel advantageous as well, if it uses the time to learn the lessons on offer. For example, the grotesque attitudes we have seen during this crisis provide very important lessons about the kind of politician to avoid. Alemán won by a sizable margin in 1996 even after spending six notoriously corrupt years as Managua’s mayor, which the entire electorate knew about. He went as far as he did during his five years in office as President because that same electorate let him go that far. Will we now definitively dump him? The arguments and reactions Alemán is using to avoid recognizing his crimes are providing a lesson on the kinds of qualities we should reject out of hand in our leaders.

Ortega defines his position

After the US government cancelled Byron Jerez’s entry visa, a decision that Daniel Ortega criticized for affecting "a prominent Nicaraguan," Ortega and the other FSLN leaders settled down in their ringside seat to watch the Bolaños-Alemán duel and see who would begin to wear down first. The application of Alemán’s "spatter down" strategy made it easier and safer for them to leave their seat and move around. It is no accident that Daniel Ortega chose that moment to descend from the spectator’s box and begin defining his position.

And how has Ortega defined himself? First he emphasized the "seriousness" of the electoral crimes that may have been committed, recalling that the FSLN had already denounced them and suggesting by implication that his party had really won the elections. (Deputy Prosecutor General María Lourdes Bolaños, who like Judge Méndez is closely linked to Ortega’s circle, promptly echoed that view while at the same time dismissing the possibility that the evidence in the guaca trial would be enough to sustain the attorney general’s money laundering accusation.) Next he offered the FSLN bench’s 38 votes in the National Assembly to strip Alemán of his immunity, flouting that the FSLN has the legal key and insinuating that it would cost dear to anyone who might want to buy it. He also took advantage of the confusing legal situation generated by the trial to criticize both corrupt Alemán and neoliberal Bolaños, seeking thus to legitimize the FSLN’s own worn-out leadership by suggesting that it is the only alternative. He also hooked into the new national anti-corruption consciousness to call for protest marches and thus preempt the possible emergence of any other leadership in this struggle. Finally, he forced new Sandinista alignments around his own figure and discourse, causing another wave of resignation to wash over the ranks of party dissidents. It has been surprising to see how quickly many critical or simply non-Danielista Sandinistas have echoed Ortega’s "definitions."
As net winner of the duel’s prolongation, the FSLN general secretary was able to claim this wide array of objectives thanks to the obsolete but deep-rooted political culture he represents so well, the "legality" the FSLN helped create through the pact and, above all, the passivity, resignation and impotence into which Sandinismo has sunk.

Double standards:
Another important lesson

Daniel Ortega also waxed ironic. What are big capital and the US empire complaining about now if they were responsible for getting Alemán into the presidency in the first place, he asks rhetorically, trying to make us forget that it was he who got Alemán into the National Assembly, and for life, at that. He proclaims that the FSLN was the first to denounce Alemán’s corruption and has never ceased doing so, trying to make us forget that the centerpiece of the pact he hammered out with Alemán was to keep quiet about each other’s corruption and the corruption they shared. He also wants us to forget the sanctions that liquidated all FSLN militants who dared to question that pact. Ortega argues that the Immunity Law should be respected in the case of Alemán, accused of massive theft, trying to make us forget that Nicaragua is now involved in an international lawsuit with the Inter-American Human Rights Commission precisely because he disrespected it when accused of rape and child abuse.
Nicaraguan society can find another lesson in the opportunistic, albeit implicitly defensive attitudes of Ortega and the other FSLN leaders in prolonging the duel. Discerning the double standards that dominate the FSLN’s whole way of being is an extremely important and needed lesson for the third of Nicaragua that considers itself Sandinista. Discovering the political cunning of that two-headed caudillo monster embodied in the Alemán-Ortega duo is a class no one has passed yet. The two political strongmen still need each other. Democracy will be the winner if and when their respective parties cut loose from them.

It all started with
Hurricane Mitch

In the prolongation of this duel, there are real grounds to claim that Bolaños has not cranked up the economy yet, as he had promised. As usual, however, Alemán and Ortega are arguing the wrong reasons. The big issues are not really whether Bolaños’ Cabinet is more or less technocratic, more or less able, with greater or lesser inertia or social insensitivity, or has dedicated all its time to the anti-corruption fight. They have infinitely more to do with a history of underdevelopment closely linked to the impunity of those who have always taken the lion’s share in the state-as-booty vision, and even more to do with what happened in the last three years of the Alemán administration.
Hurricane Mitch’s rains, a curse for so many Nicaraguans, were manna from heaven for Alemán and his government. There was a sudden and unexpected increase in foreign aid after Mitch, much of it earmarked for construction work. This made possible a 7% economic growth rate the year following Mitch’s devastation, the highest rate recorded in the previous 20 years. Although that was not repeated the next two years, there was still good growth despite the already institutionalized corruption, which diverted a lot of the aid. By the end of 2000, however, the growth began to fizzle out into stagnation.
The improvement in those three post-Mitch years cannot be explained by the amount of aid coming in alone. Another important factor was the increasing amount of remittances sent back to family members by the wave of emigrants who had given up waiting for opportunities to emerge in their own country. This fueling of the national economy by foreign aid and family remittances in turn consolidated Alemán’s leadership.

Builder President

The results of the growth that followed in Mitch’s wake are already reflected in the most recent poverty survey, which the new government has not wanted to publish for political reasons. It shows a net reduction of poverty from 48% to 46% of the population and of extreme poverty from 17% to 15% between 1999 and 2001.

When Alemán’s backers present him today as the "Builder President," they are not out of line, because Nicaragua indeed experienced a boom in state construction investment following Mitch. Where they cross the line from reality to fantasy is when they argue that these works are the proof that he did not steal. As mayor of Managua in the early nineties, Alemán earned a reputation as the politician who "steals but gets things done." It is from that category that he is now challenging Bolaños, a politician determined to consolidate his legitimacy with a very different and perhaps less dynamic classification: steal nothing and do what you can.
The problem is that Bolaños has been able to do virtually nothing so far, partly because the previous administration tied his hands for this year at least. From their dominion of the arenas of "legality," both the Alemán and Ortega camps are taking advantage of that powerlessness to delegitimize the anti-corruption cause.
President Bolaños’ efforts to pull the economy out of the stagnation it has fallen into in the past two years are hobbled by several tremendous limitations, starting with the plummeting of international coffee prices the previous year. That was followed by the collapse of several banks, caused in part by the coffee crisis but infinitely more by the unbridled corruption that went hand in hand with the PLC-FSLN pact, in which consecutive state bailouts generated an unsustainable domestic debt. Most recently was the irresponsible expansion of public spending in Alemán’s last year in office, which made the fiscal deficit even more unsustainable than it already was.
To these last two macroeconomic variables must be added the sustained pressure applied by the International Monetary Fund, which is not known for giving anybody a helping hand when they are down, no matter how seriously they may be trying to get back on their feet. The government has therefore been forced to expend a great deal of energy struggling to be heard by a deaf IMF.

Some longer-term
economic plans

If the expansion of public spending in 2001 left a disastrous deficit, Alemán’s squandering of public funds paid him handsome dividends in political terms. That spending plus the aid bonanza of the previous two years created tangible improvements for a great many people and help explain the sizable margin by which Bolaños won last November’s elections as the candidate of the governing PLC.
It also allowed Alemán to leave office as a "winner" who could turn the tables on Bolaños once the new President focused the anti-corruption fight on him, deflecting the bad publicity with charges that Bolaños is incapable of maintaining the economic activity of his own years. Few Nicaraguans understand the macroeconomic disaster that Alemán bequeathed Bolaños, or the preconditions of the IMF’s structural adjustment package, or how much foreign aid automatically entered state coffers after Mitch and where it went, much less that this faucet has run dry and the IMF has blocked others. They only know that when Alemán reiterates that Bolaños is not getting the economic show on the road, their own experience seems to bear him out.

More order, less corruption

Getting the show back on the road is not just an issue of starting up the economic motor again. It first needs fuel, major repairs and payment of the IMF’s hefty road toll. The government has, however, made a start in certain areas that should pay off further down that road, because the current fight against corruption is not just about investigating and punishing yesterday’s corrupt officials. That is only its backward-looking dimension.
The other dimension is its future projection, in which the anti-corruption fight has a lot to do with imposing order and establishing controls in public administration. It is necessary to ensure that disorder and the practice of handing out posts based on party and personal loyalties rather than job skills will not continue providing a fertile breeding ground for more corruption in the future.

Government officials in the Bolaños administration still pull down salaries utterly disproportionate to the poverty of the country and most of its inhabitants, although at least they are no longer secret or bloated by under-the-table add-ons. Nonetheless, the incipient mechanisms intended to guarantee austerity, transparency, efficiency and control in public administration are beginning to be felt, and that is no small feat.
In addition to putting order in administration, Bolaños is also having to impose macroeconomic order, considerably restricting public spending and increasing taxes. With post-Mitch reconstruction aid no longer flowing in, public investment projects were the first to feel the ax. And because Alemán had invested a great deal of political capital precisely in the construction of rural roads, schools and major highways, projects that generated a lot of temporary employment after Mitch, their disappearance had a major impact.

The US recession
is another obstacle

Upon taking office, Bolaños ran into two other major economic obstacles, one totally out of his control and the other only slightly less so. The first was the recession in the United States and the second has been the frustrating negotiations with the IMF.
The US recession is much more pronounced than had been expected and as a result economic growth in the coming years will not match the levels achieved in the second half of the nineties. Not everyone agrees about how much it will affect the money sent home to relatives by Nicaraguan emigrants in the United States, but everyone does agree that the remittances will not keep growing at the same rate. Some 300,000 Nicaraguans live and work in Miami, many of them in the construction and tourist industries, both of which are being hard hit by the recession. In fact, Miami is precisely one of the US cities experiencing the greatest unemployment levels right now.
The US recession is also affecting the economic growth model proposed by Bolaños, who from the day he took office has continually emphasized foreign investment in tourism and the offshore assembly plants know as maquiladoras. In the case of the latter, the recession is depressing demand for the products, mainly textiles, produced by these Taiwanese, Korean and US-owned sweatshops for re-export to the States. Consequently, even if Nicaragua offers better political conditions today, new investors are simply not coming, and those already here are not expanding their operations, because their main problem is not here but in their most important market. This trend began to be noticed in early 2001, when there were already layoffs and temporary closures in the free trade zones because of dropping orders from the North. Bolaños can do absolutely nothing to jump-start this basic motor of his strategy and generate massive employment quickly.
As for tourism, the central problem is that Nicaragua is poorly prepared for any quick conversion into an attractive spot for ecotourism or adventure tourism. It actually has many more natural resources to offer than Costa Rica, but is still light years behind its neighbor in both infrastructure and tourist service culture.

Bread and circus

With so many economic limits, the duel’s prolongation suits not only Alemán and Ortega beautifully but, strange as it may seem, even suits Bolaños. There is no lie that does not possess a grain of truth, and there is indeed some truth in Alemán’s argument that Bolaños is providing circus because he can’t provide bread.

There’s a lot more lie, however. The anti-corruption struggle and the collective reflection it is triggering nourishes people’s faith in change and in a better future, and this is a definite economic asset, albeit intangible and long-term.
Bolaños knew full well that the first year of his administration would be a tough one. He knew he would have no outside resources, would have to sort out a very strong contraction in public spending, would probably be unable to get an agreement with the IMF due to its unmeetable conditions and would have no means to implement any social program with a significant impact. This grim reality is why he has had so little bread to offer.
If Alemán had been stripped of his immunity, stood trial and been sentenced to prison, the recession and unemployment would have become even more prominent. Getting the country’s economic motor started depends little on the progress of the anti-corruption struggle, although elucidating the political scenario quickly and constructively could have a noticeable influence on future investments, the country’s credibility with the international lending agencies and an economic improvement, even if not immediately.

What do the domestic debt,
the IMF, banks and the media have in common?

The second big obstacle in the path of President Bolaños and his Cabinet has been the negotiations with the IMF, which is unwilling to bend its requirement that the government drastically shrink the fiscal deficit.
The IMF knows perfectly well that Nicaragua’s domestic debt burden is the main problem with its public finances. It also knows that this debt is largely inherited from the pact and that the interest on that debt, which the government must pay the national banks and bankers, is the main drag preventing the new government from achieving any economic take-off.
Nor is the IMF unaware that these same banks and bankers were exempted from paying the equivalent of US$30-40 million in income taxes over the past four years, as a fiscal privilege granted by the Alemán government. This is just about what it would take to close the fiscal gap. How does the IMF justify demanding that the government pay the banks, and not that the banks pay their taxes, particularly since all that is at stake in the second option are the banks’ profits while the lives of the poor hang in the balance with the first one?
And why is there so much talk in the government and the media about other tax evasions, other exonerations, and not this one? Could it be that the Bolaños government is backed by the banks and has bankers in its Cabinet? Might it also be that the media, which have taken up other aspects of the anti-corruption struggle so strongly, are financed by ads from banks and bankers?

A lone ranger

Bolaños’ only weapon in this duel is the legitimacy that his anti-corruption cause gives him in public opinion and civil society. Thus armed, he is up against a political society—reduced via the pact to virtually the FSLN and the PLC—wielding the legality it controls. Some of Bolaños’ sympathizers call him the Lone Ranger.
President Bolaños is out on his own in other ways, too, including the isolation caused by his Cabinet’s excessively modernizing technocracy. The bulk of his ministers have a poorly developed political nose and social sensitivity but are long on that new and lucrative science some have dubbed "povertology."
There is a palpable lack of synchronization between the Bolaños’ economic and social teams and even in each team’s internal strategy and public discourse. An economist close to the Cabinet commented to envío that "it all sounds like gelatinous cacophony." So far nobody in the executive branch has taken on the role played by former Central Bank president Noel Ramírez during the Alemán government. Ramírez was the face associated with the macro-economy and convinced the public that he was coordinating economic policy, fashioning himself for the public eye as a cold and insensitive bureaucrat. Bolaños’ current Cabinet has no face, no leadership and no sensitivity, which is seriously eroding the government; if this continues it could undermine Bolaños’ own legitimacy. It is yet another reason why both the FSLN and PLC legislators are enjoying enough space to get away with murder.

The market basket
and the treasure trove

After revealing Alemán’s treasure trove, Bolaños sent the National Assembly another bill to expand taxes in order to reach the collection target required by the IMF. As before, both the content and the objectives of the proposed reforms were confusing.
The government technocrats managed the debate very poorly, blaming everything on the IMF in a clumsy attempt to deflect the political costs of the new taxes. In turn, the FSLN and PLC representatives in the National Assembly turned the tables on Bolaños by blaming everything on him.

One of the elements of the Bolaños bill was to tax several previously exempted items in the basic market basket, which was a compromise alternative to the IMF’s insistence on taxing all 53 items. These same FSLN and PLC legislators threatened not only to oppose this measure but also to repeal the tax on the items previously taxed in a show of their "great concern for the poor." The President and a number of independent analysts quickly jumped on the gesture as "populist." First, they argued, the population would barely feel any benefit, as the prices of these products would surely not go down. Those who doubt such a prognosis need only look at the supermarket prices of coffee in the consumer countries, which did not even flutter when international prices plummeted to a third of mid-nineties’ prices. Second, eliminating the existing taxes would cut government tax collection by under US$2 million; a mere dent in the deficit the government is trying to cover.

The FSLN and PLC benches won the battle of the "macroeconomic confusion" created around the market basket, whether it was real, virtual, bait or astute negotiating. They joined forces to approve a tax reform package quite different than the one Bolaños pleaded with them to pass. It was a demonstration of strategic strength at the right political moment. The big loser was Bolaños, who, as part of the build-up to the August 7 revelations about the guaca had rashly announced that he would use the money found in Alemán’s stash to avoid taxing the market basket. It was his cavalier way of illustrating that "it pays to fight corruption." Only a few days later, when he submitted the tax bill, he had to eat those mobilizing words.

No breathing room until 2003

It is almost a sure bet that the IMF will sign the structural adjustment agreement with the Nicaraguan government at the end of the year. The European Union, which had already promised to urge the IMF to sign, and the United States, which suggested it would do so during Under Secretary of State for Western Hemisphere Affairs Otto Reich’s visit to Nicaragua at the end of August, have in fact used their influence with the international lending agency. This will help get the economy moving and allow Nicaragua to comply with another phase in the agenda to enter the HIPC Initiative to pardon of a large part of its foreign debt.

This does not, however, mean that the IMF will get off Nicaragua’s back after the agreement is signed. It will continue overseeing the implementation of the drastic conditions embodied in the agreement, which Bolaños will have to reflect in both cuts and new taxes in the 2003 budget. Even so, the government expects to have some breathing room next year with the signed agreement freeing up enough resources to launch some of the programs Bolaños promised during his electoral campaign.

The life raft

The most important of the social projects ready for 2003, the one in which the government has deposited its greatest hopes, is a massive low-cost housing program. Next year’s economic growth projections are already being calculated based on the expected results of this program and one other, the repair of various highways that are in very bad shape. These two programs will generate jobs because they are relatively labor intensive, but their major impact will be limited to the cities.
In the longer term, the government’s greatest hope of all depends on the US free trade agreement with Central America. Bolaños and his team view this as a life raft, expecting of it both a more favorable economic setting and the guarantee of a modernization of politics, and consequently more solid and enduring governance.

Bitter coffee and
hunger in the north

The countryside will continue to be the government’s Achilles Heel, the economic vehicle hardest to get moving now and in the future. The Bolaños government still has no answers for the crisis generated by the precipitous drop in international coffee prices. The mountainous northern departments of Matagalpa and Jinotega produce most of the coffee that until the last few years made up nearly half of Nicaragua’s total export package. Today, thousands of the workers who used to pick coffee on farms that are now closed and bankrupt line Matagalpa’s highways to exhibit their misery, ask for handouts and plead for a solution to the unemployment and hunger.
They camp out there, rain and shine, in dozens of groups, like a festering sore that all can see, about whom all are talking, but that no one seems to have any idea how to treat other than with handouts. Over a dozen children and adults have died of hunger in the camps alone—if families sleeping on the ground or at best in a rotting hammock can be called a camp—while hundreds more show grave signs of malnutrition. And hordes more are suffering and dying silently and invisibly deep in the mountains.

The only effective responses to this drama require political will and institutional capacity. Does the government have either? Coffee is no longer the answer in Nicaragua. International prices are not going to rise in the next few years, and could even fall further. The production of organic coffee is not a lasting solution either, because the competition is enormous, with all coffee-growing countries employing the same few strategies. This crisis has not been taken very seriously in Nicaragua. The most that can be seen is a stubborn determination to make coffee viable again, at least in speeches, because in practice the irreversible failure of many coffee businesses, especially medium and large ones, is inescapable.

Neither the power
nor the resources

What a large part of the thirty thousand unemployed wage laborers who used to work for the coffee processing and exporting companies, the sector most affected by the crisis, are asking for is land, which is a reasonable and logical demand. A government more able to provide answers would find it for them, buying it from the bankrupt coffee plantations and organizing flexible ways for the workers to purchase it in quick and efficient operations.
If no such answers are forthcoming or the government drags its feet, we can expect to see the reactivation of armed groups and an increase in rural crime, signs of which are already visible. The drama of the "camp-ins" along the highways reflects the near total powerlessness of this group, due in no small part to the lack of resources available to them.
Seeing the families starving in those camps, one can’t help remembering that the tragedy was further aggravated by the chain of swindles organized by the Centeno Roque brothers through the Sandinista-owned Interbank, the first of the two banks that went under nearly three years ago. Their maneuvers left many coffee processing businesses unable to pay the small growers for their harvests or their own workers to dry and pack the coffee. One of the most frequent scams by the Centeno Roques’ import-export business was to use Interbank to mortgage, without informing their owners, hundreds of properties put up as loan collateral by small and medium growers. These brothers and the Interbank managers thus have a responsibility for the hunger raging through the north today that FSLN spokespeople are careful not to mention, pinning all the economic responsibility and all the social insensitivity on the new government.

Banked money that
is not circulating

Bolaños has not hesitated to claim that one of his economic accomplishments has been a considerable increase in deposits in the financial system. While this is unarguably due partly to the credibility awakened by his government, that is not the only explanation. It is also due to the rock-bottom interest rates paid in US banks and the instability of the stock market.
The increase in deposits is also not the accomplishment that it might seem because these deposits are just sitting there earning better interest than they would in US banks; they are not moving the economy. The same high rates that attracted the money to Nicaraguan banks makes it prohibitive for the country’s productive sector to borrow. There is thus little relationship between attracting resources to the country and facilitating their availability for production.
There are also no visible accomplishments related to employment, little money is circulating on the street and it is evident that the economy is at a standstill. The Central Bank’s data on economic activity show a further contraction in the first two quarters of this year.

So far, the only economic achievement that Bolaños can justifiably claim is the effort his government is making to order and balance public finances after years of corruption and irresponsible spending. But ordering and balancing trigger recession, and this has a huge political cost. Now alongside graffiti supporting Bolaños’ war on corruption are new ones calling him a traitor because he has not kept his campaign promise to provide new jobs.

The surprising part is that Bolaños has not paid as high a price as could have been anticipated; what has saved him is that the war on corruption still has the population’s sympathies, a very subtle sign that we are advancing, no matter how slowly. A CID-Gallup poll released at the end of August shows 97% agreeing that the Bolaños government should be investigating possible acts of corruption by the Alemán government, up 5 points from April. Asked who they support in the confrontation between Bolaños and Alemán, 79% responded Bolaños and only 7% Alemán. That is closely mirrored by the responses to a question about favorable vs. unfavorable opinions of a number of political figures. Bolaños received a 77% favorable response—6 points higher than Violeta Chamorro, who usually tops such polls—and Alemán only a 16% favorable response. Cardinal Obando, once a major favorite, has slipped to only 42% favorable, with Daniel Ortega above him by 3 percentage points.

We need patience
and a long view

The Bolaños-Alemán duel can be expected to drag on until at least the end of the year. This prolongation is logical, given all that has accumulated over Nicaragua’s history and all that is at stake for Nicaragua’s future.

No one doubts Bolaños’ legitimacy in this duel he has unleashed, a war he is calling a "civic revolution, without shots or gunpowder." Some are not just passively backing it; they are beginning to participate in initiatives and to reflect with more information and arguments on the economic, social and ethical ills triggered by corrupt public officials as well as the corruption within society to which they have so inured us.

The prolongation of the duel can also have advantages for society if we can only figure out how to discover and exploit them. We find ourselves enrolled in a great school, in which basic courses on patience and a long-term perspective must accompany all other subjects studied. After so many expectations and hopes created in a country where shortsightedness predominates, only patience and a long view can help us past the frustrations caused by the "legal" obstacles revealed following the opening of the guaca.
Faced with such a novel situation, it is only fair that we continue to cultivate hope in the form of long-term patience rather than short-term promises, because the best results of such legitimate struggles are never harvested in the first picking.

More Asterisks Along the Anti-Corruption Road

* US could try Alemán for money laundering
The outgoing US Ambassador in Managua, Oliver Garza, first floated the possibility that the United States might be considering a suit against former President Alemán for money laundering on August 13. Three days later President Bolaños told Garza that "money launderers and terrorists have to know that they cannot take refuge in Nicaragua." The two declarations led to a flood of opinions on the legal possibility of extradition and even speculation that Alemán might be captured in a Noriega-style operation. On August 19, Alemán himself, alluding to the Sandinistas, made the following crack over his radio station: "They say that the eagle from the North will come to carry this rabbit away. If they want to, come ahead. But for those who pride themselves on having terrorist friends, sparrow-hawks will follow behind to pluck out their eyes." The speculation increased when it was announced that Under-Secretary of State Otto Reich would make a two-day visit to the country on August 26-27. Reich, who did not meet with either Alemán or Ortega, publicly expressed total support for Bolaños. He did, however, meet with a cross-party selection of legislators, including die-hard Alemán supporters, who later showed signs of looking for a political way out of the conflict involving the former President. On the day of Reich’s departure, some seven thousand people gathered in Managua for a street demonstration called by Daniel Ortega, who both strongly criticized the US government and issued an ultimatum to the National Assembly to strip Alemán of his immunity.
* Bishop Mata pleads for clemency for Jerez
On August 28, bishop of Estelí Abelardo Mata sent Judge Juana Méndez a letter asking her to amend Byron Jerez’s sentence to house arrest on bail so he can care for his adolescent son, who is confined to a wheelchair because he was born with spina bifida. After enumerating constitutional rights and international agreements on children, the bishop asked the judge to "put her hand on her heart and take inspiration from God to respect this person’s human rights." The letter, supporting a request made the previous day by Jerez’s own son, whose mother and sister are fugitives from justice and whose father is in prison, all for money laundering and fraud against the state, triggered strong public rejection. The strongest argument was based on the constitutional principle that "we are all equal before the law" and reminders that many very poor mothers have been sentenced to prison for stealing pittances while their small children were abandoned with no one to advocate on their behalf. In a television phone-in many viewers wondered why Jerez could not use some of his reported fortune to pay for a nurse, while others questioned whether the boy was really abandoned, as members of Jerez’s family always turned up for his court appearances.
* Petitions for and against stripping Alemán’s immunity
Following the formal revelations of Alemán’s treasure trove on August 7, a new movement calling itself National Conscience was created with the slogan "I’m signing against corruption." In the last three weeks of August alone it collected 542,175 signatures all around the country demanding that the National Assembly remove Alemán’s immunity so he can stand trial for his acts of corruption. Hundreds of young people participated in the collection of signatures, for each of which they were paid the equivalent of roughly a quarter. The effort was financed with funds from foreign aid and augmented by contributions from the movement’s board members.

The latter include directors of the Civil Coordinator, media figures, business leaders and some politicians who since the last elections have unsuccessfully been trying to pull together a third way that can move beyond the disasters of the PLC-FSLN pact.

On September 1, in a pro-Alemán gathering of some three thousand peasants in Malpaisillo, his supporters handed him 382,000 signatures opposed to stripping his immunity. That day, Alemán pledged that he would sue President Bolaños and acting Attorney General Francisco Fiallos for libel and slander.

* Accusations of fraud in a state construction company
After President Bolaños lifted the lid on the guaca, the Public Ministry, until then passive in other notorious corruption cases, got intricately involved in the trial. With notable belligerence and clearly some prior knowledge of data, Deputy Prosecutor María Lourdes Bolaños centered her investigations on the fraudulent decapitalizing of the MAYCO state construction company during the Alemán government. Although officially privatized "in favor of the workers," this company was actually bought by Alemán and his group. The deputy prosecutor provided evidence of funds funneled out of MAYCO to feed the trove of money laundered by Alemán that the Attorney General’s Office had discovered in Panama. She also produced evidence of various ghost companies created with MAYCO resources and of millions of dollars that the company spent on construction projects for properties belonging to Alemán and his family. Particularly important was her revelation, backed by invoices, checks and contracts, of how Alemán’s officials erased the evidence implicating Alemán and Jerez in the pillaging of MAYCO.
* Nicaragua among the world’s most corrupt countries
In late August, Transparency International released its latest report, in which it analyzes and grades the perceived corruption of public officials and politicians in 102 countries around the world, based on polls and surveys taken by various independent institutions. Nicaragua has the dubious honor of being in first place in Central America, fifth in Latin America (surpassed by Paraguay, Haiti, Ecuador, Bolivia and Venezuela) and twentieth in the world.
* Other kinds of corruption denounced
In mid-August, the Committee of Nongovernmental Organizations of Organized Society of the South Atlantic Autonomous Region issued a pronouncement supporting the anti-corruption struggle headed by President Bolaños. The statement noted that "the Atlantic Coast’s historic abandonment by successive governments, which benefit from our region by granting constant concessions to exploit our natural resources, is also corruption. The approval of mega-projects and sale of the region’s wealth without consulting the Regional Council is also corruption. The constant deceit through electoral promises, manipulating our claims for our ancestral rights, such as territorial demarcation and the titling of communal lands, is also corruption."
In yet another pronouncement issued on August 15, the Autonomous Women’s Movement came out "in favor of the executive branch’s actions against corruption." It took the opportunity to remind Nicaraguans of the corruption hidden within "the social model imposed by the State and other predominant social groups that has generated profound inequalities for women." In an allusion to the Catholic Church’s influence on reproductive health and sexual rights, it added, "Nicaragua’s good governance is only possible in the framework of respect for constitutional precepts and the lay nature of the State."

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