Envío Digital
Central American University - UCA  
  Number 202 | Mayo 1998



We are Hitting Bottom: Where is the Way Up and Out?

Are we witnessing the first incontrovertible evidence that Nicaragua is at the mercy of drug traffickers? Will society react in time? Will the still uncontaminated institutions, the honest and responsible political and social leaders, know how to turn this dreadful mishap into an opportunity?

Nitlápan-Envío team

Nicaragua is being buried beneath an avalanche of crises of all kinds. One convulsion comes on top of another and each new crisis forces our attention away from the one that just hit.

The latest crisis has revealed how deeply into our country international drug traffic has penetrated and how high up the political ladder it has climbed. The Nicaraguan public remains aghast at the constant flow of new information that has followed the inadvertent media discovery of a luxurious executive jet, part of a drug ring, used for four months with total impunity to transport cocaine both within Nicaragua and to other countries.

The ecological crisis, now of old vintage, is the most structural crisis of them all since its solution is the farthest away. Alarming signs of this crisis multiplied in April. But those with the most power to act paid little attention to these signs. They are so absorbed in their self-serving myopic projects that they use their power for little else.

Despairing signs that the country is turning into another Africa are accumulating. Its territory is becoming a desert; its institutions are dissolving; its leadership classes are tribalizing; all while its population gets hungrier by the day. Is there a way up and out of all this?

The "Presidential" Jet

On April 27, the Channel 2 nightly news program "100% Noticias" reported on the strange presence and suspicious flights of a Lear 35-A jet, housed in a brand new, tightly guarded hangar at an abandoned state-owned airport on the outskirts of Managua. People living near the Los Brasiles airport frequently referred to the plane as "El Presidencial." Each new day since then has brought one sensational revelation after another. The jigsaw puzzle pieces are slowly coming together to reveal the most collosal of the scandals the Liberal government has faced so far.

The eight-passenger luxury plane with its sophisticated aerodynamic design, an exclusive model that reportedly cost some $4 million, was stolen in Florida at the beginning of 1997 and brought into Nicaragua in December of that same year by José Francisco Guasch, a Cuban-American with a long drug trafficking history. The Alemán government's highest institutions were opened to Guasch, allowing him to "legalize" the obviously undocumented plane, after making a few modifications to it, in only a few days and without paying a cent—at least in taxes.

Guasch immediately created a new business for executive and ambulance flights called Ceylon Air, and made his chauffeur the majority stockholder. The jet was put into the air immediately. There is talk of between 20 and 50 flights, including trips to El Salvador, Honduras, Costa Rica and Colombia, all of them out of a small abandoned airport with no migration or customs checks. Civil Aeronautics had moved the Nicaraguan Army out of this airport shortly before it became the plane's home.

Millions of Cocaine Particles

Guasch, who moved in and out of government offices as easily as his plane moved in and out of the country, showed his gratitude for the facilities offered him by putting his company's only plane at the service of top government officials free of charge. Ministers, vice ministers, the Vice President and even the President used it for both business and pleasure trips.

After the journalistic revelation, when the National Police moved in to inspect the jet, they discovered millions of cocaine particles in its cabin, parts of the fuselage, the seats, everywhere. After first even denying knowledge of the plane's existence, President Alemán, looking more upset than he ever had before, admitted that he had flown in it to a Central American presidential summit in San Salvador. An official communiqué released on May 4 stated that the President was "surprised in his good faith," while his spokesperson said that Alemán's "excessive generosity" and openness to foreign investors explained what had happened.

Two days later President Alemán decided to deal with the scandal surrounding his government by issuing an executive decree suspending the director and vice director of Civil Aeronautics and the director of Migration. The decree was full of judicial inconsistencies. For example, it violated the Constitution and the Law of the National Police (PN) by also suspending PN Commissioner Carlos Bendaña, who had been the liaison with Interpol; Commissioner Carlos Palacios, who headed the PN Anti-Drug Division and worked with the DEA; and three other police officials with responsibilities for that same division. Given their experience, these were the people best prepared to head up the investigation of what has been dubbed the "narco-jet."
By the same decree, President Alemán formed three executive commissions to investigate the scandal and determine responsibilities. At their head he put Edgar Quintana, Minister of Construction and Transportation, (on whom Civil Aeronautics depends and who had been in the jet in question several times), and José Antonio Alvarado (Minister of Government and the President's right-hand man). The fact that the President, who was himself implicated in the scandal, had created the commissions, named other implicated individuals to head them and removed very experienced police officials sparked serious public outcry.

With the many facets and implications of the scandal only barely beginning to surface as envío went to press, the media and a perplexed public were already starting to ask a lot of very good and tough questions. Meanwhile, the National Assembly's Anti-Drug Commission went into permanent session and the judicial branch initiated its own proceedings.

"The System" Is to Blame

Civil Aeronautics director Mario Rivas, the highest official removed from office so far in connection with the case, was promptly taken in for questioning given his undeniably direct relationship to the case. Rivas, who has enjoyed Alemán's full confidence, is married to one of the President's nieces and lived in the United States—where he received US citizenship and had occasion to meet Guasch—until the Liberals took office in Nicaragua last year. Right up to the time he was handcuffed and taken to the courthouse, Rivas defended the legality of everything that happened. Once in court, he sought to dilute his obvious responsibilities by stating that "the system," not he, was to blame.

Bulls eye! That is precisely what this distressing and painful affair, with its as yet unpredictable consequences, has revealed. The economic priority of Arnoldo Alemán's government "system" is rapid capital accumulation for his loyal group, in a duel to the death with the new Sandinista capitalists and some of the traditional oligarchs. After 18 months, this "system" has not yet paid the President's circle of Cuban-Nica-Miami friends in full for their campaign contributions. It is indeed a system, because, contrary to what Alemán would like, he doesn't control all power or all branches of government or all institutions or even have full access to all state funds. So he needs "support," like that represented by the group around Guasch, himself now a fugitive sought by Interpol, among others. The prestige of politics and politicians has fallen to new and paralyzing lows thanks to this "system." Will Nicaragua find a way up and out of the abyss?

A Country in Flames

As a result of the poverty that is pushing peasants ever further into the agricultural frontier, of the insatiable voracity of the lumber dealers and of the drought caused by El Niño in this part of the world, thousands of hectares of Nicaragua's forests were lost to fires burning out of control from coast to coast throughout April and into May. A high pressure front trapped the accumulating smoke, leaving Managua's skies so thick that the sun became an impotent little yellow ball that turned as red as a rabbit's eye at sundown. The international airports of both Nicaragua and Honduras were officially closed for several days due to the dangerously low visibility.

According to the internationally recognized Natural Resource and Fire Monitoring project, which uses satellite surveillance, over 2,000 more forest fires occurred in Nicaragua in April alone than in 1997 as a whole. The satellites registered over 450 fires a day between April 1 and 25, for a total of 11,283, compared to some 9,000 in all of 1997.

Invaluable forests were devoured by the fires in the strategic northeastern mountainous area of Bosawás—a biosphere reserve—and in the southern area of the Indio-Maíz reserve along the border with Costa Rica. Hectares more of rich vegetation were devoured around the Mombacho volcano, Mozonte, Bluefields, Río San Juan, Dipilto, Paiwas. Flames even seared Managua's own ever-shrinking lung this fiery April.

This ecological crisis is not independent of the misgovernment, the tangle of judicial weaknesses and the various fierce economic wars underway in the country. Yesterday it was the rice war and tomorrow it may be a war of the drug cartels, but there are also wars among the lumber merchants. And in all, just like the wars fought with a different kind of fire power, it is the country as a whole, its entire society, that "puts in the dead," as Nicaraguans say. In this especially dry pre-rainy season the Atlantic Coast put in 70% of the dead —that is, 70% of the devastating and uncontrollable fires were in that vast forested area. How did they get started? Was it recent peasant migrants employing traditional slash and burn agriculture in a nontraditional setting? Was it the lumber dealers? Were any of the fires provoked? With so little wind, how did so many of them get out of control?
In the last week of April, Comptroller General Agustín Jarquín, alarmed by what was going on, decided to make an on-site tour of the Atlantic Coast to find out more about the problem of the burning and clearcutting of the forests. On his return to Managua, Jarquín reported on the ecological disaster he had witnessed and on the total lack of controls he was able to verify. The lumber dealers go wherever they want, carrying rolls of blank permits with the seal of the Ministry of Environment and Natural Resources (MARENA) already stamped on them.

Within hours of the Comptroller's hard-hitting declarations, President Alemán, who has been engaged in an ongoing turf war with Jarquín since taking office, decided to make his authority and his interest in the issue felt. He ratified a presidential decree from last June, extending the prohibition of cutting and marketing royal cedar, mahogany and pochote anywhere in the country for another five years. He established fines and confiscations for anyone caught trafficking in these precious woods, the most valuable of the national flora and already in danger of extinction.

Needed: An Environmental Audit

The moratorium does not seem to be an appropriate solution. Ecologists and environmental organizations from civil society, to whom so little attention is paid, recall that the June 1997 decree in no way helped stop the tree felling. Quite the contrary, it shot up the price for these woods, thus increasing a whole set of corrupt activities that go hand in hand with the lumber business, and ended by increasing the deforestation. They also recall that MARENA's most able officials and technicians were massively fired with the change of government and say that the current ones seem to be acting more as representatives of the lumber dealers' interests than as defenders of the interests of society and the state.

The moratorium is not only insufficient, according to the specialists, but is also unjust because it punishes equally those who exploit the wood and give nothing in return, and those who use it rationally then invest in reforestation. The ecologists argue that the solution is to implement a quota system of extraction by zone. They say that Nicaragua is one of the few countries that has no forestry planning program and that having one would help people learn about the forests and their rational use.

The Comptroller was not pleased with the decree either. He requested a "state of forestry emergency" throughout the country and took a shot across the government's bow by announcing that his offices would audit the lumber concessions that MARENA has provided and continues providing at its complete discretion.

The panorama is frightening. The smoke-clogged skies of April were a warning. Nicaragua only has 30% of its original forests left, and each year 150,000 hectares more disappear, without being replanted. The rapid deforestation, which has led to the disappearance of dozens of rivers, is the country's most pressing environmental problem. At the current rate, the country's entire forest cover will have disappeared in 20 years, and Nicaragua will be a desert. Is there time to reverse this trend? Is there a way up and out?

Taking Office or Taking Complete Control?

As the drug jet scandal was darkening the political skies, the five magistrates of the Supreme Electoral Council (CSE) took the risk of flying across the smoke darkened territorial skies to the Atlantic Coast on May 4. That was the day legally set for the CSE to swear in the newly elected Regional Councils members in the two autonomous regions and preside over the election of their seven-member executive boards, which in turn would then elect their respective Regional Coordinator (customarily referred to by coast people as "governor").

A relatively rapid and surprise-free session was expected in the North Atlantic Autonomous Region (RAAN). It was assumed that everyone there was by now accustomed to the fact that Alemán's Constitutionalist Liberal party (PLC) had an absolute majority with which to elect whomever it chose to the board, without having to negotiate anything with any other party.

In the South Atlantic (RAAS), on the other hand, the magistrates were prepared for a longer and more conflictive session. Among other reasons, the PLC was four votes short of a majority. The FSLN had formed a progressive bloc with the two councilors from the Coast Alliance, but still needed nine votes. There was thus tense competition for the support of the two other benches: the new Multiethnic Indigenist Party (PIM) with seven members and the Miskito organization Yátama with four. It was rumored that the PLC had offered one Yátama member a house and money, and another the position as regional director of ENEL, the electricity utility.

But few political actors follow scripts in today's Nicaragua. The RAAN elections were marked by conflict, while calm reigned in the RAAS. In the RAAN the FSLN opened the board elections demanding respect for a Regional Council by-law requiring that the board reflect the political proportions of the Council itself: 4 from the PLC, 2 from the FSLN and 1 from Yátama. But when the magistrates reviewed a copy of the by-laws provided to them by the FSLN they saw that it had neither signatures, nor date, nor any mention of its period of validity. When a PLC member argued that the by-law was not in effect, and that the PLC favored political pluralism but not political proportionality, the FSLN's 13 councilors walked out. The 8 Yátama councilors quickly followed them but not before one rejected as "totally humiliating" a PLC offer to "give" Yátama the post of second at-large board member as a token of political pluralism.

Left alone in the hall, the PLC bench proceeded to squabble with Stedman Fagoth, a PLC National Assembly representative and thus full voting member of the Regional Council. The issue was whether to elect an FSLN member to the second vice-president post and a Yátama member to the second-at large post in their absence or leave the two posts vacant until learning whether the nominees would accept, or—as Fagoth seemed to be holding out for—to fill those two posts with PLC members along with the other five to make it complete. A one-hour recess to "reflect" on what to do, while everyone waited in the assembly hall, failed to resolve the impasse; Fagoth steadfastly abstained, which apparently carried much more weight than his single vote implied on the surface. At some imperceptible sign, the entire bench caved in and unanimously voted PLC members into the two posts.

All this took place before the complacent smile of President Alemán, who had transferred his office to the RAAN for a few days. Even though the drug scandal was blowing up in Managua at that very moment, Alemán, who had no role in the regional government inauguration. decided to spend the entire four-and-a-half hours it ended up taking sitting silently beside the CSE magistrates.

In the RAAS, where the President put in a briefer appearance, the PLC bench looked more like a sports team than a party—all its members, men and women alike, were wearing identical maroon shirts. This caused more than one onlooker to quip, "The PLC is no longer 'red without a stain' [a 1996 PLC campaign slur against the FSLN's red and black banner compared to its solid red one]; now it's burnt red." With the first vote, for board president, it became clear that all 4 of the Yátama councilors in the RAAS and 3 of the PIM ones had gone over to the PLC, giving it 3 more votes than the minimum 24 it needed. With no debate or vacillation, the PLC elected 5 of its own and 2 from Yátama to the board. It is not clear what the PIM councilors who abandoned their leader Rayfield Hodgson for the PLC got out of the deal.

A PLC councilor was elected "governor" in both the RAAS and the RAAN: in the south it was Randolf Hodgson and in the north Alba Rivera. The Miskito Council of Elders had publicly warned that it opposed Rivera's election. While there are differing interpretations of the relationship between the Council of Elders and Yátama, sympathizers of the latter organization carried out armed actions in various areas of the RAAN as an expression of their rejection of the board's composition.

The Last Opportunity?

Even though the board elections could have particularly important consequences this time, they had all the characteristics of a frivolous spectacle, much as in 1994. But the actors had exchanged scripts. In 1994 it was the PLC, not the FSLN, that walked out in the RAAN because it did not get the number of seats it believed it merited. And in the RAAS, the FSLN left in 1994 rather than authenticate the PLC monopolization of the board and the governorship, while this year it did not withdraw; instead it protested the repeat performance with non-participation, neither voting against nor abstaining. And, finally, Yátama's councilors divided in the RAAS this year while those in the RAAN maintained their dignity and their unity, perhaps due to the greater weight of the Council of Elders' influence in the north.

The main exception to the overall lack of seriousness this time was the somber speech of Sandinista National Assembly representative William Schwartz in the RAAS. Midway into the voting, when it was clear that the PLC planned to steamroll the board, he appealed to the Coast identity of the PIM and Yátama councilors who were voting with the PLC, warning them that they should not let Alemán's central government have a "free hand."
According to article 181 of the Constitution, he reminded them, the central government must discuss with the autonomous governments various upcoming laws that are very important to the Coast: on forestry, mining, fishing, and a new one on hydrocarbons. "Only a Regional Council that has its own independent criteria will be able to successfully negotiate these concessions," he stressed. "Later, don't come complaining. Don't come asking why the PLC steamroller won."
Schwartz ended his speech saying, "Any indigenous people in Latin America would love to have an autonomy law like ours, even with all its holes and its problems." Although there is a lot of frustration on the Coast because of this law and the failure to push through a regulatory law that would strengthen it and turn it into a guarantee of autonomy, that is not the only problem. No government in the two autonomous regions since their inception in 1990 has made any consistent and serious effort to use the law's existing potential with concerted creativity to favor Coast interests.

The last opportunity may now have been lost. The PLC lacks only a few votes to get the 60% needed in each Regional Council to totally reform the Autonomy Law itself. If that happens, the Atlantic Coast, already the country's natural resource reserve and well on its way to being a drug haven—will have become another key piece of the "system" with no holds barred. Is there any way up and out of this?

The "Day After" Geneva

It is against this complex backdrop that the government has finished plotting its economy policy, the implementation of which contains some hope of finding a way "up and out."
"Total backing from the international community" was how the government characterized the three acts of its initiative in March and April with the powerful institutions that today control the course of the world economy. Act One: the signing in Washington of a structural adjustment agreement with the International Monetary Fund, which will be in effect until March 2001. Act Two: a pledge by the international donor community in Geneva to provide foreign funds for Nicaragua's development over the same three-year period. Act Three: the renegotiation of Nicaragua's bilateral foreign debt with the Paris Club countries.

While the government itself is celebrating these three successes and expectation reigns outside the government, more extreme optimists speak of a "before" and an "after" Geneva.

Returning to the Countryside: A Revolution?

The government took five documents containing its long-term economic strategy to the Geneva meeting, which was attended by representatives of 40 donor and cooperating countries and institutions. The documents, particularly the proposals for rural modernization projects presented by the Ministry of Agriculture and Livestock (MAG), were distinguished by technical consistency and socio-political lucidity.

The MAG proposals delineated a return to the countryside, to agriculture and to the rural household so coherently that, if the project targets are met, Nicaragua will in coming years achieve an authentic economic, social and even cultural revolution.

After such intensely-debated failures of neoliberal policies in the Latin American countries—which have increasingly marginalized the peasantry and overpopulated the cities with unproductive and quasi-indigent informal workers—the Nicaraguan rural modernization proposal seems to have seduced the international community, always eager to find new approaches, original models and viable proposals that offer alternatives to the enslaving globalization wave. The funds pledged in Geneva for projects to be developed in Nicaragua are primarily earmarked for the rural areas.

A Ton of Questions

All kinds of open technical and even political questions hang over the future of the projects presented by the MAG. Will there be enough efficiency, realism and other skills to respond day after day to such ambitious designs, even though they will produce only long-term results? How will the rest of the government apparatus relate to the MAG, which is in charge of implementing these projects, since the government has no truly national project, and is so eaten away by personal and party interests? Will transparency and a respectful and pluralistic democratic relationship with civil society working in the rural areas prevail in the implementation of these projects? Will the government politicians misuse the copious international funds for these projects to guarantee votes for Alemán's PLC, such that the return to agriculture ends up being instead a return only to crass party clientelism?
Did the government use the MAG's coherent project in Geneva only as a "calling card" to the international community? What organic link exists between the rural policy that the MAG proposes and the other governmental policies? More precisely, what link exists between this strategic project with a national scope and the practice of the competing economic groups that dominate the upper and middle-level government spheres?
The way things are going, these are all reasonable questions. And there are many more. The most optimistic Nicaraguans, however, though sharing these doubts, believe that the technical solidity of the rural project presented by the MAG and the nature and amount of the funds pledged to it by the international community allow hope for the "day after" Geneva.

Reelection with Populism?

The significant international backing for the government's economic administration could create favorable conditions over the coming years for President Alemán's eventual reelection. Something similar happened in Peru and Argentina, in which Presidents Fujimori and Menem eliminated the constitutional impediments to their respective reelections. Making astute use of opportunities provided them in the framework of the neoliberal macroeconomic policy, these two presented themselves as retooled versions of Latin America's traditional populist strong-man politician. Both also effectively used the social compensation funds provided in the framework of structural adjustment programs as the underpinnings of their political clientelism. Will Alemán, with his newly pledged funds, be able to recover his own populist version, the one that got him elected, and develop it to those same ends?
Reality has clearly shown that his priority in this first year and a half in office has not been to create and consolidate a grassroots-based political clientele. He seems far more interested in seeing to it that his economic group can accumulate the greatest possible amount of capital in the shortest period of time. His project for remaining in power, at least so far, rests on that accumulation more than on benefactor populism.

The cascade of corruption cases—influence peddling, lack of transparency, conflicts of interest—in which his government institutions and so many of his governmental officials are involved palpably illustrate that this high-speed race to accumulate capital and economic power by using all the state's economic spaces is unarguably the priority for Alemán and his group. It is, in fact, the project. All the rest is frosting, and comes later.

What Still Remains To Be Privatized

A centerpiece of their accumulation strategy is to milk the neoliberal policy of privatizing state holdings for all it is worth, by assuring that they get top dollar in assigning contracts to private companies they own stock in for the sale of services to state entities, and that they pay bottom dollar in the purchase of the not-yet privatized state companies.

The shady deal made by the state electricity utility ENEL with a private energy supplier is a clear example of this state-private company confusion. In April ENEL signed a purchasing contract for 50 megawatts of electricity with Centrans-Enron, a US-Guatemalan company headquartered in Grand Cayman. ENEL chose Centrans over AMFELS, a competing bidder set up in Nicaragua a few years ago with capital from Singapore, even though Centrans had not responded to prior recommendations by the Comptroller General's office or even fulfilled the conditions established in its own bid, and even though its offer was costlier and carried ecological risks. Why? A brother-in-law of President Alemán has stock in Centrans, and there is speculation that other high-level functionaries of ENEL and of the executive branch itself might have have investments in the company. The issue became a public scandal when the Comptroller General's office ordered ENEL to void the contract on April 29.

At about the same time, Vice President Enrique Bolaños—who heads a project called Transparency in the State—appeared on television boasting of his "success" in personally selling the geothermal plant, apparently ignoring all legal procedures. Even greater scandals appear to be waiting their turn on stage in the tortuous negotiating process to privatize the profitable national telecommunications company. The lack of respect for both the law and the citizenry on this stage is so distressing that it gets harder and harder to imagine a way up and out.

International Aid Is Resentful

While applauding the international backing for the Liberal government's economic policy in Geneva, we should not forget that the government's own questionable management is what caused the slow disbursement of already-approved international cooperation funds for economic and social development projects in its first year. Soon after taking office, President Alemán's appointed ministers swept out most of the professionals in charge of those projects, who had been trained with funds by the same project donors to assure efficiency. The results of the policy to replace those technicians with Liberal functionaries who are politically loyal but often not professionally capable, has been disastrous. The damaging effects will not be repaired in the short run.

According to figures of the Ministry of External Cooperation, the execution of foreign aid funds dropped from US$413 million in 1996, the Chamorro administration's last year, to only $288 million in 1997, the first year of the Liberal government. Since around $420 million were authorized for disbursement in 1997, it means that Nicaragua failed to use some $132 million of what was available to it for economic and social development due to the Alemán government's highly politicized and otherwise erroneous management.

It also needs to be stated that these unexecuted funds from last year have been carried over to this year, and form part of the financing for development projects that the Consultative Group pledged to Nicaragua in Geneva. Were this information widely acknowledged, it would mute the triumphalist applause a bit, since it means that approximately half of the foreign funds coming into Nicaragua in 1998 were negotiated by the outgoing Chamorro government two years ago.

Controls and Monitoring

The Consultative Group's financial backing of the Liberal government has two key differences with respect to the backing that these same governments and multilateral lending agencies gave the Chamorro government. The first is how the use of all this foreign aid will be controlled. The Consultative Group conditioned its support on direct participation by the Comptroller General of the Republic and by organized civil society in overseeing that the funds are used correctly. The government is required to assign an additional national budget line for the Comptrollers' office so it can do this effectively.

The government has also been obliged to create a commission to provide follow-up to the use of the funds, which will be made up of the MAG, External Cooperation and the Central Bank, plus three members of the private sector and civil society. But the government seems to have figured out how to avoid any independent critical participation by civil society organizations not already allied with it. It has announced that COPROSA, a nongovernmental organization of the Catholic Archbishopric of Managua, will represent all NGOs in the country in the commission. The two private sector representatives will the president of the Supreme Council of Private Enterprise (COSEP), a known Alemán supporter, and a not yet designated representative of small and medium business.

It is problematic that no small and medium agricultural producers are represented in this commission, despite the fact that the rural development projects are the backbone of the strategy presented by the government and the main beneficiaries of the international financing. The government is doing everything it can to avoid the participation of the independent National Union of Farmers and Ranchers (UNAG), for the same reasons that it named COPROSA and excluded the Federation of Nicaraguan NGOs (FONG).

The Liberal government is relying on acceptance by international donors of the commission's hardly pluralist composition and hoping it will disburse the funds not based on pluralist control over them as much as on the improved technical capacity to design and administer the projects. It is placing all its bets on the capacity and professionalism of the MAG functionaries.

On the Agenda, But No Special Treatment

The second key difference between the Consultative Group's support to the Chamorro government and that promised to the Liberal government resides in the composition and kind of financing agreed to in their respective aid packages. The one pledged to the Liberal government has a smaller proportion of liquid funds and more that will come tied to the development of specific projects. In addition, both donations and bilateral cooperation in general are reduced, while loans coming from the multilateral lending agencies are increased.

These variations indicate that, although the liberal government has managed to keep Nicaragua on the agenda of international cooperation, the exceptional treatment it has been receiving since the end of the war is coming to an end. The profile of the aid Nicaragua is receiving now is increasingly similar to that of the majority of other poor countries.

The drop in the flow of hard cash means that the Liberal government will have more trouble financing its import bill. That, in turn, means it will have a tough time maintaining the precarious macroeconomic stability that has been achieved. Nicaragua's export income barely covers two-thirds of its imports. The country's trade gap is some $500 million a year, but the government only has about $200 million a year with which to close it.

Pardon the Debt?

The Alemán government's third achievement has to do with the country's untenable debt burden. The negotiations with the Paris Club in April allowed the government to substantially reduce the interest on Nicaragua's bilateral debts with Club member countries. It did not, however, affect the interest payments Nicaragua is obliged to make on its multilateral debts, contracted over the past eight years with the World Bank, the IMF and the Inter-American Development Bank. Annual interest payments on Nicaragua's foreign debt total about $270 million, of which $200 million goes to the multilateral debt. This means that, of the $800 million in hard cash pledged to Nicaragua in Geneva over the next three years, three-quarters of it must go to cover these interest payments, leaving only $200 million to help close the trade deficit.

On April 23, after 36 hours of difficult negotiations with the 14 Paris Club countries, they condoned $212 million in interest on the bilateral debt over the next three years. The debt principal with these same countries as of the end of December 1996 was just under $1.39 billion, on which the country must pay $70 million annually in interest. With these negotiations, that amount has now been reduced to only $3.5 million a year for the next three years, as long as the second Enhanced Structural Adjustment Facility (ESAF II) agreement is in effect.

The government still has one more act ahead of it in its negotiations with the powers that be in the international economy: the promised massive pardon of the entire foreign debt, interest and principal. Reduction of the interest payments on the multilateral debt will be considered in the year 2001, once all objectives and targets contained in the ESAF II agreements signed with the IMF have been satisfactorily met.

Then and only then, Nicaragua will be included in the initiative for Highly Indebted Poor Countries, known as HIPC. But there is no space for excessive optimism in this area either. Thus far, no poor country in the world has been able to benefit from this international initiative, since the institutional and financial difficulties involved in putting it into effect are still too complex. The International Monetary Fund has stubbornly refused to finance the initiative with its own resources because it believes that it violates the financial principles governing its operations. And the funds contributed to the HIPC by the World Bank and the industrialized countries are not enough to effectively respond to the magnitude of the debt problem of the desperately poor countries.

Is There Any Way Out?

There is no call for triumphalism or excess optimism anywhere along the road to or from Geneva. Humble realism is a far more appropriate attitude.

No coherently critical response or alternative to the government's economic policy is coming from civil society or from the political opposition yet. Nor is any expression of "That's Enough!" coming in response to the misgovernment, now openly revealed on the drug traffic flank. Civil society is still weak, its organization incipient, its leadership and potential base both very dispersed. It still needs to get a lot of practice under its belt, and has a lot of learning to do.

The FSLN leadership, caught up in its own business dealings, and also absorbed in capital accumulation, inexplicably ended up excluding itself from the negotiations with the Consultative Group in Geneva. Its argument was that it did not want to be an accomplice of the government's administration. It also accused the international community of lending itself to the Liberal government's political games. This decision has reduced the FSLN's spaces and undermined its influence with international cooperation. It has also weakened its ability to inform and convoke the various business, professional and labor organizations that could pressure for changes in the government's social and economic policies.

Furthermore, the FSLN leadership has lost the moral standing to take on the recurrent government immoralities or to bring together the dispersed honest forces of the nation—even Sandinista ones—to turn the latest scandal into an opportunity to forge paths to consistent ethical and political alternatives.

We are reaching the bottom of the abyss. In fact it feels as though we are already touching bottom. Is there a way back up and out?

Print text   

Send text

<< Previous   Next >>


América Latina
When Children Organize And Want to Work

The Killing Stone, Bedrock of Peace?

Some Voices of the 55,000 Victims


We are Hitting Bottom: Where is the Way Up and Out?

Central America's Granary: Reflections from Europe
Envío a monthly magazine of analysis on Central America
GüeGüe: Web Hosting and Development