Envío Digital
Central American University - UCA  
  Number 148 | Noviembre 1993



Transport Workers V. The Whole Economic Plan

The people pinpointed the most serious error of the economic plan: a recessive and anti-productive fiscal policy. The transport strike was the social expression of the collapse of the economic model.

Envío team

The national transport strike in mid September may turn out to be the most important social event since the Chamorro government took office. For the first time in over three years, a social movement managed to break through the isolation of the political parties' upper echelons and affect the interests of big importers, private banks and even the IMF. In so doing, it became a major voice in the debate about the country's economic policy. The strike was also the social expression of the economic model's collapse.

At issue not only for the strikers but for the impoverished population as a whole was the rash of regressive new taxes the central and municipal governments have levied since 1990: first a homeowners tax; then a 15% across the board sales tax; then a stiff road tax even for horse drawn carts; then multiple price hikes on petroleum products (47% just in 1993) bringing the price of gas to over $2 a gallon, the highest in Central America. Then came the announcement that all vehicle owners would have to buy new license plates, even though the existing ones were supposed to be valid until 1995. The last straw for the transport sector was Decree 6 93, issued last month, taxing the right to own a vehicle. "Next they'll tax us for owning shoes," said one incredulous participant in a discussion tallying up all those costs.

Barricades Go Up Again in Managua

Managua awoke on Monday morning, September 20, to discover itself immobilized. Throughout the previous week bus, taxi and delivery truck drivers had been engaging in partial work stoppages and calling for "civil disobedience" by all vehicle owners (specifically by refusing to pay the new vehicle ownership tax). But the government had ignored them, forcing the transport unions and cooperatives to pull out all the stops. Before dawn on Monday, strikers barricaded the capital's main intersections and the highways leading to the other regions with whatever was handy. Travelers landing at the airport had to hire horse drawn wagons to get themselves and their luggage to the nearest hotels. Even before the sun was up, parades of people could be seen trudging to their jobs on foot. "I didn't come across a single vehicle, and had to walk 10 miles to get to work," said one woman.

The Somoza government had made the strikers' task easy by designing Managua's post earthquake housing tracts as self enclosed units, with only one entrance off the main avenues; thinking ahead, his idea had been to close off escape routes for trapped revolutionaries. Now, by late morning on the first day of the strike, adults and youth from those neighborhoods formed human chains to pass the four inch thick cement paving blocks being pried up from the avenue to those stacking them waist high across that one entrance. By then, the acrid smoke of burning tires, another hallmark of Managua strikes, was already wafting over the city.

The departmental capitals did not come to a full halt until Tuesday; in those smaller cities, where everybody knows everybody else, the strikers gave people a chance to do necessary chores first. They also left the streets open to private vehicles, so people who needed to could get to work. In the more impersonal and alienated capital, however, transport workers are as militant as the US teamsters; they had drawn up a list of vehicles they would let pass milk trucks, press, the Red Cross, government officials, foreign diplomats and the like and they stuck to it. That led to some heated exchanges between strikers and people who tried to get through in their cars, fearful of losing their jobs if they did not show up

Reaction of the Populace

A fair estimate is that 20% of Managua's population actively supported the strike, pitching in to build barricades, bring the strikers coffee, food and cigarettes, or spell them at night so they could get a few hours sleep. Most of the remainder supported it passively, although some of the well off right wing did so for spurious reasons. Active supporters reasoned that "we don't know what will come out of this, they may even gun us down, but it's better to go like that than the way we are now, slowly starving to death." The passive ones looked at it differently: "This country isn't pulling itself together, it's unlivable; we'll have to leave." Between them they reflected two options left to the poor: emigrate or die.

The government's intransigence and manipulative effort to divide the transport workers were leitmotifs throughout the strike. The government took the position that the only representative organizations were FETRACANIC and FETRACOLNIC, both led by Sandinista businessmen loyal to the government's economic policy. Its negotiators quickly reached an agreement with them, leaving on the sidelines the 25 unions and 257 cooperatives of bus and taxi drivers and commercial truckers, which together have 30,000 members, 80% of the country's transporters.

The government's close mindedness pushed many originally passive supporters to lend a hand. The first night into the strike many more barricades went up due to the government's attitude. That same night the ultra right Radio Corporación was badly damaged for the umpteenth time since 1990.

Although the national strike commission had prohibited any abuse of individual vehicle owners, it could not control the rash of irrational actions. A number of individuals with justifiable reasons to request passage had their tires punctured and were verbally harassed. Someone even cut down a huge old tree with a chain saw to use as a barricade.

A roughly accurate estimate could also be made of who was at the barricades: perhaps 20% were older Sandinista grassroots leaders, who used their experience to impose calm and a "cool head" where they could. Another 30% were transport workers and men and women from the neighborhoods. They were joined by perhaps another 15% who were neighborhood youth fired up by the novelty of the situation. The rest were adolescent gang members, and they were the ones responsible for much of the unnecessary abuse; of the 212 arrested during the strike, 109 had prior police records for robbery.

On Tuesday afternoon, spontaneous violence erupted at a barricade on the Carretera Norte. Police had been ordered to clear that highway into the city from the airport to allow President Chamorro through on her return from a meeting in Guatemala. With tempers already high, strikers tried to stop the police from dismantling the barricade. Supporters poured out of their homes armed with machetes, rocks and anything else they thought to grab. In the ensuing clash, five people were hurt and two killed one of the latter was police subcomandante Saúl Alvarez, a respected Sandinista, and the other a woman just visiting from Siuna who was felled by a stray bullet. The tragedy made many political leaders realize the seriousness of the demands. The government at least realized the seriousness of the strikers; President Chamorro stayed away until the next morning, and then was taken home from the airport in an army helicopter.

The violence on the Carretera Norte turned the mood to one of fear and concern. Food stocks were dwindling and prices in neighborhood stores began to shoot up. Factories, banks, shops, schools and government offices were nearly empty. Nonetheless, the government let the strike go on until 4 pm Wednesday before sitting down to negotiate with the strike commission as with earlier incidents, only once the situation had reached the brink of disaster.

At 5 a.m Friday, after trying to wear down the strike negotiators with unacceptable proposals during the nearly non stop session, the government finally caved in to most of their demands. The strike supporters had worn it down first by raising even more barricades throughout Thursday night. Among the government's numerous concessions, the most important were a freeze on gas prices for the rest of the year, a discount on those prices for transport vehicles and a promise to repeal the vehicle ownership tax (Thursday afternoon the strikers had let a spontaneously formed organization of private vehicle owners lead a caravan of hundreds of cars through Managua's streets specifically protesting that tax). Within a few hours of the announcement that they had won, the exhausted but jubilant strikers and supporters had cleared away the barricades and even set many paving blocks back in place.

Three Years of Protest on a Short Leash

The current policy of stabilizing the economy without reactivating production or improving government efficiency has sparked strong labor responses more than once since the Chamorro government took office in April 1990. The paralyzing strike by state workers in May of that year and the semi insurrection of July the latter also with barricades in Managua's streets put a stop to what was known as the Mayorga economic plan. The next year saw persistent opposition to the new plan drawn up by Lacayo and Minister of Finances Emilio Pereira, punctuated with hunger strikes by demobilized military personnel, nurses, teachers and other sectors. The following year it was the takeover of regional cities and highways by recontras, recompas and revueltos, and the two month student struggle to reverse the unconstitutional university budget cut decreed by Pereira. This year, protracted opposition by virtually all producer and labor sectors and rival rearmed groups of all political stripes put the country in check.

Many of these episodes of resistance to the economic adjustment program were partially or wholly incited by the FSLN leaders, particularly secretary general Daniel Ortega, who then kept them on a short leash. While each strike, mobilization and protest achieved some narrow goals, none of them had any impact on the economic policy itself since they lacked larger objectives, and were a crazy mishmash of economic demands by organized sectors of society and the political objectives of the FSLN. The FSLN leadership's tactic of arousing then reining in these protests has weakened these movements' responses to the economic plan, and was one of the most regrettable aspects of the "co government" at least until the transport strike.

This incite and control policy has been well received by significant grassroots sectors, even some of those impoverished and excluded by the economic plan, but has frustrated and infuriated others. This time the country's dire political and economic conditions as well as the very character of the transport workers' movement revealed just how worn out this tactic is. First of all, it rings hollow given the distance the FSLN has put between itself and the government since July 19. Second, the collapse of the government's economic model which the FSLN has alternately criticized and supported since 1991 has led to an increasingly intense stand off between the government's goals and the demands of the economic agents. Finally, the non political character of the transport workers' position prevented any attempt to wrap the strike in a red and black flag.

Society Shows Its Muscle

The transport workers' victory announced the presence and growing consciousness of a new social force that is muscling its way onto the national stage. Its center is made up not of urban poor but of middle strata producers and service providers. Those who led the strike from belligerent beginning to happy ending were neither the poor nor were they business leaders born of well known families in Leon and Granada; much less were they politicians.

The discourse and self identification of this social force permits it to be called "popular" (or grassroots), but not in the sense the FSLN uses the term. The militant Sandinista bus collective "Parrales Vallejos" is not particularly representative of the thousands of transport workers who guaranteed the unity, coherence and non violent character of the movement. In fact, many transport workers do not identify with Sandinismo. The rural counterpart of the protagonists of this "economic insurrection" would be the small and medium sized farmers and ranchers. They, together with the middle level urban strata, were excluded from participation in defining the country's destiny first by Somoza, then by the FSLN and now by the Chamorro government.

With its old dogmas, the leadership of the left tagged them as incapable and vacillating petty bourgeoisie, giving them no choice but to throw their lot in with the program of either the capitalists or the salaried workers. But they have their own profile and would have won their battle against the finance minister with or without former President Daniel Ortega's self projection in the conflict.
The transport workers' "grassroots echo" is undeniable. During and after the strike one heard criticisms of Sandinistas, or of the jobless youth with police records who acted violently at dozens of the barricades scattered around Managua, but few harsh words about the transport workers. Even at the barricades, transport workers had more authority to stop the young gang members than did the experienced local Sandinista leaders.

Just after signing the final agreement with the strikers, finance minister Emilio Pereira tried to put a good face on things by commenting that "there are no winners or losers in this accord." But that is not true. For three years Nicaragua as a whole has been a loser due to Pereira's fiscal policy. Now, finally, the agreement is a clear victory for society and the starting point for changing the economic policy.

Pereira's Fiscal Policy: the Heart of the Problem

"The government wants to wring blood out of a dry hide," said transport leader Gustavo Aguiluz of Pereira's stiff new taxes. To understand the workers' resistance to any continuation of Emilio Pereira's spent fiscal policy, it is necessary to recall a general law of economic recession: unemployment or inflation.

Each time he levies indirect taxes the 15% sales tax, for example all consumers lose purchasing power. The resulting fall in demand causes production to suffer, and the result is deeper recession and more unemployment.
Since it is logical for people to resent these increases in indirect taxes, why have a good number of them passively accepted so much unemployment and recession for so long? The answer, according to this law, is that when unemployment increases, inflation drops. People have not yet forgotten the constant uncertainties of the hyperinflation and devaluations of 1988 91. In other words, they more or less consciously tolerated the unemployment and recession until the transport strike to avoid inflation.

This time they sensed that the new vehicle taxes would have an inflationary impact since transport costs figure in the price of every single good and service. And they were right. The Pereira/Lacayo plan has only controlled inflation thanks to the abundant flow of foreign aid. When this flow dropped at the start of 1993, and was followed by the US aid freeze, the government found itself with a $200 million financial gap and the underpinnings of its model began to collapse.

One result of this collapse is that the law relating unemployment to inflation stopped functioning. Even though Pereira says he must levy more taxes and cut employment and state spending even more to control inflation, such measures now have the opposite result: more inflation. The heart of the debate about changing the economic policy is just that simple: Pereira claims he must follow a restrictive fiscal policy to control inflation, while the people intuit that he is wrong and refuse to accept more taxes which, in any case, they simply cannot pay.

Political Dialogue: Many Thorny Issues

With the strike resolved, the country felt a momentary respite, but the weight of the agenda for the still pending negotiations between UNO, the FSLN and the government quickly bore down again.
At the end of August, it was an open question if and when the much touted tripartite dialogue to seek some national consensus to stabilize the country would ever take place. Literally on the eve of that dialogue UNO had announced that it first intended to hold bilateral negotiations with the government until it reached "satisfactory" agreements. As the FSLN waited in the wings, those negotiations dragged on through September with seemingly little "satisfaction" to UNO. Among its more intransigent and irrational demands to which the government refused to concede was that the executive branch "dissolve" the center group of National Assembly representatives and replace them with their alternates, who toe the extremist UNO line and would give it back the majority vote in the legislature.

With this bilateral dialogue at something of a standstill, it was decided at the end of September to initiate two other parallel ones (FSLN government and FSLN UNO) with the goal of finally sitting down all together to put an end to more than a year of institutional and political crisis. That crisis has been so severe that it has prevented the government from dealing with the collapse of its economic model or responding to the clamor of an increasingly impoverished population.

A number of thorny issues are on the agenda for the national dialogue: 1) a restructuring of alliances in the National Assembly to reflect the divisions that have evolved in both UNO and the FSLN; 2) unresolved aspects of the property problem; 3) the posts of Antonio Lacayo and Humberto Ortega and US pressures on both these politicians; 4) reforms to the Supreme Court; 5) the moving up of elections; 6) reforms to the Constitution or the convoking of a constituent assembly; and 7) the economic policy.

All these points relate one way or another to three longstanding, complex and as yet inconclusive elements. Their nature is such that, if they can be resolved, the resolution of the more secondary agenda points will come more easily.

Economic Reactivation. The highest priority of all is to negotiate a new economic program. In strictly economic terms the space still open for reactivating the economy is minimal given the erosion produced by the recessive economic policy.

In the transport workers' first mobilization in front of the government building, a third demand was stressed as much as the cut in gas prices and repeal of the vehicle ownership tax: the removal of Emilio Pereira, the all powerful finance minister. His price hikes and taxes were just patches for the tattered cloth of his economic policy, and it was predictable that they would provoke a wave of justifiable, legal and much needed civil disobedience. He is the key person responsible for Nicaragua's economic collapse. Furthermore, he has represented interests other than those of the nation from his ministerial post.

Productive reactivation and economic policy rectifications, both systematically refused by Pereira's loyalty to the most dogmatic recipe the IMF has applied anywhere in Latin America, necessarily involve changing the economic Cabinet. The first and most obvious change is to name a new finance minister, one able to comprehend the urgent task of reactivation and cooperate with it.

The modernization of the state, about which so much is spoken, requires creating a counter power to the IMF and the Ministry of Finances. There has been no serious public debate about that ministry's fiscal policy since December 1990. The cost of avoiding it has been high for Nicaragua, where social movements like the one the transport workers organized must evolve independently of their representative channels in the National Assembly. The only solution to this problem is to grant the Assembly real power to approve the annual national budget, as every other democracy does.

Modernizing the state. This element is made particularly complex by the active intervention of the US ultra right, particularly from the Senate. Modernizing the state is a task for Nicaraguans, not for rightwing extremists in the United States.

The Senate's intervention in Nicaragua's internal affairs is at the center of this conflict. The cutoff of already approved economic aid now basically until the government removes Gen. Humberto Ortega as head of the army has even caused tensions between President Chamorro and Minister of the Presidency Antonio Lacayo, her son in law. Humberto Ortega has also been one of the main issues in the long and tense history of the Chamorro FSLN "co government." His caudillo style has made it even harder for the right in Nicaragua to accept today's army and its existing commanders as the necessary and only realistic solution in our country. His leadership style blemishes an institution that could otherwise become the most civilized and democratic army on the entire continent.

Nicaragua faces two major challenges in modernizing the state, the first and most difficult of which is not to cave in to US pressure. While the immediate goal of that pressure is to remove Gen. Ortega, the underlying one is to get rid of the army's entire command structure. Doing so, however, would open the door to a period of instability that would undermine any possibility of political reconciliation, with economic costs unacceptable to most Nicaraguans. Nicaragua must defend its sovereignty from such imperial power games, in which the poor have less value than a pair of sandals.

The second challenge is to effectively modernize the army, but it is a seemingly contradictory one since the main obstacle to doing so is Humberto Ortega himself. At this juncture in the process of democratizing economic policy and creating effective checks and balances among national institutions, the army cannot be headed by someone whose brother is the top leader of the main opposition party and who is himself the strongman of a military commercial agroindustrial complex that probably has as much clout in our economy as the traditional Pellas family capital.

The United States wants Ortega removed because he is a Sandinista; it believes that his retirement will weaken the FSLN. Broad Sandinista sectors, on the other hand, also want him to retire, but because he is no longer a Sandinista. The economic consortium he has built up benefits significantly from Pereira's neoliberal fiscal policy. These sectors, particularly the tendency representing dispossessed Sandinistas, believe that the general's return to civilian life can only strengthen the FSLN.

Opinions differ about the cost of Ortega's position as army chief to his brother Daniel. Criticism is mounting of the FSLN secretary general's inclination not to sufficiently heed the concerns within the party to democratize it. He tends to rely more for support on his close relationship with his militarily powerful brother than on the Sandinista movement growing out of civil society.

Divisions in the Political Parties. Coming to terms with the divisions within the two forces of opposition to the government implies reaching at least a tacit understanding about the shifting correlation of forces. That should lead to a more realistic dialogue about issues ranging from changes in the economic policy to the legitimacy of the National Assembly's internally elected board.

The divisions within the FSLN grow ever deeper while those within the cobbled together coalition of parties in UNO are leading to an irreversible recomposition of that coalition, with one group more open to dialogue than ever, and the other more closed. The dynamic of the divisions among and within the UNO parties is political, while that of the FSLN is economic.

What are the roots of this division between economically comfortable Sandinistas and dispossessed ones? During the Sandinista government, agrarian capitalists always had more room to negotiate with then agricultural minister Jaime Wheelock than did the peasantry and lower strata of farmers. That was admittedly the first step in the FSLN's "bourgeoisification"; it retarded the agrarian reform and incited strong peasant opposition. But the most important roots of the current division go back only as far as the FSLN's adjustment policy between 1988 and 1990.

At the end of 1987, hyperinflation caused both by the war and by the Sandinista government's macroeconomic policy errors obliged it to shift toward the market. That caused a great deal of ideological confusion at the grassroots level, but provided a growing material base for entrepreneurial Sandinista figures to engage in import activity and increase their influence with the FSLN leadership. The rise of importers at the cost of producers, which has now brought our economy to a state of collapse, was thus already underway before UNO's electoral victory.

While this was not the cause of the FSLN's electoral defeat, it conditioned it; to some degree, the "piñata" was an extension of this phenomenon. FSLN leaders' passivity toward Emilio Pereira's fiscal policy is explained by the benefits some of them have reaped from it. While that policy has been tremendously recessive for the nation as a whole, it has substantially boosted their personal businesses.

The "Group of 29" came out against the National Directorate's emerging pact with Pereira's economic policy, though it expressed itself politically rather than economically. It sought to remodel and democratize the FSLN's leadership strata, but its signers allowed themselves to become too coopted by the supporters of Daniel Ortega and Jaime Wheelock among their ranks. This internal movement is only the tip of the iceberg, the most visible reflection of the growing fissure between well off Sandinistas and dispossessed ones. This fissure hinders the FSLN from acting as a responsible political force in these times of peak national crisis. A divided FSLN cannot clearly represent the interests of the majority of poor and medium sized producers, workers and public employee unions.

A key to resolving the silent conflict immobilizing the FSLN is Daniel Ortega's leadership style; he acts independently not only of the Sandinista Assembly but also of the other National Directorate members. This is particularly problematic for the FSLN given that his popularity in public opinion polls has not only held steady but has grown. And it is not gratuitous popularity: Daniel Ortega is out on the streets and in contact with people. He participates in the struggles and mobilizations and his populist style connects with people's feelings, making his incite control tactic even more dangerous in today's sensitive situation. All things considered, though, his style contrasts favorably with that of the Sandinista National Assembly representatives, who for the most part are out of touch with the people, even their direct constituencies.

UNO's irresponsibility is far greater than that of the FSLN. The UNO parties are even more removed from their potential social base big business than the FSLN is from its productive grassroots base. In the economic camp, producer organizations in the Supreme Council of Private Enterprise (COSEP) do not feel at all represented by UNO. These organizations have been more critical of the government's economic policy than either UNO or the FSLN. They do, however, agree with the UNO politicians' desperate effort to politically wear down and displace the FSLN. They seem to be willing to take short run economic losses if the gain is liquidating the FSLN's social and ideological hegemony.

These three issues changing the economic policy, modernizing the state and dealing with the internal political divisions are so interwoven that it will probably be impossible to resolve any one of them appropriately without resolving the others. The Gordian knot that ties all three together is the Ortega brothers and their tacit acceptance of Emilio Pereira's economic policy over these long three years. We can expect nothing but more problems from Sen. Jesse Helms and his local allies, the Alfredo César group, but we have both the right and the obligation to hope for more from the others.

Three different economic scenarios can be drawn up to evaluate winners and losers in the transport strike: 1) who they would have been if Nicaraguans had accepted the new taxes without protest or the government had succeeded in smashing it; 2) who they actually are; and 3) who they would be if the government expanded its Emergency Social Investment Fund (FISE) programs to pay the unemployed to repair the damages caused by the strike.

Scenario 1 of this table shows who would have won and lost if the government's plan had succeeded. The gross domestic product GDP would have dropped by 24 million córdobas over the rest of the year, with losses of 20 million for the workers and 14 million for the business sector. The Ministry of Finances would have been the only winner: 10 million in indirect taxes (indicator 4), or a total of 30 million including direct taxes (indicator 8). People's consumption would have dropped 49 million and even importers would have suffered a 23 million drop in sales. In essence, Pereira's plan was to increase the government's money supply at the cost of everyone else. This economic phenomenon is called "forced savings" because the government saves based on a policy that reduces the income of all other sectors of society. This plan may seem irrational at first glance, but the 30 million córdobas the Ministry of Finances would have collected aimed to control inflation (the IMF's number one tactic) and guarantee fiscal support to the program of payment on the IMF and World Bank debts (the IMF's number one objective). But things did not turn out quite that way.
What, in fact, was the strike's impact? As can be seen in scenario 2, the GDP dropped by 52 million córdobas, and everyone lost something. Workers' salaries and business' profits shrank just about equal to what they would have without the strike.

The real losers were the Ministry of Finances and the IMF, which is precisely why the IMF usually becomes more flexible in negotiating its conditions with insistent governments when its programs are challenged by social upheavals in the various countries. Home consumption and import sales suffered greater drops with the strike, but the overall effect was positive since it sent the IMF and Ministry of Finances a clear signal that they will also lose if they do not make changes in the economic policy.

Scenario 3 reveals the potential effect of an active fiscal policy that creates jobs and increases salaries. Better salaries produce more demand, which could stimulate production and idle productive capacity. Losses due to urban destruction during the strike were estimated at 60 million córdobas.

If FISE had hired a sector of the unemployed to repair those damages leaving Managua mayor Arnoldo Alemán and other mayors to continue their urban programs the positive effects of shrinking unemployment, even temporarily, would have canceled the additional 2 million córdobas of GDP lost during the strike. Such positive effects of potential FISE participation is partly due to the fact that such activities have a low import component. In other words, they add value without increasing the country's foreign trade debt. This is a key criterion to bear in mind when designing a new economic program. An equally important one is that a viable economic policy should not depend on any one single measure such as expanding salaries and demand, as in scenario 3.

From the perspective of this scenario, it appears rational to destroy the infrastructure to shrink unemployment levels. Nothing better demonstrates the absurdity of the current fiscal policy and the country's urgent need to adopt an expansive fiscal policy.

Who Is Emilio Pereira?
The transport strike gave Nicaraguans a glimpse of the real Emilio Pereira. Only those in political and business circles already knew that this finance minister also has two other roles: he is the IMF's inefficient representative in Nicaragua as well as the very able adviser to OCAL, a business consortium headed by Granada's oligarchic César Augusto Lacayo family.

When Somoza fired one of his ministers for spending his embezzled public funds too visibly, he explained that his subordinate had violated one of the dictator's sacred laws: "He who eats chicken should hide the feathers."

Emilio Pereira has been adept at not leaving any feathers around. OCAL itself has hardly been circumspect in its use of public power, but has left no clues that Pereira eats chicken with both it and other importers.

Pereira's role with OCAL is not a new one. With Pereira at its side, OCAL expanded its consortium under Somoza, outstripped the Mántica group under the Sandinistas and now, during the Chamorro government, has even managed to place its permanent adviser as minister of finances.

Perhaps the most visible symbol of today's new, "democratic" Nicaragua, whose shops overflow with imported luxury goods while the growing number of unemployed suffer malnourishment, is the La Fe supermarket chain, owned by OCAL leader Carlos Reynaldo Lacayo. His brother Augusto César II is the entrepreneur who organizes the beauty contests and the concerts of the most popular international singers. The consortium controls more than 20 businesses, ranging from auto imports to the preparation of the new passports (a government contract it won even though its bid was the most expensive).

A truly revealing case of Pereira's irresponsibility toward the nation's interests was his use of his government post to back OCAL's project to represent Bacardi rum in Nicaragua. The Cuban rum manufacturer in Puerto Rico planned to dump his rum here at below cost prices to destroy his national competitors Flor de Caña and Ron Plata. OCAL would have ended up with lucrative commissions, the Ministry of Finances with more fiscal income due to duties on the imported rum, Bacardi with a cornered Nicaraguan market and the workers at Flor de Caña out of jobs. The powerful and well connected Pellas family, which owns Flor de Caña among many other things, put a stop to the plan.

Pereira had better success in the beer industry. Nicaraguans now drink Miller in cans bearing the national Victoria label made in Milwaukee and imported. Toña, the other national brewery, fought differently than the Pellas family: it found ways to expand its own production. But that just means Pereira gets his cake and can eat it too: his ministry collects import duties from Victoria and a stiff "vice" tax on domestic beer sales of both brands.

Although Pereira, unlike former Vice Minister of the Presidency Antonio Ibarra, cannot be accused of any specific economic corruption, he has administered the structural waste of $2.5 billion of the foreign aid that the Chamorro government has received. That feat has so rent the country's social fabric that it dwarfs Ibarra's embezzlement of $1 million and the undermining of the government's image provoked by that action.

OCAL has a good man in Pereira, but unfortunately President Chamorro and the IMF do not. As in the case of Gen. Ortega, the problem is not the man but the duality and confusion of roles.

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