Envío Digital
Central American University - UCA  
  Number 156 | Julio 1994



Calm Before the Storm?

Since 1990 there has never solidified a strong power center. Will the structural adjustment agreement and the erosion of national life strengthen the leadership of Antonio Lacayo and Arnoldo Alemán? Meanwhile, a broad social consensus seems further away than ever.

Nitlápan-Envío team

The two most weighty items on Nicaragua's economic and political agendas over the past several months have been the government's signature on the Letter of Intent with the International Monetary Fund and the FSLN's Extraordinary Congress. By signing the Extended Structural Adjustment Facility (ESAF) agreement, the government added another vertebra to the weak backbone of power it has been slowly building since 1990. With the Congress, the FSLN increased its internal divisions, weakening its ability to influence the search for a consensual way out of the national crisis. Meanwhile, the Constitutionalist Liberal Party and its leader Arnoldo Alemán have been steadily capitalizing on the country's economic and political erosion.

On May 24, the 15th anniversary of the National Commission of Professionals, the government's economic Cabinet enthusiastically explained the benefits of the ESAF agreement to CONAPRO's members. "The positive effect of having more resources for the next three years by signing the accord with the IMF means a better investment climate for the private sector, more production and, thereby, more employment," the ministers intoned, one after another.

There is good reason to doubt this official optimism. Any Nicaraguan analyst, even any foreign observer, can see that the economic deterioration has reached unprecedented levels for the suffering majorities, who have no patience for the official optimism. In his June 5 homily, Cardinal Obando y Bravo expressed concern about what he called a "dangerous" situation. "Society is becoming tenser by the day," he said, predicting major disturbances in the future since "hunger is a bad adviser."

If few outside of government differ about the seriousness of the crisis, differences do emerge when trying explain why it is not getting better, and mount when it comes to proposing alternative solutions.

While signing the ESAF may strengthen the new backbone of power, that does not make it the best solution for dealing with the economic crisis. Technical critiques of the government's program range from the faulty economic logic prevailing in its design (lack of social compensation mechanisms, irrational trade opening, etc.) to its failure to clearly deal with the economy's structural limitations, which could well cause it to fail.

These critiques lead to the conclusion that Nicaragua does indeed need a structural adjustment program, but one adapted to the country's characteristics and limitations. They do not, however, directly take into account the criticisms expressed by average Nicaraguans: there's a political problem in Nicaragua and so much instability scares off foreign investors; Nicaraguans who have their money abroad don't want to bring it back; even medium sized farmers and urban manufacturers don't dare put more money into production because nothing seems safe; it's worse in the countryside, with the insecurity on the roads, and that's because there's no work, there's poverty; this thing just isn't working...

Certainly the political tensions are fed by the poverty, the economic crisis and the social exclusion that has characterized these past years. And no economic program can deal with the production and employment problems without taking these multiple rents in the national social fabric into account. Without doing so, the frontal criticisms made of ESAF are no more than good economic wishes.

Nonetheless, while saying that the problem is political makes good common sense, it is not enough. It is necessary to explain what is understood by political stability and how the different actors could affect it. It is also necessary to evaluate how the four scenarios laid out in last month's envío are evolving, interpreting the signs offered by the most recent events to see which script is most likely to prevail.

What Does Stability Mean?

Stability cannot be defined in absolute terms. Life is movement and struggle; total stability only exists in death. A stable situation would be one in which the majority of citizens feel that the country is viable, that it offers opportunities for workers and small and medium business as well as for large national and foreign capital.

Assuming that the fear felt by possible investors is the main short term symptom of the economic stagnation, stability becomes the main condition to make the country's economic reactivation possible. It is very worrisome that the British business magazine The Economist recently classified Nicaragua among the World's seven riskiest countries for investors. Assuming also that the bulk of the population is tired of both physical and job insecurity, stability is also key to rebuilding people's belief in the country's viability.

Economic policy options vary, as do the development models in which to frame them. The effectiveness of these alternative policies in generating sustainable employment and growth levels in the short run also varies. Independent of these policies, however, political stability is indispensable to motivate capital in a context of favorable grassroots expectations.

Even with an economic policy as seriously defective as the one we now have, stability would allow it to produce some economic reactivation. Stability would create a sense of security among businesspeople of all strata and push them to invest, thus making it possible for productive activities to function more normally.

A society is stable when its "social risk" factor (urban protests, rural banditry) has diminished enough for capital and when the majority of the population stops feeling chaos and insecurity. It is stable when violence has been reduced to the level of unorganized common crime and even that has been contained to tolerable levels. It is stable when the conflicts are not so intense as to obstruct reactivation.

Such stability can come about in various ways. The grassroots, workers and unemployed, for example, can begin to see that a stable country is more viable, and that more secure employment or simply some employment can be expected from it. Or they can tire of protests, of bearing the costs of a sterile militancy that brings no benefits and yields up evidence that they should trade it for perhaps fertile stability. Or repression can become effective enough to make them fear participating in further risky or violent protests.

Four Ways to Realign the Backbone of Power

In last month's envío we spoke of the backbone of power the set of political, cultural, social, legal, military and religious institutions that together hold the key to social consensus and a fundamentally coherent organization which can put order into citizen's lives. This backbone represents a sharing by these diverse state and social institutions of the basic rules of the national game, the objective of which is to coherently channel each institution's functioning so as to guarantee citizens a system of economic and political organization and of social status that is accepted, or at least tolerated and respected, by the majority. This backbone is solid when it can suffer the blows of conflict without damage to its most profound or strategic marrow, be this its moral conduct, its economic organization or its administrative authority.

The point of departure of our analysis of the current situation is that Nicaragua's backbone of power was thrown out of alignment with the 1990 elections. The basic norms of the political game lost legitimacy and the economy lost its operative capacity. Today, different institutions use the important resources of power they control for contradictory ends. The government heads a state whose repressive apparatus does not share the strategic goals of its ideological apparatus. The resulting weak state provides security to neither business nor labor and lacks the real means to carry out the policies that are proposed or that it promotes.

Following off of this analysis, we outlined four possible scripts that could realign this backbone in different ways, creating the possibility of a new and enduring political stability.

Script 1. Minister of the Presidency Antonio Lacayo is strengthened by positive economic results of the program he has promoted in a climate of recovered social stability. The support cast is made up of the grassroots sectors and their role is a truce.

Script 2. In this script the supporting actors increase their protests and thus the level of ungovernability. Arnoldo Alemán capitalizes on the government's decomposition, thereby strengthening his chance of winning the 1996 elections.

Script 3. Antonio Lacayo imposes his economic plan by hitting grassroots protests with heavy handed repression, thus replacing Alemán as the hero of law and order.

Script 4. A centrist force comes together and reaches consensus on a broad based social and economic program. Here the support cast is made up of small and medium urban and rural producers, who are given the role of important economic subjects.

Which Script is Winning?

The sky should have begun to clear by the end of May, permitting some forecast of the future political and economic weather. The government's economic program, agreed to in exchange for new loans from the multilateral lending agencies, had been initiated under Antonio Lacayo's baton, while the FSLN Congress, billed as a transcendental event for its self definition, was held on May 20 22. But neither the government nor the population can see a clearer horizon. Black clouds are forming, auguring that what we have seen up to now may be just the calm before a storm.

Despite the bitterness of the ESAF brew, no one seriously challenged the government's economic program. This gave Lacayo a favorable setting in which to reactivate the economy and reinsert Nicaragua into the international financial community, consolidating a policy he has followed since 1990: privatization, competition, less state, and dependence on the world market and political system.

Even though this policy is socially exclusive, the key for Lacayo would be his ability to get the backing of the most influential institutions in the country and abroad. Within Nicaragua these are the National Assembly, the army, the Supreme Court, the Catholic Church, the business organizations and the political parties. Internationally they are the US government, the multilateral lending agencies and the governments of the other main donor countries.

If Lacayo could do this, he would have enough political stability to apply his program fully and to head up the slow and complex process of consolidating a new backbone of power, overcoming the disorder and ungovernability that have contributed so heavily to the economic crisis since Violeta Chamorro took office. His methods, his relatively tolerant imposition of the economic adjustment with some room for negotiation, his ambiguous approaches to political leaders of one stripe or another, and his discourse sometimes intimate and sometimes stern, sometimes harshly realistic and sometimes honeyed with fantasy would finally begin to bear political fruit.

Four Dark Clouds

But what do events show? Is the way to stability being consolidated under Lacayo's leadership? Four recent realities could undermine this possibility.

1. The policy line coming out of the FSLN Congress was more open, militant opposition to the government. The FSLN did not discuss alternative social, institutional and economic program options, primarily because neither of the two currents seems to have one. The event ended up giving significantly more power to the Democratic Left current, which is strongly opposed to the government and neoliberalism, than to the Majorities current, which maintains an ambiguous posture of closeness to the government without radically questioning its economic program. It has a discourse of renewal but a small base.

This result could mean that the Chamorro government will no longer have in the FSLN National Directorate an interlocutor able to help limit the scope of grassroots protest against the upcoming privatizations. Although the speeches of reelected FSLN secretary general Daniel Ortega have had more nuances since the Congress, decided opposition to government policy gained ground in the FSLN's programmatic theses as well as among the congressional delegates and some of the base.

2. Public service employees threaten to pressure against privatization with measures that would deepen the climate of insecurity. The FSLN Congress endorsed active opposition to the ESAF conditions, one of which is to privatize telecommunications, energy and the mines. Slogans appearing on Managua walls in May suggest that the organized workers are not about to let these new privatizations go through without a fight. National Workers' Federation leaders have called for the taking of highways and the paralysis of public services if these plans are not halted.

In previous protests, the workers' methods barricades, blocking of traffic, armed confrontation created a chaotic atmosphere. In the heated debate among Sandinistas about methods of struggle, many have condemned violence out of hand. But a number of labor leaders take other positions: gentle protest gets nowhere with this government; or, if it responds to our peaceful protest with violence, we must respond in kind.

Up to now, the government has vacillated in the face of protests. It ignores them at first, begins negotiating too late, then combines a hard line in the talks with moderate repression in the streets, ultimately agrees to significant concessions, but in the end complies with few of them. This attitude, and reality itself, has turned the conflicts into little other than channels for increasing chaos and instability. Each one amplifies the perception of disorder, insecurity and ungovernability, and ends up seriously affecting the government's own economic policy objectives. Since big business is particularly susceptible to signs of chaos, these conflicts strongly influence this supposed protagonist of economic growth.

If the new protests are indeed militant, the government will be caught in the dilemma of either facing the conflict head on so as not to damage the embryonic stability, or risking the creation of a climate fatal to its economic plan.

3. Rural crime is heating up and getting bigger media headlines. Every day, there are new reports of kidnapped ranchers, assaults on public transport trucks and a general atmosphere of banditry in the country's north central rural zones. This is having ominous effects on agricultural production and on producers' investment expectations. The armed confrontations, many of which still have political overtones, particularly affect the poorest peasants, as do the common crimes.

The media give constant and significant coverage to this aspect of the real country, which contrasts strongly with the images of the official country provided in the government's equally constant discourse. Nightly TV news programs covering the grisly reality are interspersed with government spots that offer dubious data about agricultural growth or laud the enterprising spirit of and golden opportunities for a handful of business investors.

4. The US Congress is exerting more pressure on the Chamorro government to compensate US citizens confiscated during the 1980s. The González Helms amendment, which conditions US aid to various countries on the return or compensation by July 30 of properties confiscated from US citizens, has created a new controversy between the Clinton and Chamorro administrations at the very moment in which the signing of the ESAF accord and the role of new US Ambassador John Maisto in favor of reconciliation seemed to have blessed the Nicaraguan government and Lacayo's program.

The problem of expropriated US citizens is general to all the formerly socialist countries, and its political and legal difficulties are similar. The Chamorro government has so far defended itself under international law and not bent to US pressure. While this posture is laudable, the Clinton administration's policy is having a counterproductive effect on Lacayo's efforts to consolidate some measure of stability.

What Road to Stability: Exhaustion or Repression?

The exclusive character of the government's economic policy cancels out the possibility of achieving stability through broad social consensus. This leaves Lacayo only one good alternative script 1 to strengthen his position as the nerve center of the new backbone of power and thus increase his chances of winning the presidency in 1996. In this hypothetical script, the black clouds would only signal a brief drizzle, then clear up as follows:

* The new FSLN leadership elected in the Congress would show its conciliatory face, as some declarations by Daniel Ortega have already begun to do.

* Protests against the privatizations would weaken, since they represent narrow interests and would not have much support from either the FSLN or the public in general.

* Rural crime would continue, but at tolerable levels, since reactivation attained in the countryside through internationally financed programs would be enough to shore up the farm economy and thus increase rural employment, objectively shrinking the base for crime.

* US pressure would be diluted in negotiations and the Clinton administration would decide to avoid a test of strength with Nicaragua around the property problem.

But if the clouds gather force and unleash a tempest, Lacayo's stability could only be accomplished by coming down hard on both union protests and rural banditry. So doing, Lacayo would win the support of the urban and rural middle classes, the sectors of the population that are demanding stability "at any cost." This would also strengthen the executive's image with organized big business. The Church and the moderate wing of the FSLN would take a reserved posture toward this attitude and call for prudence, but the Church, in a pastoral letter as long as two years ago, already urged the government to develop an "executing arm." In the end, an overall perception would prevail, particularly in the international media, that the government was decisive and politically solid, which would send positive signals to potential investors.

And Alemán's Future?

If the grassroots sectors do get violent and the government does not use a hard hand, Arnoldo Alemán's image will be enhanced as the only one capable of putting Nicaragua's house in order, forging stability and justly recompensing the productive efforts of those who long for this order. This perception of the controversial Managua mayor is partly due to his patient political tactics. For the most part, Alemán does not go around buying "expensive votes" (giving privileges to big business interests), a habitual practice of the rightwing oligarchy, particularly that of a Conservative tradition. He accumulates strength at the base, with deeds. In addition to his major "urban beautification" works, he builds cement sidewalks in popular neighborhoods, quickly repairs the pot holes in middle class residential tracts, and plants shade trees along the capital's main thoroughfares. The projects, largely financed by Alemán's ubiquitous tax program, are all accompanied by big signs that say "Managua's changing, the mayor's complying." In other words, he is a man who makes the trains run on time. This makes much of the populace shrug off his suspected corruption. "So what government official isn't corrupt?" many ask cynically. "At least Alemán gets things done."

The oligarchic business sector is shaken by the emergence of his Liberal Party, heir to a history of populism and charismatic figures in both government (Zelaya and Somoza García) and the opposition (Sandino and Rigoberto López Pérez). It is shaken by the party's convocatory strength, based on a patronage pegged to social networks and to distributing social capital among farm owners, teachers or "civic leaders" in general.

This business sector, which has traditionally controlled a large part of the nation's wealth and its flows through international commerce, has been unable to put together a government consistent with its interests and endowed with the necessary apparatus of power. It thus has only two choices: fight with Arnoldo Alemán for leadership of the Liberal Party or support Lacayo's "center" or one of the other "centers" coming into vogue. The resolution of this dilemma will undoubtedly be reflected in the coming months, depending on how the Chamorro government deals with the grassroots reactions to its economic program and how well it steers around the obstacles currently strewn in its path: negotiations on the Military Code, constitutional reforms and the constantly postponed property issue.

The recent events are nothing more than signposts toward possible roads. Which one will be taken depends on three main actors: the FSLN, the government and the political class in general.

The FSLN: No Economic Program

When the FSLN declared after losing the 1990 elections that it would govern "from below," many imagined that it would be obliged to build itself into a political party after having first been a revolutionary vanguard and then a party state, thus renouncing its top down style of leading the masses. They hoped for a party that would forge its new identity by listening to the interests of the majorities, that would have the ability to propose, debate and draft an alternative economic program step by step, ultimately unveiling a less exclusive productive reactivation strategy than that of big business. And that, based on that strategy, it would offer sound technical arguments for a better distribution of the costs of the necessary structural changes.

The seriousness of the national economic situation demanded a bitter program of structural adjustments, sorely tempting the FSLN to take refuge in economic populism rather than draw up constructive criticisms.

Despite that temptation, many hoped that, as an opposition party consistent with grassroots interests, the FSLN would use its organizational strength and its important quota of real participation in the national institutions to join the search for national consensus on how to get out of the crisis.

But reality has shown that the FSLN was more concerned in the past few years with its internal problems and with defending the spaces it had acquired than in collaborating in this search. Its confusion about defending its agrarian and urban reforms and its delayed legalization of these properties, its defense of the corporativist interests of organized workers in the big state companies being privatized, its loyalty to the old myth of the advantages of collectivism, the consolidation of personal economic interests in some Sandinistas' flourishing import businesses all created potential obstacles to the FSLN taking clear positions on consolidating the agrarian reform and decollectivizing, or on the Chamorro government's absurd trade policy, or on its confused privatization of state companies. All of this has seriously reduced the FSLN's moral authority.

Beyond these and other contradictions, perhaps what most limits the FSLN's ability to constructively criticize the Chamorro government is that it has no alternative economic program consistent with the challenges of national development. It wavers between romantic populism and accepting the neoliberal adjustment with populist rhetoric.
Now as before, its basic economic subject is "the people," understood as consumer. Now as before, it stresses consumption over production and the city over the countryside. These characteristics of the FSLN's economic policy when it was in power continue coloring its views and role in the opposition.

Absence of serious debate about these essential issues and loss of moral authority are not the only things eroding the FSLN. While the ranks of Sandinista sympathizers still blame all current evils on the government's policy (in counterpoint to the right, which blames them all on Sandinismo), the FSLN's institutional spaces of real power are slowly eroding as well: the army, the police, the Supreme Court, the National Assembly. At the same time, the ferocious economic competition is cutting into the reach of its media and the economic crisis is weakening its economic holdings.

The Government: An Exclusionary Program

The Chamorro government's economic program is extremely fragile. Its limitations in the medium term and its high social costs in the short run due to its exclusionary character, which polarizes society even more are not conducive to social stability. Yet, contradictorily, the government continues to wager on stability as a key factor for its success.

One positive element for consolidating the backbone of power with Lacayo at its center is that the government has been capitalizing on the FSLN's progressive loss of influence in the institutions of power. This has perhaps not happened as quickly or as much as the traditional oligarchy would have liked, but it has been real.

The government must still avoid a number of pitfalls. Its commitments with the international lending agencies presuppose an even stronger fiscal adjustment, which will reduce its maneuvering room. It already does not have enough technical personnel to carry out the transformations that the adjustment requires, a problem that will only be accentuated by more fiscal spending cuts. As the government's possibilities of electoral populism shrink, it will be more inclined to turn to repression to impose its policy. And, finally, it will have to deal with the property issue, favoring the interests of the productive sectors but without neglecting the influential symbolic demands of the confiscated and the other big landholders against both the Sandinista "nouveaux riches" and the new power groups competing for their social status.

To secure its power, the government needs the open support of the police and the army. The police totally depend on the national budget, but the army has an important source of independence in its own businesses. The conflict that is already raging about the just revealed new Military Code, particularly regarding these businesses (see "Very Briefs," this issue), will probably end up involving the army more directly in any repressive government policy, in exchange for preserving this privilege.

Even with all this, the essential problem for the government and its economic policy is that the dominant sectors backing it do not control the majority of the country's wealth, much less its production. The bulk of the economy is largely controlled by the middle strata in the countryside and cities, who have little to hope for from the current economic policy. They only thing they will benefit from is stability, whether imposed by force or by inertia.

The fact that this wealth is in the hands of small and medium producers shows that the only way to give real solidity to an alternative backbone of power in Nicaragua would be to make political power coincide with these groups.

The Political Class: No Interest in a Program

Most of today's political fights turn on the quotas of political power that various factions or caudillos are demanding. The Conservative and traditional oligarchy wants to recover the symbolic capital of its ostentatious dominion over society. It is not enough for them to have resources and privileges unless they are clearly acknowledged, accepted by all and defended by the institutions that are supposed to guarantee order. The FSLN's upper echelons, in contrast, are not interested in flaunting the economic resources and privileges they acquired while in government, but they do not want to risk losing them.

Between these two extremes of the political spectrum the spectrum of power disputes, not the ideological one lie the reformist sectors, who represent no one. The differences in their rhetoric whether Sandinista or anti Sandinista, of the left or of the right may help show where they place themselves on the political spectrum, but contribute nothing to any understanding of their possible programs.

And now there is a new phenomenon: "center" movements that appropriate for themselves the glorious advantage of being smack between the two extremes. In a recent radio interview, Minister of the Presidency Antonio Lacayo explained that he plans to head up a "center coalition" in the 1996 elections. His political enemies say that the nucleus of this coalition would be the amalgam of Social Christian parties in the Christian Democratic Union (UDC), the social democratic Nicaraguan Democratic Movement (MDN) and the Social Democratic Party (PSD) itself.

Then on May 26, ex PSD leader Alfredo César and former Socialist Party leader Luis Sánchez both now expelled from their respective parties announced the creation of Nicaragua's 26th political party. They defined their new Democratic National Party as "center right," distancing it from Lacayo's unqualified center.

Both claim to be aligned with reason and supported by the virtues of moderation. But they lack the support of the economic sectors that could give strength to their proposal if they had one. Although they use social democratic rhetoric, they do not really defend economic democratization or active policies that could redistribute income, much less any transformation of elite institutions, all fundamental ingredients of any genuine political center as opposed to one that defines itself as simply equidistant between the extremes.

The path to development based on economic democratization appears further away than ever. One essential problem for Nicaragua's future as a nation is that the political class as a whole is not interested in the nation. Another is that the political class as a whole does not have a majority economic subject that sustains it and is represented by it.


It is evident to all observers and students of Nicaragua that the property issue is central to the country's stability or instability. A good example of its importance can be found in the attention given it in the World Bank's latest extensive analysis.
But different social realities are hidden behind a technical legal presentation of the issue and are ably mixed in all speeches, be they in favor or against any of the solutions. At bottom, three different problems converge in this issue:
1) The rural and urban agrarian reforms.

2) The confiscated, be they ex Somocistas, legitimate or late coming US citizens, or Nicaraguans.

3) The "piñata"(the legalized transfer of expensive real estate to well known Sandinistas during the 1990 government transition).

All three processes were legal, in that they were done within the framework of government authority. A government's legitimacy or lack of it is not at issue when later judging the legal value of
prior sovereign acts. What is today under consideration is the morality of these processes. This assumes a relative value judgment, depending on subjective appraisals.

The yardstick for the solution should thus be set by the government, within the arbitration faculty duly conferred on it
and in accord with the nation's welfare, not the subjective appreciations of any minority group. It should be done according to the yardstick that the property of the new owners is no less legal than that of the previous owners, and that the moral or immoral character of the new property depends on its significance for political stability and economic growth, not on the good or bad character of how it was obtained.

1) The agrarian and urban reform is the most important of the three, and also the simplest. Regrettably, the Sandinista government considered these property reforms "public charity" or a commitment to the social groups that participated in the struggle against the dictatorship, and used them in practice as a means of control and party patronage.
It is regrettable because it did not contribute to instilling in national culture the idea of agrarian reform as an economic cleansing, the construction of a base for growth and development, despite the multiple and valuable historic examples of this, ranging from the economic resurgences of the Greek and Roman civilizations of antiquity to the birth of East Asia's "new industrialized countries." Still closer to us, it is significant that the dictator Pinochet himself did not reverse the agrarian reforms of the Christian Democrats and Socialists in Chile, but deepened them through decollectivization, which guaranteed one of the most solid civilian bulwarks in the countryside for his prolonged regime.

2) The case of the confiscated should be treated firmly, though offering a just and obligatory compensation mechanism in which the bonds are adequately revalued within the margins permitted by the fiscal savings policy. Even the United States seems not to impugn the legitimacy of Decrees 3 and 38 regarding the confiscation of Somocistas, for which compensation is impossible because it would go against the nation's aspirations and the letter of its Constitution. In the rest of the cases, exceptions cannot be established for natural citizens and foreigners, because the law of the Republic must be the same for all.

3) In the case of the so called piñata, no significant difference exists except in the minds of some between property in the hands of a Nicaraguan businessman or a foreigner and the same property in the hands of a well known Sandinista. In this
case, the greater legality of one or another property cannot be defended for reasons of state. The government must weigh, in terms of the impact on political stability and national well being, how many piñata cases would have to be reversed to satisfy the symbolic demand of those confiscated who are basically asking that both their status as legitimate property owners and the moral infamy of the "piñateros" be publicly acknowledged. The contribution to stability obtained in this way must predominate over the possible instability factors provoked by damaging the rights of the new owners. From a political rather than legal viewpoint, "historic absolution" for all piñata cases would be by investing their capital or goods in Nicaragua, not abroad, and in small and medium productive projects, not big speculative or commercial ones, thus contributing to a national development with economic democracy.

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