Envío Digital
Central American University - UCA  
  Number 166 | Mayo 1995



The Chamorro Administration A Race to the Starting Line

The crises of credibility and economic stagnation are so deep that the Violeta-Lacayo team no longer has the resources, the capacity or the time to win back the people that brought them to power five years ago.

Nitlápan-Envío team

On April 25, Violeta Chamorro began her sixth year as President of Nicaragua. As the countdown to the next elections begins, her presidential minister, son in law Antonio Lacayo, is focused on the search for a political alliance that will keep one or both of them in office after November 1996. His objective can be summed up in the motto: Things must change to stay the same. He will try to win allies by arguing that a known quantity is better than an untested one. His maneuvering room, however, has become so narrow that his best hope is to enter the electoral race with a running start. From now on, we can expect lots of promises and little else.

The First Five Years

Before analyzing this labyrinthine political chess game in which Lacayo is now embroiled, it is useful to summarize the Chamorro administration's essential achievements and failures over the past five years. Nicaraguans need a realistic assessment, however harsh it may be, if they are to reflect on the challenges embodied in the 1996 elections.

Separating facts from the distortions both favorable and critical that have been heaped on them in today's pre electoral frenzy is no easy task. Accuracy is always the main casualty of opponents, particularly committed old allies who suddenly become the most strident new critics as the campaign rolls around, loudly claiming that they had always repudiated the things being done poorly. But it is also victim to the self congratulatory publicity of governments, above all when they are entering the home stretch as spent and vilified as this one. Given the crossroads at which Nicaragua now stands, cloaking reality in false optimism is an irresponsibility of historic proportions.

Truth is never black and white; it must be sought in the wide range of grays. In this case, it must begin with an honest appraisal of the Chamorro Lacayo administration, using a variety of yardsticks: the securing of peace, the opening for democratic participation, reactivation of production and jobs, and the fight against extreme poverty.

These same criteria could also be used to assess the various political parties and their leaders. Anyone who aspires to power should adopt the notion that people are not simply to be used before elections and discarded afterwards. Government legitimacy and leadership should assume the electorate's mandate, which requires promoting the rule of law and citizens' participation. All that is left undone in this regard will be paid for later, not only in punishment votes, but in the apathy into which an ineffectively governed country sinks as well as the ungovernability resulting from uncontrolled conflicts.

1990: An Historic Moment

The change of government in Nicaragua in 1990 was not just one more peaceful transfer of power through elections; it was the first in over half a century. The fact that it happened, with the Sandinistas' valiant recognition of the electoral results, filled a longstanding democratic aspiration of the people who overthrew the Somoza dynasty.

That political moment was etched in the minds of many Nicaraguans as the irreversible establishment of a democratic system. An act as profound as Somoza's expulsion itself, it put another nail in the coffin of the past, with its military coups and crass disregard for the electorate's wishes. Running roughshod over this conquest, which the people have now incorporated into their lives, would have pushed the country over the rim of instability.

The new government plotted a course toward representative democracy, the predominance of civil over military power, political reconciliation, economic stabilization and the setting up of a market economy. The population's main expectations were to do away with war, improve their living standards and enjoy the prosperity expected from a better relationship with the "great neighbor" to the North.

What the government has actually done in these transition years was not guided mainly by the mandate of those who elected it or by the aspirations of the people as a whole. The results have been largely determined by deals cut with the domestic political forces, which were highly polarized in 1990, and by external pressures, mainly from the US Senate and from the economic conditions set by the International Monetary Fund and World Bank. Realigning the correlation of forces after the elections has been complex and difficult, and is still inconclusive.

Only Relative Peace

Among the administration's main successes in the first two and a half years were to disarm the Resistance forces and discharge over 84,000 members of the army and police. Both were necessary to pacify the country because they established the new government's legitimacy and authority and adjusted the military apparatus to the new conditions of peace.

Consolidating that peace required both strengthening civilian command over the military and reinserting the former combatants from both sides into social and political life. The culmination of the first process was to professionalize the army and police and avoid their incursion into politics, which has largely been achieved. A strategic accomplishment in this regard was the retirement of General Humberto Ortega, the last symbol of Sandinista power, from the army in February 1995.

Providing a social and productive response to the 600,000 people uprooted by the war not only former combatants, but also internally displaced families and repatriated refugees as well as to the 10,000 war disabled was an equally necessary condition for lasting peace. But it has not happened because it was not a government priority. Virtually the only response to their needs has come from international agencies and nongovernmental organizations.

Once the combatants disarmed, the government subjected them to an endless cycle of pressuring for assistance, waiting in vain for the government to fulfill its promises, then pressuring again, in which even armed pressure had relatively little success. The government's failure to reactivate agriculture and insert these people back into production is at the base of today's malaise in the rural areas. It has left semi politicized armed bands roaming the countryside, kidnapping producers, rustling cattle, destroying property and engaging in highway banditry in an escalating spiral of violence. The economic desperation has also brought new levels of insecurity to the cities.

Ineffective Adjustment: A Country Without Work

At the economic level, stabilizing the currency and prices (i.e. eliminating hyperinflation) and reinserting the country into the international trade and financial circuits can only be counted as relative successes. Doing so improved relations with the United States, but did not bring the better treatment that many expected from Nicaragua's return to the US fold. In addition, the costs of these "successes" have been enormous: the recession has continued and extreme poverty has grown, with no signs of letup.

The stabilization of prices and the currency is more the fruit of the fixed exchange rate permitted by the massive foreign aid received in 1991 92 than of any effort to reactivate production, except for a few isolated cases. The adjustment is thus ineffective, since stabilization has been partnered with greater macro financial and social gaps. Despite public spending cuts and financial restrictions, the trade deficit has widened notably since 1991. Balance of payments problems even made it necessary to institute an ongoing recessive fiscal adjustment to buttress the stabilization.

We have been analyzing Nicaragua's contradictory economic reality from various angles in envío since 1991; for now, one example will suffice. A characteristic feature of the recessive crisis is that falling wages have not increased formal employment. It has gone on shrinking year after year, due to continuing cuts in public sector jobs, weak domestic demand and the drop in traditional agro-exports.

The high and growing underutilization of labor illustrates how dramatic the situation is: 50% of the economically active population was underemployed in 1992 and 1993, and that figure rose to nearly 52% in 1994. Open unemployment also grew considerably last year, reaching almost 24% of the labor force.

The work programs of the Emergency Social Investment Fund and the Ministry of Social Action, which together provided 30,000 temporary jobs in 1994, could not even absorb the 54,000 new Nicaraguans who entered the job market that same year much less mitigate the open unemployment of the 363,000 laid off workers. The job cuts in the formal sector have been dramatic. The number of people paying social security dropped 23% between 1990 and 1994 in absolute terms, without even factoring in the growth of the employable population. In the central government alone, the number of job posts dropped 16% just in 1994.
The bulk of un and underemployment is in production, mainly agriculture. The general lack of reactivation in such labor intensive activities is sparking greater rural to urban migration and increased levels of extreme poverty.

The social problem is so immense that it can only be solved by sustained national plans that are closely linked to reactivating production as a whole. Without this, the scarcity of jobs will keep demand depressed to levels incompatible with the reproduction of economic activity, and the poverty alleviation programs financed with foreign aid will be of little benefit.

The Government's Three Ineptitudes

Between 1990 and 1994, Nicaragua received the highest per capita foreign aid of any developing country: $182 annually, though it has now dropped to $130. But the huge foreign debt service the country was paying meant that even that capital flow could not cover the current payments gap, so the debt kept on growing. By 1994, 96% of all cash aid went to service it.

The worldwide tendency for foreign cooperation to drop imposes an urgent commitment on Nicaragua: it must make rational use of what does come in and establish an economy that depends less and less on it to function. Signing the Enhanced Structural Adjustment Facility (ESAF) agreement with the International Monetary Fund a year ago guaranteed the government enough resources to keep the economy minimally operating for the rest of its term in office; apart from any small bonuses, the government now knows exactly how much cash aid it will get.

This knowledge should have significantly shifted the debate: instead of focusing on how to bring in more aid, the issue now should be how to prevent so much from going back out in debt payments and how to use what stays to have the greatest productive impact. But the government continues bemoaning the lack of hard cash, without making the best use of what it has contracted. Its implementation capacity is still so low that it cannot put to use more than $500 million annually, 20 40% under what it has contracted in some years.

The government's ability to manage an investment portfolio is also very limited. In the absence of a development framework, this leaves open the debate about how to get tied foreign resources and best use them. Despite all the economic restrictions, there is still room to improve public administration, or at least create the conditions for the next government to do so, but neither is being done. The situation is like a business on the verge of bankruptcy, in which the owners, top managers and even union leaders grab what they can for themselves, without trying to save the company from going under, while workers (the population, in this case) look on helplessly.

Finally, the government has little ability to either do economic forecasting or manage conflicts sensitively. Its ineptitude in both areas undercuts any realistic and scientific basis for its political actions.

Democratic Decision Making or Closed Door Deals?

The government unarguably deserves credit for establishing unrestricted media freedom, also a legitimate democratic aspiration of the population. This has allowed civil society to air its differences in public, facilitated greater knowledge of the conflicts besieging the country and even made those conflicts more manageable. But freedom of expression is only a necessary condition for handling conflicts and negotiating solutions to them; it does not assure that this will occur.

The media give the sense, particularly to the urban population, that conflicts can now be resolved democratically and that free and open debate suffices to establish this democracy. But this is bunk. Those with real power use other decision making levers: personal clout, back room deals, tremendous discretionary latitude beyond the reach of law, impunity and corruption.

The government's difficulty managing conflict has led it to cut deals and proffer bribes to win over allies. Continual use of such methods has kept it from establishing more open negotiation methods; its method is limited to the art of making promises with no guarantees for their fulfillment. The social and political fragmentation and the population's lack of access to decision making has dispersed society and estranged citizens from their rights. Even in the upper echelons of power, only those with the strength to make good on their threats can get into the game.

In Bed with the Enemy

The most transnationalized business groups feel that the government is again basically theirs, since it favors their interests. The first changes that appealed to them were mere trifles like replacing long sleeved white guayaberas with suits and ties for official receptions. A number of social, institutional and even cultural mechanisms have now "put things back in their rightful place." Shoemakers back to their shoes, politicians back to monopolizing decision making and bosses back to bossing. Money speaks once again, and businesspeople of all political stripes trust that this government, unlike its predecessor, will not get in their way. After the "piñata" and the privatizations, even many revolutionaries some union leaders included are among those businesspeople.

Even the army is now commanded by officers with strong business ties and some with relatives in the country's top business families. The election of Humberto Ortega's successor, newly promoted General Joaquín Cuadra, symbolizes a situation that had crystallized much earlier: the officers have become "uniformed businessmen," with stock in companies offering watchman and bodyguard services, construction and transport, shellfish and lumber, even private banking. It goes without saying that, in the sea of stagnation in which Nicaragua is drowning, these are precisely the "few isolated cases" that are reactivating.

This major political change would have been impossible without depriving the grassroots movement of any organized political alternative. The Chamorro administration's other "success," then, has been its work to divorce the FSLN political structures from grassroots demands. By playing on the FSLN's own internal contradictions, it has contributed to the organization's formal split.

This objective was so strategic and delicate that the executive branch discarded the sterile route of confrontation with the FSLN in 1990. It opted instead to offer the Sandinista leadership a deal that favored governability and application of the economic reforms the international financing agencies required. In exchange for letting the executive branch push through the adjustment policies by using the system of centralized power and virtual subordination of the other branches set up in the 1980s, the FSLN got to keep the goods appropriated in the famous "piñata" and hold on to its top positions in the army, police, National Assembly, electoral branch and state universities.

But if both sides benefited, both also paid a price. The cost to the government was a break with the electoral coalition that brought it to power. It was a minimal and even necessary cost in light of the polarizing discourse that the Liberal and Conservative extremists in that coalition unleashed against the FSLN. Their "winner take all" position was simply not viable, much less compatible with President Chamorro's discourse in favor of reconciliation. But avoiding extremism did not have to imply strengthening authoritarianism or sidestepping a broadening of the political game, in which tolerance and negotiation are the norm in relations between rivals.

The cost to the Sandinista leaders for tactically supporting the government's socially exclusive economic program was that they moved away from their social base, which became increasingly demoralized. The population's most burning issues unemployment and personal safety only figured rhetorically on their agenda. If the political cost of the "piñata" which the presidency, true to its word, never seriously challenged is included, the Sandinista leadership paid far more than the government did for this deal. It meant that the FSLN could not rectify its errors or fight to democratize the political system, and could even do little to democratize itself internally. As in the rest of life, internal modifications can only come about by acting on one's immediate surroundings. In a grouping of revolutionary origins, the result of this fatal game was to commit suicide as an alternative and independent political force able to create its own pole of opposition to what the government was building.

Government by Muscle

Since no basic consensus existed about the course of the reforms or the modifications that the political and economic model would produce, the government has just muscled them through rather than seeking consensus based on a convergence of fundamental interests. The results are not encouraging.

The rhetoric in lieu of arguments that accompanied the change in the economic and social model offered it as the only road open to Nicaragua. Any exploration of alternatives was discarded from the outset. The government explained the excessive international opening, its abandonment of its social responsibilities and services and its unbridled favoring of the wealthiest sectors with credits and privatization as the inevitable road to "modernization."
This rhetoric masked the government's unwillingness to modify the strongly presidentialist political system it inherited, which allowed it to push through its economic "reforms" with few hassles. The advantages of this system were so great that the executive branch opted to share its privileges with no one. This attitude condemned any attempt to seek social and political consensus on a new model to immediate failure, which is why many of the positive dialogue processes initiated by the Chamorro administration have gone only part way and usually nowhere near as far as the country required.

The government's failure to realistically acknowledge and resolve these problems has been astonishing. It has increasingly and more insistently blamed the Sandinista legacy as the cause of all ills. Admittedly, this is nothing new: the FSLN did the same with Somocismo, and with the war, which indeed prevented the revolution from advancing in better conditions but was used as an excuse to cover a multitude of errors.

Nicaragua's social and economic conditions when Chamorro took office were undeniably tough. The Sandinista government's recessive stabilization and adjustment measures in the late 1980s had failed to improve the critical economic situation, due to a lack of foreign resources to sustain them. Without such resources, the measures could not reverse the causes of the hyperinflationary spiral: falling production and multiple domestic and external imbalances. By 1990, the foreign debt stood at US$8.64 billion, while compound interest on the unpaid portion had climbed to $1.85 billion. The current balance of payments deficit persistently hovered over $500 million while the export volume of goods and services fell to 1996 levels and the purchasing power of those exports continued to drop steadily.

But the challenge for any government with a real vocation to govern is precisely to diminish inherited ills and ultimately leave them behind. What, if any, improvements in this economic picture have been reaped by today's harsh economic policies, with all the aid resources the new government has received?

Did the Economy Really Grow in 1994?

According to the official line, the economy finally began a real growth tendency in 1995. As long as no one looks up from the accounting books at what reality is like on the street, this can be said with a straight face.

Nicaraguans are used to the government's groundless promises of growth. Having controlled hyperinflation by 1991, it promised that 1992 would be the "year of improvement." When that did not happen, it claimed that the "take off" would begin in 1993. That did not happen either.

Since the government can no longer afford the image of another lost year, it announced that the Gross Domestic Product had grown a "modest" 3.2% in 1994, less than the predicted 4%. But while the economy did begin to pick up slightly, it was far less than the government claims and for reasons having little to do with a change in the tendency. The Interamerican Development Bank estimates a 1.8% growth, based on official sources; FIDEG, an economic analysis firm with Sandinista leanings, puts it at 1%; other private specialists go as low as 0.5%. There are technical as well as political reasons for the discrepancy, but no analysts calculate that real per capita income has increased. Most of the population, according to recent opinion polls, estimate their situation as "worse."
After ten years of continuous recession, any growth is worth lauding, but there is no basis to present it as if the country had touched bottom and is now on the way back up. It is false to suggest that the population's vale of tears is at an end.

Although 1994 export income was also not as high as the government claims, it did grow and will probably continue growing in 1995, thanks to the windfall coffee prices and unexpected price rises for sesame and some nontraditional export categories. Increases in other agricultural areas, particularly basic grains and cattle, are questionable, however. If they were as the government says, the GDP would have grown even more than it claims, which suggests an inconsistent method of calculation.

The rise in coffee prices meant a 34% increase in the volume of coffee exported, compensating for the nearly 28% fall in 1993, while the value exported more than doubled that of 1993. Together with the growth in beef and shellfish exports, the total increase in goods exported in 1994 was 28%, with a net 3.2% growth in the overall export of goods and services.

The peasants have made a tremendous productive effort, responding far better to the inclement adjustment than large exporters. Can they sustain this effort without a determined policy of support to agriculture? So far there is no sign of such a policy and the former combatants have still not been massively reintegrated into production.

In large measure, then, the economy grew due to a series of factors beyond the intervention of the government. Only actively reorienting both policy and outside resources toward productive development can break the vicious circle of stagnation and spark a genuine and lasting recovery. Without this, the 1994 bonanza will not reactivate the economy on its own, and will surely not improve the wellbeing of anyone except a few coffee exporters.

The government's only active strategy, however, has been to please the international financing agencies by uncritically implementing their economic policies and making no effort to understand the nation's reality. In 1994, it limited its actions to managing the relative domestic price stability and controlling the slide in the nominal exchange rate. While its primary contribution to maintaining macroeconomic stability was an ongoing effort to reduce the public sector's fiscal deficit, real stability still depends on loans and donations.

A Single Minded Goal: Pay on the Debt

Even with the ESAF resource flows and the promise of increased coffee income, the government's economic policy, above all its foreign exchange rate policy, suffered from inconsistent objectives in 1994. To stimulate exports, the government set up a controlled sliding exchange rate, then to keep inflation down, it severely restricted credit to the private sector. In short, it tried to keep prices moving slower than the córdoba devaluation, but that is impossible in a dollarized economy. All that can be hoped for is that prices not end up leading the movement in the nominal exchange rate.

This clash of macroeconomic objectives also occurred with fiscal policy. The government tried to finance more of its public spending by increasing tax collection. One way it did this was to index public utility rates to the sliding exchange rate, which implied periodic increases. But this, of course, had an even stronger inflationary impact.

Even though the government reduced its quasi fiscal deficit, various factors undercut this accomplishment. One was the limited success (only 30%) of what is euphemistically called the "Labor Mobility Plan," more crudely known as slashing the government payroll through "voluntary" and compensated layoffs. Another was the four hour a day energy rationing begun in July 1994, which, after a brief respite, is again up to two hours.

The government's austerity measures have taken the easy path of just cutting along the dotted line. The harder but also more effective route of improving the quality and coverage of public services or improving economic forecasting and administrative capacity has been left untouched.

The government's only goal in this whole effort to increase public savings was to meet its 1994 foreign debt obligations. In the end, it had to take out a loan from its Central Bank to do so. Despite breaking one commitment to ESAF to meet another, however, the IMF certified in the Paris Club meeting on March 21 of this year that Nicaragua was "on track." "We're on good terms with the Fund," the government proudly said on its return from that meeting, turning a deaf ear to both criticisms and demands at home.

The Bottom Line: Writ in Red

All the government's changes in the political and social system strengthen authoritarianism and social inequality. But these characteristics are not optimal for reactivating the economy. The problem is less one of foreign resources than of creating the political, institutional and technical conditions that encourage domestic savings, the capitalization of production and job generation. None of this happens with an authoritarian government that refuses to promote the security and confidence that the different social and productive actors need to climb on the bandwagon of production and an equitable sharing of its fruits.

The way real power is being exercised makes a mockery of the promises of "a revolution of honesty" made five years ago. This enormous liability makes the Chamorro administration's bottom line very negative, not only in relation to what the population expected, but also to what might be expected of any minimally credible and decent government. Its inability to resolve the chain of crises and its ongoing irresponsibility in setting them aside is only topped by the general social insensitivity of its whole governing style.

The social and political costs of the changes the Chamorro administration instituted have been high for it as well as for the population. It is thoroughly discredited with the citizenry due to the grim reality and to its repeated failure to keep its many promises. By today, the political and economic limits on its ability to govern and emerge gracefully at the end of its term are severe. The main restrictions are the following:

* The rupture of the constitutional order due to the "battle of the branches" over the reforms to the Constitution has confirmed the frustrated and impoverished population's conviction that most politicians are not the slightest bit interested in any agenda but their own. The presidency's unabashed rebellion against the reforms has gone on so long because Antonio Lacayo has yet to find a legal, much less organizational way to realize his electoral ambitions. He is becoming even more desperate as he watches the coming together of a new center right political alliance among Sergio Ramírez's Sandinista Renovation Movement (MRS), the Christian Democratic Union (UDC) and the Social Democratic forces (PSD) headed by Alfredo César, with Miriam Argüello's Conservative Popular Action (APC) flitting around the edges.

* Recent polls reflect the population's faith in representative democracy and in electoral succession as the mechanism for winning and exercising power. The majority wants the president's term to be shorter, but gives democracy high marks as the basic principle of political life. This restricts the government's ability to do what it pleases about the presidential succession and simply push its weight around to resolve its conflicts with the National Assembly.

* The government's popularity has fallen tremendously, both nationally as the opinion polls reflect and internationally. Domestically, the government's nepotism, corruption and inability to resolve conflicts except through bribery and intimidation have cost it all its credibility. It is viewed as being committed to no one's interests except those of its own members. Abroad, its image is of a divided government that cannot reach accord among its various branches. In addition, both the donor community and the international financing agencies have persistently counseled better use of foreign aid to reactivate the economy, but the government has passively followed the agencies' financing requirements to the letter, demonstrating neither spunk nor creativity.

* Although the institutional crisis has more impact abroad than at home, it has shattered the officially promoted illusion that the country's crisis was its lack of foreign resources and that politics and peace are already in the bag. The institutional instability generated by the executive legislative fight cast huge doubts on the country's stability as a whole. Given that the struggle against nepotism is a popular aspiration and its conquest is laid out in the constitutional reforms, the government has made a serious error in challenging the reforms and failing to measure the possible aftermath of its challenge.

* At an economic level, both the ESAF agreement and the recent debt renegotiation in the Paris Club sent the government a clear signal: it cannot abandon the reforms or incur excessive public expenses for example, squandering foreign resources on the electoral race under pain of having its funding channels blocked. The executive now has little of the room it had in 1994 to curry needed support from political and economic elites with credits or bribes. It has even less room to satisfy the population's key demands in this critical pre election year.

* Finally, Managua Mayor Alemán's thus far unchecked rise as a strong presidential contender in the next elections has caused Minister of the Presidency Lacayo to clutch at the idea that he needs the state machinery to compete against Alemán. At the heart of Lacayo's desperate acts is his willingness to do anything to stop the constitutional reforms from going into effect and to enter the electoral fight with a material advantage over his opponents.

Time Is Running Out

As all polls show, the administration's popularity has fallen year after year, but it has now bottomed out alarmingly. The government's economic, juridical and political reforms, as well as its closest allies, have gone down with it.

The cost for a good part of the potential electorate is political apathy, frustration and skepticism. These attitudes make the system even less participatory, since few trust that their participation will get them anywhere. While this might favor the government by producing a high abstention rate precisely among those most likely to vote against it, it will also make democracy even more fragile after 1996. Should this happen, it will be one of the Chamorro administration's worst legacies.

A strong demand for stable employment shows up in the polls alongside serious distrust of the government due to its unkept promises. The growth of extreme poverty and the government's immobility around reactivating economic activity and employment has earned the administration strong "bad" marks.

The population's attempts to find employment do not grow out of any government policies, but out of migration to neighboring countries (El Salvador, Costa Rica), or criminal activities such as theft, drug trafficking and prostitution, which only increase people's fear for their own safety. The fact that poverty is growing faster than the creation of legal job posts also affects the police, which is not up to the task of social control. Those involved in selling protection services do benefit from it, however, since they guard the properties of those who can afford "private" police.

The social demands are now so huge that, to erase the population's current skepticism, the government would have to launch more extraordinary poverty combating programs than it can either finance or implement in the time remaining. The government is also in a losing race against time to make significant demonstrations of populism and patronage.

The Grab for the "Center"

The political center, patiently knitted together by Antonio Lacayo from his privileged position in power over the past five years, has slipped from his fingers. The stitch is being picked up by the MRS UDC PSD alliance.

This new and previously unthinkable alliance so far shows no signs of exchanging the traditional methods of political wheeling and dealing for a clear anti government program that could get out the vote for genuine change. Even the MRS has eschewed a more grassroots center left alternative that would call on the population to participate in civic activities; it has opted to enmesh itself in tired old political arrangements at the top.

This fragile alliance has chosen not even to create participatory spaces so important sectors of the population can actively speak out on behalf of the reforms or of a generally more open political system. By failing to do so, it is not taking the population's agenda on as its own. Outside of a few passing criticisms of privilege and corruption, it has remained silent about the government's economic policy, tacitly accepting the neoliberal consensus about its merits. Unless this changes, it cannot expect to get many votes beyond the business class and some of the more comfortable and intellectual middle sectors.

Alemán for President?

The other important coalition, headed by Managua mayor Arnoldo Alemán, is of a rightwing populist stripe. It is attracting most of the other Liberal tendencies, the National Resistance Party (PRN) which represents many of the former "contras," and the most reactionary Conservative sectors. Buzzing around the edges of this coalition is the intransigent group of property owners confiscated by the Sandinista government, who see it as their best hope of recovering their goods. It is also generally attracting anti Sandinistas of all kinds who recall Alemán's vitriolic discourse against the FSLN a few years ago. Alemán has tamed this discourse in favor of a new, more widely palatable image, but still speaks out against the Sandinista "piñata" frequently, to keep his hardline backers from getting confused.

Any group opting for this coalition knows out front who the presidential candidate will be. Alemán not only brooks no debate about it, he also gets far and away the highest rating in all polls. The most his possible allies can hope for is to ride his coattails. Nicaraguan politicians' traditionally unprincipled nature could thus turn into a liability for Alemán, saddling him with an opportunistic and unwieldy alliance like UNO was in 1990.

His populist and anti government discourse has capitalized on the discontent of much of the population. He has solidified this base of support through the successful administrative experience he has acquired from his platform as mayor of the capital municipality. Obviously, his influence is explicitly rejected by both Sandinista and Lacayo followers, but it creates fear in some oligarchic sectors as well. Business leaders are unsure what course he would steer the country on as President. Once the constitutional reform problem is somehow resolved, we can expect to see many electoral tickets forged largely to pull votes away from Alemán.

The FSLN still contemplates going it alone in the first electoral round since it believes it could come out with a strong vote (one of the reforms requires a second round if no one wins the majority in the first one). But it is sounding out possibilities of an alliance to support Lacayo's center bid in the second round should Alemán look like he could win it. The FSLN considers that nothing could be worse than Alemán taking office not even an unholy alliance that would allow Lacayo, or even Violeta Chamorro herself, to run.

All this is giving Lacayo a second wind; he is now trying to sell the idea that Violeta, who comes out stronger than he does in the polls, should be reelected for another term. But this means quashing the constitutional reforms rather than simply disobeying them, as he has done so far. It is a complicated challenge.

The Reforms: Only Step One

Society should push for regulations to the current free market scheme and for a broadening of the restricted democracy, but as long as the presidentialist political system keeps everything immobilized, such improvements cannot be made. The reforms took a first step to modify that system and, despite the step's timidity, it shook the system's pillars.

Even though the reforms focus only on formal democratization aspects and do not take up the essence of the participatory advances the population achieved in the revolutionary decade, they do create important checks and balances between the branches. They thus modernize the state, institute formal and representative democracy, make public administration more transparent and widen legislative control over economic decisions and international negotiations.

The problem of the reforms is not de jure but de facto. Modifying the correlation of forces by simply legislating a redistribution of power in the political system has met head on resistance from the executive branch, which is defending its prerogatives like a she lion defends her cubs.

Neither the legislators nor the parties supporting the reforms have followed Cardinal Obando's oblique advice: muster popular support if you want the reforms to prevail. They are not defending the justice of the reforms to call the population to civic battle, perhaps because they think it will polarize the country anew. They have preferred the more familiar path of back room political deals and gentlemen's agreements, but it is a dangerous path, since there are no gentlemen to comply with them.

This unfortunate attitude also muddies one of the most important positive aspects of their process of approving the reforms in the first place: by finding a nucleus of consensus never seen before in the national political arena, they have changed the political game. This consensus could allow such thorny issues as property and privatization to be dealt with, just as it already permitted passage of the Military Code. It relaxes the political tensions to some degree and allows personalities and institutions that yesterday never even spoke to each other to sit down today and negotiate.

It is lethal to go on playing the old game of forcing top level political pacts through intimidation; it could lead the country to the edge of a social and political catastrophe. It is dangerous even if the threatening rhetoric is only being used to get the upper hand at the negotiating table, because it puts at risk the few possibilities that 1995 offers this country to revive the economy.


The institutional crisis triggered by the National Assembly's promulgation of its constitutional reforms on February 24 has neither ended nor moved forward. The executive branch still refuses to recognize them, arguing that they involve a legal problem that the Supreme Court of Justice must resolve. The legislative branch has proclaimed the new Constitution now in effect, arguing that it is a political problem that the government should resolve by discussing not the content of the reforms but only their implementation.

The United Nations Development Program (UNDP) headquarters in Managua hosted four long rounds of dialogue between all four branches of the Nicaraguan state starting on March 14. The invitation was issued by a group of five friendly countries Canada, Spain, Mexico, Holland and Sweden who offered to mediate in the hopes of breaking the impasse. The contents and results of the meetings are unknown, except that both the legislative and executive branches agreed to withdraw their media spots in favor of or against the reforms, and all four branches promised to respect Violeta Chamorro's full term
in office (until January 1997).

After a group of rightwing parties complained that no one had authorized the legislative representatives attending the talks and persuaded one of them to withdraw, the international mediators decided to invite political party leaders as well, making it a virtual "national dialogue" from which a national accord should emerge. Three rounds of that dialogue took place before Easter Week holidays put a temporary halt to them, but produced no results either.

One of the UNDP's objectives in hosting those meetings was to inform the politicians of a poll it had promoted on governability in the country. The poll revealed that political activity and the political class as a whole are increasingly discredited, and that the majority of Nicaraguans want a national accord that will resolve the country's main economic problems.

Meanwhile, one of the National Assembly's first steps to begin implementing the reforms was to elect five new Supreme Court justices on April 6, following consultations and study of the lists of candidates that had been submitted. (The reforms increase the Supreme Court bench from nine to twelve, and two existing vacancies had to be filled.) One of those elected was from a list submitted months ago by President Chamorro to fill the two vacancies. The executive not only insists that the Court must decide on the reforms' validity but has also declared that it will not recognize the new justices. Four days before they were elected, one of the sitting justices died of a heart attack, further weakening the Court's ability to hand down a decision on the reforms. Both the lack of a quorum on the old bench and the election of new justices have thus aggravated the crisis.



The government claimed "total success" in negotiating a pardon of "80% of the debt" at the Paris Club meeting. Since it is always very secretive about its negotiations, it is hard to get details about what actually happened, but these facts illustrate the inaccuracy of the government's version:

The Paris Club meeting was held for debtor countries to renegotiate their debts with the Club's member countries on a case by case basis in accord with what are known as the "terms of Naples," which permit a reduction in line with a country's needs and ability to pay.

Nicaragua's debt with Club creditors is only 12% of its more than $11 billion total debt. It aspired merely to reduce its service payments by 80%, putting off any renegotiation of the debt stock until after 1997, but it did not achieve even that. It came away only with a recommendation for negotiating a reduction of its debt payments to each creditor, which offers two options:

1. Write off 67% of all due and past due service payments which are considered uncollectible in any case. The remaining 33% must be paid without fail, after being restructured over a 23 year payment period at market interest rates.

2. Consolidate the whole debt at concessionary interest rates with a 33 year repayment schedule, to reduce the current net
value of the matured debt by 67%.

Just over $862 million (nearly 60%) of Nicaragua's $1.439 billion debt with Club creditors is either now due or already in arrears. Pardoning 67% of this amount would leave $284.5 million payable. Adding the other $567.8 million unaffected by the pardon
brings the new total to $861.5 million, which is only a 40% reduction, not the 80% the government claims.

These negotiations relieved Nicaragua's planned 1995 payment to Club members, which the government considers a priority debt, by 50%. That is, the government scheduled $71 million in service payments to them this year, and now will only pay $36 million.

The creditor countries did promise to consider reducing the debt stock in June 1997, but only if the government gets good marks on implementing the three year ESAF agreement which ends in
April of that year. The signal is clear: Nicaragua has been granted some short term relief from its debt payment problem, but is under strong pressure to implement the reform program without debate, even beyond the current administration.


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Copenhagen: The Potential Success of a Failure

The Cycles of Crisis Are Narrowing

Faith, Hope and Mung Beans

The Chamorro Administration A Race to the Starting Line

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Shots Fired Against The Peace Accords

The Generals in Their Labyrinths

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Will the US Go in 2000?

Burning Questions, Pending Tasks

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