Envío Digital
Central American University - UCA  
  Number 192 | Julio 1997



Is There a Bridge Over These Troubled Waters?

The government keeps making enemies and establishing ties with Miami capital. Its strategy puts national stability at risk, but everything seems to indicate that the government is decided on navigating through turbulent waters.

Nitlápan-Envío team

The liberal government continued to open more fronts of confrontation and add new names to its growing list of adversaries in May, disregarding the serious climate of economic uncertainty and mounting social discontent. Debate over President Alemán's tax bill and the bogging down of negotiations with the sectors that participated in April's protest aggravated the conflicts. With the economic war barely underway between new and old groups and between national groups and those in Miami, and with the Sandinistas announcing a new "national protest campaign," pressure from the international community forced the President to call for a National Dialogue in the hope of forestalling the new protests.

The Liberal Tax Strategy

From a strictly economic viewpoint, the structural imbalance of Nicaragua's public finances is unquestionably the key to understanding the new "Law of Tax Justice." Public spending cannot be financed by the current level of tax collection, while continuing to cut social spending to reduce the fiscal deficit brings ever greater political costs. The government was forced to find a way to increase its income through taxation.

With the exception of Costa Rica, Nicaragua has the relatively highest social spending in Central America, as a legacy of the revolutionary transformations of the 1980s. It also has the highest foreign debt in the region and one of the highest in the world; about a third of the budget is earmarked just for debt service.

The absence of national resources to finance public spending was papered over with foreign financing during the Chamorro period, but since international cooperation levels began to fall and will continue to do so, the International Monetary Fund consistently required the Chamorro government to reduce the public deficit and is now requiring the same of the Alemán government. President Chamorro sent a new tax bill to the National Assembly near the end of her administration, but the heat of the electoral process prevented its passage.

The Chamorro bill's tax collection objectives were more limited than those of the Liberal law, since the Chamorro administration was not interested in altering the status quo. Alemán's law has a wider and more controversial reach and its long-term logic is to achieve an economic reactivation strategy based on agriculture and complemented by foreign investment in assembly plants for re-export (maquila). Central Bank president Noel Ramírez, one of the drafters of the law, declared that the government is working to "turn Nicaragua into one huge free zone."
There are coincidences between the Alemán government's short-term political objectives and the long-term logic of its tax law. The law mainly affects oligarchic capital and the new Sandinista capital, while fundamentally benefiting both the Liberal state, which will have more resources available, and Liberal capital in Miami allied to a sector of Cuban exiles, who will be able to invest in Nicaragua with full facilities. The pro-agricultural logic of some aspects of the law also benefit Alemán's main domestic allies: the country's medium and large agricultural producers.

An Initial Blemish: Its Technocratic Origin

The new tax law modifies almost all of Nicaragua's tax system, reforming 33 laws that were in effect up to now. In no other Central American county has a government ventured forth with such a complex and complete law as this one. Furthermore, it is thus far the new government's only economic policy instrument. The law's first major contradiction is precisely that the government has still not crafted either an economic program or a coherent development policy. Tax laws are normally designed to serve a government's economic policy. In Nicaragua, it's the other way around: tax collection is being ordered before the economic policy has even been formulated.

The law was born with several blemishes; the first its technocratic genesis. Such a transcendental and far-reaching law was conceived, drawn up and directed exclusively by the Central Bank, without consulting the economically affected sectors much less any other part of civil society. There wasn't even any coordination with the Ministry of Economy. This is unprecedented in Latin America. It was logical for the Ministry of Finances to design the law, but it would have been a nice democratic touch to subject it to some kind of consultation.

As jurist and tax expert Teódulo Báez explained to envío, "The new tax law's objectives do not appear clearly defined, and the text is full of worrisome contradictions in which a political and ideological skew predominates and the technical aspect is forgotten." Among these contradictions, says Báez, the law contains no incentives to production or to those who want to create jobs. It also infringes on the historic benefits that the universities, nongovernmental organizations and cooperatives had through certain tax exemptions.

It Also Has Blemishes of Intent And Procedure

The way the tax law was announced, presented, debated and approved undermined its legitimacy. It also created unnecessary (and irreparable?) fissures in the government's relationship with an important commercial and industrial sector that had been an ally prior to the law's passage. And if it created problems with allies, it deepened the rifts that already existed with other national sectors.

Another of the law's blemishes is that it was passed with the Liberal's now habitual "steamroller" legislative method. Furthermore, it was approved after the national budget was passed with figures that presupposed its approval. In other words, the government included some $100 million in its budget bill based on an as yet unapproved tax bill. This shows the lack of political interest in any serious debate about the law with either affected economic sectors or other groups of civil society.

There wasn't even any willingness to debate it in depth in the National Assembly. After a heated controversy that prevented the bill from being approved with the "urgency procedure" that President Alemán initially requested, an article by article it debate on the Assembly floor began on May 14. Though the debate remained heated, it lasted a mere two days. The government had no intention of conceding any of the major fiscal principles contained in its project.

Against All Privilege?

In a costly publicity campaign in all the media, the government presented the law as the key to economic reactivation based on the agricultural sector. It was also touted as benefiting the poorest sectors of the population.

The government promises that the law will bring quick benefits to the sectors hit hardest by the crisis, particularly the ravaged agricultural sector. It will also benefit salaried workers, who must only pay half of the income tax that they paid last year: a drop from 110 million córdobas in 1996 to 56 million in 1997. A rapid drop in import duties will also favor them since it will allow prices to be cut for many imported products. But what does all this mean given the existing high unemployment figures, which are even increasing with the new government?
Another benefit the government announced is the possibility of increasing tax collection by substantially eliminating the "privilege that certain tax exonerations represent." In 1996, the state exempted 1.6 million córdobas worth of taxes. From this perspective, the new law is highly contradictory in doing away with the exonerations that benefited the agricultural, service and artisan cooperatives, small business, universities and NGOs, while establishing no measure to eliminate the privilege assumed in the extra-budgetary collections that various ministries have been habitually taking in for some years.

The Ministry of the Economy and of Government, among others, directly charge up to 700 million córdobas annually for various transactions ranging from concessions and licenses to fines. This amounts to almost a fifth of the national budget. For political reasons the tax law did not prohibit this means of collection, which leaves so much room for discretion and corruption, even though the IMF and World Bank have been pushing for it for some time.

Not daring to acknowledge that the government lacks effective mechanisms to exercise adequate fiscal control, the President has tried to "assure" it by naming Agustín Alemán, his brother and legal adviser, to authorize all future exonerations.

Preparing Ourselves for Globalization

The loudest protest against the tax law came from the nearly two thousand businesses that for decades have enjoyed exclusive distributing franchises to sell products from important foreign companies in Nicaragua.

According to Central Bank president Noel Ramírez, repeal of the Law of Representation of Foreign Houses, which was written into the tax law and will go into effect in July 1998, "prepares Nicaragua to insert itself into the process of globalization and economic opening." This measure and others in the law, according to Ramírez, are geared "to assure us that the markets are functioning, the discretionalities are ending and the privileges are disappearing." The Liberal government is banking on the total opening of the country to foreign capital, and is creating the best conditions possible for it to compete with traditionally lethargic national capital.

The Liberal attack on the national monopolies in the commercial sector is apparently intended to subject them to the strict rigors of the laws of the market. The government proclaims that it is not discriminating against them in favor of foreigners but is requiring equal efficiency from both. It also claims that a total opening of the market will result in greater benefits for consumers, by bringing down prices and reducing the earnings of local intermediaries.

Where the Government Hopes To Attract Capital

The Alemán government thinks reactivation can come about by giving a "little subsidized push" to agricultural capital, partially restructuring its debts to encourage it to invest. At the same time it is continuing the effort to attract Asian transnational capital, which began to arrive in Nicaragua during the Chamorro administration.

The government's biggest gamble, however, is that it can reactivate the economy because only it can attract the largely Somocista capitalists who were "shipwrecked" by the revolutionary change of 1979. It also thinks that the non-Somocista oligarchic capitalists who "survived the wreck" will end up supporting it because they have "no other tree to hang themselves from."
This strategy suffers from serious contradictions. Insofar as the Liberal government confronts Sandinista capital, which in the 1990s is allied with the shipwreck survivors, it will satisfy its victims, but will also create instability in the country. Furthermore, those who washed up on Miami's shores once already are not about to risk investing in Nicaragua if the ship of state feels rocky again, no matter how much they may like the cut of Alemán's jib.

Providing incentives to the shipwrecked capitalists risks a confrontation with traditional oligarchic capital. Carlos Pellas, the prime representative of this group and a man who makes very few public appearances, made one after Alemán took office just to remind everyone that "we export $35 million and give jobs to 9,000 heads of household."
Noel Vidaurre, the Conservative presidential candidate financed by the Pellas family, offered one of the clearest objections to the law of migratory incentives, which the President pushed through in February to stimulate the shipwreck capitalists to repatriate. He has also been one of the voices in the National Assembly who most vigorously presented arguments against the tax law.

Another important contradiction of the Alemán strategy is that the shipwreck capitalists, if they do return, are not going to want to invest as much in agriculture or job creation in the productive sectors as in financial services and commerce. They no longer have the links to agriculture that they had in the 1960s and 70s, particularly now that cotton, beef and coffee are not as profitable as they were back then.

As for the other part of the government's reactivation strategy, the only indices of foreign investment in Nicaragua today are those of a sector of relatively unimportant Taiwanese maquiladoras and the obscure capital of a group of Cubans from Miami headed by Jorge Mas Canosa. The latter appears to want to "buy" Nicaragua so he can transfer his powerful anti-Castro economic and political base from Miami to Central America.

Will the Cooperatives Survive Or Will Landed Estates Reappear?

The tax law's most serious blemish is the lack of consensus around its birth. Although it is said that 95% of its articles were approved with no major opposition, the serious discrepancies around sensitive aspects-its effects on cooperatives and municipal governments, a new land tax, etc.-herald a chain of opposition leading to destabilization.

The exemptions and other fiscal incentives and benefits contained in the Law of Cooperatives are wiped out by the tax law. The government considers that, since the tax law is a step toward making better use of the exemptions, the Ministry of Finances should decide year by year what to exempt for the cooperatives. In the medium run, this will reduce the productive capacity of this sector of the national economy, which represents small and medium agroindustrial businesses. The new law's reduction of import duties could very likely even end up annulling its productive capacity altogether due to an invasion of lower priced and better packaged foreign products. Eliminating benefits to the cooperatives thus does not appear geared to assure better tax collection.

New Land Tax Burden

Teódulo Báez commented to envío that the new tax that must be paid on landholdings "is one of the most surprising and negative aspects of the tax law." He reasons that "this is a country with land disputes, indebted producers, lack of financing, and violence and insecurity in the countryside. Can anyone think that much is going to be collected for land? Or is the real goal something else? Isn't this unpayable tax a way to seek the reconstruction of the latifundios, obliging the peasants-particularly those organized in cooperatives-to sell off their land?"
This tax could certainly mean a restructuring of land tenure around the country over a not very long period of time. According to calculations by the Nicaraguan economic research institute FIDEG, the land tax, which fortunately exempted the lands of indigenous communities, will affect 159,539 rural families who have a little over a million acres of land all told. If agricultural activity is already trying to cope with the drying up of the peasant economy, debts and lack of credit, a considerable rural sector will simply find it impossible to pay a land tax and will be forced to sell.

The producers' associations believe that one immediate impact of this unprecedented land tax in Nicaragua-which also exists nowhere else in Central America-will be increased prices for agricultural products. Other doubts arise from the law's plan for applying the tax. In its first stage, it will only deal with land volume, but in 1999 will include use and quality. The proposal thus creates conditions for former estate holders (latifundistas) and new aspirants to that niche to appropriate considerable land extensions in the first stage so that they won't be affected by the application of the expanded tax later on.

It has been known for some months that Guatemalan and Salvadoran capitalists are buying up land in different areas of the country. "Not only Central American capitalists but also local ones," say Sandinista sources and others, "present themselves as dynamic forces willing to buy whatever land is available, despite the land tenure changes that have occurred. They want to buy the Agrarian Reform land at half price; they want to buy the land of those who have gotten into debt with the national banks; they want to buy it all."

Is Municipal Autonomy Slated to Die Young?

The government is doing everything it can to reduce the autonomy of the municipalities down to mere words through financial strangulation. First it slashed the national budget's contribution to the municipal governments this year from the 8% requested to 4.87%. Now, with the new tax law, the mayors' offices are only authorized to charge 1.5% in municipal tax, in place of the 2% that they charged before. That 2%, itself insufficient, provided between 60% and 70% of the income of all municipalities.

And now? The municipalities will fall into the hands of the central government, which can support them or not at its own discretion. This action, aimed at reducing local power, clips the rights won by the municipalities, violates the Constitution and ratifies the President's desires to centralize and control everything.

The Association of Municipalities of Nicaragua (AMUNIC) was one of the strongest critics of the tax bill; Alemán even had to call his own Liberal mayors into line and urge them to support the bill, which they never did. The law is a low blow to local power, and is catching them flatfooted, since the only compensation proposals under consideration to cushion the difficult economic situation of the majority of municipal governments are very dubious.

"Alemán Won't Finish Out His Term!"

Although many of the consequences of this controversial law remain to be seen, grassroots and business leaders of all tendencies think that its application will mean higher living costs and a drastic recomposition of Nicaragua's social and economic sectors.

The law revealed the conflict of interests to which the Alemán government is subjected. The commitments acquired with the Miami capitalists who supported Alemán's electoral campaign pit him against an important economic sector within the country and increase tensions with many other social sectors.

By eliminating the privileges of the traditional national capital that remained in the country in spite of all the adversities, the flexible opening to foreign capital pits Alemán against the Terán group, the powerful Pellas group and the more casual Lacayo group, who are the main representatives of large commerce and industry. These groups now feel betrayed and are raising an accusing and threatening finger against Alemán and his advisers.

The angriest criticisms of the tax law come from this sector. After the final vote approving the law was counted, Luis Alizaga, leader of the Association of Representatives of Foreign Houses (ARCEN), which groups together the roughly two thousand franchise dealers, told the National Assembly, virtually shouting, that "Alemán's not going to make it to the end of his mandate in the year 2000, and who knows if he'll even get to the end of 97!"
According to Roberto Terán, who among other things is the exclusive Kodak dealer in Nicaragua, the law "is a confiscation," designed to favor over a thousand merchants living in Miami. He says it will create an even more serious problem than the property mess since it will mean job losses for some 60,000 Nicaraguans, and less tax collection since foreign investment is tax exempt. Several businesspeople said they would file suit in the Supreme Court and join the protests of the grassroots sectors affected by the law.

A Development Mechanism Or a Negotiating Card?

This voluminous and transcendental law, which seems mostly to have been conceived as a simple tax collection instrument, affects all sectors. It's not easy to visualize how it will influence the development of our economy's competitive capacity to the degree so enthusiastically claimed by the government. That enthusiasm is either consciously false or the product of limited objectivity. It also leaves aspects of Central American integration dangling, since products imported from neighboring countries are still taxed while those from other regions will not be.

It is particularly unclear which tax mechanisms will guarantee the reactivation of the agricultural sector. Expanding the tax base as much as the government aspires to presumes a buoyant economy in which all citizens are in a position to pay their taxes, but that hardly describes Nicaragua. With such a limited number of real contributors, it will be very hard to collect the 600 million córdobas that the government calculates the law will net. There is every reason to suspect that, in reality, the law's objective is to create new taxes and not to reduce the many that already exist.

For the functionaries who designed the law and now defend it tooth and nail, its main benefit is to have improved the conditions to negotiate a new adjustment plan with the IMF starting in June. In fact, the major accomplishments that will be presented to the IMF delegation are the government's austerity plan, unveiled in February, and the tax law.

The Four "Work Tables"

While the debate raged about the contents of the tax law, the different social and economic sectors that participated in April's national protest pitted their strength against the government in four controversial "work tables," as the government called them. The greatest achievement of April's protest-the "barricade crisis"-was to sit the government down to negotiate. But reality has shown that one thing is for it to sit down and another is to get it to negotiate. It has been very hard to force the Liberal government to assume commitments that it will later have to fulfill. (This is a very different style from the Chamorro government, which promised anything and delivered little.)
The unity of the grassroots sectors and their capacity to come up with real proposals and resist caving in only helped them avoid sinking in the bog that the negotiation tables turned into almost from the first day, April 21.

The results from the four tables-social area, production, transport and reformed property-were virtually nil. The talks were more a propaganda display for the government than a reality. They produced more friction than agreement, thus further eroding the relationship between the Sandinistas and the government and tarnishing the government's image with the population as a whole.

From the outset the government considered the petitions of the pro-Sandinista sectors to be excessive. The Sandinistas, in turn, accused the government of a lack of political willingness to resolve the conflicts presented at each of the tables.

The government seems to have put its chips on protracting the talks indefinitely, while it extracted itself from the many internal contradictions that had been accumulating. Various government functionaries admitted as much by claiming that "we're only maintaining an open communication channel and listening."
The protesters, fearing just such a strategy, had only agreed to participate in the tables for 30 days. On June 7, nearly 20 days past the deadline, the FSLN announced that it considered the tables closed and their labor fruitless. It called for a "second phase of national protest." That and only that forced Alemán to bow to international pressure and expand the four tables, turning them into one larger one, a table of National Dialogue, to which all parties, union confederations, business associations, universities and other social sectors were invited. This dialogue, scheduled to begin on June 30, will have a "maximum agenda," according to Alemán.

About the only clear product coming from the tables, which had essentially stopped meeting even before the 30 days were up, was new uncertainty. Would the National Dialogue resolve it?
More progress was made at the production and transport tables than at the other two, though the extent of the agreements cannot be measured. The government made a big deal over an accord with transport workers, but was unclear about which of the three groups into which the sector is divided had signed it. Even more to the point, with article 74 of the Cooperative Law repealed by the tax law, doubt is cast on any agreement on fiscal issues that may have been made with the transport cooperatives.

The talks at the production table were geared to finding flexible ways of restructuring the producers' debts with the state banking system and implementing complementary programs to support agricultural reactivation. The government proposed that the producers pay their debts over a seven-year period at 14% interest, while the producers asked for nine years at 7%, with a two-year, interest-free grace period.

With agriculture the linchpin of the government's reactivation logic, as Minister of Agriculture Mario de Franco has oft said, this table turned into a test of how much real willingness exists to gamble on the country's small and medium agricultural sector. The table seems to have flunked the willingness test.

The Reformed Property Is Key

The work table on reformed property didn't show much progress either. The discrepancies between David Robleto, Minister of Foreign Cooperation, and Rosendo Díaz, president of the state holding company CORNAP, responsible for privatizing all the public businesses, made it hard to discern the government's real position. The central issue in the discussions at this table was the future of the nearly 200 state properties that went to the workers and veterans from both sides of the war as a result of agreements made in 1991.

This table was considered so important that President Alemán himself presided over its first session. He gave the government representatives a copy of Law 204 to use as a basis for the debate. This law was passed in August 1995, but the Chamorro government didn't publish it until April 1996, once the companies it was most interested in had been privatized. Putting the law into effect so late was an attempt to keep the businesses acquired by the workers from being deeded to them.

The representatives of the reformed sector battled to use Law 209, the property agreement mediated by former President Carter and passed into law in December 1995, as the basis of discussion instead. Once the government finally backed down from its obstinate opposition, CORNAP presented the registration situation of the privatized properties and a list of the former owners who have already been compensated and thus can no longer claim their properties. The opposition objective at this table was to keep the workers' purchasing option open and set definitive deadlines for the payment.

The Greater Property Problem: An Irresolvable Conflict?

The most conflictive table and so far the one that has made the least progress is the "fifth" table. Actually the first discussion to be established, this is the one between the government and the Sandinistas on the overall property problem, which began right after Alemán took office with no need for barricades or other protests first. The government's delegation is headed by Vice President Enrique Bolaños-whose visceral anti-Sandinista sentiment rivals that of Alemán in his first years as mayor of Managua-and the FSLN's delegation by Sandinista legislator and National Directorate member Bayardo Arce.

Given the tempers on both sides around this issue, the verbal sparring at this table has not been timid. The Sandinistas accuse Bolaños of being an "insidious liar" who is "incapable of resolving the property problem." Daniel Ortega has requested several times that he be replaced in the negotiations to make some agreement possible on the grounds that he is "poisoning" the dialogue.

"Either President Alemán isn't running anything and Bolaños is doing whatever he feels like, or they've worked out a good cop-bad cop routine," said Ortega just before the other tables fell apart. "But what is clear is that there's no coherent attitude between what Alemán says and Bolaños does."
Bolaños' standard riposte is that the Sandinista leaders are trying to "legalize what they stole." His rather strange response to the collapse of the talks was that "there has never been a dialogue about property between the government and the FSLN. Dialogue leads to agreements, arrangements, and the government has never had this intention. There has only been an exchange of ideas about property."
Finding any solution in this environment seems a mission impossible, which augurs that the conflict will go on and on.

The FSLN formulated a new bill to fill the gaps or imprecisions in Law 209, which it submitted to the public and the government in May for consideration. The FSLN's proposal starts with Law 209 but develops it further, to assure that everything done by the state in the 1980s and 90s not be forgotten, as some Liberals hope will happen. According to the new bill, the state as a whole, and not just its judicial branch, must help settle the conflict, establishing principles, conditions and mechanisms. The proposal defines as irrevocable the decrees under which the properties of the Somozas and their coterie were confiscated. Bolaños reacted very negatively to the FSLN proposal and some days following its release, the government sent the FSLN a counterproposal. Like the others, then, this issue seems hopelessly bogged down.

Meanwhile, the international community is showing signs of serious concern about the setback implied by starting over from scratch on the property issue, as some in the government seem determined to do. International organizations have invested a lot of time and money into seeking a definitive solution to the property conflict, but it continues to be a labyrinth of interests in which some have vowed to play a dangerous all-or-nothing game.

The Shadow of Jorge Mas Canosa

All this contention over such strong interests occurred in the context of both a profound new economic crisis-with obscure and muffled official moves to try to surmount it-and the upcoming negotiation with the IMF to reach a new structural adjustment agreement.

There is now enough evidence to prove that the government is taking rapid measures to recompose Somocista capital, opening the social and political spaces that it needs to recuperate the lost time and power. This decision endangers the rule of law, since the government is not scrimping on either political or economic efforts to impose those interests. The government is using the Liberal steamroller in the legislature to push laws through, violating basic constitutional principles, and hobbling civil society. The Liberals' urgency is risky and could precipitate uncontrollably violent reactions by closing the spaces to social disagreement.

Presenting this issue in the National Assembly with new data at the beginning of June, Bayardo Arce called the Liberals' ambition a "feast for Somocismo." The FSLN legislator began by pointing out that not one dollar in foreign aid has come into the country in either loans or donations since Alemán took office. Arce went on to explain that the only way to deal with Nicaragua's hard cash needs was through a financial transaction with US-Cuban multimillionaire Mas Canosa, who apparently injected $100 million into the country's international reserves through the purchase of Central Bank bonds.

Arce first spoke of this transaction at the end of April. Now, with papers in hand, he returned to the theme in the National Assembly. He also sent a letter to the Comptroller General requesting that the issue be investigated. Experts consulted by envío say that it could be transcendental for the Nicaraguan economy.

Arce charged that "there are international groups in operations with the Central Bank. The interested parties are the group of Jorge Mas Canosa, the Hamilton Bank-which belongs to Cuban exiles in Miami-and the Fernández Hollman group. These people have a plan to buy $250 million in bonds this year, 1997, and already bought some $100 million or more.... The most serious part of all of this has two aspects. The first is that the government has been saying that the country's economy is moving forward and that the international reserves have grown. But the economy is only functioning through the purchase of these bonds; furthermore, part of this increase in hard cash has already been eaten by the government because no foreign aid has come in the meantime.

"The second worrisome aspect is that the debt contracted through this transaction has to be paid by Nicaragua in 360 days. It's a very costly foreign debt because a country like ours negotiates international aid with 5, 8, or 10 years to pay it back, even 40 years, and negotiates it with 2% interest. It never negotiates it with a 1-year repayment schedule at 18%, 16% or even 15% interest, as it did on this occasion. How is Nicaragua going to pay this debt? Since it won't be able to pull together the money, this will surely be the port of entry for Mas Canosa to buy ENITEL [Nicaragua's profitable telecommunications company].... Or to give him entrance to a society, which is already set up, in which the Fernández Hollman group, people from the government and Cuban exiles are already involved, who are going to come to take over the cement company and put a cement maquiladora in Nicaragua. The tax law has paved the way for this with some exonerations."
One can only wonder what the IMF and World Bank must have said about this transaction, which is prohibited by the norms of these multilateral lending agencies.

A New "Asonada"?

Given the negotiation impasse and the deteriorating climate due to a lack of consensus, and also given the unrelenting poverty, the obligatory question is whether or not the country is at the threshold of a protest similar to or greater than April's. Depending on the answer, another obvious question is whether the crisis-ridden economy would be able to withstand it.

The most hardline government sectors have begun to speak of the need for a new and stringent law to deal with any new asonada, the new buzz word for a tumultuous situation of any definition. Meanwhile, they organized pro-government marches in Granada, Matagalpa, Masatepe and León, and there are signs that they are organizing other activities somewhat more clandestinely.

Vice President Enrique Bolaños took on the role of promoting what is being called the "Anti-Asonada Law," which would give the executive office powers to order the preventive arrest of protest leaders, withdraw the immunity of any legislator involved in such protests and use repression against the demonstrators themselves. The aim of this law is to quash any expression whatever of grassroots discontent.

On top of this would come a reform of the Military Code, aimed at reducing the authority of the military commanders. A group of Liberal National Assembly representatives initiated the legal steps required to substantially modify the code, which regulates the National Army, to subordinate it to the new Ministry of Defense, now in the hands of a civilian (currently Jaime Cuadra, of Alemán's Liberal Constitutionalist Party).

Bolaños, who is behind this reform as well, had made declarations days before in which he suggested that the army should "redefine its tasks." He added that it should also reduce its size (even though with 15,000 members, it is already the smallest in Central America).

Army chief Joaquín Cuadra said that it was inappropriate to alter the code, since it "would create tensions in an institution that is collaborating with stability in the country." Army spokespeole responded to Bolaños with the list of non-military task that it carries out: it cares for the forests, develops vaccination campaigns, collects garbage, protects turtles, is working on de-mining the rural zones, etc.

Bolaños has apparently been a victim of the limited clarity regarding his functions at the side of a strongman like Arnoldo Alemán, who doesn't tolerate anyone overshadowing him. Bolaños publicly expressed his disagreement with the outcome of April's national protest-the dialogue and negotiation tables-which (by coincidence?) was agreed to while he was in Taiwan. Upon his return to the country, he warned that "in the next asonada we're going to play hardball" to put the Sandinistas in their place.

Bolaños' role as the government's strongest purveyor of anti-Sandinista vitriol is causing the government problems. He and other anti-Sandinista hardliners in the government have become obsessed with wresting all remaining spaces and quotas of power away from the Sandinistas, and this is a serious provocation. Liberal leaders make the mistake of confusing governability with an absence of criticism and a lack of social mobilization. To some government personalities, democracy seems to be synonymous with unquestioning agreement with official policies and discourse.

Meanwhile, there is no consensus among grassroots leaders about the methods of struggle to be used. The essential question is to what degree the Liberals' errors and the population's disenchantment, added to the explicit bad will of some government functionaries, might be creating a sufficient breeding ground for the emergence of a new national scenario.

The "Asonada" of Reality

The FSLN and Alemán's Liberals are at a particularly propitious moment to demonstrate their negotiating ability and surmount the conflicts, earning the sympathy of a population that is disconcerted by the new government's erratic movements.

The leadership circles know how risky it is to be extremely hard-line, much less totally inflexible. But finding an intermediate position isn't easy in a country that is still extremely polarized. There's a lot to discuss and seek consensus on. And there's a lot to talk about in a National Dialogue table, be it bilateral or multilateral. But until the problem of the daily table of food begins to be addressed for the majority of Nicaraguans, the protests will continue and will grow, with or without work tables, with fewer or more parties participating, with deadlines met or missed. Ideologies are no longer what spark "asonadas." Reality does.

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