Envío Digital
Central American University - UCA  
  Number 107 | Junio 1990



Playing with Fire

Envío team

Note to our readers: The day this issue of envío went to press, the Chamorro government signed a sweeping agreement with the counterrevolutionary forces for the post-disarmament period. An analysis of the significance of this accord will have to wait until next issue, but as a service to our readers, we include in the “Documents” section a first, unofficial translation of the accord itself, together with the previous three accords signed between the contras and the incoming UNO government.

This issue’s “The Month” focuses on the economic and political issues surrounding the other major event of the Chamorro government’s first month in power—the week-long state workers' strike.

Nicaragua has once again gone under the economic knife with no anesthetic. It is the fourth austerity package imposed since February 1988 without any international funds to stabilize the national currency and thus make the painful measures more bearable. The only difference is that this time the surgeon is the new UNO government—the same one that won February's elections by promising US financial assistance, relief from the economic crisis within 100 days, an end to the war and prompt contra demobilization.

In the first week of May, UNO devalued the official córdoba by nearly 86%. By the end of the month, after a total of l0 devaluations, the official price of a dollar had skyrocketed from 53,800 córdobas to 160,000, a devaluation of nearly 200%. This provoked a record monthly inflation of close to 130% in the basic market basket of 53 products. A 100% salary adjustment in mid-May, following a week-long strike of civil service employees, thus fell well short of recovering their lost purchasing power.

The Sandinista government had been forced into similar measures with no painkiller because none was offered, but it at least provided aspirin and band-aids to those hardest hit. This time, the measures could even have been put off until the arrival of the $300 million grant promised by the US government. They were not, and the patient did not get so much as a sympathetic bedside manner. The negative effects of the UNO package on the poorest sectors are not unique; governments all over the Third World, and particularly in Central America, are now beginning to implement similar policies with sophisticated technical assistance from some of the big multilateral lending agencies. While Nicaragua has its own set of local political conflicts, the measures themselves are part of the increasing assault on labor by capital that defines today's international scene.

Following the surgery, state administration employees were the first to demand a renegotiation of the doctor bill. Receiving no reply, they put on more pressure. Within days, the government's manner abruptly changed from negligent to defiant. On May 9, President Chamorro suspended the Civil Service Law and decreed two new laws, violating constitutional limits on her right to do so while the National Assembly is in session. The new decrees also violated aspects of the March 27 transition agreement between the government-elect and the outgoing Sandinista government. One opened the door to re-privatizing state-held lands and the other to reversing past confiscations of urban and rural properties. (See box at end of article for details of laws.)

The state workers viewed the government response—an abrupt departure from its conciliatory pre-inauguration tone—as tantamount to turning the bill over to a Somocista collection agency. They initiated a strike, which grew by stages over the following week, in which their lead slogan was “Not one step backward." Not only were ministries shut down, so were the banks around the country charged with approving agricultural credits. (See second box at end for chronology of strike.) All this provoked social instability during the crucial preparation period for the new planting cycle.

It was expected that the new government would have to devalue the currency; the virtual lack of devaluations since January had altered relative prices and widened the gap between official, parallel and black market exchange rates. This rekindled the economic speculation that had been contained by the previous government, even without international financing, right up to the last days of the electoral campaign. It was not expected, however, that the US would fail to support the measure with immediate and substantial assistance.

More than two months after Violeta Chamorro's electoral victory, Congress still had not approved the $300 million President Bush requested for Nicaragua. And when, five days after the workers began their strike actions, President Chamorro requested $40 million in emergency assistance, President Bush refused. Nicaragua, he said categorically, offered no guarantee that it could repay the loan.

In this article, envío looks at five fundamental questions underlying the political and economic conflicts in May: 1) Why did the United States not assure economic assistance to Violeta Chamorro during this tense transition period? 2) Why did the UNO government opt to apply such drastic measures all at once, before having sufficient hard currency in hand to back its measures? 3) Why did it shift from reconciliation negotiations with the FSLN, such as characterized the transition period, to a hard-line style that broke the agreement and polarized the actors in this first economic initiative? 4) How did the strike unfold and what lessons can be learned by both the government and the FSLN leadership? 5) Finally, given Nicaragua's limitations and its possibilities for foreign aid, what economic behavior can we expect during the Chamorro government's first 100 days and what are the perspectives for future conflicts?

1. Why hold back aid?

Part of the reason US aid was delayed can be found in current congressional sentiment in favor of financing Eastern Europe rather than Central America. Another part lies in the well-known internal conflicts between Democrats and Republicans in Congress. The Democrats held the aid package to Panama and Nicaragua, which Bush wanted, hostage to myriad amendments such as one to finance abortion, which Bush opposed. As a result, the bill wended its way more slowly than usual through the labyrinth of congressional committees.

US Ambassador to Panama Arthur H. Davis called the five-month delay in sending aid to that country after the US invasion "the cost of true democracy." According to Ambassador Davis, the Panamanians, now freed from the Noriega dictatorship, have no experience in real democracy, in which executive power is limited by legislative power. While the wait for assistance is hard, the ambassador concluded, the democracy coming to Panama is well worth the economic cost.

Such explanations lead one, not incorrectly, to view US polities as extremely cynical. The economic disasters in Panama and Nicaragua were created precisely by US policy. Despite weak and vacillating resistance from Democrats, the Republicans had no trouble finding immediate—albeit covert—aid for their aggression against the two countries. Now the Democrats prefer to fight for short-term domestic political advantages over alleviating the resultant economic suffering of six million Central Americans. That is the democracy the US wants to impose on the rest of the world.

Nearly two weeks after the Chamorro government resolved its first confrontation with the workers, Bush finally leaned on the Democrats to remove the offending riders on the Nicaragua-Panama aid bill. (Meanwhile, hardliners in Congress, through a complex series of maneuvers, avoided new restrictions in military aid to El Salvador.) But Bush's late show of interest begs the question of why he did not exert such pressures earlier, and why he did not use one of the other routes open to him—such as his sizable emergency fund—to respond to Chamorro's $40 million emergency aid request. Was it inattention due to other more pressing issues? Was it a reluctance to pay the price the Democrats might exact for being leaned on? Was it pressure from the hard-line rightists in the Bush alliance and the CIA to withhold the funds to force Chamorro's hand? Or did the "'the House itself reason that the delay, while probably not altering the new government's short-term economic program, might create tensions inside the country beneficial to its own medium-term goals in Nicaragua?

The answer is not clear, but elements of it are. The United States sees no guarantee of an acceptable economic and political climate in Nicaragua as long as the Sandinista Popular Army (EPS) exists; the US gambled its international image for ten years to destroy that army. Yet the centerpiece of the March 27 transition protocol was an explicit agreement that the professional integrity of the EPS would be respected; the implicit meaning was that General Humberto Ortega would not be removed from his position.

A mid-April visit by Undersecretary of State for Latin American Affairs Bernard Aronson to pressure Violeta Chamorro not to ratify General Ortega illustrates the importance of US concern. The mission took place despite signs that Chamorro and her chief adviser Antonio Lacayo would resist such direct US intervention in domestic policy and despite the diplomatic cost of the initiative so close to her inauguration. In fact, as collective breaths were held, Chamorro announced in her inaugural speech that Ortega would remain head of the EPS until the contras disarm (supposedly by June 10) and a plan to reduce the army was drawn up and initiated. Postponing the aid also provokes social instability, which could lead the Sandinista opposition to political errors.

If the FSLN were sufficiently discredited, such instability could be used to justify refinancing the contras or, if necessary, even direct US intervention. Labor Minister Francisco Rosales insinuated the former when, during the strike, he said he could understand the contras not wanting to demobilize as long as the Chamorro government could not control the strike because it did not control the army.

There is nothing novel in the US maintaining a "two-track" policy toward Nicaragua that permits it to bet on military intervention and on economic and political pressure at the same time to mold the kind of government most to its liking. The economy of this small country and the welfare of its people have never been a priority for the United States.

2. Why not hold off measures?

Devaluing the córdoba is aimed at encouraging exports. This is the path the Sandinistas chose in 1988 to improve the income level of the majority and halt the inflationary spiral that eats up the little they do have. The Chamorro government, too, is basing its economic recovery on increased exports, though with different beneficiaries in mind. But exports do not grow overnight. And without an infusion of hard currency, cither from exports or international financing, devaluations just feed inflation.

The only other way to contain inflation is to drastically cut government spending. An obvious target is the military budget, but it would be politically risky to slash it before the contras demobilize because it would mean completely abandoning the transition protocol. The only option left is massive layoffs of state employees. Thus, the government cannot be blamed for beginning the process of devaluation and layoffs. What it can be blamed for, however, is doing it all in one blow. Gradual devaluations, such as the Sandinistas had been doing for the past year, would have jolted the already reeling economy less, and might have avoided a direct confrontation with the working class. So why the "shock treatment," particularly with US funds in the offing, and, with them, more favorable economic results from the policy?

The problem was timing

To be eligible for the soft loans from the World Bank and the Inter-American Development Bank that the UNO government is counting on for its stabilization plan, it must pay off the arrears with those multilateral lending agencies (roughly $ 300 million by the end of 1990), or at least improve its possibilities of renegotiating the debt. Without this, the two banks can consider no further loans. But to attract the financing to do this, the new government has to show international donors that it can quickly increase exports.

The UNO government has decided to make cotton the cornerstone of economic recovery; it is the only crop that can both guarantee short-term export earnings and show quick growth for the country. Recovery of both cattle and coffee requires several years. The “timing” problem was that the big cotton growers had not yet been paid for their last harvest. Without a strong devaluation, their córdoba earnings would have shriveled and they would have been unable and unwilling to increase the area sown during the cycle now upon us. The Central Bank would have thus lost its best negotiating card with the 30 donor countries and multilateral lending agencies expected to attend a crucial meeting with Nicaragua in Rome the first week in June.

The emphasis on cotton also explains the logic of the new decrees affecting the agrarian reform. The immediate aim of Decree 10-90 is to encourage the renting of rural state-held lands, either to their former owners or to others, to plant more cotton now. (Land rent has always been more important in the Pacific, where it is a custom of the cotton bourgeoisie.)

With Decree 11-90, the way is opened for these former landowners, and the bourgeoisie as a whole, to actually recover their expropriated properties. To satisfy both the cotton growers and the multilateral lending agencies, then, everybody but the agroexporters went into the new planting cycle decapitalized to a greater or lesser degree by the devaluation. The government's "shock" measures hurt not only workers and consumers, but also small and medium agricultural producers and peasants, as well as artisans and small manufacturers who also produce for the domestic market.

3. Why the polarizing posture?

If support for the cotton bourgeoisie, international pressures and the lack of a more multifaceted program for Nicaragua explain the brutal devaluation and the land decrees, they neither explain nor justify the confrontational style that accompanied the new package and involved breaking elements of the transition agreement with the FSLN.

When the Sandinista government made a similar devaluation in January 1989, the only rational way out was to seek agreements with the bourgeoisie so they would increase production and help achieve the minimum stability required to allow the devaluation at least partial success. The Chamorro government could have done the same with the Sandinista opposition, maintaining the transition agreement and negotiating with the working class at least until it had enough hard currency in hand to soften the effects of its economic policy and weaken militant opposition. For example, the FSLN paid three months severance pay when it cut back civil service workers in 1988-89. Statistics show that the fiscal deficit was significantly reduced by the layoffs despite this cost.

Why did the new government take the confrontational step of reducing severance pay to one month? There are at least two hypotheses. The first suggests that pressure from the US and the most rightwing elements in UNO have created irreconcilable tensions even at the center of the government and profound changes in its orientation. This interpretation speculates that the hegemony of the “moderate” line in the government has buckled under to Vice President Godoy and other reactionaries in the UNO Political Council and the business association COSEP, whose interests are closer to those of the United States, leaving the government no possibility of negotiating the conflict with the Sandinista opposition.

A variant of this is the "power vacuum" thesis. According to this interpretation, the tenuous power balance between the government and the FSLN, the divisions within UNO and the fact that, caught off guard by its electoral victory, UNO entered this new period without a defined strategy led to a vacuum of leadership. Without clear orientations, Central Bank president Francisco Mayorga and Labor Minister Francisco Rosales gave their own tone to the economic package and the resulting confrontation.

The second hypothesis, which we see as most likely, is that, independent of personal styles, there is no change in either the unity or the strength of the most influential sectors around President Chamorro. Rather, the conflict represents the first tactical battle in their war to undermine FSLN political representation of the popular sectors. They also raised the volume of the conflict to appease the most reactionary sectors in UNO, but without abandoning their own strategy and timeline for weakening the Sandinistas. (See “UNO's Balance of Power,” this issue, for further elaboration of this thesis.)

If the cornerstone of this group's medium-range political strategy is to neutralize the working classes, the most important immediate task is to hammer away at the FSLN’s legitimacy with this base. In the pro-Sandinista public workers' demands for a 200% wage increase, the Chamorro forces saw a perfect way to both reduce the fiscal deficit and score a victory over the FSLN—already damaged by an avalanche of UNO propaganda that outgoing Sandinista state workers had looted government offices during the transition period. La Prensa spread the looting stories over several pages and accused the strike leaders of being the same ones who had sacked the ministries.

In fact, the confrontational tone and the political character of this first economic package should not have been such a surprise. It was premiered in the economic program of then-candidate Violeta Chamorro, called “Agenda for the Recovery of the National Economy.” Even though current Central Bank minister Francisco Mayorga, the document's main author, thought at the time that US funds would come in time to initiate the program, he still wrote a strong anti-Sandinista tone into the document for the post-electoral period, the FSLN's moment of greatest weakness. The “Emergency Phase: Plan for Immediate Reactivation,” which covers 1990, promises multiple attacks against the FSLN and projects economic advances only by eliminating FSLN "corruption,” privatizing state properties and counting on "popular enthusiasm in support of the moral authority of the new government."

4. What happened in the strike?

A countervailing factor to the government's desire to weaken the FSLN’s base is concern that a radicalized base could escape the FSLN's control. In fact, a determining factor in the unfolding of the strike was the workers' increasingly autonomous militancy. Abandoning negotiations and violating the transition protocol provoked more polarization, instability and conflict at the base level, risked totally undercutting the weak contra demobilization process and increased the possibility of more war.

Only hardliners in the US and in UNO believe there is an advantage for them in massive instability in Nicaragua. The FSLN, too, wants to avoid chaos, which could become a pretext for US intervention; it has made every effort to keep the doors open to an understanding with the more reasonable forces in UNO. These concerns at times can create a tendency towards negotiations, although with clear costs for both parties. On May 15, the day before the strike was settled, La Prensa suggested on its editorial page that the Sandinistas "may have begun to promote the strike to make some show of force, but they committed an error of political calculus. They forgot that too many things could come into play if the conflict escaped their control.... The strike has created more of a crisis for the FSLN than for the government.”

Although each side alleged that the other had miscalculated, the government backed off first. The paralysis of ministerial activity in the first days had little impact on the economy and thus on the government's resolve to break the strike. Only when the public employees closed the banks, walked off their customs posts at the borders and in the airport, parked some urban buses and cut telephone and other services, did the government agree to dialogue. It was also the day Bush refused President Chamorro’s emergency request. She replaced Labor Minister Rosales as negotiator and sent in presidential minister Antonio Lacayo to soften the confrontational tone, end the crisis and get on with their policy through other means.

In the accord, government negotiators agreed to a 25% wage increase on top of the 60% offered before the strike (a total of 100%), plus the promise of another increase indexed to the inflation of a 53-product market basket during the last three weeks of May. With these measures, the union negotiators hoped to recover the salary loss they had suffered since UNO came to power. But as the figures at the beginning show, they failed.

The government also agreed to reinstate the Civil Service Law and draft the regulations for it in negotiations with the state employee unions. In addition, the government agreed not to lay off any workers until the law was regulated and to reinstate all those fired since between March 19 and May 10. All but the salary agreement has already been violated, and, even then, some ministries have not yet paid the 25%. Immediately after the government agreed to jointly regulate the Civil Service Law, the UNO bench in the National Assembly pushed through reforms to both it and the Labor Code passed in the last days of the Sandinista government. Employees can now be fired without warning or legal recourse. The layoffs continued and are increasing, justified by a clause in the Civil Service Law that defines positions “of confidence,” as including even cooks and cleaning personnel.

The results of the strike can be summarized in three points:

1. It ended in a temporary standoff. Forced to negotiate with the strikers, the government sacrificed its new no-nonsense political image. It failed to delegitimize the FSLN and only increased the combativeness of the state workers. It succeeded, however, whether intentionally or not, in forcing the FSLN to rethink its own efforts at reconciliation. It was the first post-election opportunity for the party to gauge the degree of base-level radicalism in its ranks and to see the "moderates" in the UNO government in action.

Just as this sector of UNO is playing the FSLN and its own hardliners off against each other, the FSLN leadership can now be expected to give more lead to the actions of its own radicalized base as a way to force the dialogue it would have preferred to maintain through less confrontational means. The gauntlet has been thrown down, and both sides have picked fire as their weapon of choice.

2. The initial phase of the Central Bank's stabilization program suffered a slight setback. As Minister of Finance Emilio Pereira indicated, the accord meant putting 180 billion córdobas into circulation without backing, a 10% increase in the fiscal deficit. On the other hand, the highest government estimates of economic losses due to lost work—430 million, or $3 million per day—are exaggerated. The strike only began to have economic costs in the last couple of days, when public services were affected.

3. The government's decision not to talk to the public workers at the outset and their ensuing strike sent waves of tension down through Nicaraguan society, where post-electoral emotions were already provoking low-intensity violence against the Sandinista and union bases.

With what had been ceded in the strike accord annulled in the National Assembly, the next step is up to the workers. The National Workers Front, which includes the Sandinista Workers' Federation, among others, settled on five major demands after analyzing UNO's first month in government: 1) immediate and unconditional demobilization of the contras, 2) respect for the accords signed at the end of the strike with the Ministry of Labor, 3) the immediate reintegration of more than 200 fired workers, 4) respect for freedom of speech through access to the media and 5) no privatization of state sector property,

Another point that should go on the agenda is the Mayorga Plan's promise to offer temporary alternative work to those laid off and already unemployed—a promise backed by $10 million in the US aid package. The workers were only demanding minimum social justice. And, as envío argued during 1988-89, real social justice in a small peripheral country includes the ability not only to provide severance pay but also to relocate laid-off workers in other remunerative work within an economic model that uses and strengthens the comparative advantages of peasant and small-and medium-sized agricultural production. Genuine support for these rural productive forces is not only necessary to guarantee consumer goods to the domestic population; it also encourages increased exports without the costly imported inputs, machinery and other equipment required by capital-intensive agriculture.

The prospect of this happening is not very likely, however. If the FSLN erred by giving too much priority to capital-intensive production at the expense of the majority of the economically active population, it can be predicted that the new government will accentuate this error.

Lessons for both sides

The unfolding of this conflict illustrates a series of elements that will continue to influence future clashes as well as the negotiation with the unions that has already begun.

The Government's Silent Majority. The government could not win this battle against the Sandinista popular movement because most of those who voted for UNO are a passive “silent majority.”

The FSLN, despite the weaknesses caused by a top-down tendency, still has significant capacity to mobilize the masses, especially within state institutions and the small but strategic industrial and agroindustrial enterprises. Faced with this mobilization, the government only has the police and army, both of which favor a pro-worker public order. Given the transition protocol, the government can do little to change the army as long as the contras are not demobilized. This is the main lesson of the May conflict for the government. Without demobilizing the contras, restructuring the police and army and building its own broad and active network of pro-government popular organizations, the government is at a strategic disadvantage. While it is moving fast on all these tasks, its only recourse in the meantime is the implicit threat of US intervention, either directly or through the contras.

The Strike's Narrow Focus. Independent of the importance of the skilled public sector in Nicaragua, the strike's relative isolation from the productive sector weakened the strikers' struggle. The interests of state employees are not the same as those of other sectors of the working class, much less of the peasants and the urban informal sector. The last two together make up 55% of the economically active population, while the state employees are little over 10%. It is crucial to link the demands of all these forces, both in the state and private sectors.

In the last days, the strike began to get support from other worker and peasant groups. Some peasants occupied private farms demanding plots, but fewer than took over state lands last year in the Pacific. By the end of May, as the implications of the new land decrees began to be understood, there were reports of at least 25 farms occupied by farm workers. On the other hand, some peasants mobilized in favor of UNO, alongside old landowners who threatened agrarian reform cooperatives. But these, too, were insignificant.

Moral Authority and Ideological Struggle. The moral authority of both the government and the opposition will play as important a role in future conflicts as it did in this one. The pro-government media stressed Mayorga's justification of the economic package and confrontation with the state workers as stemming from FSLN corruption and “indiscriminate sacking” of the ministries after the elections. Although the removal of ministry property was neither as widespread nor as costly as it was made to appear (some former ministers are suing their UNO replacements for libel), it weakens the FSLN's struggle.

The people do not perceive the fact that no government on the continent has been as austere and honest as the Sandinistas. Since 1987, there have been cracks in this austerity, but the majority of Sandinista cadres have been self-sacrificing. Sandinista ambassador to Spain Edmundo Jarquín, husband of Violeta Chamorro's daughter Claudia, noted in an opposition radio interview that, within months of taking office, high-level officials in other governments can afford houses and cars, whereas Sandinista officials came to office straight from the mountains, and until the electoral defeat only had a house and car assigned to their use. (In its propaganda campaign, UNO also made much of the fact that the FSLN legalized property titles to many of these assigned houses just before leaving office.) Jarquín added that National Assembly members were only paid the equivalent of $200 a month for most of the last six years (President Chamorro just granted Managua mayor Arnoldo Alemán a monthly salary of $1,750).

While only a case-by-case examination of concrete charges would separate truth from exaggeration, the political damage is done. The FSLN’s basic focus in this period has been to defend the Constitution and the revolutionary reforms and laws. To do so, the revolutionary organization must itself be above reproach, particularly in the face of such general scarcity.

The FSLN at first centered its ideological campaign against the government on the unconstitutionality of the government's new decrees. After several rounds of erudite legal debates among lawyers, it shifted focus and found the government's jugular: "How could Violeta Chamorro dialogue for 13 hours with the contras and guarantee their economic situation while refusing to negotiate with her own civil service?"

Separation of Polities and Economy. The divorcing of political debate from economic reality could weaken both the government and the Sandinista opposition in future conflicts such as this one. Francisco Mayorga's discourse about the new climate of economic confidence contradicted the increasing black market activity and wave of commercial speculation. (Black market money exchange is now so rampant that sellers stand openly on their favorite street comer waving fists full of córdobas at the windows of passing cars.) After all the May devaluations, the black market dollar price remained 100% higher than the official rate (320,000 vs. 160,000 córdobas to a dollar, respectively, by May 31)—a vote of no-confidence in the new government’s economic program and an indicator that the inflation of “psychological expectations” will continue to haunt the stabilization plan.

There were also contradictions in FSLN discourse. In the strike, the pro-FSLN state employees led the demand for 200% wage increases, a position that contradicted the Sandinista government’s constant effort to teach the public that such salary increases only bring more inflation if not accompanied by foreign aid or increased production. In the barrios, one could hear criticisms of the public workers' demands: "Why are they asking for higher salaries? It will only be worse for all of us.” Similarly, past Sandinista discourse favoring productive over nonproductive workers undercut the civil service employees' position during the strike. The truth is that the country cannot tolerate such an inflated civil service. The line should not be to maintain it but to force the government to relocate these workers in productive labor instead of throwing them out into the already large army of unemployed and underemployed.

As for medium-range struggles and the 1996 elections, the UNO government's prospects will depend partly on its own ability to create a base of support among the popular sectors while it continues to openly support the exporters and other well-off sectors. This year's US aid package includes $60 million to create a social emergency fund to cushion the pain of its economic program. If well used, it could create just such a patronage relation among the poor. The FSLN's medium-range possibilities will depend on its ability to link up with the majority of small rural and urban producers and to discover how to represent the material interests of those who do not earn year-round salaries. Up to now, the FSLN has not known how to interpret their interests or has seen them as hostile to the revolutionary process. These views contributed to the FSLN's electoral defeat and will be major challenges to its future.

5. What to expect next?

Economic tensions will be sharpened by runaway inflation, new devaluations and increased speculation until the arrival of the US aid is felt in the economy. Even though the Sandinista government set aside more than $100 million of inputs to begin the annual planting cycle, money will be put into circulation in the form of producer credits without hard currency backing. Mayorga's constant talk about changing the monetary system to a dollar-backed “córdoba oro” is like throwing gas on this already raging fire.

Even without these factors, the normal cycles of this basically agricultural economy always mean that May to August is the period of greatest scarcity. Basic grains are harvested in August-September; and until then, there are few peasant-produced goods. There is also little cattle slaughter before then, when they have been fattened up on the winter pasture. Imported commercial goods bought with profits from the November-January export harvests also take until at least July to arrive in the country.

Planned inequality

Even assuming the UNO government effectively directs the US funds earmarked for increasing peasant income and rehabilitating health and education programs, its economic reactivation program will increase Nicaragua's social inequality. The first page of its basic document, “Agenda for the Recovery of the National Economy,” specifies that, although the gross domestic product is predicted to reach a 9.5% annual growth rate by 1994 and last until the end of the decade, efforts to improve popular consumption will be postponed until 1995. Apart from the stated fact that economic recovery will benefit the capitalists at the cost of working people, this estimate is utopian, even with the economic bonus that comes with the end of the war and the US blockade. Reactivation, while substantial, will probably be much slower than predicted.

The document Mayorga will present to the upcoming donors' conference in Rome states that the government is “developing a system of tripartite negotiation between workers, government and business owners, reinforcing the state's redistributive policies and designing systems for workers' participation in the ownership and profits of the enterprises.” But this progressive language is belied by the confrontation in May, evidence of the real process ahead in Nicaragua. Increasing the salary differential is part of the UNO government's program. The salaries of the 200 top central government managers alone will cost Nicaragua a minimum of $7 million a year. Furthermore, salary and social differentiation will have a political hue. Already, old officials in the presidential building have a yellow ID card while Chamorro's new appointees have a red one. The meals for those with red cards are much better than what is provided to those with yellow cards.

Beyond these clear signs of social inequality in the central government, the weight of injustice will fall most heavily on peasants and on the urban poor who earn their livelihood in the informal sector. If the Sandinista opposition can interpret and effectively channel the demands of these broad masses of producers impoverished by the government program, the revolution's gains can be defended more successfully and perhaps expanded, even in an economy dominated by the big exporters. If it cannot, and the government can guarantee an adequate flow of foreign financing to stabilize the currency, popular reactions may not be strong enough to protect the revolution's achievements.

A liquidity crisis

With the $300 million from the US now assured, UNO's next big hurdle will be the Rome meeting. The US assistance, together with the Soviet Union's willingness to honor aid commitments equivalent to $288 million made to the Sandinistas before the elections, leaves Nicaragua with a shortfall of only about $40 million in covering its minimum operating expenses for this year.

The government's real problem right now is the $404.8 million Nicaragua needs to bring all its foreign debt servicing up to date, and the approximately $150 million it needs as untouchable Central Bank reserves to back the introduction of the córdoba oro. The problem is that the potential donor countries meeting in Rome, which include Japan and the European countries, would rather finance new projects that also benefit their own economics by providing locally produced goods than throw hard currency at Nicaragua's domestic and foreign balance of payments crisis.

If the Central Bank cannot stabilize the currency, it will face serious problems with producers who are demanding resources for their normal activities. The bank has promised to pay for the harvest of both export products and basic grains in the new currency. With the scarcity of hard currency, this is clearly impossible for those who produce for domestic consumption. Last year the government sold inputs to producers at the relatively cheap official rate; the new government will sell them for córdobas oro and at prices set at the more expensive parallel rate. This will increase the costs for peasants and small and medium producers for the domestic market, particularly since they will have to accept old, devalued córdobas for their harvests; this translates to an enormous transfer of profits to the export producers. Furthermore, all producers have begun to criticize the Central Bank plan to charge interest in córdobas oro at a rate between 18% and 20% higher than those in the rest of the region.

COSEP leaders such as Ramiro Gurdián continue accusing the Chamorro government of being pro-Sandinista. Behind such political rhetoric is economic conflict. The government wants to maintain state control of foreign commerce, a basic Sandinista reform, to stabilize the currency; COSEP and even the more progressive producers of the cotton bourgeoisie want to privatize it so as to have direct access to payment in hard currency. For their part, the Somocistas who return from Miami want to participate in a division of the state spoils, while the government wants to assure efficient production. The new land-rent decree aims at stimulating immediate planting; it stipulates that the state-held lands, once rented, cannot be sub-rented to other producers. Those who want land have to show their productive credentials as well as their political ones.

These multiple economic tensions with producers (the industrialists and cotton growers of COSEP and the more modern-thinking CORDENIC, those who come back from Miami; the small and medium growers in the Union of Farmers and Ranchers (UNAG) and outside of it, UNAG's Federation of Cooperatives and unorganized peasants), are perhaps more serious for the government than its conflict with the public employees. The Central Bank's encouraging planting estimates, based on credit requests, will—if true—have less than encouraging consequences when it comes time to pay for the harvests.

Particularly during this liquidity crisis, demands from the agroexport sector and from the United States will be listened to before those of small and medium producers for the domestic market. In last place will be the needs of the peasant poor and the agricultural workers, although much will depend on their own militancy.


The end of the strike does not mean an end to conflict over the salary component of the economic program, much less to the larger conflict over where Nicaragua is headed. After only a month of UNO government, public employee posts are under threat; agrarian reform lands are under threat; the university autonomy law passed before the Sandinistas left office is under threat (the government is already taking control of research centers functioning under the university umbrella); and, neither last nor least, the once militarily thwarted contras are being treated as a force to be reckoned with.

There is less surprise inside Nicaragua about the direction the UNO government is moving in than about the speed at which it is moving there. What is coming next for Nicaragua is already here: a period of social and economic instability. At the center of this is the ever more fragile accord between the government and the Sandinista opposition, the increasing space the government is providing to the contras, and the radical response of growing numbers at all levels within the FSLN as the government makes its social alliances clear. The class conflicts so effectively controlled during the FSLN government's policy of national unity against US aggression are being uncorked.

The new challenges for the FSLN leadership are many. Having gone straight from being a political military organization to being the governing party, the FSLN now finds itself the major political opposition following an unanticipated electoral loss. In the real world of electoral politics, that could mean slow rollbacks of some of its achievements and a legitimate shot at recovering power in the next elections. In the surreal world of Nicaragua, it means that many of the forces whose power the FSLN has spent nearly 30 years and over 80,000 lives trying to eradicate have been kept on a life-line by the United States and are now determined, sooner or later, to eradicate the FSLN.

As a revolutionary opposition party in this new/old, real/surreal setting, the FSLN must redefine itself through a process of critical, but constructive, self-evaluation. Much about Nicaragua has changed. Workers and peasants are not the same illiterate, self-defined "animals" the Somoza dictatorship kept locked between the fear of repression and the somnambulance of paternalism. The FSLN leadership, criticized from within its own party and mass organizations for top-down styles, must find a new, more democratic way of incorporating the ideas and struggles that are now demanding to be expressed at the base level, enriching, modifying, but not endangering, the larger, more encompassing strategy envisioned at the leadership level. It will not be an easy process; it will require cool heads at all levels, in the midst of a very heated climate. But to the degree that both leadership and base can do so, the resistance of the working class and peasantry to the new government's plans will have greater weight and direction. All this, of course, if Nicaragua succeeds in getting past this extremely unstable stage.

The Chamorro forces have begun to show that they are no more willing—or perhaps able—to engage in serious national unity efforts with the Sandinista opposition to guarantee stability and minimum social justice than the hard-line business sectors were when the Sandinistas were in power. They are more inclined—or perhaps forced—to speed up their program when pressured from their own right flank and slow it down when pressured from the left. Given the current power balance and level of tensions, they are playing with fire.

The FSLN leadership has been forced to rethink its estimation that it could come to a principled understanding with the “moderate" forces in UNO, reserving its intransigence for what Daniel Ortega referred to in a Los Angeles Times op-ed piece as those in UNO who “want to make Sandinista heads roll.” The distinction between the two is now less clear. At the same time, a radicalized sector of the Sandinista base has moved beyond the leadership's strategy of maintaining open dialogue with the government. FSLN leaders are now likely to take a more dialectic approach to its strategy, pressuring from the left by permitting more militant expressions from the base to force dialogue in more favorable circumstances. Given the political, economic and even military instability, they, too, are playing with fire.

We offer our readers summaries of the first two decrees emitted by President Violeta Barrios de Chamorro and the first two laws passed in the new National Assembly. The two decrees, declared May 11, 1990, open the processes of selling state lands and returning confiscated property. The first, Decree 10-90, offers former owners of state lands or any interested party the opportunity to rent the land for the 1990-91 agricultural cycle while the privatization process takes place. Both state lands administered by the state and in third party hands are eligible. Decree 11-90, Review of Confiscations, forms a commission to review all confiscations and return the property or reimburse the former owner.

Decree 10-90 Provisional Land Rent
* Allows state to rent our productive rural lands which have been state land or confiscated land to those who claim ownership of them or have the desire and ability to produce on them temporally. (Does not include lands taken under Decrees 3 and 38, confiscating Somoza lands.)
* Claim should be accompanied by property title, copy confiscation decree, description of property, formal commitment to cultivate it.
* Requests will be resolved by Ministry of Agriculture within seven days. Appropriate state institution will hand over the land. If in third party hands, Ministry of Agriculture will order the current occupant to leave.
* If state has invested in the land (coffee, sugar, etc), renter will pay the state accordingly.
* If land had a lien prior to confiscation, renter will pay it.
* National Development Bank will issue appropriate credit at normal rates for this productive cycle.
* Any excess state agricultural machinery will be sold or rented.

Decree 11-90 Review of Confiscations
* Law declares formation of National Review Commission of five people, headed by Attorney General Duilio Baltodano Mayorga to review confiscations. Attorney General representatives in the regions will also receive applications and pass them on to the Commission.
* Documents necessary include information about person claiming the property, property titles, declarations of five witnesses attesting to ownership, demonstration of property confiscation, registration certificates or other pertinent information.
* Applications will be dealt with as they are received
* When lands cannot be returned because cooperatives or individuals are using them for a socio-economic function, former owners will receive appropriate indemnization in Córdobas oro.
* Applications must be field within 180 days of May 11, 1990.

Civil Service Law Reforms Law # 101
* Expands employees “of confidence” to include almost all workers, ranging from ministers and vice ministers to secretaries and domestic employees. Under this new law, almost all state employees can be replaced by workers the new administration considers “of confidence.”.
* Suspends formation of the various Civil Service Commissions (which would implement the law) until further reforms are made. This effectively suspends the whole law, allowing firing of state employees and forbidding strikes for state workers.
* The President of Nicaragua will delegate responsibility for writing regulations of the Civil Service Law.

Labor Code Reforms Law #102
* Only unions with legal standing can negotiate labor disputes. (The Ministry of Labor grants such legal standing.).
* Abolishes law that allowed collective bargaining between workers and employers without state interference. Now the state, through the Ministry of Labor, will be directly involved in labor disputes (a return to the Somocista labor code).
* Worker participation in the administration of the workplace is weakened.
* Abolishes section that demanded three months’ severance and just cause for firing workers. Returns to one-month severance pay and no just cause (from Somocista articles #16, 119).
* Weakens the strong union rights section of the Labor Code.
* Only legally recognized unions can participate in collective bargaining.


May 7
*Labor Minister Francisco Rosales announces 60% wage hike.

May 9
* National Assembly, Press Office and other ministries in three-hour work stoppage and demonstration in front of Presidential Offices demanding renegotiation of wage increase, union legalization and respect of earlier collective bargaining agreements.
* President Violeta de Chamorro suspends Civil Service Law protecting state workers. (Decree 8-90).

May 10
* Confederation of Public Administration Workers and National State Employees Union (UNE) call for work stoppages by Construction and Transport, Customs, National Assembly, Presidential Offices, Health Administration. Demands include 200% salary increase, reinstatement of Civil Service Law, review of collective bargaining accords.

May 11
* Constitutional lawyers submit to Supreme Court "recourse to amparo" that Decree 8-90 is unconstitutional.

* a.m. At press conference, Chamorro reiterates suspension of Civil Service Law and announces the Provisional Land Rent and the Review of Confiscations Decrees. Rosales agrees to meet with UNE but threatens to declare the strike illegal.

*p.m. Rosales meets with union secretary to negotiate, and that evening UNE executive committee meets. By this time 30,000 of 48,000 UNE members on strike including ministries, Customs and the National Assembly.

May 12
* Rosales meets with National Workers Front (FNT) representative Lucío Jiménez. Rosales invites CPT anti-Frente union representatives too. FNT demands: 200% salary increase, suspension of firings, reinstatement of Civil Service Law and joint preparation of Civil Service Law regulations, no firings of strike activists. Rosales' demands: immediate return to work, salary freeze, job stability and review of collective agreements.

May 13
* Rosales tries to impose CPT leaders as negotiators. UNE refuses, and CPT leaves. Rosales' demands: suspension of strike without salary guarantees, threatens use of police force. According to Jiménez, both sides agree to meet Monday 10 am.
* Central Bank, Construction, TELCOR announce they will join strike on May 14.

May 14
* Broad strikes begin. "Instead of meeting with workers as agreed, Rosales holds press conference and declares strike "illegal, illicit and non-existent," and that those who do not work Tuesday will be fired. Claims the unions have not negotiated in good faith.
* Strike lawyers present petition to Supreme Court challenging Rosales' claim that the strike was illegal.

May 15
* Despite threat of job loss, strikers refuse to return to work. Occupy Central Bank, Foreign Ministry, Construction and Transport, Health and Social Welfare, National Palace, Customs, among others. INE threatens selected three-hour electricity cut-offs. TELCOR cuts both international and national phone lines, administrative health workes also participate in work stoppages. Some bus drivers on strike. Workers prevent ministers from entering their ministries.
* a.m. Foreign Minister Enrique Dreyfus tries to enter Ministry with police assistance. Tear gas is used, police enter, but strikers refuse to allow Dreyfus to enter.
* p.m. Chamorro sends letter to President Bush requesting $40 million in emergency aid.
*late p.m. Negotiations resume, with Rosales temporarily absent, and Francisco Mayorga and Antonio Lacayo participating.

May 16
* Court of Appeals declares strike is legal.
* Bush refuses to give the $40 million emergency aid.
* p.m. TELCOR restores national and international phone service, toencourage negotiations to continue.
* Accord reached 7 p.m.: 60% wage increase plus ministry payrolls increased by 24%; and additional cost of living increase on June 1; salary review in June for health and education woerkers and those earning under 15 million córdobas; workers to return to work 8 a.m. May 17; no retaliatory action against striking workers; Labor Ministry will review and ratify collective bargaining agreements; Unions and Labor Ministry will jointly draw up Civil Service Law regulations; workers fired March 19 to May 10 will be rehired.

May 17
* Workers return to work.
* Internal struggle at ENABUS continues, with UNO bus drivers refusing to give up buses and rumors of firings of drivers participating in the strike.

May 18
* Civil Service Law and Labor Code reformed in National Assembly: definition of workers "of confidence" expanded to include almost all workers, instead of just ministers and vice ministers. Now many state workers can be fired and replaced with workers "of confidence." In addition, state workers no longer allowed to strike.

May 21
* Bus struggles finally resolved, buses return to normal schedule.

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