Envío Digital
Central American University - UCA  
  Number 82 | Abril 1988



Economic Reform: Taking It to the Streets

Envío team

Ten years after the anti-Somocista insurrections of 1978, Nicaragua has begun what could become an economic insurrection with a truly grassroots quality.

Economic readjustments are normally made by governments against workers—freezing salaries, raising prices and cutting back social services. In Nicaragua the working class has paid such a high price for defending its country and maintaining economic life in the face of prolonged aggression that it has begun to identify the national economy as "its own," despite the hard times. It is within this assumption of political and ideological awareness—a fundamental result of the revolutionary process of national liberation—that a new economic program could begin to acquire the characteristics of an economic insurrection. Instead of being a "package" imposed on working people, the program appears to have a guerrilla style, and to be managed by the people themselves.

With a dialectic similar to that of the 1978 political insurrections, people are now starting to make giant leaps of understanding in the economic field. They are discovering the great obstacles that need to be overcome and the tasks that must be undertaken to recover from the economic crisis.

Just in the first month of the new program there were three distinct phases to this discovery process:
1) Week one: Monetary reform, currency changeover and public mobilization against speculation in the markets.
2) Weeks two and three: Institutional reform and public awareness of the need for widespread public action to confront inflationary expectations.
3) Week four: Mobilization for efficient production.

The Nicaraguan economic crisis is more acute than the crises that have disrupted the Mexican, Brazilian and Argentine economies during the eighties. The adjustment policies in those countries have had little success, and at the time of implementing them they did not confront the constellation of problems Nicaragua faces. Here, the challenge is how to carry out the drastic measures necessary to avoid the collapse of the monetary system in the middle of a war, while also completely restructuring he ministries of state, without additional external resources and now with the full political and diplomatic commitment to quickly negotiate a cease-fire with the counterrevolutionaries. The only response to a challenge of such magnitude is a grassroots economic insurrection.

Faced with such enormous objective limitations, the only economic strategy possible is to use the new political space to respond with a popular movement, thus imitating the tactics employed in 1978 to confront the dictatorship. But mobilizing people against an economic enemy is more difficult than the struggle against Somocismo. It is a matter of confronting the forces that act against the grassroots project and, even more complex, struggling against "the enemy within."

A bold and unorthodox package

On February 14, President Daniel Ortega announced a monetary reform and economic readjustment aimed at putting a brake on hyperinflation and reordering an economy submerged in the chaos brought on by the costs of the war.

The package announced that Sunday afternoon was the boldest in the history of the hemisphere. The devaluation of the córdoba was on the order of 3,000%—compared with the devaluations of 600% to 700% carried out by Argentina and Brazil, and by Nicaragua in 1985.

In the earlier devaluation, the government eliminated consumer subsidies, as is usual with adjustments in market economies. In the most recent package subsidies to producers were eliminated, a unified exchange rate was adopted and the devaluation of the córdoba was allowed to affect the costs of production directly.

The package was also the most unorthodox ever introduced. According to economic theory, one should not attempt such a profound economic readjustment without having an orderly system of relative prices, so that the values of goods make sense in relation to other goods. Nor should such changes be carried out without sufficient foreign reserves in the central bank.

It was not like this in Nicaragua. The new package could not take advantage of an alignment of relative prices, in fact the package is intended more to put these prices in order. In the same way, the economic changes were made without the normal infusion of foreign exchange that the IMF provides for countries that decide to implement such a program. Nicaragua launched its program trusting not in the IMF but in the people’s capacity to make sacrifices. As we have already noted in the last two months, however, the changes made in the Nicaraguan economy would be like "surgery without anesthetic."

As distinct from the recent economic adjustments in other Latin American countries, this one has been made in the middle of a war and a revolutionary process. For this reason the Nicaraguan program could not simply be monetarist.

Analyzing the measures announced by the President, Foreign Trade Minister Alejandro Martínez Cuenca emphasized this unorthodox element of the Nicaraguan economy: “Our measures differ from those the IMF has proposed in different countries, even in neighboring countries, where they are sustained by freezing the wages of workers on the one hand, and by seeking a total reduction in public spending on the other. Here, the war makes it impossible to reduce public spending totally and we’re not freezing wages."

Unreal prices and inflation

Along with the devaluation, a nominal increase in salaries averaging 400% was announced. This increase was possible given the nature of Nicaragua’s inflationary spiral. In order to understand the new program and its possibilities of success, it is necessary first to understand the fundamental causes of Nicaragua's inflation and its economic crisis. As distinct from what happens in other countries, the mass of salaries does not weigh heavily on the economy because the working class has been permanently assuming a series of economic sacrifices in order to maintain the country’s defense. As Ladislau Dowbor, Brazilian adviser to the Nicaraguan government, said: “In Brazil the central element of the inflationary chain is the dynamic of wages/production costs/prices, whereas in Nicaragua the mass of wages has no impact on the inflationary process.”

One of the principal objectives of the new economic package is to curb inflation by eliminating distortion in the relative prices of goods and services. The distortions that most affect the economy are those that exist 1) between what producers pay for imports and receive for their exports and 2) in the wages/prices relationship. A central objective of the new package is to halt the deterioration in the standard of living of wage and salary earners and restrict the incomes of those in the speculative sector. As will be explain later, an even higher salary increase could have been granted without significant inflationary consequences.

In Nicaragua, the principal cause of the galloping inflation is the war. Its destructive effects consume the equivalent of one fifth of the gross domestic product annually. Military spending consumes 62% of the fiscal budget, leaving 24% for health and education and only 14% to maintain the economy. In light of these statistics, it is appropriate to speak of the "Nicaraguan economic miracle"—maintaining the gross domestic budget at historic levels of $2.5 billion with only the efforts of the people.

Along with the war, there are four other main causes of inflation:

1) The fiscal deficit produced not only by war but by the enormous foreign exchange losses and multiple exchange rates;

2) The imbalance in wages and prices that contributed to the growth of a larger informal speculative sector;

3) The long-term investment program, which monopolizes enormous resources without adding immediately to the supply of goods, in a fragile economy where the scarcity of every kind of input increases prices in all sectors;

4) The public expectation that inflation will continue—what economists call “inertial inflation.”

It is currently impossible to reduce the costs of the war substantially because all the negotiating periods are accompanied by stronger military actions as part of the negotiating strategies of both sides. The success of the new measures depends on their impact on the four sources of inflation listed above.

Phase 1: The old córdoba stops here

In all structural economic readjustments someone has to pay the costs. February 15, 1988, will be written in Nicaragua’s history as “Black Monday” for speculators. In the three days of the currency changeover—called “Operation Heroes and Martyrs of Quilalí” by the government in memory of the 18 civilians murdered by the contras on February 4, 1988—60,000 people at 1,611 sites throughout the country changed all of their old córdobas for new ones at a rate of 1,000 to 1. The basic rule governing the operation, after dropping the three zeroes, was to not change more than 10 million old córdobas for each household. Anything above that was held in the bank for later investigation into whether it had been legally acquired. (The owner of any business could legally change an additional 10 million).

The importer Lipsia Vanegas, who changed the record amount of money for an individual, handed over 8 billion in old notes. Of this 7,990 million was held in a deposit account and she received 10,000 in new córdobas in exchange for the 10 million she was allowed to convert. The US Embassy handed over 208.5 billion old córdobas at the Consular Division of the Foreign Ministry, the place assigned for diplomatic personnel to change money. Of that, 198.5 billion were deposited and only 10,000 new córdobas provided to the Embassy. (The employees of the Embassy were not carrying any documentary proof that the córdobas had been changed legally from dollars, thus it is doubtful that the US government will be able to recover any of it).

A few of those who had more than 10 million and could not legally account for it tried to distribute the surplus amongst poorer people to change for them, in exchange for a percentage of the amount. In some cases these plans were detected and punished—in Managua, only 20 people in the first two days. In large measure, this trick did not prosper because people were delighted that the wealth of speculators who had been bruising their wallets for four years was now being removed with the stroke of a pen. Why collaborate with them to impede it?

A contra was captured trying to cross into Nicaragua near Somotillo with 3.2 billion córdobas. This was money that the counterrevolutionaries had been using to pay their messengers or buy a few supplies. Three vehicles from the US Embassy maintained a constant patrol around the money changing sites and staff handed over bulky packets to some citizens.

Many of those with enormous quantities of money that they could not explain did not bother to exchange it or, like Enrique Bolaños, leader of the private businesses grouped into COSEP, invited his friends to a tearful celebration where they burned it.

In the three days of the operation, 116.5 billion of the more than one trillion old córdobas that had been in circulation were withheld in bank deposits. Another 100 billion, including money handled by the contras or other illegal agents, was not turned in. These two amounts add up to 19.8% of the total monetary supply withdrawn from circulation. To remove such an amount of money was a great step toward curbing inflation.

The success would not have been so significant had it not been the biggest clandestine act of the Sandinista revolution. Mobilizing more than 60,000 people in the operation, the FSLN struck a genuine guerrilla-style blow to the speculators. Without doubt it was Managua's best kept secret, ever, in a city with an oral tradition in which delicate information can move faster than dust in the dry season.

The first steps in Operation “Bertha,” its nom de guerre, were taken in 1984, when it was thought the monetary reform would be needed in 1985. It was kept as a top secret for three years, thanks to the oath sworn by those involved:

I, , involved in the task of Operation “Bertha,” solemnly swear before the most sacred principles of our revolution, before the memory of our heroes and martyrs, to faithfully and zealously preserve the knowledge acquired and maintain the compartmentalization and secrecy of Operation “Bertha.” If this oath is violated, may the revolutionary laws fall on me, and the contempt of the Nicaraguan people be my punishment.

At the end of 1987, the government took the decision to introduce the economic package, and on January 23, 1988, the final phase of the operation was begun. Groups made up of the government delegate and the heads of the army and the Interior Ministry in each region prepared the logistics of the operation.

On February 9, a team of 20 printing workers and 300 trainers took the oath for Operation “Bertha.” By February 12 the number involved in the “economic conspiracy” had risen to 5,000. In this last phase, with so many people in on part of the secret, it was necessary to disguise the operation. The government leaked the following story to La Prensa, which was published on the front page on February 11:


Unofficially, La Prensa has learned that in a few days the central government will be putting new fiscal policies in place through the Ministry of Finance with the release of a 500,000 córdoba banknote on the 15th of this month, next Monday, the total release of which will amount to 7.5 billion córdobas during the coming year.”

On the same day, Barricada, the FSLN paper, ran a photograph of the new half million córdoba note as a signal that the monetary supply was going to grow even more. The following day it announced maneuvers in region III (Managua) with more than 15,000 participants, in exercises “of a military character, such as civil defense.” La Prensa published this headlines: “FORCED RECRUITMENT PROVOKES NATIONAL STAMPEDE. THOUSANDS HIDE. CIVILIANS MOBILIZED. THEY'RE NOT TOLD WHERE THEY'RE BEING TAKEN," accompanied by a photograph of bank employees with their bags abandoning their posts to leave for the “military mobilization.”

It was not only La Prensa. All of the US intelligence services were caught in the trap. Even their continuous recordings of telephone conversations were not able to decipher who “Bertha” was—the name was chosen in honor of the German long-range cannon named after its blonde manufacturer, Bertha Krupp. They could not have imagined in years, much less in the days before the plan was to be revealed, the economic shelling the reactionary sectors of the country were going to suffer on February 14, Valentine's Day.

Knowledge of the operation was compartmentalized to such a degree that the teams planning the operation in 1987 and 1988 did not know until the last days that the new bills had been in Nicaragua since 1985.

During the three days of the changeover, the country’s economy was paralyzed, but the advantages of eliminating 20% of the money in circulation were incalculable.

A mass movement against speculation

The assault on speculation was not only technical, a product of the successful implementation of operation “Bertha”; it also generated grassroots actions throughout the country to protect the new prices set for basic goods. In León, Estelí, Diriamba, and even in conservative towns like Juigalpa, tens of thousands of people demonstrated against speculators. Even more significant than the demonstrations was the wave of pressure exerted on merchants in all of the country's markets beginning on February 18. As a result of these social pressures, merchants with licenses allied themselves with consumers to block the reappearance of illegal traders. In the grassroots neighborhoods, the Sandinista Defense Committees (CDS) organized against speculation, selling goods they confiscated from greedy merchants at official prices and returning to them the amount of money that should have been charged.

It was the moment to rise up against speculation and people responded energetically to the FSLN’s leadership. The relationship between wages and prices had improved significantly and people grasped the basis of the slogan, “Now we’re going to defend wages and prices.”

Although it was going to be impossible to maintain stable prices in an economy in which imports had experienced a 3,000% price rise, public mobilization had not only a political logic, as some people thought, but also an economic one. Under the weight of popular pressure, the more speculative businesses laid low, leaving the state, service cooperatives and honest merchants to regain a space in the market that they had lost to the speculators.

Comandante Ramón Cabrales, minister of domestic trade, said: “The basic activity in commerce is selling, the circulation of working capital. If someone waits on the sidelines right now, when devaluation is increasing prices for all those products that are not controlled, they’re going to get to the point where they can’t recover their working capital. This is the error of some businesspeople. They’re waiting to see what prices we come out with so they can climb on the bandwagon.

Except for merchants with large reserves, those who held back couldn’t buy up production at lower prices in the first weeks after the measures and, as a result, lost ground. La Prensa, speaking for this sector, declared on March 9 that “commerce is in ruins,” because of “lack of working capital.”

The claims of the 1,600 members of the National Association of Small Import-Export Traders, and of Dr León Ruiz, president of the Chamber of Commerce, who accused the government of creating a “climate of complete uncertainty and confusion among the merchants,” served only to excite more people. On March 2, COSEP released a declaration strongly condemning “the brutal trampling and plunder of our goods carried out by the authorities against the traditional merchant sectors. It has confiscated from the citizenry billions of córdobas that God only knows how much toil and work it took to earn.” In addition to God, working people well knew who had done the toiling for those merchants to have gained so much.

If it was so beneficial, why wasn’t it done earlier?

Many Nicaraguans and even non-Nicaraguans might ask: “If the currency changeover has brought such benefits to the economy, why wasn't it done earlier given that everything had been ready since 1985?”

Late or early, the state had to begin to discipline the productive sector as a whole (state, cooperative, competitive private business and the areas dominated by large private capital). It could not continue subsidizing through the enormous differences between the exchange rates for imports and exports.

The córdoba was so overvalued that it encouraged a great flow of Nicaraguan products into Honduras and Costa Rica. A whole sector of illegal petty traders lived by buying cheap Nicaraguan products and then selling them for much higher prices in neighboring countries. More córdobas were bought with the earnings and thus the business was continued. The Nicaraguan government had to close its borders during the three days of the currency changeover in order to block this sector from exchanging its accumulated earnings.

Late or early, the government had to move closer to a system of “shadow pricing,” where the prices of goods in Nicaragua shadowed the movement of prices in the region and changes in the value of the US dollar. In a small country with such an open and vulnerable economy, it is impossible to maintain a system of prices unrelated to those of the region.

The devaluation and the unifying of the exchange rates were to be two very hard measures. There has been a lot of comment that it might have been better to take these steps in 1985, before the economy had suffered such a grave deterioration. While this opinion has validity in strictly theoretical terms, the opposing view underlines the geopolitical framework of the revolution and argues that the advances made by the counterrevolution at the beginning of 1985 would not have permitted the launching of the drastic measures of 1988.

The increase in everyone's cost of living that these two measures will produce was not a medicine that the government wanted to prescribe in the difficult situation of 1985. This is why, although the monetary reform was not made until 1988, the new notes bear the date 1985. In the decision to postpone the necessary economic measures, the impact of US aggression on the economy were measured alongside the government’s inability to structure a survival economy that would halt the inflationary spiral begun in 1984.

With the sustained strategic decline of the counterrevolution by 1988, the government implemented the plans developed in 1985. “Laxatives have a disagreeable taste and side effects,” commented Nicaraguan economist Francisco Mayorga. At the time of prescribing these necessary measures the government also wanted to announce other, more popular moves such as the campaign against speculation and the cancellation of housing debts carried by almost 4% of Nicaragua’s poorest people. By the end of 1987 the government could wait no longer. Inflation was 1,300% per year, with monthly rates of two to three times this amount in the last quarter before the measures were announced.

Phase 2: Belt-tightening

By the middle of the first week after implementing the new measures, Nicaraguan Vice President Sergio Ramírez judged them a great success. At the end of the same week President Ortega launched the second phase—the reform of state institutions.

In two speeches on February 20 and 21, the President announced not only the institutional reform program, or “compaction of the state” as it is called in Nicaragua, but also spoke of an ethic for the economic difficulties that the grassroots movement would transform into a new style of social control over the market.

In front of 1,200 representatives of the 60,000 that participated in the currency changeover operation, the President announced a plan to cut the state budget by 10% by merging ministries, reducing administrative positions and transferring qualified staff to the productive sector. In his speech, President Ortega stressed that the economic policy was intended to support the productive sector and control speculation, and that the Law of Maintenance of Public Order and Security would be rigorously applied to speculators. He also announced that the government would not revalue the debts of the 12,000 small and medium cattle ranchers in the interior of the country to avoid discouraging them in their struggle to maintain production in the middle of a war. At the same time, he spoke of the need to rationalize the state investment program to adjust the economy to the needs of defense. Finally, he announced a new tax on the “dollar store,” originally known as the Diplomatic Store. The clients of this Managua supermarket, which sells a wide range of imported goods for dollars, are the city's better-off residents. The tax is expected to hit 55% of the store's earnings, and this money will be spent on importing basic goods for the population.

Government "compaction"

During the following two weeks the state worked extra hours to carry out its normal functions as well as the institutional reforms and budget cuts announced by the President. The Ministry of Industry and those of Domestic and Foreign Trade were amalgamated into a single new Ministry of the Economy to be headed by Comandante Luis Carrión of the FSLN National Directorate. Those of Construction, Transport and Housing were integrated into one ministry under Comandante Mauricio Valenzuela. The Ministry of Education, under Father Fernando Cardenal, took over the functions of the Ministry of Culture, the National Council of Higher Education (CNES) and the National System of Vocational Training (SINACAP), the last two of which had ministerial rank. Finally, the duplication of functions between the Ministry of Justice and the National Registry was eliminated with the creation of the position and office of Attorney General.

At the end of the second week, President Ortega indicated that the main goal of the state compaction was to “redefine priorities of government management while freeing up more efficient staff and moving them to other strategic areas.” No state department or business was exempted from the new austerity measures. The Defense Ministry and the Ministry of the Interior, the latter responsible for policing, migration and internal security, have also prepared plans for budget reductions.

An austere and agile state

The institutional reform was motivated by the objective not only of reducing the fiscal deficit by 10% but also of transforming the government into a more agile instrument. While reducing the deficit will significantly help in the struggle to restrict inflation, this will not be sufficient as long as the cost of the war continues to weigh so heavily on the economy and to fuel inflation. With the present cuts, the government has reached the point where it is unable to make further reductions without harming education and health services . The space for further improvements is limited to a “qualitative reform” of governmental economic management.

In his speech to the inauguration of the 1988 National Assembly session, President Ortega emphasized that while 84% of the gross domestic product (GDP) was consumed by the people and the remaining 16% by the state in 1980, the costs of the war and the public investment program had reversed the balance so that in 1987 popular consumption had dropped to only 48% of the GDP. “This clearly reveals the depth of the crisis,” he said.

In the same speech, he described the type of social control that would be necessary to increase production and consumption of the people: “We cannot accept demagogic positions in defense of speculation. Speculators must be put in their place, and it must be taken into account that the speculator is not only one who moves in the markets but the producer or the businessperson—private or state—who alters the costs of production; those who hoard products and then later, when the prices go up, abruptly release them onto the market; that ministry, government official or private organization that does not respect the salary scale....”

He compared the effort needed to implement the new package to the political and military insurrection of 1978: “We will work with the same energy and firmness that we used in the struggle against the Somocista dictatorship, using all that force that wants to help us, because this is not the moment to take lightly the dramatic situation the country is experiencing.”

Public understanding grows

On the night of February 24, Comandante Luis Carrión said to a big rally in the Plaza of the Revolution, “As a people we have taken on the new economic measures as ours and we’re taking actions to defend them.”

In the following weeks people not only kept energetically defending the measures against the speculators, they went on to develop a much deeper understanding of the measures taken in the struggle for production and economic stabilization. The fight against speculation continues to show people that the inflationary process creates deep divisions within the community. People have taken the first steps to overcome these divisions, starting with the alliance created between the public as consumers and the legal traders.

“This has happened because it’s unjust that people like us legal merchants, who pay taxes, are the victims of speculation and usury,” said a vendor in a Managua market. And from a grocer at the same market: “I'm illiterate, but I realize that the government has supported these operatiions by increasing the wages of workers.”

The basis of this alliance between merchants and workers already existed in urban families, where their survival strategy has required that there be salaried family members and others working as merchants. As a result, merchants can understand the needs of workers and vice versa.

As Lea Guido, Secretary General of the women's organization AMNLAE, puts it: “We have a new movement of women merchants who help us in the fight against speculation. We’re going to start campaigns to promote the ‘good merchant.’ It’s a question of moral and material recognition, in the framework of solidarity between legal merchants and consumers.”

While the rightwing media have projected the public economic mobilization as a violent measure, the times when most pressure has been exerted on the merchants have, in almost all cases, already gone through an orderly process consisting of three phases: 1) persuasion; 2) temporary intervention by the Ministry of Domestic Trade (MICOIN) and the organized people to sell the hoarded products at official prices and give the money to the merchant; and 3) closing the establishment if there is a recurrence. This type of direct control is currently giving way to more hegemonic and integrated social control over prices.

Integrated social control

In the first days of the new measures, the merchants demanded more and better deliveries given the public demand for basic goods at the official prices. “hat the state should create now is a connection with farmers and produce growers so they can sell directly to the retailers and that way we could guarantee the official prices of the basic market basket,” proposed a vender at a Managua market. Before the state could proceed with this suggestion, some sectors of the public were already doing it. According to the leader of one
“We've reactivated the network of grassroots inspectors to work against speculators and are implementing a series of social control measures. We've been making efforts to obtain products. We've contracted to buy 5 tons of rice and a truckload of maize from a producer in Jalapa, Rufo Amador. Also through the owner of the expendio [local store supplying rationed basic goods] we’re buying beans and bananas in other parts of the country."

Responding to public pressure, MICOIN Minister Ramón Cabrales indicated that the public should replace his ministry and that Sandinista Defense Committees in the grassroots neighborhoods can act like the workers who are responsible for the factory commissaries. “For example, they can negotiate with someone who has a truck for hire and use it to seek products to improve supplies to the expendio in the neighborhood.”

For its part, the National Union of Farmers and Cattle Ranchers (UNAG) has begun to mobilize its members—small and medium private producers—in a national effort to open peasant’s stores in all towns so producers could sell directly to the public and thus eliminate speculation. UNAG president Daniel Núñez described other necessary elements for social control to function over production:

“In Nicaragua there’s free trade in basic grains. As such, the owner of an expendio is perfectly able to go and buy the production from a peasant. It’s a method of social control against speculation. At times I think we’re attacking the ants and letting the elephants go by. Officials of the National Perishable Products Company, who have never had discussions with the wife of an onion grower and know nothing about onions, come imposing prices that have nothing to do with reality.”

It would obviously be impossible to use policy measures to control all competitive production of basic grains, vegetables and other products. But the public has been discovering that there are social control mechanisms to eliminate inefficiencies and injustices in the distribution channels.

The major problem, as Núñez says, is with the "elephants" of the market—that small number of businesses that have controlling shares of sectors of the Nicaraguan economy.

At the end of the second week of the measures, a new concept of social control had been defined, clarified and taken up in a more pragmatic and broad manner by the people than by the leaders themselves. Their mobilization against retail merchants also took on the speculation that exists behind the closed doors of the productive enterprises and even began developing control over all the production and distribution channels, not just the final link in the chain.

The Secretary General of the Farmworkers’ Association (ATC), Edgardo García, explained clearly this new sense of social control:

“The first task of the unions is to resist the bribery of employers, who tell them their salaries will improve if they sell the products to the merchant. To make this task widespread, it’s fundamental to understand that things have to go through secure channels for them as workers. Some real work has to be done to contain the speculators, not letting products slip out of the warehouse or work center and get to them.”

The possibility exists for a joint effort of workers and administrators to right the economy, as can be appreciated in the views of Hugo Veliz, director of a textile enterprise: “Some businesses allege that rising prices are a way of making inflation a social cost. They consciously adapt that price mechanism to compensate for inefficiency. I think that the state can't be too considerate with these administrators. They should be removed. In summary, I believe it's necessary to be tough not only with the speculators but also with those who don't fulfill their responsibility to produce at lower costs in order to offer better prices.”

Speculation linked to inertial inflation

Behind the process of discovering of a more integral form of social control along the entire chain of production and distribution was a confrontation with a whole style of economic administration. In such situations the logic was to some degree contaminated by the dynamic of inertial inflation, where agents increased their price calculating that if they didn’t they would perish at the hands of the other agents in the chain.

Faced with the new measures, producers will be tempted by “inflationary expectations” to raise their prices to recover the subsidies lost with the unifying of the exchange rates, merchants will be tempted to raise their prices to be able to buy the goods that will be more expensive every time they come from the productive sector, and consumers, having to pay the price merchants ask, will be tempted to demand higher salaries from their employers, who will thus be tempted to pass the new costs on to the merchant and the consumer. Within this spiral of inertial inflation, nobody wants to lose, all think the other will fall into temptation first and all defend what is theirs. In the end all lose because production drops with each round of the spiral.

Inertial inflation is always a reflection of the class struggle. In Nicaragua it also reflects US military aggression against the people, one of the principal objectives of which is to cripple the economy and open deep divisions within the society in order to destabilize the revolutionary government.

The institutional reforms are intended to attack the style of economic administration based on inertial inflation. Its principal goal is to economically unify Nicaraguan society in the face of the US aims. The people took up ethic announced by Daniel Ortega to launch the governmental belt-tightening. As a settler from La Herrera neighborhood said, repeating the President’s idea, “Everybody has to be measured with the same ruler.”

A Barricada editorial of March 10 put in sharp relief what the President had called “a qualitative readjustment of government” and the need for the government to set the standard with a new administrative style that targeted inflation.

The artificially inflated setting of costs—and thus of prices—by companies, the irrational use of credit and imports and profiteering from the tangle of exchange rates all reflect a period, or a style of doing things given a concrete situation. It would be worrying if the private entrepreneur, the state administrator or the union leader didn’t realize that for the monetary reform to be effective in correcting the economy's distortions, a real change in approach is needed.

The state must set the standard

Nothing is more difficult—even though the objective conditions of the political economy offer better conditions now—than transforming consciousness and getting people to abandon habits and attitudes they have acquired as managers. The government compaction thus has a sine qua non requirement: the state plus the men and women who are its front line must provide leadership in new behavior.

No company can continue to be profitable in any way other than increasing production or reducing costs.... That is the challenge implicit in the execution of the government compaction and it’s not out of line to point out that along with good will there should also be stringent controls to guarantee discipline.

The Nicaraguan state must set the standard and has been doing so in its actions during the first weeks of the new program. Nonetheless, while the war goes on, the power to stop inflation rests not in the government’s hands but in the people’s. It is because of this that the beginnings of a leap in the public’s economic consciousness has been so crucial. The success of the government's new economic program depends in great measure on its dissemination and consolidation among the bulk of the Nicaraguan people.

Phase 3: More production, more taxes

The great danger in applying such unorthodox economic shock therapy is the possibility that the measures may produce a production recession, that after cutting liquidity so drastically, it may not be possible to reintroduce what the productive sector needs to restart its work. It should be noted that the paralysis caused by the monetary reform was preceded by months of productive stagnation resulting from the December vacations, the petroleum crisis (and in turn the energy crisis), and the resultant closing down of factories in December, January, and February.

The danger of a recession is a by-product of a drop in demand. There are indications of such a drop because people simply don’t have enough money to buy the products at the high prices that result from the proportion of imported materials needed to produce them. The 320% increase in the price of medicines brought a marked drop in pharmacy sales, especially as it coincided with the time when all families had to buy supplies for their children at the beginning of the school year.

In any competitive economic sector, it is necessary to increase efficiency when demand falls so as to sell for less than the competition. When a few big businesses control more than 60% of a market, on the other hand, a situation of oligopoly power exists, and such a group of businesses can manipulate the market instead of responding to its demands. There is thus a danger that these measures, instead of encouraging production by lowering demand, may just lead to a cut in production in the non-competitive sectors. There is concern, for example, that chicken production might fall because a high proportion of urban consumption comes from only a few producers. At current prices, eggs are not being sold and chickens are left in the markets.

The government had barely launched phase two when it set out on the third and decisive phase of implementing its new program: the battle to increase the availability of basic goods in the short term. The problem with the third phase is that there was no unanimity about how to begin. The changing of the country's money had paralyzed the economy, so the producers were demanding liquidity. According to them, the next step should be to immediately begin a program of releasing credits, thus enabling production.

According to the financial sector, which had been bled for years by the productive sector’s inefficiency, such liquidity would only cause more inflation and what was needed was the application of strict limits on liquidity so that producers would be required to sell their inventory immediately to get it. For the financial sector, the only way to increase production was a recession, which would force economic restructuring and greater efficiency in production.

This analysis, which would deal with the productive sector's inefficiency in one hard blow, was hotly debated in the months leading up to the monetary reform, as were the reasons for the economic recession since 1984. At its core, the financial sector's recipe was, “Accept a recession in order to put the country's finances on a sound footing and reestablish fundamental equilibrium.” But doing this required either maintaining the key prices set by the government at the time of the monetary reform, or devaluing the currency more, at the same rhythm as the erosion produced in the new price and salary scheme.

By the beginning of April, there were already theoretical discussions about whether the financial sector could have maintained the key prices scheme by pacifying the demands of the productive sector for higher prices with a large and rapid injection of capital. It had been decided to stanch the credit flow and give way in the price scheme, under threat from the first days of the new economic package.

Any economic readjustment of such a profound nature was bound to provoke a period of price instability and then a period while the market settled. In our case, price instability was worse than normal because the state went back to discussions and administrative price fixing with the productive sector—most importantly with the few very large rice and sugar producers and the big dairies in the Pacific.

For Comandante Leticia Herrera, then head of the national Sandinista Defense Committees and responsible for their mobilization to maintain the prices fixed by the government, it was frustrating that the government itself was now beginning to negotiate those prices with the producers. “A single body is needed,” she said, “to define and regulate prices, because people really lose confidence when people shoot off in different directions.”

It is obvious that no one could control prices in the competitive produce or basic grain sectors. The oligopolies presented the real problem, which was how to apply the controls necessary to force them to become more efficient.

But before analyzing the problem of the productive sector and the price scheme, it’s necessary to review the failed attempt of the rightwing political parties and unions to break the salary scheme in the face of the revolution's commitment to the working class.

Salaries and worker consciousness

Workers enthusiastically supported the measures, with the exception of some groups that had higher salaries than others because they worked in areas that serviced the wealthier classes. Among them were waiters, with their obligatory 10% tips, who earned more in two hours than some other workers earned in an entire month. Or the workers in car repair shops where, because of hyperinflation, car owners had grown used to paying whatever they were asked. Construction workers also got much higher salaries than workers in other industries because of the pressures of military construction and long-term investment projects, which were much higher than this sector’s human and material costs. The groups where there was the most conflict were the “labor aristocracy,” who lived off the inflation that was suffocating the rest of Nicaragua's workers, and who fell into the trap of defending their privileges, encouraged by the opposition political parties and their unions. These groups' protests fell on the deaf ears of a wider working class, which not only supported the measures but rejected the pro-US policies and opportunism of these opposition groups more than ever.

Although the measures included a hefty wage increase of some 400%, they eliminated a whole series of incentives that had been growing during 1986 and 1987 and averaged 90% more than the basic wage in the productive sector and 40% in the non-productive sector. Table I shows that although the effective rise in base wages in the productive sector was less than 400%, this was a great relief for the working class. Bearing in mind the total wage, including incentives, the effective rise for workers was only about 200%.

Although the wages of the productive sector are still higher than those of the non-productive sector, the table shows that in the new economic package, the improvements in non-productive wages were actually greater than productive sector wages.

As can be seen, the wage scale, which previously had a range of eight times between the bottom wage and the top one, was liberalized in favor of the higher range. There is now a difference of 15.1 times between the top and bottom wages.

Raising wages was necessary not only in human terms, but also in economic terms. The distortion in the balance between wages in the formal sector and prices meant a permanent temptation for workers to move to the informal sector, a temptation particularly strong for professionals. Workers at the top end of the scale who left the formal sector began selling their services at inflated prices to that same formal sector, but now as free agents in their informal mini-establishments. It was to avoid that dangerous phenomenon that the differential in wages and salaries was increased.

According to the projections, the new average urban salary of 2,562 córdobas (level 16) will buy the basic basket of goods, which includes some 46 products. Additionally, it is calculated that there are an average of 2.2 workers per family, which means that those in the middle ranges have enough income to consume much more than the basic basket of goods.

But those same calculations indicate that the maximum basic wage for a worker (level 9) will only buy about 60% of the basic basket. Table II shows the serious subsistence problems and there is likely to be no solution to the crisis for several years.

Although all the political polls—as well as the inability of the contras or the rightwing political parties to establish a political base—indicate that the Nicaraguan people believe that the revolution is the only road for Nicaragua, the economic crisis demanded an improvement in the wage-price relationship. Workers pressured for and won the retention of their incentives and extras, although only in the productive area. With that step, the income of workers and technicians in the productive sphere were increased some 30%. At the same time, the labor minister announced that “all substantial movements in prices will be accompanied by a movement in wages. Workers should be confident that adjustments will be made when they are necessary.”

Two days before the labor minister's statement, 500 representatives from the Sandinista mass organizations signed a document titled “Pronouncement of the Fundamental Forces of the Revolution: Defense and the Economy Are a Single Concept for Survival.”

That document sets out the main feature of today's situation: the most fundamental revolutionary social forces are once again concentrating their attention not only on the military-political struggle but also on a new mobilization that integrates defense and the economy. The document confidently states:

“The concentration of large economic problems does not frighten us; we are certain that we can resolve them, no matter how tense the situation becomes.

“In today's situation, without renouncing what is possible, workers’ economic demands are deferred, and the economy becomes survival to fulfill the tasks of military defense, because military and economic defense are one single concept.”

Table III shows that the purchasing power of wages rose substantially with February's measures. But it also shows that the 113% inflation in the cost of the basic market basket seriously reduced this purchasing power the following month. (Increases of 205% in grains, 18% in meat, 8% in dairy products and eggs, 146% in perishables, 73% in cereals, 78% in household goods and 209% in clothing, gave an average inflation of 113% in the minimum market basket during the first month after the monetary reform.) By March 23, the perceptible improvements for workers had been eroded, leaving the real purchasing power of wages even lower than in December 1987. After the first month, any effect of the magic wand had disappeared .

The effect on wages has come less from speculation (well controlled by the popular movement) than from production shortages and the business forces that pressed for higher prices.

Prices and business pressures

The reaction of the Chamber of Commerce and UPANIC, the large cattle growers' association, both organized in COSEP, was to wait. Their politics led them to make absurd economic statements, like saying that the monetary reforms decapitalized them, or that the measures constituted a “checkmate on producers, a step which will end up decapitalizing us.” "

In spite of compensatory salary rises, any big devaluation or monetary reform that eliminates liquidity is a measure that weakens the working class’ economic power, reducing the value of its work, and increasing the value of the capital of the employers, whoever they may be. In an editorial, Barricada responded soberly to COSEP’s statements: “If the monetary reform has any political intention, it is to strengthen the mixed economy in this country.”

After repeating that the measures would do nothing to halt inflation, Dr. Manuel Callejas, head of UPANIC, prescribed what the politicized business sector saw as the only effective medicine for the Nicaraguan economy: “We've said it several times; the solution is for the state to return everything to private hands so the country can improve, because we have produced better than they can..”

Although the private sector’s efficiency might be potentially better than the state sector, in reality it has been far below that of the peasants and small producers and, even more crucial, it has been much worse than other private producers in Central America. “The benefits and the marvels of free enterprise have been nothing more than rhetoric. They haven’t predicated their statements on the example of their own experience,” Roberto Larios, Barricada analyst, said of Nicaraguan entrepreneurs. Precisely because of its inefficiency, the business sector moaned about the new economic measures because they require more efficiency and require that the companies live without the state subsidies of which they are so critical.

The reality is that immediately after the measures, businesspeople, especially those from the highly concentrated parts of the economy, went running to the government asking for handouts. According to Barricada of February 26, one of the cattle associations asked for $4.54 per pound of beef on the hoof in response to the $1.45 offer from the Agrarian Reform Ministry (MIDINRA)—even when the international price is only $0.85 and Honduran ranchers find it profitable to export at that price. At the end of the negotiations, the price paid to the rancher for a pound of beef was fixed at 22.50 córdobas, or $2.25. The price set for exports is only 9.09 córdobas, or $0.91. In this situation, there’s no incentive to export, yet exports are one of the principal aims of the measures. In the last six years, according to MIDINRA’s statistics, meat exports have fallen 49%, while the sales of meat within the country have risen by 89%.

While the state pays 10 córdobas per dollar for exported meat, it pays 22.50 c6rdobas per dollar for meat to the domestic market. That means that instead of officially devaluing the currency, a subsidiary has been given to the producer, undermining the key exchange rate that was supposed to act to improve the distortions in relative prices. This means that the state export operation, which has contractual obligations to sell 15 million pounds of beef to countries such as Canada, is demanding more subsidies to balance the losses incurred by not selling those 15 million pounds in the domestic market.

What happened with the cattle ranchers happened with the rest of the producer associations from the heavily concentrated areas of the economy. According to Barricada, the dairy farmers of the Pacific basin wanted 25 córdobas per liter of milk, when MIDINRA was offering them 10 based on the average production cost of the peasants in Matagalpa (8.50 per liter) and the big producers of the Pacific (12 per liter). In the end, the price was set at 13.85 córdobas per liter.

No industry demonstrates the paradoxes of the Nicaraguan economy more clearly than milk, where the peasant forms of production are much more efficient, rational and appropriate for the country's situation than are those of the big concentrated producers of the Pacific who depend on imports. In fact, the modernization of dairy production means that the people will be able to consume less and less milk, as the international recession obliges Nicaragua to devalue its currency more and charge producers more for their imports. In this context, the most technologically advanced forms of production become the most regressive in social and economic terms.

On March 10, with 150 tons of rice stored in the warehouses of the 50 big rice producers and a major shortage of rice in the country's markets, Mario Hanon, president of the National Association of Rice Producers, demanded “realistic prices,” asking MIDINRA for 10 córdobas per pound, even though the rice in the warehouses had cost those 50 producers only 3,500 old córdobas (3.5 new) a pound to produce. The next day, the new price of 6 córdobas per pound was announced, giving the growers profits of more than 70%.

The rice sector’s inefficiency can be judged by the international rice price. Nicaragua would be able to import rice for US$0.14 per pound, or 1.4 córdobas per pound. The central problem is the exaggerated and inefficient use of imported inputs by the big rice producers. They are now using airplanes for virtually all their work. Planting, fertilizing and insecticide applications are all done from planes. They used to use planes much less and were more careful in their use of agricultural chemicals. The imported component of rice production costs was 42% in 1982 and is now 64%. When it’s much cheaper to import than to produce domestically, the problem isn’t the free market but paternalism toward big producers. The implicit exchange rate being offered to the rice producers is actually 42.3 córdobas to the dollar.

For their part, the peasants who produce rice without irrigation do it for 30% lower costs per hundredweight than the high-tech rice producers. The best way to discipline an oligopoly is to expose it to the competition of domestic producers who are much more numerous but much less powerful, and less interested than the big producers in reaping extraordinary profits.

In the same way, the over-technification and inefficiency of the sugar sector has meant that the state has caved in to the producers, accepting an implicit exchange rate of 50 córdobas to the dollar, as compared with the official 10 to 1 rate, thus provoking more inflation.

One of the strongest tensions between the financial and productive sectors is over the use of technology. The financial sector wants to reduce dependency on excessive agro-chemicals and reduce the credit flow to the productive sector by some 30% during 1988 in order to rationalize production. The sorghum growers were one of the few highly-concentrated groups who, after reviewing their technological needs, admitted that the state hadn’t exaggerated its official calculations of imported inputs for that category.

In agroexports, the coffee growers who use fewer imports accepted the new prices without protest, with the exception of the most politicized groups, who tried to blame the government for weather problems and problems caused by the war. Unlike the coffee growers, the cotton growers, whose technology level makes them extremely dependent on imports, are having to move to exporting sesame seeds, now that the production costs per quintal of cotton are about $150, while the value of cotton on the world market is only $64.

Peasants and small producers

The peasants have been dealt a hard blow by the economic measures. Like the working class, peasants own their own labor power but not capital, which can increase in value in a currency devaluation. Unlike the workers, they didn’t get a big rise in their wages because the reform took place as the coffee and cotton harvests were finishing, and before planting began. The prices of all household goods, and even more so of productive inputs, rose just when the peasants had nothing in their barns to sell. All of UNAG's “Peasant Stores,” just like the peasants themselves, were without liquidity to prepare for the new planting cycle.

Peasants sold their corn for 50,000 old córdobas per quintal in 1987. Now the state's warehouses have a million quintals, worth more than 150 new córdobas per quintal. That means that the revaluing of capital produced by the currency devaluation gave the state a 200% profit, some 100 million new córdobas.

The peasants from the wettest part of the country who have beans to sell faced official buying prices of 450 córdobas per quintal, some 50% less than prices in December last year. The attempt to control bean prices created a black market where there shouldn't be one because the sale of beans by peasants has been defined as free. The black market price went up to 1,500 córdobas per quintal. Obviously, peasants were not selling beans to the state, the supply of beans has fallen and the consumer is paying very high prices for this basic food. Only importing beans can maintain the official price to the consumer, and this will have the disadvantage of discouraging peasant bean producers, especially in the areas of Region V, where the contras operate. It would also increase Nicaragua's dependence in the area of basic foods.

Attempts to administratively control the prices of peasant products may actually damage urban workers' interests rather than benefit them. The consolidation of the worker-peasant alliance depends above all on producing more. That in turn depends on their being to compete in the market against those classes that are much better off. The power of the workers and peasants to compete should increase when the market of the oligopolies is regulated and production is encouraged among the small competitive activities of the peasants and artisans.

Workers, peasants, economic dignity

In Nicaragua, the problem with the concentrations of big producers is not their swollen or unjust profits but their production inefficiency and their continued dependence on state and foreign subsidies. In a country where unions have renewed their negotiating capacity and business income taxes are 70% of profits, it can be said that the battle against wealth has been won. Additionally, the profit taxes are levied much more on the large concentrated companies than on small competitive producers.

The problem, then, is not of profits and accumulation, but of inefficiency in the concentrated sectors, be they public or private. The inefficiency has spread to small producers, peasants and much of the working class. The war has meant that the rebuilding of national political dignity has not been matched by a revolution in the productive culture. In this sense, the revolutionary state, and the FSLN, has to recover the time lost to the war by emphasizing the mechanisms and spirit necessary for the entire society to take up the challenge of creating a culture of production and equality, where those who work eat and those who work more eat more.

The third phase of the economic package became a battle against the inherited logic of subsidy, consumption and inefficiency; an effort to create national economic dignity. Despite such a notable economic mobilization in the first and second phases of implementing the new measures, the workers' economic insurrection now faces a very difficult situation. The enthusiasm and mobilization could disappear because the efforts of the masses to control prices only functioned halfway. As Table III above shows, inflation continued spiraling, reaching 113% in the first five weeks after the monetary reform.

With the February 14 devaluation, which increased the cost of imported inputs by some 3,000%, it was completely impossible to control the inflation rate. According to technical calculations, in an economy where a third of the GDP is dependent on imported goods, the rise in those prices would have to produce inflation of at least 1,000% during 1988. Additionally, inflation in the sectors most dependent upon foreign technology would spread to other sectors that have a smaller imported content.

Why risk disillusioning people by embarking on a mobilization whose aims can never be met? The answer is that there was very little maneuvering room to improve the economy so people had to be mobilized, come what may. And the easiest target was the speculative sector. The fundamental objective of the popular mobilization was to involve the FSLN's activists and all the Nicaraguan people more directly in the management of the economy. The new economic measures were a happening: the dice were thrown, with confidence in the people’s ability to turn risk into success.

Given the failed attempt to control speculation and inflation even in the official prices, the people’s awakening came along with the first signs of disillusionment, a new and ever clearer piousness that their well-being depends more on their own ability to raise production than on anything else. The mobilization for social control in factories carried within it the germ of a growing socialist consciousness that it is workers who are responsible for the administration of the economy.

But there’s not much room to maneuver in the battle to increase production either. Workers, peasants and those in the informal sector have their work cut out. On the one hand, the working class is being asked to strictly discipline the enterprises in the heavily concentrated sectors, both state and private, where the use of illegal imports and high levels of inefficiency generate much more inflation than the producers in the competitive sector. On the other hand, the peasants, the medium-scale agricultural producers and the urban workers in all industries and informal production have to mobilize to occupy a more dominant position, using resources previously committed to the longer-term projects in the state sector.

Worker action

In businesses like Sacos Macen, the state-owned agricultural sacking manufacturer, the administration is working with the staff to control speculation and fill the role played by the speculators. The workers are creating their own repair shops to maintain equipment, repair vehicles and do construction—activities previously contracted out to workers in the informal sector at exorbitant rates. The elimination of this parasitic speculative sector will reduce the costs of production in industry. In the same way there will be a decision to increase exports and use the earnings to import raw materials without recourse to the cross-border traders.

In this and other industries, all these efforts to reduce costs, relocate people and eliminate extra overtime have arisen with a lot of participation from the workers in economic management. The consolidation of the mobilization depends on policies that put the productive sector before the administrative sector—linking salary increases to increases in production.

Peasant action

One of the more effective mechanisms in the second phase of implementing the new measures has been the policy to control intermediaries through growing direct contact between the basic goods outlets in the grassroots neighborhoods, factories and small and medium-scale agricultural producers. Leaders of the CDS and the factory commissaries have increased their efforts to obtain the transport needed to buy direct from the countryside, while UNAG is promoting the establishment of peasant stores throughout the country where producers can sell direct to the public.

In this effort, increased production must be assured together with the elimination of speculation. The buyer who speculates with peasants’ products normally carries products in his truck to sell to the peasants, also at speculative prices. It is preferable for the peasant as for the urban artisan to reduce speculation without also reducing the supply of goods needed for production. This means that the danger of a productive recession does not come from demand in the competitive productive sphere of the peasant and workers in informal manufacturing, as happens in the heavily concentrated sectors, but from the supply side.

The acute shortage of productive inputs for peasants means that the costs of production go up and thus urban consumer prices rise, as would happen with any producer. But it has another, worse effect: peasants no longer send their products to market, reverting instead to a mere subsistence economy.

An important aspect of the state compaction has been a sharpening up of the institutions that service the peasants and the informal productive sector in the cities. Those grassroots productive sectors include more than 60% of the national work force and produce 35% of the GDP. There are economic as well as political reasons for the government to handle this great force better, as US aggression is changing from military to political, with the opposition to the revolution centering its efforts on protests against the government's economic management.

Mobilization of the worker-peasant alliance depends on resources more than slogans. The only space for advance in this sense is found in the creative transformation of investments, which last year represented 20% of Nicaragua's GDP. The great majority of past investment has been dedicated to creating a new, technologically more advanced sector in the Nicaraguan economy. The solution in the current period, decisive for ending the war and overcoming the economic crisis, is to postpone those investments for a long time while dedicating the resources to the simple reproduction of the economy, guaranteeing basic needs and the alliance of the grassroots majority. On February 20, President Daniel Ortega announced the need to “rationalize investments,” because the current level could not produce concrete benefits in the next two years, during which priority must be given to a survival economy.

Nicaragua still does not have a strategy for building a survival economy. Rather, it has experienced a serious economic decline, as much from the war as from an investment plan that didn’t permit the mobilization of the worker-peasant alliance. Survival doesn’t mean ceasing to invest; it means redirecting and transforming those investments that have long lead times before maturity, putting those resources in the hands of peasants and small and medium urban and rural producers. It means a program of grassroots economic mobilization in the short run and an immediate expansion in production by the grassroots sectors. It means a return to carefully maintaining the country’s existing plant and infrastructure and simple reproduction of the economy.

This transformation of investment will require enormous creativity. It means first assuring that bank credits are really directed to the peasants and competitive producers of the city and the countryside. Second, there will have to be guarantees that the new profits the state made from revaluing corn, and above all from revaluing and selling imported inputs during April and May, get channeled in the last third of the year to the grassroots sectors more than to the state or the concentrated oligopoly sectors. Third, there will have to be renegotiations of bilateral investment loans for projects with long maturation times, adjusting them to the crisis the country is living through, and at the same time making good use of the resources made available by the special Central American development projects of the EEC, the UN and the group of Latin American Presidents who met in Acapulco.

In the first month of the new measures, the economic mobilization strengthened military and political mobilizations. It was true, as the revolution’s fundamental forces said in their March 10th pronouncement, that the people's economic insurrection and the defense of the country represent “one single concept for survival.” Nevertheless, material obstacles and government economic policies remain to be resolved in order to sustain that mobilization and get results.

If on the one hand there are clear signs that the country has never been nearer to consolidating a survival economy, on the other there are indications that, in the third and crucial phase of the program, the state lacks the agility and management ability needed to back the grassroots mobilization awakened by the revolution with economic resources.

The first month indicates that the future of the new economic package will depend on the same dynamic of the grassroots process and on the state’s ability to allow itself to be transformed in the process.

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