|Central American University - UCA
Number 70 | Abril 1987
Plan 87: Economic Realism and Political Tensions
At the beginning of 1987 Nicaragua's daily newspapers published the general lines of the 1987 National Economic Plan as laid out in speeches by the nation's leaders. In this issue, envío analyzes the main characteristics of the new plan in greater detail.
Plan 87, prepared by the Secretariat of Planning and Budget and the government's Economic Commission, contains major advances over plans of earlier years. Particularly notable is its more realistic approach to the bottom-line problem: what does planning really mean in a poor and dependent third world economy, above all one that finds itself caught up in a war that absorbs half of its national budget?
In this year's plan the government grapples unsentimentally with the possibilities of containing the economic deterioration under such circumstances. The tensions the plan will confront are all clearly laid out, and the possibilities for implementation are put forward with self-critical honesty.
Given Nicaragua's barely governable economic reality, the plan is not limited to a series of measures to be taken during 1987. Rather it proposes a guiding logic to be applied from now until 1990, one that will lay the basis for a way out of the economic crisis in the medium run.
The character of Nicaragua's economic planningNo planning system, whether indicative, as in the case of the capitalist countries, or directive, as in the socialist ones, appears full-blown overnight. With even the best of luck, it takes at least a decade to consolidate an economic planning system.
Nicaragua is no exception to this rule. Although Plan 87 shows a number of advances over previous years, Nicaragua's planning system remains very primitive. Furthermore, Nicaraguan planning is sui generis; it is a hybrid as original and confusing as the very development of its mixed economy.
Nicaragua's planning system obviously doesn’t have the directive character typical of socialist countries, given the government's decision to recognize the weight of the private sector—particularly of small family businesses—in the country’s economy. Nor could it be characterized as indicative, since the Nicaraguan state controls foreign exchange (currencies acceptable on the international market). Access to foreign exchange is the fundamental control lever of economic movement in a small peripheral country, particularly during a period of economic crisis and acutely scarce access to foreign exchange such as Nicaragua is experiencing.
Foreign exchange: Control lever of the planPlan 87 is more than anything else a plan for distributing foreign exchange and managing the national financial system based on its availability. This control over the distribution of foreign exchange, however, does not guarantee the government's capacity to either direct its use by the private or cooperative sector at a national level or administer it efficiently within the state sector.
The efficiency of the state's planning system is further limited by the fact that the foreign exchange it distributes is, in the main, tied up beforehand by commercial agreements and bilateral investment programs that permit little flexibility on the state’s part. The plan calculates that in 1987 Nicaragua will use $1 billion in foreign exchange for imports and service on its foreign debt. Of this, almost 80%, or $792 million, is tied. Even in the case of the $362 million that Nicaragua expects to receive from exports in 1987, half is already contracted in futures and the earnings are tied to commercial agreements through which Nicaragua purchases what other countries want to sell it. The state thus has about as much power over Nicaragua's house as a peasant family has over its. The force of the international market strongly conditions the power of both, no matter how strong each might appear inside their respective homes.
Planning advancesThe most notable advance in Plan 87 is its realism. Unlike the plans written up between 1983 and 1986, Plan 87 calculates "productive goals in accord with the country’s available resources and real capacities, including the assigning of resources for the indirect needs of production and particularly those of energy, transport and construction." The plan assigns $91 million, more than 12% of all programmed imports, to the recuperation of these three services, the deterioration of which has strongly affected production in the past few years.
The careful calculation of the availability of liquid and attached foreign exchange by each sector of the economy, both for the new cycle of agricultural activity and for old and new investment programs, permits the projection of more realistic goals. Plan 87 is, according to the Secretariat of Planning and Budget, "a model of seamless planning."
Without information there can be no planning. In its eighth year, the Sandinista state is slowly consolidating its management of information, and has taken its first decisive steps toward strengthening the Single System of Socio-Economic Information (SUISE), which will begin to generate statistical data based on uniform technical criteria. This will permit the National Planning Commission to have relatively reliable and timely information for the first time.
What can be expected?The new realism of Plan 87 can be felt in its first pages, when it states "It is unrealistic to think that we can aspire to an immediate economic normalization under the conditions Nicaragua is experiencing; as long as the imperialist aggression lasts, economic difficulties will continue and some problems may even worsen."
There is little room for substantial improvement in the economic panorama for 1987. Instead of advances, the plan’s objective is containment: "It is feasible to contain the generalized economic deterioration.... A certain recuperation of the production lost in 1985 and 1986 can be achieved, inflationary pressures reduced and distribution better ordered."
This goal of containing the economic crisis will not be reached in 1987. As with all the plan’s general lines, this point "is inserted in a production perspective over the next four years." Plan 87 is in fact improving a readjustment program begun in 1985, and projects this program of gradually inducing changes until 1990.
The logic of Plan 87The 1987 National Economic Plan forms an integral part of the defense of the nation against aggression and construction of a new, more just society.
Thus begins the description of the logic of Plan 87, a structure that rests on four pillars:
1) Military defense will continue to be the very first in line for assignment of foreign exchange and access to all production, energy, communication and transport services.
2) Recovery of production, with greater priority on generating foreign exchange than on producing basic goods and services for the population's survival or restoring basic productive or supply infrastructure.
3) Rectification of the financial, fiscal and investment tendencies and imbalances that have had a negative effect on economic reproduction.
4) Continuation and consolidation of the structural transformations of agrarian reform, cooperative management and the Area of People's Property, "strengthening the social base of the revolution and guaranteeing a minimum level of stable life for workers, peasants, technicians and professionals of the organized and planned sector of the economy."
Before turning to an analysis of the tensions and difficulties that will affect the implementation of Plan 87, it is worth rendering these four pillars in greater detail.
Integrate defense into the economy?There is no question but that defense has to be the number one priority, but there seems not to have been sufficient discussion in the plan of mechanisms by which military defense could be slowly integrated into production tasks instead of only acting as a drain on the country’s economic resources.
In this current period of aggression, in which almost half of the national budget and a disproportionate number of personnel are involved in defense, the handling of military defense is the only variable the government really had to work with to limit economic deterioration. The army currently has much more administrative capacity than the rest of the government put together. The revolution's military advances and its achievements in the international diplomatic arena in recent months have been notable, making it ever more obvious that the economy is the weakest link of revolutionary power. The implementation of the economic plan, therefore, must also depend on the capacity of the armed forces to assume tasks rarely assumed by armies: comprehensive defense and the containment of the economic deterioration. It could, for example, contribute to its own food production, or put its transport capabilities to the task of supplying the civilian population.
Another imperative: Recover exportsIn order to contain the shrinking of the economy and deterioration of exports and to promote foreign exchange earnings, the plan proposes the "rigorous application" of three fundamental lines of planning from previous years:
- Recover historic norms of labor productivity and entrepreneurial efficiency;
- Relocate the labor force from the non-productive sectors (especially the urban informal sector) to production (mainly agriculture) through supply measures that prioritize the productive worker;
- Prioritize the countryside over the city (particularly Managua) as regards social infrastructure, health and education.
More governmental austerityFor the third pillar—an effort to correct the fiscal, commercial and financial imbalances—the plan proposes to consolidate even more in 1987 the advances achieved in 1985 and 1986.
Containment of the financial imbalance is a central axis of Plan 1987: it seeks to reduce the aggregate financial deficit of the state sector and the inflation rate, to advance toward a certain monetary stability in 1988.
The government's budget deficit, which was 22.1% of the gross domestic product in 1985, fell to 15.3% in 1986. For 1987 it is programmed to drop again, to 12.2% of the GDP.
This will be achieved by two parallel actions: on the one hand increasing state income by extending taxes, centralizing management surpluses and selective taxes on non-basic consumption, reducing expenses on unfinanced investments, central administration and the purchase of services.
To achieve the proposed austerity levels the plan indicates that "it is necessary to make advances in constituting an effective system of economic leadership, making it possible to overcome deficiencies such as institutional feudalism and decision-making outside of the institutions’ due procedures."
Changes in the investment profileAlthough the major force of the government will be concentrated on this growing austerity in government spending, there will also be a new effort to rationalize the three motor forces of inflation simultaneously and in an integrated way. These three elements are the budget deficit, the public investment program and exchange rate losses.
In addition to cutting investments not backed by foreign exchange, the plan proposes to change the investment profile itself. There is to be a move from large capital and technology-intensive projects toward investments that are more labor intensive and reliant on traditional technologies.
This rationalization also implies that future projects will utilize technologies more appropriate to our economy in this stage, ones using fewer imported inputs and more national materials and that generate employment to absorb the unemployed in the commercial and administrative sectors.
The following changes from the 1986 investment program are forecast for 1987:
- In the near rather than distant future an effort to "reverse the investment logic of huge, slow-to-mature productive complexes in favor of smaller scale and shorter maturation projects, according to the country's real capacities." To achieve this, the 1987 investment plan includes a new credit program mainly for the private and cooperative sector, which represents almost 30% of all investments. Three-fourths of the $51.6 million in this program is earmarked for coffee, rice and cattle.
- More dedication to maintaining and recovering existing capacity, particularly in productive and social infrastructure, than to new directly productive investments. In the 1985 Public Investments Program, only 18% of the total was earmarked for replenishing the existing plant. For 1987 the figure has risen to 32% of the total $135.5 million dedicated to public investments. At the same time a better investment balance is forecast for 1987, with 39% for the agricultural sector, 17% for industry, 22% for productive infrastructure (mainly energy projects) and 22% for social infrastructure (basically housing and drinking water outside Managua).
- Fewer new state projects, in favor of finishing unfinished investment projects. In 1986, 24% of the Public Investment Program was dedicated to new projects; for 1987, only 1% of public investments will be new.
Exchange rate losses: A subsidy left uncutsWhile there have been cuts and revisions in both the investment program and the government budget, the subsidy to producers remains much less controlled. The government pays producers for the export market 160 córdobas for every dollar worth of goods exported, yet charges only 80 córdobas per dollar for the priority imported input needs of producers for both the domestic and export market. This subsidy to producers is called exchange rate loss. In 1985, exchange rate losses represented only 2.6% of the GDP; in 1987 they will represent 8.1%, almost equal to the total investment program (which is 10% of the GDP for 1987). In our analysis of the tensions of Plan 87 at the end of this essay, we will evaluate the significance to the Nicaraguan economy of this growing subsidy.
Consolidate structural transformationsPlan 87 delimits the consolidation of four areas of structural transformation: 1) agrarian reform; 2) the cooperative movement; 3) state administration; and 4) the power of the working class.
Agrarian reformThe provision of land to peasant farmers is continuing at the same pace as last year, with further rationalization of the agrarian reform process, linking it to economic development plans and to the territorial supply and commercialization systems. According to the plan, agrarian reform activities in the war zones "must continue developing in terms of the organization and strengthening of military defense."
In 1986, land was given to 18,239 peasant families. For 1987, the program plans to benefit 16,510 new families through a policy of giving land where there are focal points of peasant pressure. Although the number of beneficiaries will not change significantly, the quantity of land given per family will drop substantially, from an average 16 hectares to only 11.
Due to the pressure of the war and the flight of cooperative shareholders to the urban areas, many lands have remained idle in the cooperative sector. For this reason, some thought is even being given to redistributing 40,000 hectares previously assigned to the cooperative sector to individual peasant families who need land. There are also plans to recover and assign some 55,000 hectares of abandoned state and private farms in war zones. By these two mechanisms, together with the policy of giving less land per family, MIDINRA plans to continue extending the agrarian reform by benefiting more families without affecting the fund of land in the state (APP) sector and private hands as strongly as before.
Cooperative movementThe cooperative movement in both the countryside and the cities already has very significant weight in the correlation of social forces in Nicaragua. In 1986 the agricultural cooperatives produced 21% of the agroexports and 35% of the products for domestic consumption. Plan 87 is designed to integrate this enormous productive sector more carefully into the National Economic Plan. In an agrarian country with a strongly peasant economic and social structure, yet profoundly marked by an enormous urban informal sector, cooperativization constitutes one of the principal forms of socially organizing production, and the basis on which the revolutionary economy can be developed.
This development of the country, according to the plan, requires:
- creating cooperative accumulation funds;
- developing and applying norms for economic relations between the National Financial System and the agricultural and urban cooperatives (which use more than a fifth of all credits). This means increasing interest rates, assuring repayment, creating incentives and the like;
- regularizing cooperatives as contributors to the tax system;
- integrating the cooperatives into the land exchange scheme and forming second-tier cooperatives to increase their economic and organizational power in the market (second-tier cooperatives are larger units made up of several Credit and Service Cooperatives [CCS] or Sandinista Agricultural Cooperatives [CAS]. They are known as Agricultural Cooperative Unions [UCA]);
- making the CAS model more flexible and promoting the CCS model, "combining individual and collective interests to stimulate more peasants to join, reduce desertions and facilitate the internal consolidation of the existing cooperatives."
State administrationThe Area of People's Property (APP), or state sector, has unquestionably been the key element of the Sandinista Popular Revolution’s transformation of the Nicaraguan economy. In the first years of the revolution, however, the productive state sector (the Ministries of Industry and of Agricultural Development/Agrarian Reform) as well as the Ministry of Domestic Commerce were conceptualized as isolated, compartmentalized and expansive compared to the cooperative movement and the private sector. According to that vision, the APP would affect the totality of the mixed economy through its increasing control over the means of production. That view of the APP even influenced its relations with the state financial and trade sectors (the National Financial System and the Foreign Trade Ministry) as well as the private sector—peasants, artisans and large business interests.
Over these seven years, a new concept of the APP within the mixed economy has been forged. Plan 87 pushes for the APP to consolidate and further develop "its projection with respect to the rest of the social forms of production" through "progress in the state’s effective control over the critical production and supply links." This way the APP becomes a force that hegemonizes, connects and supports the private sector through grassroots mobilization.
To continue this process, Plan 87 proposes a series of really revolutionary measures for Nicaragua's current economy. The pivot point of these transformations is the territorial organization of production. According to the plan, "The state enterprises in each territory should be organized in such a way that they are in a position to supply productive inputs, tools, technical assistance, services, etc. to the other producers, and in exchange, assure the collection and stocking of a part of private and cooperative production."
In the countryside, the plan proposes to promote "territorial enterprises of coffee, basic grains, milk, meat, rice, vegetables and perishables. In the industrial sector the Regional Supply Enterprises for Small Industry will continue to be strengthened in the territory... subcontracting specific tasks to middle-size producers and the cooperatives through agreements."
In domestic commerce, the channels for wholesale and retail circulation of consumer goods will be perfected and consolidated, avoiding unnecessary intermediation and increasing the presence of state commerce in the country’s main development poles and cities.
As Plan 87 explains, the transition toward an APP that is an instrument of hegemony and not of control will require some years, since there already exist a series of "unnecessary intermediations" by the state that will make this transition difficult. Excessively strict application of norms in the past, for example, have led to tragic cases like the recent police action of the Ministry of Domestic Commerce against poor women who were trying to resell two pounds of beans. This type of control represents what Plan 87 sanctions as "unnecessary intermediation," which only undermines public support for the revolution. This is especially true when control doesn’t succeed in curbing speculation by the more well-off classes through their wholesale channels as all annual plans since 1980 have stipulated.
The transformation of the APP is also proposed in the area of foreign commerce, through a line of greater flexibility and more autonomy. According to Plan 87, the Foreign Trade Ministry will concentrate only on export of traditional products. "Other export products may be traded directly by the state, cooperative and private producers under the ministry’s trade norms." This means that any cooperative or private enterprise can carry out its business autonomously with buyers abroad, through the Nicaraguan Central Bank. Plan 87 also proposes advances in decentralizing imports under the same state norms, guaranteeing exclusive import rights of certain categories by base level enterprises.
In this same line of increasing administrative efficiency via greater autonomy and the decentralization of authority, Plan 87 outlines the following: "Finally, the functioning of productive state economic units must be promoted with the autonomy necessary to develop their economic functions, while the central bodies concentrate on the guidance and control function that is properly theirs.”
The power of the working classThe most crucial structural transformation in any revolution is the coming to power of the working class and its participation in the planning and administering of the economy. Plan 87 gives impetus to the revitalization of grassroots participation in planning through production councils, supply commissions and community health councils. This goal is still a good ways off, since at present its development is severely limited by the still unorganized expressions of grassroots power in Nicaragua.
A good example of such unorganized expression is the working class’ response to the government's economic adjustment measures since 1985. These measures were all production incentives that gave great advantages to those who controlled the final product, but led to a drop in real wages for workers. In 1986, despite a nominal increase of 206% in workers' wages, inflation reduced their purchasing value by 40%. Faced with this deterioration in their standard of living, protest took the form of workers leaving their salaried jobs in the economy’s formal sector and migrating to the informal sector.
This implicit challenging of the formal sector—as much of private business as of government policy—is only possible because of the emerging power of the people. Given their situation, lack of labor discipline in the workplace and migration to the informal sector are understandable, but such responses are individualistic expressions of that power, and limit development.
In practice, the only solution available to economic management is to yield to this new power; there’s no other economic road. It can yield without planning, allowing high turnover and inefficiency levels in the formal sector and a chaotic boom in the informal sector with increasing clashes between the people and Ministry of Domestic Commerce. Or it can yield with planning—as in fact will be done—by the two means Plan 87 proposes: 1) supporting cooperativization and encouraging the mobilization of hundreds of thousands of new peasants and artisans and 2) combining wage increases to the workers with legitimate demands for increased productivity.
With regard to the second part, the plan states that for the rural sector, "Salaried work in the countryside must become a viable alternative that improves the material conditions of agricultural workers.… In summary, it is a question of bettering the situation of agricultural workers, linking it to individual and collective productivity to close the gap that currently exists for the people in the countryside. This is the only way to stabilize the workforce and avoid continued pressure for more land."
In Nicaragua this means reliable access to consumer goods more than nominal wage raises. This same policy is crucial in the cities to control the growth of the urban informal sector. No amount of police force can discourage this boom if the conditions for wage labor in industry are not readjusted to reality. The informal sector has a much more productive character than Plan 87 recognizes. Without making wage labor worthwhile, without better administration and without recognizing the power of the Nicaraguan workforce, workers will continue to become artisans in the informal urban sector and compete advantageously with industry in this survival economy.
Tensions within the planThere is no question that what is at stake in Nicaragua is the possibility of a future of justice, sovereignty and equality. But Plan 87 maps out a path into the future replete with dialectical detours and tactical retreats. The process of revolutionary transformation upset various balance wheels of the old capitalist system; in this current stage, economic defense of the revolution requires that they be reconstructed.
The Plan is complex and dialectic in the sense that it projects the continuation and consolidation of structural reforms while at the same time guaranteeing that the law of value and the whole system of economic incentives work in favor of containing the deterioration of the economy. In other words, Plan 87 and all its tensions are situated between two forces: the market and the working people. The four pillars of the plan's logic described above are not impervious to the conflict between capital and the labor of the peasants, artisans, poor merchants, housewives and wage earners. If these four pillars do not support Plan 87 with complete stability, it is due to the weakness that class struggle produces in each of them.
Defense and the survival economyThe central tension of Plan 87 is revealed in these two separate paragraphs:
"A marked increase in services to the people is needed in order to recover from the damage suffered in 1985 and 1986 due to the impact of the war."
"We cannot anticipate a substantial improvement in the standard of living of salaried workers. The survival economy has to direct the little surplus it has to the defense of the country in the face of aggression."
As long as the conflict with the Reagan administration, champion and defender of the free market, lasts, the survival economy becomes, in practice, the survival of the ability to defend the people and the deterioration of economic survival.
Recovery of the international market, exports and urban lifeIn 1987, industrial exports are programmed to increase by 10.4% and the principal mining products (gold, silver and gypsum) by 38%, 80% and 23%, respectively. There will also be a marked increase in seafood exports.
The fundamental problem facing Plan 87's goal of beginning to recover overall exports, and in general to boost material production by 4.7% after a drop of 5.4% in 1986, is the lack of incentives for workers. It is a double-edged problem.
One edge is international: the prices and terms of trade for 1987-88 and probably longer discourage the production of cotton, coffee, and sugar. In December 1986, the plan’s authors estimated that a 10% drop in international prices would reduce Nicaragua's liquid foreign exchange by 40%. As it turns out, the drop in coffee prices at the beginning of 1987 and the growing deterioration of trade in the Central American Common Market (which fell towards the end of 1986 to a third of its 1980 levels) will mean a loss much greater than 40%.
The other edge is the national one: by migrating to Managua any worker can earn more with less trouble and live better than by staying in the countryside and growing coffee or cotton. The two ways to alter that situation are to decrease the advantages of living in Managua and to significantly increase agricultural workers’ income. The intention of Plan 87 is to implement the former, but the privileges of urban life are tied to economic structures that are very rigid and hard to change in a few years. On the other hand, increasing the income of agricultural workers could create two immediate tensions. First, it could discourage the business sector, lowering the availability of products both for internal consumption and for exports and increasing inflation even more. Second, without holding down the urban classes’ income even further than it is now, an increase in rural wages would mean a tremendous increase of money circulating and, thus, still more inflation. The plan anticipates this tension in its decision to favor the countryside over the city. Nonetheless, the bid for more exports will probably bring less than the $362 million the plan expects and more than the 100% inflation it projects.
These tensions within the export program are aggravated by the shrinking economy. It is the opinion of many economists that the 1987 investment program—representing less than 10% of the gross domestic product—is not enough to reverse the decline in exports given the current situation of the international market.
For this reason, according to the plan, "Defense of the national economy demands that all necessary steps be taken to confront and control the crisis, starting with our own resources and optimizing the use of foreign resources." In short, even with foreign subsidies to the economy, somebody in Nicaragua will have to pay the price of advances in production.
Financial imbalance and business subsidiesDespite the notable efforts to control the deficit based on the sacrifices of workers lower down on the scale, the greatest obstacles to implementing the plan's goals of lowering the inflation rate and somewhat stabilizing the currency will be this same tension between the requirements of the market and the demands of the people.
The subsidies to business discussed above, for example, are not the only way for business people to increase their earnings; there’s a whole range of market manipulation strategies to get around official prices. Nonetheless, the growth of these subsidies reflects a tendency within Nicaraguan economic management to contain the decline in production.
If the business subsidies were taken away, production costs would immediately go up and so would prices to the consumer; there would be still less production, followed by still more inflation. For this reason the plan stipulates a program in which the business subsidies will not be eliminated. This program will avoid burdening production with higher costs as much as possible, making the basic family market basket more expensive, and reducing social services even more. Iron control over prices could also discourage production in absolute terms, generating the same results.
If economic management is giving in to the exigencies of the market on one side, it is also giving in to the demand for higher wages for workers on the other. In the first months of 1987 extra benefits were authorized for the most qualified workers, without breaking the government wage scale. This has meant more printing of córdobas not backed up by production, even before a general wage increase that is expected before mid-year.
The goal of lowering inflation by about 100% for 1987 is in danger of not being accomplished, as much because of pressures for higher salaries by workers as of pressures for higher prices by producers. The plan's figures were based on control over this stewpot of social and economic pressures. As the plan says, "There is a very real tension in domestic finances between prices, salaries and state spending. To achieve this goal [of reducing inflation] implies wage flexibility within productive norms, without general adjustments that might provoke another wave of inflationary speculation. At the same time, it implies the containment of prices... and a rigorous adherence to ceilings on spending, credits and investments."
In all probability, as the plan recognizes, the program of prices, salaries and state spending will not be accomplished to the letter, and "inevitably, during the course of 1987, it will be necessary to take corrective measures whenever the actual situation alters the premises of the plan."
The workers’ power and the bureaucracy’s inertiaIf the bold objectives of Plan 87 are to be accomplished, it will depend on the ability of the political and economic leadership to match higher wages for workers with increased productivity. This in turn will depend on the flexibility of the administrative bureaucracy in allowing increased participation by workers, peasant farmers, cooperative members and small-scale manufacturers in the consolidation of new schemes for remuneration and for addressing working conditions. The rate of structural change is requiring qualitative leaps in workers’ participation in the economy. Only this kind of growth in participation at the base can break the vicious circle of top-down management and inertia on the part of the administrative bureaucracy and passivity and inefficiency on the part of the working class.
Conclusion: Will the plan work?Will the Nicaraguan people be able to turn the tables enough that commercial and speculative activities will fall 2.2% and production will rise by 4.7%, achieving an overall economic growth of 2.1% in 1987? Will they lower inflation to 108%? Will they increase exports to $362 million?
In the final analysis, the answers to these questions depend on:
- the social struggle for a solution to the four tensions indicated above;
- the government’s ability to achieve more coherent management of the economy;
- the transformation of the APP into an instrument that can lead, support and link the rest of the economy according to the plan;
- the channeling and mobilizing of the new power of the working class into cooperatives and other formal structures of the economy in a way that raises in the standard of living are commensurate with growing efficiency in production;
- the revolution's progress in forging new international economic alliances.
As long as the war continues, there is no possibility of overcoming imbalances in the economy. In a public debate in June 1986, COSEP representative Enrique Bolaños acknowledged that the economic crisis was 60% due to the war, 10% to the international crisis, and 10% to the shrinking of the Central American Common Market. He debated whether decapitalization by the business sector or errors in the government's management of the economy was responsible for the remaining 20%. In any case, he implicitly agreed that there is little room for either the private sector or the government to improve the economic situation.
On the other hand, improved coherence in government planning and management give some basis for believing that Nicaraguans will be able to contain the economic deterioration throughout 1987-90. Given the existing tensions and lack of maneuvering room in the face of international restrictions, it is important to remember that Plan 87 is, more than anything, a first step in a medium-term program based on Nicaragua's ability to resist military and economic aggression over the long haul.
In May of 1986, the Harvard Business Review recognized this capacity for resistance in the economy, underlining the fact that 30 multinational businesses have not left Nicaragua. The domestic business sector isn’t leaving either. The continued presence of these capitalist interests demonstrates their perception that the economy isn’t going to collapse tomorrow.
Moreover, with the strategic decline of the counterrevolution and new advances towards a political solution to the crisis, the government has enough confidence in its ability to contain the economy’s deterioration in the medium term that it is announcing a new foreign investment law. In the coming year Nicaragua will no longer be looking only for international credit and aid, but also for venture capital. This new offensive will guarantee Nicaragua's nonaligned status and its ability to seek a way out of its economic crisis, based on new alliances with the socialist countries, the liberal capitalists of Europe and Canada, and perhaps most of all with the enormous labor capital of first world unions, credit cooperatives and farming associations. The first steps have already been taken with these investors during 1985-86 and it is expected that the new law will increase the weight of foreign investment in the Nicaraguan economy.
The fact that Plan 87 recognizes that the tensions can’t be resolved in the short run reveals a hard, cruel truth. What is at issue in 1986-90 is not people’s well-being, but rather the ability of the Nicaraguan economy to change from its current trend of deterioration and regression to a positive one of development. Meanwhile, Nicaraguans will continue to suffer the economic consequences of the war of attrition that the Reagan administration insists on imposing on the country.