Envío Digital
Central American University - UCA  
  Number 70 | Abril 1987



Private Enterprise: Alive and Kicking in Nicaragua

Envío team

Notwithstanding the intense propaganda campaign abroad claiming the contrary, private enterprise has not disappeared in Nicaragua. To give an accounting of the private sector’s economic contribution today would be a topic unto itself.

Neither has the struggle of capitalists to defend their principles and widen their economic participation disappeared. The analysis in this article is dedicated to this point, and in particular the stance the different entrepreneurial groups have taken toward the mixed economy, one of the principles ratified in the new Constitution.

At the outset we characterize their stance as a political one, independent of whether any of the existing political parties within or outside of the National Assembly have taken it up. It is political because the way they understand the mixed economy, their acceptance or rejection of it and their own declarations and behavior come down to only three possible alternatives. Since these alternatives put the present and the future of Nicaragua at stake, they also put at stake the life of the people who make up the body politic.

The mixed economy: A controversial model

The coexistence of different forms of ownership since the triumph of the revolution has engendered a variety of reactions within Nicaraguan society. This is due especially to the fact that, at the beginning, the revolution created expectations among both workers and capitalists of a quick transition to a socialist revolution. From this came the expectation (which many still have) of a more or less rapid nationalization of capitalist property owners rather than one of institutionalized coexistence of private business with state and cooperative enterprises.

Different opinions circulating among Sandinista thought generated mistrust, especially among the large business owners who felt threatened by what their considered a danger to their status as capitalists. The following opinion of Enrique Bolaños Geyer, president of the Supreme Council of Private Enterprise (COSEP), reflects this view of many of his colleagues: "We believe that the mixed economy we have practiced for seven years has two characteristics: one... that it is a transitory tactic of the moment, in other words, the use of the term 'mixed economy' is the cornerstone of government propaganda. (Comment made during a seminar on "The Mixed Economy in Nicaragua," held June 19-20, 1986.)

Although there are those such as Mr. Bolaños who would disagree, experience shows that a public consensus existed that corresponded to the country’s social formation and determined the revolutionary leadership’s political options and shaped the strategic conception of the mixed economy within the FSLN.

In saying that the mixed economy is a strategic concept in the Sandinista revolution, we are mindful above all of two things: a) it has been given concrete expression in the Constitution promulgated in January 1987, and b) it is a reality, imposed on top of any conceptual differences or political desires of the FSLN, and independent of the pro or con votes in the National Assembly.

The journey from yesterday to today

In fact, five different forms of property ownership continue to coexist in the post-1979 period: individual, cooperative, state, joint (state and individuals) and the traditional indigenous communal property common on the Atlantic Coast.

During the Somoza dictatorship there was no such thing as a mixed economy model properly speaking. Big capitalist property had the lead over every other form. Banks, foreign commerce, industry, wholesale commerce and more than 50% of the country's arable land were entirely in the hands of the capitalists.

The state participated less than many Latin American and even some other Central American countries in the production of goods. Barely 11% of the gross domestic product (GDP) was produced by the state, while the capitalist sector produced 67% and small peasant producers and artisans accounted for 22% (see Table I).

The state as property holder was involved only in those productive activities that the private business sector didn’t want to touch for fear of the economic risks entailed yet were indispensable to society (e.g., communications, electricity, drinking water, railroads, etc.).

It is true, however, that capitalist property lost its leadership position with the revolutionary triumph. The developments that led to this loss include the nationalization of banking and foreign commerce and the confiscation of the holdings of the Somoza family and collaborators and capitalists who decided to abandon or decapitalize their property, and the purchase or expropriation of some properties because of public necessity.

As a result of these confiscations and expropriations, there arose a cooperativized property sector and a state property sector that took over the leadership position the bourgeoisie had formerly held in the economy. This meant the passage from an economy in which capitalist property held hegemony to a mixed economy model. The state, the small producers and the cooperatives now play an important role in the production of goods; still, the capitalist sector is keeping up an important degree of participation in the economy, as the above chart shows.

Before continuing, a few comments are in order. Until 1983 the GDP showed a positive trend, reaching a growth rate of 4.5% that year. Starting in 1984 there has been a drastic drop in GDP due to the effects of the war—and to errors in the revolutionary economic policy, as has been pointed out by the capitalists, the opposition parties, much of the population and the FSLN itself. Nevertheless, despite the drop in GDP, its redistribution among the various social sectors shows that efforts are being made to gear policy toward a more equitable distribution of resources rather than leaving them exclusively in the hands of the big property owners as was the case in the past—and is still in countries where capital holds hegemony.

A look at Table I shows that the private sector's share of the GDP was reduced by 32 percentage points, giving rise to the formation of a more balanced model of property distribution since state participation has jumped from 11% to 43% and the share of small producers has grown from 22 to 31%.

The allocation of financial resources shows a readjustment to the new mixed economy model as well (see Table II). Between 1977 and 1985 the national bank increased the amount of money available for production and services by more than 500%, from a little more than 8 billion córdobas to over 48 billion (at 1980 prices). This money was distributed according to criteria that did not give exclusive priority to the big capitalists.

Central governmental administration and military expenditures accounted for a very significant part of national bank resources (47%). Of this, more than half goes to military expenses (construction, provisions, etc.); in 1986 these amounted to more than 45% of the total government budget.

The fact that only 10% of the financial resources go to the large business sector illustrates two fundamental aspects of the national economy. One of them is the importance of this social sector since it produces 26% of the GDP with this 10% of the resources. The other is the weight of the war on these businesses since the resources dedicated to military defense could strengthen their future in the mixed economy under more advantageous conditions.

Up to this point we have indicated the macroeconomic changes the country has seen since the fall of the Somoza dictatorship, which show how a mixed economy model works. As indicated previously, and as is to be expected, this model meets with the approval of some and the disapproval of others. Furthermore, it is currently in the midst of a severe crisis due to the pressure of the war and the state’s administrative deficiencies.

The organization of private enterprise

The capitalists, particularly the biggest ones, are organized in the Superior Council of Private Enterprise (COSEP). This umbrella group consists of the Chamber of Commerce, the Chamber of Industries (CADIN), the Chamber of Construction, the National Union of Agricultural Producers of Nicaragua (UPANIC), the Nicaraguan Development Institute (INDE) and the National Confederation of Professionals (CONAPRO). With the exception of the Chamber of Commerce, founded more than 60 years ago, the other associations are of more recent origin, especially UPANIC, which was organized in 1978.

The Chambers of Construction and Industries are very weak; INDE, as an institute, brings together capitalists of the various chambers; and CONAPRO is the association of technical people working in private enterprise.

The only associations with a significant number of members are UPANIC and the Chamber of Commerce, although not all their members identify with COSEP’s political positions.

UPANIC, the most important, is made up of eight confederations of associations organized by product: cotton, cattle, coffee, sorghum, rice, milk, bananas and sugar cane. Of these, only the associations of rice growers, cattle ranchers and coffee growers are significant—not only because of their membership but also because of their importance in production. The rest, whose members can be counted in the dozens, exist more in name than in reality.

Besides COSEP, UNAG also has a certain number of agricultural capitalists.

The mixed economy and the bourgeoisie

The crisis Nicaragua is going through is one of the most serious of its history. It has three basic components: aggression from without; mistakes made by the Sandinista government; and the world crisis.

The various capitalist circles have different points of view concerning the national crisis and the mixed economy. We can identify at least three quite distinct positions regarding the model defended by the revolution:

a) The first position—that of the biggest capitalists, organized into COSEP—is important not because of the number of its adherents but because of its political significance. Those who share this point of view do not believe that the mixed economy is of a strategic nature within the revolution, despite all the FSLN statements and inclusion of the concept in the Constitution. Furthermore, they ideologically reject the mixed economy as a viable economic development model, promoting instead a free-enterprise economy with no state interference in the planning of production and distribution. Politically this group chooses to make no commitments with the state and tries to mobilize the capitalists into political militancy against the revolution.

b) The second position is one of accepting the mixed economy model. Its main adherents are agricultural capitalists associated politically with the revolution, in almost every case from before the triumph. Generally known as "patriotic producers," they have decided to accept the challenge to build a model in which they can survive and develop various kinds of property.

c) The third position is very common among medium-sized capitalists, whether members of COSEP or not. They recognize the strategic character assigned to the mixed economy, and thus demand to be allowed the space created by the Constitution to strengthen the private economy. They feel that the mixed economy prolongs the capitalist sector's chances for survival. Some call them "weather-watchers," since their stance on the revolution depends on the way the wind is blowing, i.e. on the benefits they get from the state's economic policy

Capitalists against the mixed economy

The capitalists who reject the mixed economy model have their most decided representatives in the COSEP leadership. Before the triumph this leadership circle constituted part of the second-tier bourgeoisie—that is, subordinated to the sector that directly controlled power.

They were not partners in the banks, nor could they take part in the big enterprises of either the publicly-known Somocistas or their closet allies who grew rich off their relations with the dictatorship.

The Somoza regime conceded them a certain space to develop, giving them access to financing to invest in agriculture, try their luck in industry, or speculate with stocks, real estate, housing and foreign trade. Nevertheless, this access was limited to prevent them from competing on equal terms with the Somocista entrepreneurs. In other words, they could develop as long as they played second fiddle to the top tier of the bourgeoisie. Such treatment ended up leading them into attempts at a discreet opposition to the dictatorship, which they expressed mainly in a kind of passive solidarity with the people's struggle.

This sector of the bourgeoisie, which Vice President Sergio Ramírez, with a fine sense of irony, has called "the survivors of the shipwreck," built their dreams on the Sandinista leaders’ inexperience. They assumed that with the fall of Somoza the state would sell them the nationalized businesses or at least allow them to move into the economic vacuum left by the Somocistas. A 1981 declaration of principles by COSEP reminded everyone that "the nationalization of the financing system should not be thought of as closing off the possibilities for private banking in the future. It is important to assure the private sector its participation on the boards of directors of the nationalized banks." (COSEP, "Analisis sobre la ejecución del Programa de Gobierno de Reconstrucción Nacional" or "Analysis of the implementation of the National Reconstruction Government Program," 1981.)

However, it was not long before they had to realize that this was not a possibility. They became increasingly disillusioned as the process moved along, with the state nationalizing the banks and foreign trade and launching the agrarian reform, thus taking the first steps toward building the mixed economy model.

This initial conflict became very pronounced, since the three measures mentioned above had to do with basic principles: the government was redistributing holdings that had previously been in the capitalists' hands. It became clear that nothing was more important to this sector of the bourgeoisie than the defense of private property, even if it had been built up on the thievery model of accumulation characteristic of the Somoza regime.

And they have not given up the fight. Rather, they have worked out a division of political labor between those who left the country and those who have stayed. Those whose hopes were most crushed and who had resources abroad chose to go into exile and get involved in militant counterrevolutionary activity, while those who stayed became political activists to a degree they had never even contemplated during Somoza's time.

This political militancy is expressed outside the parties; these capitalists have rather attempted to turn COSEP into their political instrument. From that position they call the revolution into question and push for a government that would allow them to regain the prospects they had during the Somoza period.

In its public statements, COSEP always points to the alleged failure of the Sandinista project. For instance, in a January 29, 1987, "Face the People" between President Ortega and the productive sectors of the country, Enrique Bolaños, the organization's president, stated: "In a word, Mr. President, we want to say today what we did not say yesterday. This is a complete failure, a national tragedy. Your government has failed. And the FSLN's political-economic blueprint has failed."

The COSEP president went even further during a speech on the mixed economy; he called on the National Assembly to “fire” President Ortega for lack of ability. Bolaños spoke as if the President was one of his hired plant managers, using the language of a business executive to reprimand him for his unsatisfactory performance: "Mr. Manager, you aren’t working out. Look, if you won't leave voluntarily for reasons of incompetence, let's call for a shareholders' meeting. The tragedy of the Nicaraguan people requires the National Assembly to issue an immediate call for a plebiscite where the question will be raised: Do they stay or leave?" (From Enrique Bolaños’ speech in the seminar on "The mixed economy in Nicaragua," June 1986.)

This view of the course of the revolution has led these bourgeois sectors to defend President Reagan's foreign policy and thus to demand dialogue with the contras.

In spite of this radical political position (or perhaps precisely because of it), their efforts to win over the majority of their own class—even those who are members of some of the COSEP associations—have had rather modest results. In fact, they have lost influence. Last year news articles appeared about various associations that could not hold their assemblies for lack of a quorum. Others, such as the cotton growers in Chinandega and a good number of cattle ranchers in the central part of the country, have gone over to UNAG.

In a COSEP publication circulating in November 1986, the group admitted this weakness but tried to blame it on the capitalists who don’t share its stance against the revolution: "Many businesspeople want their leaders to act tough, but don't want to get involved themselves. We believe that even more disapprove of what their leaders are doing to defend the association, but do not openly express their disagreement except on a very private level." (Cuadernos Empresariales No. 7, a publication of the Institute of Economic and Social Research, affiliated with COSEP. The article was signed by León Paulino Pérez, director of the publication.)

The patriotic producers

The revolutionary capitalists—i.e. those who accept the revolution’s political and economic project—are known as "patriotic producers." They themselves did not come up with this title; it was given originally to those who keep up their productive activity independently of their political definition.

During the struggle against the dictatorship these businesspeople, who are mainly in agriculture, were marginalized by the Somocista economic policy. They received virtually no state help in their accumulation process, and had to compete with the big capitalists supported by the dictatorship and the state apparatus. They were politically very active in the Sandinista ranks, either as militants or collaborators.

Not much attention was paid to them during the revolution’s early years, and the labor organizations called for the confiscation of their properties; some were even affected by the land reform process. But instead of confronting the revolution they decided to use the institutional channels to try to get their property back.

In 1984 Daniel Nuñez, who before the triumph had been very successful in the agricultural business, became president of UNAG, and since then this sector of the bourgeoisie has begun to get its demands met. As businesspeople they have great influence among the medium-level and well-off peasant farmers, especially in the war zones. The contras have killed several of them and set fire to their farms because of their ties to the Sandinistas, but have not succeeded in intimidating them into abandoning their involvement with the revolution.

Most are small capitalist farmers and ranchers, although some are among the largest agricultural producers in the country. Because of their closeness to the revolution (some of their most important people are Sandinista representatives in the Assembly or UNAG leaders), the COSEP capitalists consider them collaborators with communism and opportunists.

The capitalist weather-watchers

In between the COSEP business leadership and the "patriotic producers" is a large layer of very pragmatic mid-level businesspeople, those who in some circles are called "weather-watchers." Typically they are capitalists who consolidated their position with the triumph of the revolution, when hundreds of businesspeople who had collaborated with the dictatorship lost out. They are usually affiliated with COSEP, although they don’t take part in the life of the organization.

These people generally constituted a third tier of the bourgeoisie during the dictatorship. Since the Sandinista revolution did not exclude anyone from a fighting role or even from membership because of his or her class origin, they tended to be involved with the revolution at all levels.

Because they are not a homogeneous group, their political leanings span the national political spectrum. Some (though a minority) of them are close to the revolution, while others show various levels of opposition to the Sandinista movement. Usually their children fought or are now fighting in the Sandinista ranks. Their relatives and friends are often revolutionaries, and they themselves can be found among the Sandinista officials, at the level of ministers, deputy ministers and executives and directors of companies.

They avoid expressing themselves politically either in the terms used by the COSEP leaders to show support for US policy or those used by the "patriotic producers" in regard to the Sandinistas. In fact, they set up a kind of ideological shield between themselves and both of these groups, which allows them points of contact with the revolution or to confront it when they feel their interests threatened.

They are identified by their acceptance of the mixed economy as a strategy of the revolutionary leadership, not a tactic of the moment as the private business leadership sees it. This viewpoint is expressed by a member of COSEP in Cuadernos Empresariales No. 7: "Now that the state has given up, for the moment, the complete socialization of the Nicaraguan economy—to finish the project of state capitalism—and has given a strategic character to the mixed Sandinista economy, the private sector now and for an indefinite period has some working room. Though this space is limited, it does mean that the sector has a new lease on life."

In other words, although they do not share—or don’t understand—the revolution's economic project, they are willing to accept the space the revolution allows them and adapt to conditions that are not completely against their interests.

But knowing the leadership of their organization, COSEP, they anticipate being lumped together with the "patriotic producers" by cautioning that no one should "fall into the danger of fostering division by attacking every tactic of adaptation as if it were collaborationism."

In general their position regarding the state's economic policy is very critical, but they don’t line up behind the US government policy toward the Sandinista revolution. As businesspeople they don’t promote a belligerent kind of political activity, especially since they are a sector that still has a ways to go to consolidate itself.

Alternatives open to the capitalists

Three alternative scenarios exist, and they are out of the hands of the capitalist entrepreneurs. Their only role is how they react, given their political stances, to the one that is played out in reality:

a) That the contradictions are resolved by direct US military intervention. This is the preferred option of COSEP’s leaders, but it clashes with the interests of the other two factions of Nicaraguan capital.

b) That the low-intensity war continues to erode the country's resources and with them the possibilities for recovery of the business sector.

c) That the war comes to an end, so that the huge resources now dedicated to it can be used to reactivate the business economy. Quite apart from the FSLN’s volition, this is the only alternative that can save the survivors of the shipwreck.

Print text   

Send text

<< Previous   Next >>


Players in Motion as Reagan Defends His Goal

Plan 87: Economic Realism and Political Tensions

Private Enterprise: Alive and Kicking in Nicaragua

Envío a monthly magazine of analysis on Central America
GüeGüe: Web Hosting and Development