The Challenge of Providing Supplies
Achievements and Limitations in the Consumer Protection Law
“There’s starvation in Nicaragua… Managua is a city of hunger and shortages, where people wait in one line after another for the tiny bit of food they can buy with their ration cards… ‘We’re all out!’ and ‘there isn’t any’ are the watchwords of the market places… Even life under Somoza wasn’t so grim as life in the Sandinistas’ Nicaragua: on top of the militarization and the growing repression, Nicaraguan stomachs are emptier than ever.”
Such are the images sent around the world by dozens of “objective” foreign journalists. Some consciously lie and distort. Others, in their flash visits, simply prove unwilling to investigate the nature and underlying causes of the periodical scarcity of certain food items. They ignore the complexities of transition from an unjust and unviable economic model to one that is more rational and egalitarian. They also interpret Nicaragua’s economic ills as a “failure” of the Sandinista government rather than a result of US aggression and the crisis besetting the unjust system of international economic relations.
In its September 1983 edition, envío explored some of the underlying causes of shortages of certain food items and other household products. In the eyes of the vast majority of Nicaraguans, shortages continue to rank, alongside US foreign aggression, as Nicaragua’s most serious problem. In this article, we examine the government’s new initiative, known as the Consumer Protection Law. Through a series of measures, it has extended its efforts to guarantee greater access to low-priced consumer goods. At first, the new measures stirred up a storm of criticism from consumers (Sandinistas and non-Sandinistas alike). As time wore on, however, the measures had a positive impact. Before examining the new Consumer Protection Law, we briefly describe the context in which this law developed.
International recession, war and the birth pangs of a new systemThe escalation of the US aggression resulting in physical damage to both productive and marketing infrastructure has been the most serious impediment to improving Nicaragua’s food supply. National defense now drains at least 45% of the national budget, devouring valuable foreign exchange and diverting countless human and material resources from productive activities. (See envío No. 40.)
Like all other Latin American countries, Nicaragua would find it difficult to provide its population with an adequate food supply even without the war. On the other side of the coin of US economic recovery, the poor of the third world are suffering from the severest recession since the 1930s. As the dollar rose with the interest rates, foreign currency from all over Latin America flowed into US banks. As a result, Mexico’s poor have been standing in lines to buy high-priced milk for years now. Likewise, a French news service recently reported that beans, a main staple, could not be found at any marketplace in Caracas, Venezuela. Nicaragua, like the other Latin American nations, has also suffered an acute shortage of foreign exchange, which affects virtually every link of the food supply chain. Fertilizers and insecticides for crops, plastic and metal containers for cooking oil, medicines and light bulbs poultry and spare parts for vehicles to transport food—all must be purchased with scarce foreign currecy.
To some extent, the “pangs” of scarcities indicate that Nicaraguans are now consuming greater per-capita amounts of many products—milk, rice, cooking oil, soap, chicken, eggs—than ever before. The government’s efforts to “democratize demand” are the principal cause of those increases. It has designed a massive program—better wages, credit, employment opportunities, price controls, subsidies, quotas—to guarantee the poor a higher consumption level. Such measures contrast sharply with the old distribution system based purely on the market forces of supply and demand. They represented the fist steps towards a system in which human needs are given priority over the harsh inequities that were the motor of the old system.
Despite the thorough overhaul of the mechanisms regulating the production and distribution of the most basic consumer goods, Nicaragua remains a capitalist country whose economy is affected not only by the laws of its own market but also by its open borders and vulnerability on the Central American and other international markets. Although the government has made efforts to lessen the inequalities between Managua and the rest of the country and between the middle classes and the workers and peasants, those disparities continue to fuel black market activities that in turn exacerbate shortages. Goods are hoarded by both small and large-scale merchants, who wait for prices to rise before releasing their goods on the market, and by members of the middle and upper classes, whose incomes enable them to overstock their pantries when rumors of shortages begin to spread. These typical market phenomena have impeded the government’s distribution efforts.
The government’s optionsIn the midst of the birth pangs a more egalitarian society, the government has only two options for maintaining the food security program it has offered the Nicaraguan poor: 1) increase the food supply by stepping up production and imports; or 2) increase control over the distribution of existing production.
The supply of most basic foodstuffs has grown, but certain areas have proven particularly difficult. For instance, meat and milk production has not—and could not possibly have—recovered from the loss of 25% of the country’s cattle herd during the years of struggle against the dictatorship (1977-1979). Two factors have caused the production of corn and beans to suffer: 1) the new opportunities offered to poor farmers, who quickly moved into the production of better cash crops, such as vegetables, fruits, pork, chicken, and eggs; and 2) the US-backed aggression, which has made production nearly impossible in traditional corn and bean areas.
The contras terrorize private peasants who cooperate with government agencies, and over 100 peasant cooperatives have been destroyed. Evacuations and peasant participation in the militias have taken labor power out of production. Peasants often fear to transport their marketable grains to collection points, and 8% of the National Basic Grain Marketing Enterprise (ENABAS) storage silos were destroyed in the last harvest season alone. Such activities, as well as the mining of access roads and ambushes and attacks on MIDINRA and MICOIN representatives, blocked the collection and distribution of much of last year’s harvest. Spare-parts shortages, which affected some 30% of the ENABAS vehicles, also kept many beans from reaching the marketplaces.
With the import bill for corn, beans, oil, and milk becoming increasingly burdensome, and with the prices of Nicaragua’s exports on a decline and imports on the rise, the government embarked on a three-pronged emergency program. First of all, prices were increased for peasant producers. Beans, for instance, rose from 400 to 800 córdobas per hundredweight. Secondly, the government itself became involved in grain production with a strategy called the Contingency Plan. Under this plan, the state brought some 20,000 acres of choice cotton lands into corn production through the use of a newly imported pivot irrigation system. The Ministry of Agriculture plans to incorporate an additional 13,000 acres into the Contingency Plan on a yearly basis. This grain production is located in areas that can be easily protected from terrorist attacks. Thirdly, the government launched a massive control program know as the Consumer Protection Law, which is analyzed in the following pages.
A new initiative: The Consumer Protection LawIn May of this year, as the economic situation began to deteriorate and complaints of speculation and hoarding became more frequent, the government sought to extend, clarify and institutionalize its distribution policies. It consulted with the national representatives of the neighborhood Sandinista Defense Committees (CDS), in which people had aired their numerous concerns. Then, with considerable fanfare, the government announced the new Consumer Protection Law (CPL), which was to be implemented during the summer months. The Ministry of Domestic Commerce (MICOIN) and the CDSs embarked on a widespread educational campaign that included pamphlets, door-to-door visits, cartoons in the newspaper and a series of CDS meetings. The purpose of the campaign was to explain the various causes of shortages and to discuss and prepare people for the new measures.
With the new policy, the number of basic products to be purchased with the consumer card increased from two (salt and sugar) to eight (adding beans, cooking oil, corn, rice, sorghum and soap). All these items were supplied weekly though official channels at low state prices.
Regional commissions were set up to determine and guarantee the necessary quantities for the regions outside Managua. Distribution channels for all these goods, except corn and beans, were to be entirely nationalized and fines imposed for any unlicensed vehicle caught transporting the designated products. At the wholesale level, this wouldn’t be overly difficult, since production of these six products is highly concentrated in either industrial processing centers or a few big modern farms, as in the case of sorghum and rice. However, it would be virtually impossible to control unofficial non-state transactions with corn and beans produced by thousands of peasants scattered across the countryside, sometimes beyond the reach of the ENABAS transport fleet.
Another key element in the new strategy was to incorporate some 15 additional “sensitive” items into the nationalized distribution system. These items are usually imported or at least depend on imported supplies. Therefore, they are more easily subject to sporadic production and supply patterns, as well as weekly fluctuations in the use of foreign exchange. (These sensitive products include eggs, chickens, light bulbs, batteries, kitchen matches, toilet paper, toothpaste, razor blades, deodorant, powdered milk, detergent and contraceptives.)
The supply of these items was not to be guaranteed, although they would be distributed at state prices as equitably as possible, whenever available. While the eight items would be distributed only through official “secure” channels, the sensitive items would continue to be available in workplace commissaries and, as revealed later, distributed with priority to agricultural workers and combatants in the militia and army. It was never announced, however, how transactions outside official channels would be controlled.
The new measures also included a 50% reduction in state subsides for basic grains. Previously, the state had purchased beans from small producers at high prices, covering all transportation and storage costs then selling them to consumers at lower costs. Whereas everyone seemed to benefit from that arrangement, it created three basic problems.
First, in order to cover the loss incurred by the subsidy, the state was fueling a growing budget deficit. With production costs rising yearly, the state was putting more and more córdobas into circulation, thus creating additional inflationary pressure. Second, both peasants and many private export crop producers (coffee, cotton, sugar and cattle) who had previously set aside a few acres to grow corn and beans to feed their workers cheaply during the harvest season were suddenly finding it more profitable to buy these food products at the subsidized prices rather than grow them themselves. By reducing the subsidy, the government intended to remove this production “disincentive” and maximize the land area devoted to growing basic grains. Third, the subsidies were exacerbating speculation problems, since they further widened the profit margin for merchants buying grains at state prices and reselling them on the black market.
Although official bean prices at the consumer level have still not come close to catching up with the 100% price hike for producers referred to above, the reduction in subsidies has already resulted in higher official corn and bean prices for urban dwellers. Official prices remain well below those of the black market and NICOIN officials argue that savings on other guaranteed products will more than offset increases in official corn and bean prices. However, in conjunction with the general pro-peasant stamp of the new law, this move can also be interpreted politically as a strengthening of the FSLN’s commitment to the peasant side of the worker-peasant alliance. With the state continuing to cover storage and transport costs, the subsidy reduction tips the balance in favor of the countryside and places the burden of rising production costs on the urban consumer rather than the peasantry. Although price increases and fewer goods on the shelves may have cost the FSLN some urban worker’s votes, the FSLN clearly considers that such a political risk is necessary to maintain the peasants’ wartime support and to convince them that it’s worthwhile to continue producing food for the urban population.
The new law doesn’t affect subsidies for fresh milk (which costs about a tenth the price of Costa Rican milk), school lunches or meals at state-owned enterprises and government ministries. Moreover, mothers of young babies will continue to receive a guaranteed supply of powdered milk.
In the cities, MICOIN is still selling the guaranteed products at state prices to those small vendors and “comedores populares” (low-priced food stalls), but the CPL stipulates that the consumer card is only to be used for purchasing goods from small, house-front grocery store owners (known as pulperos). Formerly, sugar quotas and other informally rationed products were available in workplace commissaries and supermarkets (the latter being patronized primarily by the middle class). However, to avoid the confusion and risk of corruption in the supermarkets, as well as double rationing in the commissaries (which serve only about 15% of the Managua population), MICOIN and the CDSs decided to coordinate efforts at the neighborhood level.
CDS members engaged in door-to-door censuses of their neighborhoods and a series of territorial pulpero networks was designed to channel supplies to the different neighborhood groupings. The National Association of Retail Grocers was encouraged to further its organizational efforts both to articulate the particular needs of the pulperos and to facilitate the smooth functioning of the territorial network, keeping lines of communication open, consulting with the CDSs and correcting bottlenecks and other obstacles at the neighborhood level.
The CDS mobilization: In its efforts to break away from the logic of market-based distribution, the government has had to search for ways to replace the functions of the marketplace. The state itself, as we have seen, barely has the capacity to fulfill all the responsibilities of collection. It is unimaginable that it should try to undertake all the tasks of direct distribution and control.
Negotiating the new strategy with a city of merchants
Furthermore, Nicaraguan society currently suffers from an “excess” of commercial infrastructure. As is the case in all third world societies in which the international market has penetrated the countryside and uprooted the peasantry, Nicaraguan cities, especially Managua, contain an enormous “informal” sector, consisting of small-scale venders, small merchants and service workers. The informal sector ranges from beggars, shoeshine boys and “car watchers” to pulperos, comedores and venders in Managua’s huge Oriental Market (known for its black market dealings). This sector, which comprises up to 45% of the economically active urban population, has its origins in the landless peasantry and the seasonal nature of (capitalist) agricultural labor. The latter fails to provide most peasant families with enough income for year round survival, and many families must migrate to the city in search of work. The state has no desire to expand this already-bloated unproductive sector, yet its extension and political sensitivity prevent the government from even imagining that it could be radically reduced.
To avoid a direct confrontation with this informal sector, the new policy’s restrictions were aimed primarily at limiting the big wholesale dealers’ capacity to affect the flow of supplies. However, partly because of rightwing propaganda, many smaller merchants, particularly those from Managua’s Oriental Market, began to fear that the government was planning to do away with their source of livelihood.
The CDSs operating in the big market soon held a series of meetings in which they presented the new policy clearly, dispelling many fears. The CDS have also succeeded in finding supply lines for certain restricted items needed by merchants whose incomes depend on the sale of these articles.
The government has chosen to concentrate its pressure on the large-scale violators, who risk fines, impoundment of their vehicles and confiscation of their goods if caught transporting supplies without a proper license. When the goods do slip through to the retail level, to be sold at scalpers’ prices, MICOIN officials seem to look the other way. No matter how much these prices may infuriate the poor consumer, there’s simply no way the government could ever hope to monitor all Managua’s retail dealers. Moreover, the wholesalers and intermediaries generally impose the high prices on the small venders.
Traditionally, some 300 large wholesalers supplied Managua with produce from the countryside. Through personal bonds, usury and oligopoly, these wholesalers took advantage of weak and scattered producers in order to reap sizable profits. Although the peasants were the real losers in this arrangement, the large wholesalers also had considerable control over smaller merchants and market venders.
The state now competes directly on the wholesale market and has taken additional measures to break unfair traditional patterns. For instance, by grouping and separating the private wholesale market, the state has reduced the wholesalers’ individual influence over small venders and retailers, affording these small dealers greater maneuverability as customers.
In a similar vein, the government has created or expanded five smaller markets in Managua, thereby decongesting the Oriental Market and facilitating the flow of state- purchased goods through agreements with small grocers and venders. The existence of these new markets also makes it easier for MICOIN to control and regulate resale prices.
However, such efforts have not proved entirely successful because, unless they are allowed a reasonable margin of profit, the urban market vendors tend to relocate at the Oriental Market, claiming the profits are higher there. Even those venders committed to remaining at their own market will sometimes sell selected products at the Oriental Market.
The government’s basic response to this situation has been to call upon the organized mass organizations—the National Union of Farmers and Ranchers (UNAG) in the countryside and the CDSs at the neighborhood level—to conduct the distribution tasks themselves. The government has also asked these organizations to coordinate their activities with those of the commercial sector rather than to confront it. The objective is to replace the alienating forces of the market with conscious human activity, without alienating the marketers themselves.
Initially, the CDSs were to be responsible for selecting those neighborhood store owners most likely to cooperate with the new system. Decisions were based primarily on the store owners’ past histories with the people of the neighborhood: whether they had speculated in times of scarcity, showed favoritism to certain patrons, been fair about short-term loans and advances, etc. From 180,000 retail merchants nationwide, some 6,000 pulperos were chosen and designated as “expendios populares” or “people’s outlets.” These outlets have special agreements with MICOIN to sell designated amounts at fixed prices, while respecting the consumer card system. They may conduct the rest of their business as usual. The state agrees to ship the necessary volume of guaranteed items.
The new system has not yet encountered any major problems, although it’s still not fully in effect. While the newspapers were filled with reports of significant confiscations in the week following the policy’s enactment, there have been few confiscations since, and restricted products continue to show up in the Oriental Market.
Meanwhile, the guaranteed products are flowing through the secure channels, although not always with the regularity envisioned by the law. Transportation problems and the mounting need for goods on the war front are partly to blame, but lax enforcement of wholesale regulations may be seen as a political move intended to maintain the support of the small merchant class. Furthermore, state capacities are limited. It would be simple to confiscate from only a few wholesalers, but they are innumerable. In those sectors of trade in which large-scale wholesale activity has been stopped, hoards of smaller intermediaries find ways to prevent goods from reaching the secure channels. If the government used continual repression to block all the smaller dealers’ supply lines, political opposition might threaten the entire consumer policy.
The precaution with respect to small merchants has proven successful, and in some cases the government’s efforts have even prompted vendors to organize for collective action. Such was the case of the market women who decided to boycott their traditional meat wholesaler and make their purchases at the lower state price. This, in turn, enabled them to charge their customers less while earning more.
Although it had seemed for a time that government incursions into trade might well alienate this bulging sector of the urban population, educational and organizational efforts in support of the new policy may have actually made inroads into an unexpected base of support for the Sandinistas. The small merchants now even have their own elected representative to the National Assembly. Auxiliadora Martínez summed up the situation as follows: “The Sandinista revolution is a revolution of workers, peasants and small merchants.”
The poorest Managua shantytowns and neighborhoods have also presented problems in applying the new policy. Many are so new, poor, or isolated that they don’t yet have any small grocers or venders with ample storage space for an outlet. MICOIN has been providing a special mobile supply service to these areas, sending trucks with state-priced goods each week. Although a pulpero must have a stating capital of 7,000 córdobas to be considered an official outlet, the National Bank is now making special loans to help some pulperos in this process.
The struggle against the black marketA major component of the new consumer protection strategy was the use of Managua’s seven major supermarkets to offer goods at prices higher than the official ones listed for the people’s outlets but lower than the black market prices. Paradoxically, this competition, or subtle economic attack on black market prices, drew criticism from consumers. The government’s initiative of selling scarce goods at non-official prices without prior consultation seemed unjust to many sectors of the population.
Over the past five years, government policies and CDS activities have empowered Nicaraguans to play a greater direct role in economic decision-making and in the food distribution system, in particular. Neighborhoods have had to come to terms with their own needs and coordinate their activities with the government and local store owners in order to fulfill them. Furthermore, the new CPL has prompted the CDSs to offer special workshops in basic bookkeeping and shop accounting, for instance, to train some 3,000 CDS members to be inspectors. These inspectors will see that the outlets honor their contracts and sell the designated amounts at official prices. They will also ensure that the supplies arrive on time and in the proper amounts, as well as answer inquiries concerning any irregularities in the functioning of the system.
People have grown accustomed to an active role in the distribution policy. They reacted strongly after learning on September 1 that the supermarket shelves were stocked full of items that were rarely, if ever, seen in the popular outlets. The supermarkets were offering limited purchases of guaranteed and sensitive items (powdered milk, toothpaste, etc.) that had been available only at the Oriental Market and only at outrageous prices.
The following day, La Prensa was filled with complaints and accusations that the state had gone into “speculating.” In addition, both the FSLN’s Barricada newspaper and the pro-government El Nuevo Diario were replete with people’s criticism and complaints concerning this sudden and apparently contradictory move by MICOIN. Many began to lose confidence in the government’s word, feeling that the move had made a farce of all they had been so carefully told about the CPL. Others, while happy to see the items for sale, complained that they simply couldn’t afford them at the new supermarket prices.
MICOIN representatives responded to these complaints with several arguments. First of all, they said that the products distributed to the supermarkets represented but a minute share of the total goods circulating through official channels (about 5%). Second, they insisted that the policy was directed at the middle classes, which, partly because they live in poorly organized neighborhoods without active CDSs, have less access to the territorial outlet network. It was also argued that the middle classes, those most accustomed to shopping in the supermarkets, would be wooed away from the Oriental Market by the slightly lower prices. Their córdobas could be taken out of the pockets of speculators and used by MICOIN to contribute to transport, storage and subsidy expenses, thus reducing the fiscal deficit and the inflationary pressure that accompanies it. Third, the MICOIN officials maintained that this competition from the state would put downward pressure on the speculators’ prices, thereby benefiting everyone’s buying power. In fact, this competition has caused both the black market and the state’s new “parallel” prices to fall. (See table.)
The table illustrates how supermarket competition drives the black market prices down. Moreover, the government removed approximately 100,000,000 córdobas from circulation between September 1 and October 15. It plans to remove 1,000,000,000 by December 1985. The move thus seems to have served its function well, and the ministry appears to have stocked enough supplies to thwart the middle-level speculator’s attempts at buying out the supermarkets in order to take advantage of subsequent shortages and price rises. The parallel prices seem to be just low enough to compete with the black market and just high enough to make black market reselling unprofitable at the present time. Indeed, some of the new parallel market goods are still lying unsold on the supermarket shelves. However, this unsold stock points precisely to the CDS’ still unanswered criticism of the policy. If these goods were being sold at official prices through the secure channels, they would have been purchased already by those too poor to afford to shop at the supermarkets. After various meetings with MICOIN officials and open discussions at all CDS levels, the National CDS headquarters issued an official communiqué to MICOIN, the text of which was reprinted in El Nuevo Diario on October 29. While acknowledging the rationale and potential advantages of the new parallel market, the statement criticized the ministry for issuing the policy without first consulting the CDSs. The communiqué went on to request prior consultation on similar matters in the future, as well as neighborhood, zonal, and municipal meetings at which ministry officials would explain the new measures to the population. The CDSs further demanded that MICOIN fulfill the needs of the territorial network before releasing any goods on the parallel market.
MICOIN has responded to the communique, citing savings and the substantial price decreases in its defense. It also justified the policy as a kind of tax on those wealthy enough to pay the supermarket prices and argued that the supply of the eight guaranteed products to the outlets would not be affected.
The question of the sensitive goods, however, remains unanswered as we go to press. If the government hopes to rout black market dealings in these scarce items, it will have to sacrifice the outlet channel to a certain extent and for a certain time. It will also have to contend with pressure from the CDSs.
ConclusionsAlthough the Sandinista government has shown creativity in its attempts to guarantee basic products for the population, it can’t completely resolve the supply problems while US aggression persists. The Sandinistas admit this and didn’t win the elections with promises of economic miracles. The wartime economy will require sacrifices from all sectors.
While the people’s hearts, votes and long-term interests may still be with the party that overthrew the dictatorship, their behavior as participants in the national economy will continue to correspond to the place they hold in society. The middle class, Sandinista or not, will use its economic power to hoard. Small merchants will continue to speculate. Technical workers and professionals, in both the state and private sector, will hop from job to job in pursuit of higher salaries. The rural poor will continue to migrate to the cities in attempts to succeed in the informal sector. Proletarian laborers with no other way to preserve the little they have will pressure for higher wages and even strike. However, Nicaraguans will also continue demonstrating their willingness to sacrifice for the future the revolution promised. The voluntary militias, overwhelmingly composed of workers and peasants, are but one example of this readiness to sacrifice. All the same, the FSLN must work to reconcile its plans for the future with the urgent demands of the present.
It has been argued that in the past generalized economic scarcity has created the material basis for the bureaucratic deformations of societies undergoing social transformations. In such societies, privileged access to limited goods has contributed to the establishment of bureaucratic groups with interests of their own; meanwhile, the unsatisfied popular demand for goods has moved the state to act forcefully in an attempt to ensure orderly behavior in the distribution process and, in some cases, to stifle political discontent.
In Nicaragua, however, the Sandinistas’ sensitivity to the needs and demands of the nation’s various social groups (including the entrepreneurs, who continue to profit in the midst of the crisis), as well as the government’s dependence on grassroots participation for the implementation of the CPL initiative, have been strong bulwarks against the deformations mentioned above. The mass organizations, such as the CDSs, have served as genuine sources of base-level power, insuring that this sensitivity is maintained.
The mainstream US press has created an image of the CDSs as the strong arm of Sandinista totalitarianism, the supreme expression of a repressive apparatus. This could not be further from the truth. The CDS and other mass organizations have been responsible for fulfilling the tasks that the still-unsophisticated state cannot perform alone: health campaigns, vaccinations, the distribution of supplies, environmental hygiene, electoral polling, etc. The real danger, then, lies not in the risk of repressive tendencies, but rather in the population’s freedoms, which could result in opportunism, corruption and inefficiency. However, just as when they were fighting in the mountains, just as during the urban insurrection and just as in the elections, the Sandinistas have no alternative but to trust the Nicaraguan people, the only ones who can eventually solve the shortage crisis.