Envío Digital
Central American University - UCA  
  Number 387 | Octubre 2013



The corporative government’s “miracle”

President Daniel Ortega’s calls for dialogue with the Colombian and Costa Rican Presidents failed, but he’s been very successful in his most recent dialogues with his own country’s business elite. His offers to talk about border problems are consistent with long-term state policy while his concertation with big private business reveals an ideological split within the FSLN.

Envío team

After a 10-month silence, on September 9 Colombia’s President Juan Manuel Santos finally announced his official response to the International Court of Justice ruling on a territorial dispute with Nicaragua. Last November, the ICJ recognized Nicaraguan sovereignty over more than 90,000 square kilometers of the Caribbean Sea, occupied by Colombia for 43 years and now returned to Nicaragua as an “exclusive economic zone.”

Colombia’s position is one of implicit contempt for that ruling. Santos defined it as “inapplicable” and went so far as to issue a decree rectifying the marine limits established by the Court. Santos argued that the ruling will only apply if Colombia and Nicaragua sign a treaty. Nine days later he reiterated his position aboard a war frigate. Flanked by his defense minister and other officials, he announced that Colombia will defend “its” maritime territories “vehemently and forcefully.”

Colombia and Costa
Rica vs. Nicaragua

Colombia sought backing from the governments of Costa Rica, Panama and Jamaica in defense of its illegal position, and got it from two of them—Jamaica didn’t buy in. Echoing Santos’ charge that Nicaragua has international “expansionist ambitions,” Costa Rica’s President Laura Chinchilla referred to the suit her own government lodged with the ICJ against Nicaragua for invading a 3-square-kilometer island in the mouth of the Río San Juan that Costa Rica insists is its sovereign territory. That river serves as the border of the two countries but belongs to Nicaragua. Both this suit and the one by Nicaragua against the highway constructed on Chinchilla’s orders along the very edge of Costa Rica’s side of the same river, with serious environmental consequences, are currently being analyzed by the Court, but it will not issue its decision for some time yet.

Cutting through all these tensions, President Ortega reiterated his willingness to talk to Colombia, which he said he hoped would produce “a treaty that will allow us to put The Hague’s ruling into practice.” While insisting that there be “dialogue and not confrontation,” Ortega asked Costa Rica to wait for the ICJ ruling on Calero Island and the riverside road.

These offers that President Ortega wisely proposed to defuse the current border conflicts found an understanding ear in Panama’s President, but positive results seem a lot harder to come by with Presidents Santos and Chinchilla. Both are stirring up nationalism on their “haciendas” due to plummeting popularity and complex internal problems with electoral races looming in which Santos is seeking reelection.

On September 16, Nicaragua asked the ICJ to delimit the country’s continental platform in the Caribbean Sea beyond the 200 nautical miles already recognized by the Court, based on article 76 of the Convention on the Rights of the Sea. For geological reasons the platform that should belong to Nicaragua is one of the most extensive of the American continent and its recognition would extend Nicaragua’s maritime border to the 350 nautical mile mark. Although Nicaragua’s request is supported by international law, President Chinchilla considered it another provocation. The Colombian President backed her, calling it “unseemly, groundless, unfriendly and rash.” Both see it as yet more proof of “Nicaraguan expansionism.”

“I would have had
to play the fool”

It was against this backdrop of interwoven border conflicts that the Presidents involved in the disputes gave their annual speeches in the United Nations General Assembly. Panama’s President mentioned the conflict, but in a low tone; Chinchilla spoke stridently about it and Santos chose to hold his silence.

President Ortega simply didn’t attend. He justified his absence to a group of Nicaraguan business leaders this way: “The expectation was that there would be a clash between Colombia and Nicaragua… What would have happened if I had run to the United Nations? It would have increased expectations; there would have been even more sensationalist journalism… It would have been like the image of the bullfighter waiting for the bull… I would have ended up playing the fool. I think we did well not falling for a game of media confrontation….”

Had he attended the UN meeting not to reinforce the image of the bull and the bullfighter but to dialogue bilaterally and make a statesman-like speech at this world forum, Ortega could have cleared up any number of misunderstandings and falsehoods that have peppered the speeches of the Colombian and Costa Rican Presidents. He could thus have encouraged some much-needed understanding between the peoples of our countries, improved the profile of his own government, which has been somewhat discredited internationally in recent years, and improved Nicaragua’s image. He missed a golden chance to present himself as a promoter of dialogue representing a very impoverished but never expansionist nation.

Territorial limits:
A state policy constant

If Nicaragua has ever had a state policy that enjoyed continuity and authentic national consensus over the successive governments and governors, independent of their priorities or ideology, it’s the one on territorial limits. The predecessors of the first Ortega government in the eighties, his own government during those years, his successors and his current government have all followed the same policy. In all others, be they on rural issues, tax, education or anything else, impositions and conflicts between the State and the different sectors of society have prevailed. Moreover, each change of government has brought decided breaks with past policies, in that eternal “scrap everything and start from scratch” mentality that characterizes the arrival of each new administration.

Something similar seems to have happened in other Latin American countries as well. In colonial times and after the independence struggles against the Spanish Crown, the majority of the conflicts and even the wars in which our countries have faced off against each other have been over border disputes. And they always unified the governors and the governed in the same or very similar patriotic and nationalist sentiments.

Nations treated as haciendas

In his lucid book El orden tutelar (The Guardianship Order: On forms of authority in Latin America), Peruvian sociologist Guillermo Nugent explains it this way: “The issue of territories has had exceptional importance in the formation of nationalism in Latin America. Why? Among the various possible explanations, one that seems relevant to us is this: the representation of the territory as something that must be defended or conquered was the thing most shared given the characteristics of a guardianship order that impeded any other shared sentiment among the citizens.

“In a social universe where the demarcation line, if one can call it that, passed between protectors and those they protected, the national territory was like an imaginary extension of the hacienda. The most important thing in a hacienda is its boundaries. The demands for and affirmation of territory were much more important in fostering nationalism than discovering common features among the nation’s inhabitants. The people were recognized more in the form of a map than in their own faces and habits. Territory offered the unifying element as a nation with respect to another nation.”

These hacienda-nations have also been projects of a single ethnic group that imposes its identity and culture on the others living in the territory, violating the multiethnic reality. That’s also how it was in Nicaragua where, during the war of the eighties, we had to grasp that nation-building isn’t just fighting for borders and boundaries, seas or rivers, but also undertaking a fragile process of integrating all its multiple ethnic groups. Sociologist Manuel Ortega describes this in detail in the Speaking Out section of this issue to explain the serious risk to which that fragile process has been exposed by the Ortega-Wang Jing canal concession law.

A “miraculous” dialogue

The dialogue in which President Ortega continues to enjoy virtually unmitigated successes is the one with the country’s business elite. He met again with its leaders on September 4, the day after José Adán Aguerri was reelected for the sixth consecutive time as president of COSEP, the business chamber umbrella organization that was such a formidable adversary of the revolution in the eighties. It was only one of the many meetings of this type that have taken place since Ortega took office again in 2007. Early that same year Ortega surprised many by congratulating COSEP for being the “best functioning CPC,” comparing it with the nascent Councils of Citizens’ Power, created by the First Lady as “conveyor belts” of executive policies.

In opening this new get-together, banker Ramiro Ortiz celebrated the “private” dialogue with Ortega as a “miracle” for Nicaragua. He exhorted his colleagues to “forget political issues” and congratulated them all on what was happening in Nicaragua compared with the region’s other countries “that don’t have this kind of dialogue.” Julio Herrera, representative of Guate¬mala’s Pantaleón Group, who for the past 15 years has been investing in a sugar refinery and buying up land for sugar cane in the northwest part of Nicargua, which earned him COSEP’s “businessman of the year” award, backed up Ortiz’s enthusiasm. He stated thatthe “consensus seeking” between the government and big business in Nicaragua “has achieved what Central America as a whole needs: a legal system, a personal security system that is missing in the rest of the world.”

From the door-knocker
to the Constitution

The Salvadoran President’s technical secretary, Alexander Segovia, demonstrated years ago in his study of the business elites in Central America how their “dialogue” with the region’s governments worked.
Segovia referred to the most powerful economic groups’ “right to the door-knocker” and explained what it consists of: “It’s the right to knock on the door and communicate informally with the countries’ highest authorities at any moment under any circumstance. This door-knocker right comes from these groups’ enormous economic weight, their central role in financing the political campaigns of the parties in power and their influence on the mass media. It also has to do with the existence of close family and economic relations among the main national groups, which allows them relatively easy access to the circles of state power.”

The most important words of President Ortega’s closing speech in the meeting with COSEP was his assurance that the Nicaraguan “model” will contribute a “new element” beyond this traditional access. “As José Adán pointed out, we need to talk about institutionalizing this model, “Ortega began. “We would be the first country to institutionalize it, giving it no longer just the force of the political will of whoever is governing, but establishing the functioning of this model by law in the Constitution of the Republic, independent of who’s in government… So far it has been functioning de facto; the idea now is to consolidate it through legal channels…. I think it’s a very major contribution we would be making to ensure stability, security, the benefits we’ve achieved in favor of the country and the battle against poverty.”

The “miracle” is simply a
corporative government

Is this pure rhetoric or a project in perspective? Ad hoc oratory or a decision by the upper echelons of business and government?

The “model” Ortega is proposing to institutionalize at the constitutional level is the alliance between the government, the business elite and the union structures linked to the governing party as the only and exclusionary representation of the interests of the other national sectors. This corporative government model is what the Institutional Revolutionary Party organized and headed in Mexico for decades. It is an authoritarian plutocracy because the power is concentrated in the hands of those who unlawfully hold the national wealth and administer it in an authoritarian manner, either going over the heads of institutions and laws, or adjusting them to suit their own interests while the unions receive perks and privileges derived from the alliance.

It’s called a corporative model because it functions like a transnational corporation, organized on behalf of the governing alliance’s economic interests rather than the public interest. In the Nicaraguan “model,” that alliance is made up of the traditional oligarchy grouped within COSEP, the FSLN’s own business bloc and the FSLN-linked Albanisa economic group.

“The human misery”

Those excluded repeated their criticisms. Perhaps they represent “the human misery” defined in Ortega’s closing speech as those who don’t accept the model.

Questioned by the media upon leaving the meeting, Carlos Pellas, the country’s most powerful businessman, said, “Do I think there’s democracy in Nicaragua? Well, there are elections, and elections clearly determine the winner. So far that’s how it’s been handled and I obviously believe Nicaraguans go vote and choose the winner. The processes continue to happen, so I consider that yes, we’re living in an open country. Here everyone is free to move about, the press is free to express its opinion and I consider that from this point of view we’re living in an open society.”

The scant political tact reflected in these statements by the head of the Pellas group in a country that has had to swallow consecutive electoral frauds—an allegation European Union observers agreed with in the 2011 election—led the “miserable ones” to raise their criticisms another notch or two.

Who benefits most?

As on previous occasions, independent analysts and media reiterated the business elite’s willful political blindness. They recalled Somoza’s strategy with the business leaders of his time—”You make the money and I’ll make policy”—and how the business leaders had to engage in politics when this strategy became unsustainable to continue making money given the unfair competition to which Somoza subjected them.

In general, the FSLN is considered the greatest beneficiary of the Ortega-COSEP alliance, for the legitimacy it receives. Less attention is put on the fact that the convergence of economic and political interests around today’s corporative model of anti-democratic and authoritarian economic growth also delegitimizes the FSLN with its rank and file because it reflects an ideological submission to neoliberal economic thinking, which pleases Carlos Pellas no end and benefits COSEP. So the business elite is also a great beneficiary of this alliance not only because it “makes money” unhindered but because it has achieved that submission, legitimizing its own thinking.

The times of the
“new economic subject”

The ideological dimension of the FSLN’s convergence with COSEP merits more reflection. It has been a process in which the FSLN has been gradually adopting the diagnosis and economic growth strategy that Nicaragua’s big business has always preached, practiced and desired for the country.

Without going all the way back to the revolution, we need to remember that the discourse of the first years of the new Ortega government (2007-2008) was stridently anti-neoliberal, blaming the multilateral financing institutions, the European donor countries and the preceding Liberal governments for the country’s slow economic growth and persistently high poverty levels.

It was a time dominated by the discourse of representatives of the FSLN’s social Left. They spoke of the “new economic subject,” the need to strengthen the grassroots economy’s productive and service sectors and the urgent need, possibility and viability of fostering the organization of cooperatives and associations to build an alternative model. That belligerently optimist discourse had been pulled together during the nineties, when the FSLN was in the political opposition and the “neoliberal night” was advancing over the land.

The times of the
“new Sandinista utopia”

In June 1994, Orlando Núñez, the most passionate promoter of these ideas, said this about what he called the “new Sandinista utopia”: “The political force of Sandinismo is currently faced with a dilemma. It has two possibilities before it with respect to marrying up with one or another economic class to become viable as an ongoing social force. On the one hand, it is in love with the modern neoliberal bourgeoisie. On the other, it is needed by the emerging economic subjects, those born with the revolution, the reformed sectors of the economy. If the party and Sandinismo opt to represent the interests of the neoliberal bourgeoisie, this history is over and everything goes back to the way it was before. On the contrary, if the option is to link up with the emerging new sectors of the economy, we would be witnessing an interesting shift in the revolution and on our way to continuing the building of an alternative model to capitalism by other means.”

2007: A new profile

History didn’t end following the FSLN’s electoral defeat in 1996 and again in 2001 or its return to government in 2007. And despite the fact that over the course of those years many Sandinista cadres became businesspeople, the utopia didn’t lose its appeal with among the FSLN’s social Left sector.

The continued existence of that utopia was expressed in the launching in 2007 of programs such as Zero Hunger and Zero Usury, the increase in social spending and the reestablishment of free education and health care. The State’s role in the economy was also strengthened, particularly providing a response in the area of basic services such as electricity and drinking water.

In April 2007 Núñez told envío: “I’ve observed that in the last 16 years of neoliberal administrations, the Nicaraguan State has used a government-plus-transnational-corporations formula. What formula do I see the State starting to apply now? Government plus associations. This doesn’t mean that corporations don’t matter now or that this government isn’t going to have corporate ties. It means we’re in a government-associations-corporations triangle and that the government is prioritizing the link with the associations.”

2009: The international crisis

We can pinpoint the inflection in the government’s priorities as 2009, when the economic recession and crisis of global capitalism that began that year delivered Nicaragua’s economy a severe blow. That year the national budget had to be cut back three times; tax collection, remittances, imports and exports, production credits and investments all fell drastically and thousands of jobs in the free trade zones were lost as assembly plants closed. The economy’s growth was negative.

To deal with the crisis, Ortega turned his earlier overtures to the business elite—until then only a cautious testing of the waters—into a process of coexistence that has become so chummy it can fairly be described today as a co-government.

The Venezuelan cooperation

That rapprochement coincided with a significant stepping up of the flow of Venezuelan cooperation. The increased resources had three important effects: they permitted the government to palliate the urgent social needs, thus camouflaging the effects of the crisis; they gave rise to the powerful economic group Albanisa; and they benefited the FSLN business bloc led by Bayardo Arce, which had been consolidating itself since the nineties and already had harmonious links with the COSEP business elite.

These three results of the abundant cooperation with which Hugo Chávez backed Daniel Ortega began to wilt the utopia of the governing party’s social Left sector. The business bloc gained ground, both because its economic power increased through the tenders and contracts passed its way by the new ALBA businesses, and because its political weight became more determining within the party, resulting in an increasing convergence between the party’s ideology and is interests. It has been an unstoppable process, an authentic “miracle” for COSEP.

The forward motion of this process didn’t produce an immediate change in President Ortega’s discourse. In the push and pull of the negotiations to get the International Monetary Fund’s approval in that difficult year of 2009, Ortega called it the International Death (Muerte) Fund and denounced it for “wanting to treat us as slaves and push Nicaragua to the edge of an abyss.”

The benefits are mutual

The rhetoric, however, began giving way to pragmatism, bringing the discourse more in line with the decisions being made. With support from INCAE, the Central American business administration school, COSEP’s big business leaders took advantage of the crisis to turn the meetings with Ortega into negotiation arenas for institutionalizing their relationship with the government, more and more clearly influencing public policy with neoliberal ideology ever since.

Under the “miraculous” model of consensus with the government, COSEP boasts of pushing through 69 economic laws and 37 regulations, all of them with political consequences that tarnished the “vigor and glory” of the new Sandinista utopia.

The FSLN doesn’t just benefit politically from the alliance with COSEP. INCAE gives the government important support by providing content—neoliberal content to be sure—to its public policies. In the government-COSEP sectoral commissions in which the corporative alliance is expressed, INCAE specialists, business representatives from COSEP and experts from FUNIDES, the big business economic research center, have the experience and skills to make specialized contributions. These commissions offer detailed proposals that help the government govern.

With all this, both sides in the alliance win politically and economically. Ortega guarantees Pellas and his colleagues the kind of social stability that no other national political leader is capable of ensuring, while they in turn guarantee Ortega the kind of neoliberal talent that few in his government have developed.

Considering this exchange of securities and benefits, the analysis that describes the business elite as ingenuously unaware of the lashing it will eventually get from Ortega’s “claws” isn’t all that convincing.

A corporative and
neoliberal model

The content of the laws and public policy proposals that COSEP has been negotiating at both the macroeconomic and sectorial levels are a continuation of the economic growth strategy designed during the neoliberal government of Enrique Bolaños. The assessment they’re based on is that the country isn’t growing enough because its economy has extremely low productivity. The proposed solution is to improve the investment and business climate by establishing national consensus about policies to further open up the market and liberalize the economy.

It’s the classic neoliberal recipe: greater levels of national and foreign capital investment are needed to shake off the country’s productive stagnation. By breaking the vicious circle of low productivity, poverty will supposedly be reduced by the “trickle-down” or “hemorrhagic” effect investment always produces by generating new jobs—depending on the volume and dynamism of the investments.

One result of this assessment has been the opening of the country to mining concessions. Nicaragua currently has 272 concessions covering a total of nearly 11,000 square kilometers around the country, mainly located in areas protected due to their valuable biodiversity. The “extractivism” Latin American governments—including those of the “left”—are enthusiastically practicing today is part of the assessments and projects of savage neo-liberalism.

President Ortega’s corporative allies consider the open-pit mining currently being employed “a fundamental pillar of Nicaragua’s development.”

From flirtation to marriage

If in the nineties the modern neo¬liberal bourgeoisie was courting the FSLN, that stage has now given way to marriage. The neoliberal model is fully embraced in the FSLN government proposal, which is based on increasing economic growth with a portfolio of megaprojects in sectors such as energy (both renewable and oil), telecommunications, tourism and agroindustry, in which the businesses of the Albanisa economic group are participating actively. The constantly hyped construction of an interoceanic canal and its related megaprojects would have to be added as well.

The megaprojects included in the government’s new National Human Development Plan for 2013-2017 are of this nature. This document has gone through various versions, none of which were consulted with civil society; in fact the government didn’t even consult its corporative allies.

Economist Adolfo Acevedo points out that with the corporative model “Nicaragua’s development pattern is being created de facto, as mega-concessions are being granted to large private national and transnational groups or associations of the two in extremely generous conditions via the battery of tax privileges designed to stimulate investment in these sectors.” He adds that the justification for all these privileges is the employment the mega-investments supposedly generate, while the reality is that they barely contribute to improving the deficit of jobs, which is Nicaraguans’ most strongly felt problem.

The growing migration, largely triggered by unemployment, and the remittances sent home by the emigrants, which sustain the economy, are never mentioned by the corporative allies when they congratulate each other for the “miracle” that is so benefiting them.

The utopia is ever
more out of reach

The lack of steady employment with a steady salary doesn’t just trigger migration. It has also been feeding the informal sector year after year. The latest IMF report on Nicaragua (2012) shares the corporative analyses of COSEP and the FSLN, but insists on a key problem for the economy that COSEP doesn’t grant much relevance: the enormous informal sector, which currently employs a full 70% of the economically active population. It’s a scandalous figure. To reduce it, the IMF proposes that the government’s economic strategy prioritize a process to incorporate small and medium busi¬nesses into the formal sector.

While this isn’t a priority for COSEP, it is for the government. Nonetheless, moving ever further away from its utopia, the FSLN doesn’t have a clear strategy on how to incorporate peasants and small merchants into modernization and national development. Its only response has been bureaucratic, through the creation of a “white elephant,” as the new Ministry of Family, Community, Cooperative and Associative Economy has been called. Functioning since 2012, this entity is nothing more than an amalgam of governmental programs and projects previously assigned to other government ministries and agencies.

Thus, the “new economic subject” about which so much was said inside the FSLN in the nineties only has more offices in a new ministry to show for itself.

The paradox of Venezuela

In this evolution toward neoliberalism, this involution that’s leaving revolutionary principles abandoned on the roadside, the historical cadres of the FSLN’s social Left are clearly the net losers, sidelined by its neoliberals. The international crisis of 2009 and the copious flow of Venezuelan resources that began at the same time increased the decision-making power of the FSLN’s business bloc and gave rise to the now powerful Albanisa economic group. This decided the battle in favor of the neoliberals… and of COSEP.

Ortega’s corporative alliance with COSEP has a lot to do with this change in the correlation of forces inside the FSLN, paradoxically provoked by Venezuela’s resources: Chávez’s cooperation consolidated 21st-century neoliberalism in “Christian, socialist and solidary” Nicaragua.

With no programmatic alternative to this neoliberal offensive, the FSLN’s social Left is limited to praising the Comandante’s astuteness or claiming we’re in a transition stage and that the strengthening and consolidation of the FSLN’s business group and Albanisa will see them increasingly displace the traditional business elite’s economic power, thus providing continuity to “the revolution.”

The “miracle” and reality

While the current moment can’t be compared to the international crisis in 2009, which provoked the inflection point in Ortega’s relations with COSEP, for exogenous reasons Nicaragua’s economic situation isn’t as favorable today as it was in 2011 and 2012.

First, the economy is cooling down. There has been a drop in international prices for our export products. This is especially true for coffee, which is also being attacked by the rust fungus and will thus provide many fewer jobs in the upcoming harvest period.

Second, the Central Bank of Nicaragua (BCN) and FUNIDES report that private investment fell 7.3% in the first half of this year and the average salary has stagnated, having failed to recover since 2009. The economic growth rate goals for the rest of Ortega’s term (the end of 2016) are “extremely prudent,” as the presidency’s economic adviser, Bayardo Arce, has acknowledged.

Third, while Venezuelan cooperation filled a number of the “holes” left by the withdrawal of bilateral US and European cooperation for a number of reasons, including strategic ones, the alleged electoral fraud of 2008 and the crisis in their own countries, new holes are opening.

Fourth, donations are dropping year by year. Between 2008 and 2011, budgetary support aid shrank from US$173 million to US$63 million. It is calculated that by the final year of Ortega’s current term, donations will have dropped by 60% compared to 2007, when he began to govern.

For all the “miracles” being applauded, the reality is that Nicaragua remains the second poorest country in Latin America after Haiti. It is also still extremely dependent on foreign donations and loans to finance a high percentage of its public investment projects.

Into the breach rode the IMF

This is the context in which an IMF mission headed by Przemek Gajdeczka came to Nicaragua between September 17 and 26 for a week of meetings with the government’s economic Cabinet to evaluate the course of the Nicaraguan economy. In October 2007, after ten months in office, the Ortega government signed a new three-year program with the IMF. While it expired in September 2010, the government requested and was granted a one-year extension until 2011.

An IMF mission came in May-June 2012 to evaluate the results of the program during the extension period; in its final report recommended the signing of a new program to support the govern¬ment’s intensification of pending “structural reforms.” These include reforms to the pension system to ensure the sustaina¬bility of Social Security; to the energy sector; and to the fiscal structure, which was supposed to include the rationalization and efficiency of public spending in addition to the new tax law designed by the government and COSEP and passed late last year with no input from other sectors.

As in this visit, the IMF recognized that the government had performed “favorably” in economic terms and had “similarly favorable economic perspectives for the short and medium term.” These good grades gave the COSEP business elite reason to expect a new three-year program to be signed on this visit. It was in for a surprise.

No program with the IMF

At the end of the meetings with the IMF, Central Bank President Alberto Guevara announced that Nicaragua had “graduated” in its relations with the IMF and no longer need an agreement. Gajdeczka put it rather differently. He expressed concern that shifting the monthly US$25 “solidarity bonus” for the 160,000 lowest-paid public employees from the Venezuelan funds to the regular budget on top of the “reduced pension” the government has begun paying to some 20,000 retirees who haven’t completed the required contributions will put the country’s macroeconomic stability at risk.

There was no comment from the government’s corporative allies, who had insisted on the need for Nicaragua to sign a new program with the IMF as a “stimulus for foreign investment and the business climate.”

Due to disagreements,
there’s no agreement

Despite the signing of the previous three-year program and evaluations showing favorable macroeconomic indicators, there are a number of unresolved disagreements between the Ortega government and the IMF over structural reforms the latter considers important to a stable economy.

One such reform the government has skirted for years is the fiscal one, rationalizing bureaucratic spending in order to finance other public investments. According to the Central Bank, 2012 closed with 216,000 public employees, up 59,000 over 2006, the last year of the Bolaños administration. Part of this increase has been due to this government’s party patronage but the other part has been generated by its increase in public services.

President Ortega’s decision in May 2010 to create the “solidarity bonus” with Venezuelan resources kept it outside the national budget and thus more independent of IMF leverage. The recent incorporation of that roughly US$68 million a year to the budget, possibly due to unpublished cuts in Venezuelan cooperation, put the Venezuelan funds directly in the IMF’s field of interest. It has steadfastly pressured for the transparency of those resources by detailing their allocation. It has also expressed concern about Nicaragua’s vulnerability due to its increasing dependence on those funds.

Another structural reform the IMF wants to see implemented has to do with energy. It has requested clear rules for the energy system, including definition of the electricity rates, rationalizing the subsidies policy for users, which right now benefits poor and rich alike.

The fundamental and most immediate disagreement has to do with Social Security. The IMF wants a full-blown reform that would guarantee its long-term viability. An IMF-backed proposal that got as far as being posted on the Nicaraguan Social Security Institute (INSS) web page some months ago would increase retirement age and double the number of weekly contributions a person needs to pay in to be eligible for a pension. Not sur-prisingly, it sparked massive social rejection.

To avoid the political cost of a reform of that caliber, the government has instead proposed short- and medium-term palliatives. While the IMF-endorsed proposal sought to ensure INSS resources until 2070, the administrative “patches” the government decided on will only keep INSS afloat until 2036. Even they must be put into effect next year or risk a deficit in Social Security funds the central government itself would be obliged to cover as of 2016.

Which one was
the deal breaker?

If a new agreement had been signed this year, the government would surely have had to face the IMF’s insistence on these and been forced to resolve most or all of them. Which one was the deal breaker? Was it that the IMF and the government couldn’t agree on the terms of the social security reform? Or did the discord revolve mainly around the issue of the government reducing its subsidies? Or was the snag the risks that the “private” debt with Venezuela represents for the government?

The best way to gloss over the disagreements was to speak of the country’s “graduation” and announce future “accompaniment” by the IMF, even though Gajdeczka had to admit that such a concept, common in the nongovernmental organization lexicon, has no precedent in his institution’s history.

A skillful decision

The government’s economic Cabinet must have perceived during its meetings with the IMF mission that contradictions would be inevitable if the three-year program were signed now. It understood that it would end up not complying, and to avoid that it decided to “graduate with honors” and not sign anything. The lack of an agreement with the IMF, however, obliges the government to go into debt as it will be uneligible for the low-interest resources it normally receives from the World Bank and Inter-American Development Bank to support macroeconomic stability and ensure international reserves.

Foreseeing this, the “timing” of the September 4 meeting with COSEP couldn’t have been better: the corporative alliance wasn’t affected by the “graduation” decision. Back then, the business elite had no inkling of the fact that the government might not sign a new agreement with the IMF.

Politically, it was a skillful decision. Having “graduated,” the government ended up with a free hand for another year, but leaves the door open. The economic Cabinet announced that the IMF will return to the country next September as a “trusted adviser.” If the three-year program is signed then, the government will be armor-plated by the IMF until 2017 and will thus be able to face the uncertain 2016 electoral campaign on better footing.

Amartya Sen speaks

The IMF arrived in Nicaragua just as Amartya Sen of India, winner of the 1998 Nobel Memorial Prize in Economic Sciences, was leaving. He had come to the country to participate in an international seminar held in Managua’s Central American University (UCA) sponsored by the United National Development Programme, the National Council of Universities and the UCA itself.

Sen has written and spoken numerous times in numerous countries to establish the differences between economic growth and human development, and stress that the former doesn’t guarantee the latter. He has also explained that growth and development can exist with authoritarian undemocratic governments, but that neither economic growth nor human development is sustainable without a democratic system of government. For Sen, democracy is a political and economic path that achieves what authoritarianism can’t either politically or economically… or among the people.

These ideas are amply developed in his speech of nearly 15 years ago, which we reproduce in this issue of envío because they are exceedingly pertinent to today’s Nicaragua.

Pope Francis speaks

Pope Francis seems to have learned the lessons of authoritarianism as well, and experientially. In an extensive interview by Antonio Spadaro, editor of the Jesuit publication La Civiltà Cattolica, he recognizes his errors when in 1973, only four years after being ordained a priest, he found himself at age 36 appointed provincial of the Society of Jesus in Argentina during the military government there: “I had to deal with difficult situations, and I made my decisions abruptly and by myself.” He acknowledges that “my authoritarian and quick manner of making decisions led me to have serious problems…. Eventually people get tired of authoritarianism.” In Nicaragua, those who rule must make decisions in difficult situations on a daily basis. Our history teaches that the authoritarian way of making them doesn’t resolve the problems but rather complicates them.

Do the corporative allies deciding things in such an exclusive and authoritarian manner really need reminding that those who “get decided about” eventually tire of authoritarianism and obedience?

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