External resources give the regime economic breathing room
After over two years of worsening recession,
which was reaching the brink of a depression
with the onset of the coronavirus pandemic,
Nicaragua’s economy has been able
to skirt collapse as the clock inexorably ticks
toward negotiation of the conditions under which
the country’s 2’21 elections will be held.
As this brief economic update shows,
external resources and strict policies
have come to the economy’s rescue.
Just as Fox News portrays a “parallel universe” much more favorable to President Trump than the other media outlets in the United States report on, Nicaragua’s official media studiously avoid any mention of the economic crisis into which the Ortega regime plunged the country starting in April 2018. There is no mention of the high unemploy¬ment, the percentages of the popu¬la¬tion thrust back into poverty and ex¬tre¬me poverty, or the number of small businesses that are floundering or have gone under. Just as both Trump and Ortega avoided discussing the reality of the coronavirus pandemic to avoid “alarming” people, both only focus on what is positive about their respective country’s current economy.
and Herculean tasks
Nicaragua’s official media focus on the painstaking works of the “good government’”: small acts of charity distributed through “solidarity outreach” by the Sandinista Youth organization visiting the poorest to deliver food packages or wheelchairs. Ruling party municipal officials are also implementing projects such as street repair, opening parks, organizing street fairs and the like.
Even greater emphasis is placed on the Herculean efforts of the “Government of Christian Solidarity” as it inaugurates major and much needed road infrastructure projects, some of which are financed by a US$238 million loan signed with the Central American Bank for Economic Integration (CABEI) back in February 2018.
Hospitals are also being built, schools renovated, drainage and drinking water systems improved, financed by multilateral aid also mainly approved prior to April 2018. There are also both pre- and post-April projects financed by Germany, Spain, Japan and Korea, countries that don’t follow US policy, as well as by the World Bank’s Carbon Fund, described by researcher Selmira Flores in the “Speaking Out” section of this issue. None of these projects are keeping the economy afloat, but all benefit the population and mean the regime is not suffocating.
New loans have broken
the financial blockade
This month the more than two-year-old financial stranglehold on the regime was broken when the Inter-American Development Bank (IDB) approved a new US$43 million loan on August 18 to “contain, control and mitigate” the coronavirus. Because this is humanitarian aid, it is exempted from the Nicaragua Investment Conditionality Act, also known as NICA Act, signed into law by President Trump on December 20, 2018. That law requires US representatives to all multilateral banks to vote against any regular loan requests by the Ortega government.
The money will be used for urgent projects: expansion of a hospital ward for COVID-19 patients in Managua and improvement of substandard conditions at four public laboratories and twelve public hospitals, including two hospitals in the neglected Caribbean region. In addition to this indispensable help to combat the pandemic, it is more generally a boost to the economy, alleviating public expenses and reactivating some employment.
The loan request required the government to acknowledge it had not managed to control the virus, something it has been loath to do. While Nicaragua’s Ministry of the Treasury will execute the loan’s funds, the IDB has set up four international agencies—the United Nations Office for Project Services, the Council of Ministers of Health of Central America, Project Concern International and the Pan American Health Organization (PAHO)—to supervise and monitor its handling of the program’s three phases.
PAHO has repeatedly expressed concern that the Nicaraguan govern¬ment isn’t adequately providing information about the development of the pandemic in the country. While the government has never responded to PAHO’s offers to come to Nicaragua to help improve the situation, the strict control imposed by the IDB puts in evidence the lack of credibility in the government’s figures and the distrust that generates internationally.
The CABEI also approved two new loans this month. The first, US$50 million, is for small and micro businesses. The CABEI awarded a second loan of US$171.6 million for building social housing in the “Bismarck Martínez” residential development, a flagship of the regime’s self-proclaimed victory over the “coup d’état” (its name for the April 2018 citizen uprising). Taking the IDB’s oversight plan for the health loan as a model, the Superior Council of Private Enterprise (COSEP) has asked the CABEI to audit the government’s use of the housing resources, including the fairness of the method by which construction companies are hired, and families are benefited.
Taiwan, a partner in the CABEI, gave it US$130 million to help Central American economies. The contribution came with an express request to include Nicaragua in the distribution of funds. Since the pandemic began, the Taiwanese government has continuously donated health supplies to the Nicaraguan government, thus protecting its diplomatic relations with our country. This importance of maintaining a strong diplomatic profile has led it to ignore the regime’s failure to account for how the supplies have been used.
from the 1980s
The government’s economic team has made it a policy priority to restrict public spending and keep inflation low. This means increased unemployment, cuts in social services and mounting poverty. It is a tough-minded political decision since the effects of the economic crisis on the population would normally counsel deficit spending. This prioritizing of macroeconomics is the opposite of the decision the FSLN government adhered to for most of the revolutionary decade. Strangled by the US economic embargo and unrelenting financing of the contra war, the government prioritized maintaining support for the nascent revolution with public spending and employment while also having to finance military defense. It did so by printing money not backed by hard currency or production, in the process racking up a world-record 33,000% hyperinflation rate by the decade’s end.
Three key elements are different today. For one, Washington, while still accustomed to getting its way, is now targeting the economy of the governing family and close circle rather than the population as a whole. For its part, the FSLN government today is relying more on repression than on social spending to keep the population in line. As Trump has demonstrated in his own political practice, it’s cheaper and less complicated, at least in the short run, to focus only on keeping the support of your own base. And finally, while the ruling couple has squandered its political credibility with the international community, the country’s economy is firmly rooted in the globalized system of imports, exports, tourism, investments and finance, which has more tolerance for rising poverty than rising inflation.
and Ortega governs
The grave human rights violations the Ortega regime has committed and is continuing to commit to a lesser degree are not forgotten. But it’s worth asking if the loans received in August aren’t a signal that the international community sees a kind of stability in the regime, whereas the opposition appears so disorganized it can’t even come to any internal agreements beyond some relatively no-brainer electoral reform demands.
The government’s official narrative to the international community portrays it as steeped in activity, perhaps to confirm the “compliment” Organization of American States Secretary General Luis Almagro gave Ortega in June of last year. In an interview given in Medellín, Almagro said “there is no comparing Nicaragua and Venezuela. Ortega is not Maduro. Ortega governs Nicaragua, Maduro represses Venezuela. What has Maduro done besides repress his political opposition? Nothing. Ortega, with many fewer resour-ces, tries to address health and education, and keeps trying to solve his country’s social issues.”
The narrative surrounding the development projects executed by the “good government” that fill the official media projects optimism in the future leading up to the 2021 elections. That narrative also portrays Ortega and Rosario Murillo as urgently wanting to win those elections by fair means. This could actually be within their reach if the opposition fails to develop solid unity and attractive leadership. Or if, lacking necessary conditions, abstention again wins the day.
“Fair means” is a very relative term in today’s Nicaragua. A little-publicized constitutional reform of 2014 explicitly eliminated second-round voting. In case that wasn’t clear enough, even the need for a second round was implicitly eliminated by requiring no minimum percentage of votes to win the presidency on the first round. Ortega could thus theoretically walk away with his fifth re-election based on a one-vote lead. But of course that won’t be necessary if the National Coalition crumbles or even just splits in two, and a number of aspiring new parties rush to apply for legal status and a place on the ballot.