Neo-Liberal Nicaragua

When US-backed candidate Violeta Chamorro won the most observed election ever in Nicaragua in 1990, she promised Nicaraguans that US government aid would quickly put the country back on its feet. After a decade of war, exhausted Nicaraguans took Chamorro at her word. However, US aid currently averages around US$38 million a year–a trickle by any standard [1]. Nicaragua has taken twenty years to recover output levels it attained in 1982. Always among the poorest countries in the region, the war and its aftermath have left Nicaragua the second poorest country in the hemisphere after Haiti.

Nicaragua has been a hapless guinea pig for a neoliberal and neoconservative experiment–if one can call it that. The neoliberal treatment is better described as “misery by design”, and the neoconservative penchant for democracy has meant corrupt and inept governments installed by means of rigged elections in which US government representatives have actively campaigned for their preferred candidate. A quest for self-determination and overcoming the legacy of dictatorship and war has given way to a systematic impoverishment of the country, and to craven subjugation by the country’s governments to the whims of the US embassy. The implicit promise once made to Nicaragua before 1990, to bring the country out of its misery, has given way to neglect. An observer may conclude that the US is still punishing Nicaragua for having attempted to obtain its independence and exercise its right to self-determination. One wonders how much longer this torture must continue.

A Snapshot

Nicaragua’s economy has always depended on agriculture. But, whereas the US subsidizes its farmers at record levels, the doctrine imposed on Nicaragua has been rigidly free-market. Predictably, Nicaragua’s agriculture is in crisis. The extensive network of cooperatives built up prior to 1990 has fallen apart, unable to compete through lack of access to credit, spiraling costs and stagnant or falling prices. Government policy, while not openly attacking agricultural cooperatives, has been deliberately unhelpful.

Until 2000, coffee had been Nicaragua’s main foreign exchange earner, and it had a long history since the 1870s. After years of World Bank pushing countries (especially Vietnam) to plant this cash crop, the coffee sector in Nicaragua, as elsewhere, has collapsed. The resulting migration from the land has exacerbated all of Nicaragua’s serious social problems, compounding the economic crisis that is affecting the whole region. Last year, hundreds of destitute families camped out for months on the roads leading to the coffee growing areas, pleading for work. Television showed pictures of children in Matagalpa, the coffee capital, showing levels of starvation usually associated with Africa.

This month the Nicaraguan Institute of Statistics and Census announced that 30% of people in the Matagalpa suffer malnutrition. 5000 rural workers and their families are marching from Matagalpa to the capital Managua to demand assistance agreed between the government and the rural workers–promises the government has not kept. CENIDH, the national human rights organization has confirmed that nine people have died of hunger on the march so far, including several children.

The problems of the rural economy worsened through the 1990s with the unraveling of the radical land reforms carried out under the Sandinista government of the 1980s. Former supporters of the Somoza dictatorship, as well as people with legitimate claims, appeared to reclaim land for which many of them had already been compensated, in some cases more than once. Many of them had racked up huge debts against property before fleeing the country with the proceeds in 1979. The Sandinista government failed to issue solid legal land titles for most of the properties they distributed, leaving the way open for dispossession and eviction of thousands of families and cooperative members under the Violeta Chamorro government and her successors.

Even former Contra fighters who took up arms against the Sandinistas in the 1980s remain disgruntled. Their leaders faced tough negotiations to get any just compensation for their supporters. Confronting the very politicians who urged them to go to war in the 1980s, they often resorted to armed force to occupy land. So disenchanted are these former Contras–now referred to as the ex-Resistencia–they have joined their old enemies, the Sandinistas, in a political alliance known as the National Convergence. Politicians of all parties agree that the last few years have exacerbated the economic crisis with no progress in sight.

Chronic Corruption

US government and World Bank officials have praised recent anti-corruption measures in Nicaragua. But their espousal of neo-liberal economic measures, like privatization and government cutbacks, actually promoted corruption in the first place. The IMF has prompted wage reductions in the public sector of 44 per cent since 1990. This impoverishment has further increased the incidence of petty corruption.

To bear that out, pay a visit to the local Public Registry office. Want a certificate that your property is free of any lien so you can get credit at the bank? Ten dollars–no questions asked–yields a preferential procedure and a certificate is produced straight away. Non-financially assisted “normal” service will take much longer.

Thirty dollars and a quiet word to the relevant official can readily improve problematic exam results. Fifty dollars in hand and a persuasive conversation with the judge will help resolve a tricky lawsuit, especially in remote rural areas. Stopped for a traffic violation? To avert a heavy fine, take the two officers (there are almost always two) to their nearest friendly Coca Cola stall, buy two very expensive sodas and the friendly lady at the bar will pay her two uniformed clients later.

An anti-corruption drive headed by someone like current President Enrique Bolaños is unlikely to root out systemic corruption. He was Vice-President for five years under President Arnoldo Aleman–know popularly as “Gordoman” (Super Fatman)–now under arrest for defrauding the country of hundreds of millions of dollars. Recent testimony by disgraced former Treasury Minister Byron Jerez directly implicates close relatives of Bolaños in Gordoman’s ransacking of the treasury.

In February 2003, in a regional seminar on corruption, US Ambassador Barbara Moore said, “It is very appropriate that we are meeting in Nicaragua which has been in the front line of the struggle against corruption under the leadership of President Bolaños.” Setting the tone of his anti-corruption government, President Bolaños draws a lifetime pension as a former Vice-President as well as his salary as current President. When he was questioned about this on television recently, he replied: “It’s legal, isn’t it?”

Bolaños was installed as President in 2001 with a helpful US electoral high tech manipulation, just as Arnoldo Aleman had been eased in before him in 1995. Opposition Vice-Presidential candidate leader Agustín Jarquin related how the then US Ambassador Oliver Garza arrived at the electoral count center in the small hours of election night demanding that the count be restarted with new US embassy-approved personnel. Election officials tamely submitted to Garza’s demands. The count developed into a marathon. Despite a large back room computer staff, the electoral authority took weeks to confirm all the results against a background of acrimonious political wrangling. It is possible Garza was confused–maybe he thought he was in Florida.

Perhaps this is an example of what former US ambassador, Lino Gutierrez, meant when he told the Managua American Chamber of Commerce in June 2001: “Certainly we ought to celebrate the fact that 34 of the 35 governments in our hemisphere came to power through the ballot box. But we have all learnt that democracy is much more than holding free and fair elections.”

One trend the neo-liberals should approve is the way the Nicaraguan Army has become a major player in the economy. After three major bank failures over the past two years, the banking regulatory body was looking hard at Banco de Finanzas, in which the army has a large interest. The regulators soon backed off perhaps because former Army chief, Humberto Ortega, is an important regional investor inside and outside Nicaragua. Although not as powerful as the army in Guatemala, the enterprising Nicaraguan army has followed its counterparts in Honduras and El Salvador in consolidating a shady and powerful military-business elite.

Neo-liberalism: neo-business as usual

Since 1990, the World Bank and the International Monetary Fund have worked to open up markets (of course, it is always referred to as freeing the markets) and cut back government expenditures. Privatization is a key part of this program. Over three hundred small state enterprises were privatized between 1990 and 1995, but it has taken longer to bring the big state utilities–Power, Communications and Water–to the market. Under cover of the unconvincing measures to improve efficiency, neo-liberals hoped to hoodwink people in Nicaragua into accepting the privatization of the water utility. Anxious to force the issue, the IMF tried to impose this as a condition for a loan earlier this year. However, legislators defeated the proposal when it came up for approval in the National Assembly. The measure has been shelved–at least for the moment.

Nicaragua has already privatized its telephone utility, creating a monopoly of landline phones. It did the same with electricity distribution, sold to a Spanish multinational, Union Fenosa. Consequently, stories of over-charging abound, such as the woman tortilla maker living in a shack with just a small television and a couple of light bulbs, earning around US$28 a month. Accustomed to bills of US$3 or 4 a month, she suddenly received one for US$200. Forced to pay these exorbitant demands or go without, many Nicaraguan families sink deeper into debt.

Resentment against the price rises is widespread. The prices of both water and electricity have increased fivefold since 1990. During the same period, despite a modest increase in the minimum wage in 1997, wages have been virtually frozen, while prices for basic items rise relentlessly. Over 60% of the population make do with less than US$2 a day–that many people live in poverty. The cost of the basic basket of goods for a family of four has doubled since the early nineties.

Health and education services are impoverished, and the government can barely provide even the most basic facilities and services necessary. For the huge numbers out of work, health services might as well not exist at all. What use is a prescription for US$10 of medicine to someone with an income of US$28 a month? Hospitals depend on donations from individuals and foreign charities even for the most basic equipment–a nebulizer, a dialysis machine.

Nicaragua is unable to educate the people it needs to develop its economic potential. Over 40% of the school age population fails to attend classes. Nineteen-year-old Gabriela Garcia has almost finished a degree in Information Systems Engineering at her local university in the capital, Managua. Her mother is a nurse earning around US$55 a month. Gabriela was brought up in her grandmother’s house where family remittances from relatives overseas helped see her through college. The household includes Gabriela’s pregnant sister, her brother and two cousins. To complete her degree Gabriela needed US$900. She says, “Maybe I’ll get lucky and win the lottery.” For the foreseeable future, her life is on hold. She’s looking for any work she can find to help pay the family’s routine debts. But Gabriela’s lucky to have gotten so far; 65% of Nicaraguans starting school never finish their secondary education.

Education initiatives collapse because incompetent, ideologically motivated Education Ministry personnel are incapable of sustaining program agreements from one semester to the next. Off the record, a high-ranking World Bank official will say they would rather cut Nicaragua loose; the government is so inept. They hang in there because an admission of failure would have a very high political price.
The majority of Nicaragua’s economically active people cannot generate enough income to sustain their families. Family remittances from abroad are now Nicaragua’s principal source of foreign exchange. Rural areas suffer depopulation as able-bodied men, women and children move to the cities and beyond in search of work. Nearly a million Nicaraguans work in Costa Rica, and most do so illegally. In a typical barrio in any city around 60% of people will be out of work. Many people cook just every other day in order to save money.

Y drogas tambien…

Drugs also have become a dominant and unwelcome fact of life in neo-liberal Nicaragua. Bags of crack can be bought on the street for a dollar. Most petty crime is drug related. Drug and solvent abuse have become a way of life for the youths of the widespread and increasingly violent gang culture. Neo-liberals should certainly admire the enterprising spirit, while neo-cons may well approve the drug-induced passivity.

Recently police chiefs on the Atlantic coast were arrested for involvement in the local drug trade. A police chief in Managua is alleged to have authorized paying informants with bags of drugs. Noting the lack of economic options for survival apart from the drugs business, local Atlantic Coast Catholic Bishop Pablo Schmidt, stated: “If you take this away, how are they going to live? This is not an easy problem to solve. And it destroys not only the image of a people, but their culture as well.”

Yes, this is globalization

Beside this misery, for over a decade USAID has subsidized agribusiness elites in organizations supposedly promoting market solutions. At the same time, the banking system starves small and medium farmers of credit, stacking the broadly-based domestic agricultural economy in favor of large agribusiness. The clear conclusion is that Nicaragua has been softened up prior to being railroaded into a Central American Free Trade Area (CAFTA) to yield preferential trade advantages for US investors and corporations.

Mario Arana, the Nicaraguan government representative in recent CAFTA negotiations remarked: “The offer made by the United States to Central America is well below expectations and this is particularly true in the case of Nicaragua.” He added, “I believe that Nicaragua comes out worse than the other countries, because of the nature of her economy, fundamentally agricultural.”

Jose Marin’s story is emblematic. He owned a smallholding in the beautiful rural coffee growing area of San Juan del Rio Coco, but he had to sell it to pay off his debts. Now he lives with his family of seven children in a rented shack. He works as a security guard earning US$90 a month–and he should consider himself lucky.

Under the former Sandinista government, Jose Marin would have been able to renegotiate his debt with the state-owned National Development Bank, keep his land and continue producing. A talented young woman like Gabriela Garcia would have finished her education with a grant from the State. Books were subsidized. Health care was free. Prices for basic goods were controlled by the State.

Murky politics…

The Sandinistas, who promoted that welfare state model back in the 1980s, now continue to emphasize health, education and support for small and medium agricultural producers, but as part of a market economy. The biggest group in the National Convergence opposition front, the Sandinistas are still headed by Daniel Ortega who led the opinion polls in the run-up to the last election despite controversy provoked by sex-abuse allegations from his former step-daughter Zoilamerica Narvaez, herself a prominent figure in Nicaragua’s women’s movement. Most people believe he will again be the opposition presidential candidate in the next election in 2005.
Despite widespread disenchantment with politicians, Nicaraguan civil society is vibrant and vociferous, a valuable inheritance from the revolution. After a decade of cutbacks in health, education and social services, community associations and non-governmental organizations have shouldered much of the burden. Their operations are funded overwhelmingly by overseas donations from the plethora of aid and development programs offered by foreign governments and aid agencies. To a large degree, government cutbacks and market reforms in Nicaragua, as elsewhere, are only feasible on the back of subsidies from foreign donors. Neo-liberal accounts of international development seldom acknowledge this fact.

The importance of Nicaragua

The importance of the Nicaraguan experience is that members of the same gang who ran Reagan’s illegal Contra war (Negroponte, Armitage, Abrams, and others) are now prominent players within the Bush Junior regime. Back then, they lied that Nicaragua threatened US security, just as they have lied about Iraq. A look at contemporary Nicaragua therefore gives some idea of what Iraqis can expect from their US occupiers.

Miguel D’Escoto, who guided the successful Nicaraguan case against the US for terrorism in the International Court of Justice in 1986, wrote last month, “It would be a serious mistake to conclude that the current behavior of the United States represents something temporary that will change when George Bush [Junior] leaves the presidency. Never in its history has the United States taken a backward step in its drive towards universal domination and never has it corrected its behavior, going from bad to worse from the point of view of the rights of the rest of humanity.” He writes from experience. In Nicaragua, as elsewhere, no self-determination is tolerated, and the US ambassador is the de facto proconsul.

Today’s neo-conservatives pontificate about democracy, freedom, and economic development. One only has to look at Nicaragua to see what this means. From the Nicaraguan perspective, US foreign policy is made up of three main ingredients: hypocrisy, cynicism and sadism. Nicaraguan society was destroyed by the Reagan and Bush Sr. regimes to make a policy point–countries that diverge from US control will be undermined economically and, if sanctions fail to bring them into line, subjected to military attack.

Fifty thousand people died during the US-instigated Contra war against Nicaragua, ostensibly to put it on the “road to democracy”. In 1987, the International Court of Justice ordered the US government to pay Nicaragua an indemnity of US$16 billion in compensation for the losses caused by its terrorism. But of course, the US ignored the ruling and pressured the 1990 Violeta Chamorro government to drop attempts to secure this just restitution. Nicaragua was rewarded with an economic aid drip feed and the prescriptions of the World Bank. Whereas Israel receives US$540 per capita in economic assistance, Nicaragua, one of the poorest countries in the world with a similar size population, receives little more than US$7 [2]. Note, a very well off society with a notorious apartheid-like reputation, receives over 70 times more aid than a very poor and battered society, and a country battered by the effects of American intervention.

The US owes a moral debt to Nicaragua, due to the war it waged against the country, the long-time support for the former dictator Somoza, and the promises made leading up to the 1990 elections. Seen in that light, US aid to Nicaragua is a pittance.

Today, most people in Nicaragua are even worse off than they were twenty years ago. The Clinton and Bush Jr. regimes intervened decisively to ensure the elections of Arnoldo Aleman and Enrique Bolaños; one a crook, the other a stooge. Under the aegis of the US and the World Bank, these proxies, and Violeta Chamorro before them, put in place the disastrous policies that have reduced most Nicaraguans to ever-deepening penury. The hopes of the poor majority for a decent life have disappeared. The sign at the end of the neo-liberal route for Nicaragua reads loud and clear: “Dead end. Made in the USA.”

TONI SOLO is an activist based in Nicaragua and can be reached at


[1] It is very difficult to obtain US aid figures for Nicaragua. First, the Nicaraguan government doesn’t have these figures, as any request to the Nicaraguan Central Bank will reveal. Furthermore, much of the aid is “in kind”–thus with US technicians or goods, and any value can be imputed for these. Even if USAID states that it has spent $1.1bn since 1990 (US Census Bureau tables show a total of US$540 million aid for the same period), one must reckon that a significant portion of this pays for US input–roughly estimated to be about 40%, i.e., funds that mostly pay for expensive American personnel and overheads. Finally, one must realize that US aid is not under the control of Nicaraguans. Aid to Nicaragua is not a lump sum like the aid Israel receives to disburse at will.
NB: the US embassy, USAID, and Nicaraguan gov’t agencies were most unhelpful in obtaining these numbers. They all referred us to their websites, and one can easily verify that there is little break down in their numbers or no figures at all.

[2] For the figures on Israel, see Paul de Rooij’s Feeding the Cuckoo, CounterPunch, Nov. 16, 2002. The Nicaraguan figure was obtained as follows: the average reported aid flows for 1998 to 2003 were divided by the average population during those six years.