Neo-Liberal Nicaragua is a Neo-Banana Republic


U.S.-backed candidate Violeta Chamorro won the most observed election
ever in Nicaragua in 1990, she promised Nicaraguans that U.S. government
aid would quickly put the country back on its feet. After a decade
of war, exhausted Nicaraguans took Chamorro at her word. However,
U.S. aid currently averages around $38 million a year—a trickle
by any standard. 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 taken 20 years
to recover output levels it attained in 1982. 

has been a hapless guinea pig for a neo-liberal and neo-conservative
experiment—if one can call it that. The neo-liberal 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 U.S. government representatives
have actively campaigned for their preferred candidate. An observer
may conclude that the U.S. 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 will continue. 

economy has always depended on agriculture. But, whereas the U.S.
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. 

2000, coffee had been Nicaragua’s main foreign exchange earner
and it had a long history since the 1870s. After years of the 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, with levels of starvation usually
associated with Africa. 

month the Nicaraguan Institute of Statistics and Census announced
that 30 percent of people in the Matagalpa suffer malnutrition.
Marching from Matagalpa to the capital Managua to demand assistance
agreed between the government and the rural workers—promises
the government has not kept—are 5,000 rural workers and their
families. CENIDH, the national human rights organization, has confirmed
that nine people have died of hunger on the march so far, including
several children. 

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 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 


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 percent since 1990. This impoverishment
has further increased the incidence of petty corruption. 

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 question asked—yields
a preferential procedure and a certificate is produced instantly.
Non-financially assisted “normal” service will take much

dollars and a quiet word to the relevant official can readily improve
problematic exam results. Fifty dollars 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 expensive sodas,
and the friendly person at the bar will pay her two uniformed clients

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—known
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. 

February 2003, in a regional seminar on corruption, U.S. 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

was installed as president in 2001 with helpful U.S. 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 U.S. Ambassador Oliver Garza arrived
at the electoral count center in the small hours of election night
demanding that the count be restarted with new U.S. 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. 

this is an example of what former U.S. 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.”  

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-Business As Usual 


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 300 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 for the moment. 

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 $28 a month. Accustomed to bills of $3 or $4 a month,
she suddenly received one for $200. Forced to pay these exorbitant
demands or go without, many Nicaraguan families sink deeper into

against the price rises is widespread. The price of both water and
electricity has 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.
The cost of the basic basket of goods for a family of four has doubled
since the early 1990s, while over 60 percent of the population makes
do with less than $2 a day 

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

is unable to educate the people it needs to develop its economic
potential. Over 40 percent 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 $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
needs $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 percent of Nicaraguans starting school never finish their secondary

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. 

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 percent of people will be out of work.
Many people cook every other day in order to save money. 

Y Drogas Tambien 


have also 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.  

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 drug 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.” 

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
U.S. investors and corporations. 

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 its economy, fundamentally agricultural.” 

Marin’s story is emblematic. He owned a small holding 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 $90 a month—and he should consider himself lucky. 

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. 

Sandinistas, who promoted that welfare state model back in the 1980s,
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, is 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, 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. 

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 many 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. 

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 in the Bush Jr. regime.
Back then, they lied that Nicaragua threatened U.S. security, just
as they have lied about Iraq. A look at contemporary Nicaragua gives
some idea of what Iraqis can expect from their U.S. occupiers. 

D’Escoto, who guided the successful Nicaraguan case against
the U.S. 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 Jr. 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 U.S. ambassador is the de facto proconsul. 

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, U.S. 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 U.S. control will
be undermined economically and, if sanctions fail to bring them
into line, subjected to military attack.

thousand people died during the U.S.-instigated Contra war against
Nicaragua, ostensibly to put it on the “road to democracy.”
In 1987, the International Court of Justice ordered the U.S. government
to pay Nicaragua an indemnity of $16 billion in compensation for
the losses caused by U.S. terrorism. But the U.S. ignored the ruling
and pressured the 1990 Violeta Chamorro government to drop attempts
to secure this just restitution. Whereas Israel receives $540 per
capita in economic assistance, Nicaragua, one of the poorest countries
in the world with a similar size population, receives little more
than $7. 

U.S. 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. Today, most
people in Nicaragua are worse off than they were 20 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 U.S. 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.