Neo-Liberal Nicaragua is
a Neo-Banana Republic
The U.S. is still punishing
for attempting to gain independence
by Toni Solo
Z magazine, September 2003
When 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.
Nicaragua 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
Nicaragua's 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.
Until 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
This 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. CLNIDH, 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 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.
U.S. 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.
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
question asked-yields a preferential procedure and a certificate
is produced instantly. 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 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 later.
An anti-corruption drive, headed by someone
like current President Enrique Bolanos, 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 Bolahos in Gordoman's ransacking of the treasury.
In 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 Bolanos." Setting the tone of his
anti-corruption government, President Bolanos 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?"
Bolanos 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 Agustin 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.
Perhaps 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
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-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
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.
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 $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 debt.
Resentment 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
Health 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.
Nicaragua 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 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 percent of people will be out of work. Many people cook every
other day in order to save money.
Y Drogas Tambien
Drugs 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
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 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."
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 U.S. investors and
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 its economy, fundamentally
Jose 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.
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.
The Sandinistas, who promoted that welfare
state model back in the 1 980s, 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.
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 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
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 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.
Miguel 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. Ieaves 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.
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, 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
Fifty 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
The 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 Bolanos; 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. "