Central American University - UCA

Number 252 | Julio 2002

Nicaragua

A Government in the Opposition and A Pair of Caudillos Who Won’t Step Down

Bolaños dared Alemán to give up his immunity to clear up the "long chain of presumptions against you." Alemán challenged him right back: "I won’t and no one can make me." In the next breath he called for a national accord, something that the FSLN is also insisting on. Are these the labor pains of a new pact?

Nitlápan-Envío team

The test of strength between Bolaños and Alemán—both have called it war—is occupying the entire political stage. Bolaños has decided to make the fight against corruption the centerpiece of his strategy in this war. Backers of both are fiercely fighting it out within the Constitutionalist Liberal Party (PLC) in full view of the expectant national population, international community and, above all, the US government. How much longer will Bolaños wait before attempting to twist Arnoldo Alemán’s beefy but resistant arm? No one knows, and the resulting uncertainty is wearing down both the government and the country. Meanwhile the Alemán-Ortega pact appears to be reactivated.

In the economic terrain, the many unresolved structural problems that have been dragging Nicaragua down for some time now are still with us, and new ones are arising, some of them a direct product of the paralysis that this war is generating. The test of strength in the economic sphere was played out this month between the government’s determination to put the country in order and the difficulty of achieving this in a collective culture that still has a way to go before achieving a true sense of citizenry. Six months into his term, President Bolaños is the lead figure in a political paradox: he is presiding over a government that is in the opposition.

A selective, targeted fight

Enrique Bolaños did not throw in the towel in the battle against corruption, as some had feared. He can’t. This fight and his determination to present results are his most valuable assets in negotiating the international aid that Nicaragua so badly needs. Bolaños simply paused along the way and made some observations. The first observation convinced him that the institutions that make up the justice system are incapable of taking things to their logical conclusion. Guided by his class instincts, he also came to understand that going all the way would end up condemning many of his own friends and allies to jail. He therefore decided to selectively target Alemán and his innermost circle, which helps explain some shifts in the three cases that have reached the courts so far, which Bolaños has collectively termed the "first wave" of the anti-corruption fight.

It does not seem like a bad idea to opt for a selective strategy in the fight against corruption. A large majority of the population understands and supports this shift, although no one has called it by its real name. The Alemán administration is logically the freshest in people’s memory and there is more information available about its corrupt acts. It would be frustrating, however, were Bolaños to remain satisfied with the simple media theater of pegging Alemán back by just raising the stakes on him in a verbal contest unaccompanied by a judicial strategy. People want to see more cases in the courts, the perpetrators punished, someone paying for their crimes and, above all, the money recovered.

A three-way pact

Over the course of the month, the uncovering of corruption cases directly linked to Alemán and those around him unsurprisingly got interlaced with the notching up of the political war between the incumbent President and his most recent predecessor over leadership of their party. And as the weave got tighter, it became increasingly clear that the Alemán-Ortega pact was being retooled.
On June 9, PLC national secretary René Herrera, the man who is to Alemán what Montesinos was to Peru’s Fujimori, argued that that the country was teetering at the edge of an abyss and that "there is no other alternative than a government-PLC-FSLN pact." The fact is that the country fell off the edge and hit bottom a good while ago. Reediting the pact to include Bolaños (it did not go unnoticed that the PLC was not identified with the government) would almost inevitably start with an agreement to call off the anti-corruption fight before it touches the two elite groups from the previous pact.

On June 13, Jaime Morales Carazo, best man at Alemán’s wedding and a politician of unquestionable political skills who had a lot to do with the pact Alemán made with the Ortegas, announced that he was irrevocably resigning his directive responsibilities in the PLC. In so doing, he unleashed a diatribe against his protégé, attributing the PLC’s current crisis to "the pride and demented ambitions for power of a handful of irresponsible people and to the exceptional greediness of their self-enrichment." While not yet indicating a change in the correlation of forces within the PLC, Morales Carazo’s decision sent out a clear signal to a particular Liberal sector: lower the lifeboats, the ship is going down.

A new polarization

Two days later, Bolaños acknowledged to the international press that virtually all state institutions had issued checks under the table to fatten the salaries of top government officials. Days after that, two scandalous irregularities surfaced that had occurred in the Ministry of Transport during the Alemán government. The first was that all manner of improvements were made to Alemán’s properties using machinery and personnel from the state construction company COERCO, leaving it gutted. The second was that the 18-kilometer highway that Alemán had built to facilitate the last stage of his journey from Managua to his luxurious hacienda home in El Crucero was revealed to be the least traveled in the entire country. The new transport minister declared that the government will not foot the maintenance bill for this "personal" highway.
That same day Bolaños admitted in an interview on the Telemundo TV chain that if proof were found, Alemán would to go court and to prison, because he would not be protected by immunity forever. It was the first time that Bolaños had mentioned the possibility of jail for his predecessor. Alemán shot back that Bolaños was "insolent" and reminded him that as Alemán’s vice president he had never denounced the corruption he was now reporting. These public declarations followed an angry private conversation between the two men in which Bolaños reportedly gave Alemán one last chance: resign his presidential post in the National Assembly and leave the country in exchange for dropping all charges against him. But Alemán would not allow his arm to be twisted. Instead he declared open war to the finish.

Alemán’s resistance is proving very costly for the country, which is going through a peculiar recession with the banks full of money but investments paralyzed. It is costly for the government as well, since it is consuming too much of the energy of a Cabinet of technocrats unskilled in political disputes of this magnitude and nature. And it is costly for the population, habituated to the Sandinismo/anti-Sandinismo polarization (FSLN vs. PLC, Ortega vs. Alemán), but now having to try to make sense of a new polarization. The old and the new conflicts are quite closely linked, however, in part because Alemán is also resisting by presenting himself as the only caudillo capable of holding Liberalism together to prevent the FSLN and Daniel Ortega from returning to power. Furthermore, the FSLN leadership under Ortega’s control ended up in such a deep pact with Alemán’s gang that they now have an active hand in the strategies of this war.

The credit card scam

With the verbal war declared both publicly and privately and the pro-Alemán media attacking Bolaños with increasing fierceness and vulgarity, the rest of the media eagerly leaped on the newest corruption case, this one directly and immediately implicating Alemán himself. What was quickly dubbed the "credit card scam" was perfectly chosen to cause the greatest impact and the most justified indignation in public opinion and allowed Bolaños to quickly recover the ground he had lost as the standard-bearer of the anti-corruption struggle.
Offering details of Alemán’s presidential expenditures, the media reported daily on how he had used a personal credit card backed by public funds in the Central Bank. The President spent US$1.8 million on jewelry, luxury hotels, cabarets, copious meals, Egyptian rugs, his engagement party and his honeymoon in Venice. This included $70,000 in jewelry, $30,000 in Thai arts and crafts, $14,000 in a single afternoon of shopping in Miami, $10,000 in booze in a single night in Panama, and so it went…
The Sybaritism associated with Alemán’s official travels—it was always suspected that the above spending had involved state funds—was now exposed before a tattered and hungry population that could not even imagine how someone could spend such enormous sums in an entire lifetime. Alemán & Co. denied nothing, but did take a rather questionable shot at justifying them: the former head of state claimed he had acquired the gifts to give his counterparts on official visits and also to buy the favor of foreign investors...

The Attorney General’s Office
is "Taking careful aim"

The Office of Attorney General (PGR), the only institution in the justice system still completely on the President’s side, weighed in for the test of strength with Alemán for the first time in June. It announced that it was not only investigating the numerous irregularities already detected in Alemán’s probity declaration, but would also investigate his credit card scam and other possible ones, confident that the former President would not have been satisfied with a single card. It also announced the investigation of credit cards used by other government officials, not only during the Alemán administration but also those of Chamorro and Ortega. The announcement came after having already requested information about this practice from some fifty state institutions.

Will the PGR be able to fulfill all of its many promises, so many of which are uttered to feed the verbal war and rile up a population that doubted the government’s determination to pursue its anti-corruption war? Deputy Attorney General Francisco Fiallos tried to explain the slowness, timidity or incapacity attributed to his institution this way: "We are taking careful aim, using a telescopic lens rather than shooting off a shotgun blast. That’s why we are taking all the time in the world." Knowing how unsystematic efforts of any kind in Nicaragua tend to be, it is hard to imagine that everything announced can be fulfilled, even with better aim. It is also hard to imagine not only how much time but also how many skilled and honest professionals the PGR would need to investigate everything it listed and everything that needs to be investigated in Nicaragua.

President Bolaños announced in early July that he would elect a new attorney general, since the current head of that office, Oscar Herdocia, is frequently out of the country due to a serious illness. In an interview in May, Herdocia expressed an opinion that is acquiring increasing significance in the country’s tense ethical climate. "Corruption’s roots," he said, "have been growing in Nicaragua for a long time, and have thus contaminated many people. The hope is that those who are learning to live under the rule of law will enthusiastically combat corruption when they see it, and that many who have committed acts of corruption will try to return to their initial essence. It would be excellent if those who have taken something that does not belong to them return it, if those who have committed a crime try to make amends for it, to compensate for the damage caused. Law has its extenuating and exempting circumstances. The law considers less rigorously those who have committed a crime and demonstrate the desire to repair it. We want to create an Attorney General’s Office that acts according to due process, but we would be flexible enough to see the person within every human being. We understand that repairing the error committed diminishes it to a certain degree. More important than not falling is getting up again."
The two corruption cases keeping Byron Jerez, the former government tax office director and PLC treasurer, under lock and key together with 7 of the 10 others convicted—3 are still fugitives—are still in motion. In the case of the luxury vehicle swindle, Judge Juana Méndez freed Harvey Mayorga, who was Jerez’ right-hand man in all his businesses, re-sentencing him to house arrest because he is suffering leukemia and needs special care. The PRG criticized the judge for the measure, arguing that it "puts the whole process at risk." Eduardo Boza, the new attorney general, explained that his greatest fear is that "Mayorga could begin to clean up the evidence in the case, which would hinder the recovery of the ill-gotten goods." At the same time, the PGR began to comb the accounts of Byron Jerez and his family abroad, especially in Panama, finding that at least US$2 million have already been transferred to other banks since his detention. In the "check scam," the other case involving Jerez, the PGR requested to open a case against Byron’s brother Gerold, currently out of the country, on whom it has abundant proof linking him to the laundering of money from corrupt acts to pay the taxes on the family’s companies in the United States and to benefit their businesses.

The Channel 6 fraud case, in which suits were filed against Arnoldo Alemán and two other Liberal legislators shielded by their parliamentary immunity, is also still in motion. In June, the five collegial comptrollers of the Office of Comptroller General (CGR) unanimously issued a resolution establishing the presumption of penal responsibility for just three of the nine government officials accused. The rest were only assumed to have civil responsibility, thus freeing Alemán and the other two legislators of all penal responsibility. This resolution opened the way for a stay of proceedings for the majority of those involved in the next stages of the process. Both the Offices of Attorney General and Public Prosecutor requested that the charge be withdrawn against five of the nine and that they go free. The judge denied the request. Two Mexicans and two top-level officials of the Alemán government—former treasury minister Esteban Duquestrada and former state telecommunications company director David Robleto—are still fugitives. The judge declared the latter two in contempt of court. The judge also later granted bail to Salvador Quintanilla, one of the five "absolved" by the attorney general’s office, due to heart problems that she believed could endanger his life if he remained in prison. She did the same for Roberto Duarte, who was not among the five, and for the same reason, although the attorney general challenged the second decision.

The fast-ball pitch

After the revelation of the credit card scam, which was the government’s fast-ball pitch marking the strategic turn in the fight against corruption, it pitched another for strike two in this new political inning. The Liberals who back Bolaños, summoned by none other than Vice President José Rizo, a solid Liberal ideologue, met in Managua for an Extraordinary PLC Convention on June 23 to begin to rescue the PLC from the "tyrannical control" that Alemán and his loyal backers have exercised over it. They declared the event not only legitimate but also legal because it included 224 of the 411 delegates to the ordinary PLC Convention, scheduled for July 11. It was the official baptism of the PLC split.
Defying the pro-Alemán party chiefs, the convention refused to recognize the current PLC leadership and provisionally elected new authorities. It also declared null the PLC’s December 2001 internal elections—when, violating the procedures established in the PLC statutes, Alemán handpicked totally loyal authorities—and recognized the legitimacy of those elected prior to that date. The convention also annulled the pro-Alemán convention scheduled for July 11, and called for a plebiscite to elect new convention delegates. It ratified the principle of non-reelection of anyone who has already occupied the presidency of the republic in an attempt to close off Alemán’s aspirations for 2006. Alemán’s backers in the PLC refused to recognize the pro-Bolaños convention, shrugging it off as a "gabfest," legally challenging it and holding their own convention as planned, on the traditional Liberal date, July 11.

The government’s near desperation to twist Alemán’s arm led it to risk using an historically questionable tool: the state-party. It was Vice President José Rizo who called the convention and Alejandro Fiallos, the presidency’s communication secretary, was elected president of the new provisional leadership. President Bolaños himself delivered a brief but crucial speech at the convention, in which he explained one of the profound meanings of the "combined strategy" against Alemán. Without mentioning him by name, he described Alemán’s political challenge to both the government and Liberalism. "His insatiable desires for dictatorial power are dragging the PLC down," he warned. "And today, just as before, this kidnapping of the PLC is leading us into a dark night, which obliges us to stop him right now."

The "dark night" is coming

"Dark night" has been a synonym for FSLN rule since Pope John Paul II, gifted this metaphor to the anti-Sandinista forces on his second visit to Nicaragua in 1996. Bolaños was using it here to refer to the 2006 elections. A divided PLC, or else a PLC in Alemán’s hands with him as its presidential candidate, as he never tires of forecasting, could be defeated by the FSLN, even with three-time loser Daniel Ortega as its candidate. Based on this calculation, Bolaños feels the need to act in time, starting "right now."
In this extremely early pre-electoral analysis, it cannot be forgotten that Daniel Ortega and Arnoldo Alemán, both of whom can still keep a sizable sector of the impoverished population captive and polarized and thus depoliticized and misinformed, need each other to feed their worn out leaderships. Neither should it be forgotten that the attempts by Bolaños’ backers to break this tiring test of strength by creating a new party have in the pact an almost immovable institutional obstacle. To be more specific, the current electoral authorities are the most loyal followers of both strongmen and the current electoral legislation makes it virtually impossible for any new party to prosper. The pact already envisioned this and tied the knots that keep the country trapped in a polarizing two-party system very tightly. Bolaños and the other Liberals who want to renovate the PLC have very little room for maneuver, even given the power of the state.

Trial balloons for the pact

The Liberal convention organized from within the government put the fight between the two Liberal groups at a fever pitch. While the pro-Alemán leadership exerted pressure by challenging the legality of the convention, it threw all its irons into a different fire by dedicating a million córdobas (US$70,000) to put together a street demonstration in support of Alemán in Masaya, Bolaños’ birthplace. It wanted to show Bolaños what real Liberal muscle feels like, to show him once and for all who runs the party, to persuade him that it will be impossible to govern without the party that put him in power. And even more specifically, it wanted to force him into a negotiation in which ending the anti-corruption fight—or at least "shelving it for now"—would be the condition for allowing him to continue governing.

Adding fuel to the fire, and revealing hidden interests in the internecine Liberal war, FSLN National Assembly representative Nelson Artola took the microphone in a plenary session on June 27 to ask for the 60 votes needed to remove Enrique Bolaños for "mental incapacity." He vehemently argued that "there is no other way out than to declare him incompetent, as he rightly deserves, and put someone in who can sort things out!" Incapable, inept, unbalanced… They are the same terms Alemán’s backers use daily to disqualify Bolaños. It cannot go unmentioned that legislative opponents of President Alemán, several Liberal dissidents included, attempted the very same gambit with Alemán a couple of years back.

Artola also based his anti-Bolaños diatribe on the country’s difficult economic situation, the same as Alemán’s backers. "This government isn’t getting moving!" cries Alemán regularly, apparently forgetting his own government’s part in the profound economic stagnation. The immediate excuse for Artola’s petition was the unjustified acts of police repression in Sébaco against coffee growers who were protesting the lack of government responses to their plight. Artola’s Sandinista colleagues in the National Assembly rushed to state this was not the FSLN’s official position but rather an emotional response to the sufferings of the growers in the north, and proof of the total freedom of expression within the FSLN. As Artola is a proven Ortega backer, there is little room for doubt that he was floating a "trial balloon" with full forethought. On June 29, at the annual reenactment of the strategic withdrawal of thousands of Sandinista guerrillas and civilians, including the wounded, from Managua to Masaya under the very nose of Somoza’s National Guard, FSLN founder Tomás Borge launched another. Reaffirming that the government was resolving nothing, he cried, "The FSLN demands a national agreement!"

US cancels another entry visa

Artola’s wrong-headed proposal was universally criticized, and in all analyses appeared the specter of the constituent elections that Ortega and Alemán have been toying with since 1999. The strongest reaction came from the ambassadors of the European Union countries, who the very next day asked the Nicaraguan population to support their President, expressing their concern about "the increasingly strained national political climate."
The international community has never been more active than now. It is explicitly and unconditionally taking Bolaños’ side in his test of strength with Alemán and could well prove the key to calculating who will finally win this inning. The international community has no other alternative for Nicaragua than Enrique Bolaños. Otherwise, it’s the pact and its two caudillos, together with all the corruption and shared impunity that this would imply.
Within the international community, the United States has found a very effective weapon in this war: canceling the entry visas of Alemán cohorts and relatives. They are like fish out of water if they are denied access to their vacation Mecca, their shopping sprees and their businesses. The US government has already applied this measure to Alemán’s iron circle—Byron Jerez and Jorge Solís—and even limited the duration of Alemán’s own visa as a warning shot. Failing to have the desired effect, it then went after the very center by canceling the entry visa of Amelia Alemán, matriarch of the family and active partner in brother Arnoldo’s murky affairs ever since he was mayor of Managua. Smug to his dying breath, Arnoldo Alemán flung the insult right back: "Amelia is resisting the pressures with exemplary firmness," he retorted. "‘Don’t cave in, brother,’ she tells me."
Following in his father’s footsteps and slap in line with all US governments since the FSLN’s revolutionary triumph in 1979, George W. Bush’s government still appears irrationally determined to prevent any Sandinistas from ever taking power in Nicaragua again, even as the result of a democratic process. While this appeared to be a Cold War hangover, it has been given new impetus by the US war against terrorism, which at least for the purposes of the last Nicaraguan elections positioned the FSLN as dangerously connected to the "axis of evil." In this context, it is increasingly clear to the US government that Bolaños and his group of Liberals would be much more effective in preventing the FSLN from returning to power than Alemán and his group. The FSLN, meanwhile, already appears determined to ensure its own failure by insisting on Ortega’s candidacy, pushing unpresentable leaders, and further distancing itself from its principles and from the people. The United States is abandoning Alemán, but very cautiously. It fears the consequences of a power vacuum in the PLC and in a country of unpredictable brushfires that could turn into raging blazes. It recognizes the weight that the Alemán current still has in the PLC and that caudillismo still has in the country, which would potentially favor Ortega at election time.

Shades of Argentina

On June 29, the PGR announced that as part of the case it had opened on Byron Jerez’ brother Gerold, it would also investigate GENINSA, a corporation that administers the Alemán family estate—Amelia is its legal representative. The PGR has accumulated evidence demonstrating that public funds were used to pay off GENINSA’s loans and other debts running into the millions.
That same day in a visit to Juigalpa, President Bolaños declared that he felt shame for the "bad offspring" of Nicaragua and the PLC, who had caused the bankruptcy of the Rural Development Institute, directed during the Alemán government by Eduardo Mena, GENINSA’s "foreman" and an intimate of Alemán. Mena currently enjoys immunity as a Liberal representative to the National Assembly.

Two days later, Alemán counter-attacked. He announced over his radio station, La Poderosa, that the economic crisis would force the government to freeze bank funds, as had happened in Argentina. It was a telling sign of his increasingly serious credibility problem—or perhaps of La Poderosa’s limited listening audience—that there were no runs on any bank. President Bolaños referred to his declarations as "financial terrorism" and raised his tone a notch, blaming the economic crisis on the fact that Alemán "sacked the country and left it bankrupt." The PGR warned that if Alemán did not retract what he said, he would be charged with attacking national stability. Alemán continued insisting that Nicaragua would experience the same problems as Argentina unless there was a national agreement. On July 9, the PGR charged Alemán, but the gesture was more symbolic than effective and irrelevant compared to other more clinching and strategic suits.

The missing link

On June 29, Alex Centeno Roque, the most hunted fugitive of justice among the dozen or so Nicaraguans hiding in different countries, was captured in Honduras. He and his brother Saúl, responsible for the collapse of Interbank, the bankruptcy of hundreds of small rural producers and protagonists of the greatest swindle in the country’s history, "the rice husk scam," had been eluding an arrest order since February. They have 13 lawsuits hanging over their heads, three of which carry prison sentences. Alex Centeno began an odyssey of court appearance on July 2, denying all charges.
Any number of people in Nicaragua knew where the Centeno Roque brothers were and what they were doing. But it took four months for a joint operation between the Honduran and Nicaraguan police to manage to capture one of them. Although Alex had donned a new look that made him almost unrecognizable, the timing of his capture gives food for thought. Conjecture aside, however, much information is still needed to be able to better understand what is lurking behind this capture. Is he a catch to parade before the international community? If Bolaños has decided to target the anti-corruption fight on Alemán and his circle, the international agencies and the US government are not forgetting the other focal point: the FSLN interests behind Interbank. Or is he a pressure point on the FSLN? On Alemán himself? Perhaps even on others the public knows nothing about?
The Centenos are, as humorist Molina cleverly remarked, the "missing link" between Alemán’s clique and that of Ortega and other financial, business, commercial and even religious powers. Brilliant peasants from Quilalí who became millionaires in a single decade, owners of apparently the greatest fortune in Nicaragua, these brothers knew how to convince people of all ideological colors in the nineties, the confusing years of the piñata, the agrarian counter-reform, the pact and institutionalized corruption.

The Panama accounts

Yet another overwhelming corruption case with Alemán at its center broke on July 3 with a plethora of numerical details. In collaboration with Panama’s judicial and banking institutions, the PGR gained access to nearly a dozen of Alemán’s accounts in Panamanian banks, some joint accounts with Byron Jerez, which appeared to have been used to launder public funds so they could be used in private businesses. It is becoming increasingly clear that millions of dollars passed through these accounts. The PGR reported that it had tracked down other accounts and properties belonging to Alemán in a number of countries with the objective of returning all this ill-gotten money to Nicaragua. Transfers had already been made to empty many of these accounts.
Among the joint Alemán-Jerez accounts, one in the name of the Nicaraguan Democratic Foundation had received funds from the company involved in the Channel 6 fraud, which is crucial evidence that further links Alemán to the first corruption case to be heard in the courts. Alemán declared that the account did not belong to him but to the party. All the PLC leaders unanimously denied this or said that this was the first time they had heard that their party had so much money abroad.

Theater in Masaya

It was in this tense climate that the pro-Alemán/anti-Bolaños demonstration was held in Masaya. It was a depressing spectacle, in which some 12,000 peasants (the organizers had predicted 30,000) from rural areas were taken to Masaya in busses and trucks to back a person that most of them truly consider a good governor. And why do they believe that? Because in their districts there are signs saying he built latrines, opened access roads, built schools or put in telephone lines, which they consider "undeserved favors" by a benefactor government rather than works to which they have every right as citizens of this country and that were mainly financed by foreign cooperation in the wake of Hurricane Mitch. In the demonstration they burned portraits of Bolaños and Rizo, shouting, "They should go!"
Alemán’s speech—he spoke behind a podium replete with sacks of sand, in case of shots—was brief, loud and menacing. He warned that "we’re going to teach the inept and incapable how to govern!" He also insisted that Nicaragua was heading down the same road as Argentina. Although he did not announce his presidential candidacy for the next elections, as had been speculated, he did imply as much through one of his favorite phrases: "There is no deadline that does not expire and no debt that is not paid!" The most significant part was his call for "a political accord among the country’s influential forces." If not, he warned, "there are difficult days ahead for Nicaragua!" Alemán announced that on that very day the PLC was launching a "fight against poverty," making it clear that it was not against corruption. Days later, René Núñez, Daniel Ortega’s spokesperson in the National Assembly, declared that the only way out of the crisis in Nicaragua is a "political accord." And Tomás Borge announced that the FSLN would be initiating "the struggle against poverty" on July 19, the anniversary of the 1979 revolution, making the same distinction similarly understood.

Spectacle in Managua

After the grotesque theater in Masaya came the real pressure: the fanatic spectacle of the pro-Alemán PLC convention held on July 11. Was it a prologue for a second edition of the Alemán-Ortega pact?
During the event, the delegates ratified Alemán as honorary president of the PLC and clamored for a pact. This got packaged as part of a national proposal to "get Nicaragua moving again." Its first point, the most concrete priority, is a national agreement involving only the "majority political actors" and excluding the "minorities deluded by power." According to Alemán’s fans, the only participants in this "negotiation," which must get underway "immediately," are the government, the PLC, the FSLN and the Christian Way and Nicaraguan Resistance parties, the latter two unconditional PLC allies.

The Supreme Electoral Council, controlled by the pact with three pro-Alemán magistrates and two pro-Ortega ones, is charged with deciding which of the two Liberal currents is legal. The magistrates were invited to the convention, attended and were given an ovation, thus legitimating the Alemán wing of Liberalism and condemning the Bolaños wing to oblivion. It was the first appreciable move of the pact since the inauguration of Enrique Bolaños, who is now experiencing the paradox of heading up a government in the opposition while also trying to grapple with this two-headed monster fabricated by Arnoldo Alemán and Daniel Ortega in 2000 that is functioning in three of the four branches of state. Leaders of the Convergence, which is allied with the FSLN, rejected the possibility of any new pact and warned of the danger. Although invited, no diplomats or Catholic Church representatives attended Alemán’s convention.
With regard to the fight against corruption, the proposal affirms the party’s backing, as long as it is "impartial and respectful of human rights," and is conducted under the principle that "All—all!—are innocent until proven guilty." Naturally, the convention delegates made no proposal to reform the Immunity Law, which prevents some of the guilty from being proven so.

Reforms and adjustments:
Twenty days of solitude

This war is developing against the backdrop of the economic crisis and the country’s undeniably serious problems are serving as fuel to the pro-pact rhetoric of both Alemán and Ortega’s supporters.
As people’s fear that he would back off in his fight against corruption began to erode Bolaños’ popularity, he and his Cabinet members found themselves faced with their first major economic controversy. The government was largely responsible for finding itself alone in this crisis. With a lot of improvisation and little prior consultation with sectors that would be affected, the executive branch sent the National Assembly a budget reduction proposal and a tax reform bill that included new collection measures. President Bolaños requested immediate approval for both.
The government’s argument is as simple as it is correct. Nicaragua spends considerably more than it brings in every year, which has created an unsustainable fiscal deficit. To reduce it, budget expenditures need to be cut and more taxes have to be collected. The budget adjustment bill therefore seeks to cut the equivalent of roughly US$40 million, while the tax reform proposes measures to collect the same amount, largely through eliminating exonerations and exemptions.

The Assembly received the legislative package on June 11, giving it under 20 days to discuss and approve the legislative package. If it did not happen by June 30, Nicaragua would lose the opportunity to get the International Monetary Fund’s endorsement and sign a new structural adjustment agreement, which is an indispensable condition for getting the $100 million that the country urgently needs disbursed before the end of the year. It also needs the IMF’s green light to receive other bilateral aid funds and to get into the HIPC foreign debt reduction program this year. Nonetheless, all legislative benches immediately rejected the proposed measures, forcing the government to postpone a scheduled August meeting with the IMF in Washington for another two months.

World record deficit

Although the agitprop of the FSLN and Alemán’s group mechanically link adjustments and reforms to neoliberal abuses and the incapacity of "that old traitor Bolaños" respectively, the former is simplistic and the latter plain wrong. Nicaragua has the highest fiscal deficit relative to its gross domestic product in all of Latin America, in fact on the planet. The country spends the equivalent of $900 million annually and brings in only about $600 million. The government says it has gotten donations and loans to close this gap somewhat and that it is thus reasonable to ask the country to do its part by providing more and spending less.
This fiscal deficit, which has been growing for years, reached its current scandalous levels in the last two years of the Alemán administration. A major dose of responsibility goes to the FSLN which, bound to Alemán through the pact, tolerated and shared his corruption on the understanding that Ortega would return to power through that pact, enabling the FSLN to recover from the bankruptcy caused by the collapse of Interbank. The origin of the fiscal deficit is a structural imbalance between income and outflow, but its exponential growth comes from both the corruption institutionalized by Alemán and the bank failures in which both sides to the pact participated. The first deprived the country of at least US$600 million and the second cost another US$400 million.
The budget Alemán drew up to be executed in 2002, which had the greatest gap in our history, would have left whoever won the elections, be it Daniel Ortega or Enrique Bolaños, with an unsolvable problem. And that was just fine with Alemán, who would politically manipulate the financial chaos for his own populist purposes, with an eye on his presidential candidacy in the 2006 elections.

Pressure from the IMF

In fact, Bolaños was not following such an irresponsible budget. The adjustments he sent to the parliament only sought to formalize in law the cuts he had already begun to make. Was this formalizing really necessary? The international financing institutions, which are strongly backing Bolaños and believe in his determination to eradicate corruption, are not so quick to believe the macroeconomic figures, and Nicaragua’s record in this area justifies pessimism. Thus the IMF turned on the pressure to insure that the budget cuts already being implemented and the tax reforms to be implemented would be officially on the books. Although laws are no guarantee of compliance, they do at least serve as evidence. Strong-arming by such a powerful creditor as the IMF put the government in a tough spot, since it had little time and not much practice in seeking consensus. It thus presented a proposal that fell like a bomb, eroding Bolaños’ support in critical moments of this inning with Alemán.
Even the pressure, however, could not explain certain areas of inexplicable incoherence in the budget reforms. One was a $3.5 million increase in the presidency’s budget for running expenses, especially salaries. Excessive salaries in the executive branch and a retinue of high-ticket advisers and consultants would appear to have little to do with Bolaños’ self-proclaimed "New Era."

Everybody pinched

It was not the budget cuts but rather the tax reforms that caused the biggest controversy. Arguing the urgency of increasing the base of contributors who pay direct taxes and reducing the excessive volume of exonerations, the government proposed measures that unsurprisingly caused an outcry from the many who would be affected by them.
The proposal includes taxing—for the first time—certificates of deposit, the first and second prize from the lottery, and the profits of casinos and bingo and slot machine houses. It would increase the tax on airplane tickets, alcoholic beverages, soft drinks and cigarettes and the income tax rate on profits from professional services and self-employed professionals. It would suspend the income tax exemption for NGOs whose activities generate profits, including micro-financing institutions that provide much-needed credit to urban and rural producers. It would not affect the products of the basic market basket or increase the sales tax—already an astronomic 15% that we all pay on the majority of goods and theoretically all services.

After constant pressure from the executive branch to approve the bills and constant threats by both pro-Ortega and pro-Alemán legislators to return them unapproved, the latter suddenly relented. They issued a favorable finding on the budget adjustments on June 29, just as the established period was ticking to a close, and pledged to seek consensus to approve the fiscal reforms.

It turns out that the previous day, with tension at its peak, the ambassadors from European Union countries had added their own unusual dose of pressure in a statement that included the following: "The reforms that the Government is promoting are essential to strengthening the rule of law…. The EU invites the other state institutions to collaborate with the Government to surmount the challenges it is facing." It did the job.

The government immediately announced that it had a comprehensive fiscal reform ready for 2003 that emphasizes the elimination of tax exemptions and exonerations.

Neither terrorism nor favoritism

On balance, the government got the orientation of the fiscal measures just about right, but they were criticized by the experts because their improvisation and lack of strategy risked the very goal they sought: to collect more. The measures were also criticized because they failed to go after certain as yet untouched "collection niches."
According to comments to envío by tax law expert Julio Francisco Báez, touching just one of these niches, which happens to be in the government itself, would bring in the equivalent of about US$25 million annually. "The government, the state institutions are supposed to pay sales tax on all purchases of goods and services, and they don’t do it," explained Báez. "In addition, there are institutions that legally should not be exonerated. The problem in Nicaragua is not the exonerations but the discretionary way they are granted. The government has made deals to get on the good side of certain organizations, de facto excusing them from paying taxes, in violation of the law. The first sieve through which public resources leak is thus in the government itself. Such exonerations never benefit the poor.

"This is why an overall figure, like the one the government gave us, on how much has gone uncollected due to the exonerations isn’t good enough. Detail needs to be provided by breaking down the exonerations, as there is no transparent explanation of how the government has granted them. We know that the exonerations granted outside the law are scandalous. No law needs to be passed; it would suffice to obey the existing ones. Just doing that would bring in billions of córdobas more. There is still too much discretion, too many legal loopholes and fiscal favors. Neither the Somoza government nor the Sandinista government nor the Chamorro government used fiscal issues as a brutal tool of political pressure. It was Alemán who inaugurated fiscal terrorism. It’s now up to the Bolaños government to make an explicit break not only with fiscal terrorism but also with fiscal favoritism."

CONPES: Cosmetic formalism

The fiscal reforms were not just a technical improvisation; they were not even presented correctly and on time to the National Council of Economic and Social Planning (CONPES), which is a constitutional-ranking body for consultation between the presidency and civil society representatives. While some of its members felt they had been sidelined, Treasury Minister Eduardo Montealegre argued that the project had been shared with CONPES. The fact is, however, that the government’s presentation amounted to nothing more than a formal and formalistic presentation. Montealegre hurriedly met with CONPES and took an hour to explain what the plan consisted of, without submitting any document that would allow it to be studied or debated.
This experience buttressed an already existing controversy about whether or not CONPES makes any sense. Originally created during the Alemán government with support from the United Nations Development Program, and with members chosen by the President, it has since been expanded by Bolaños. It is in danger of turning into nothing more than a sounding board for the latter’s policies, however, if it has not already done so. This formal and cosmetic role undermines the power that CONPES could have had as a kind of civil society assembly. As such, it could have provided a counterweight to the pact-dominated National Assembly, where the FSLN and Alemán-led PLC benches can negotiate a combined 87 votes to 6 for the Blue and White bench, Liberal dissidents who are Bolaños’ only parliamentary allies.
CONPES is an expression of the weak and weakened national civil society and some of its members are seeking to make a political career from it through the media. But there are already too many people playing politics through the media and too few actually doing anything among and with the people. Perhaps a key to revitalizing CONPES would be to get it out of Managua, setting up departmental CONPES offices in which local civil society could participate. As long as CONPES remains simply part of the country’s Managua-based macrocephaly and one more expression of "media-born politics," it runs the risk of never growing beyond a cosmetic formality.

Two cultural challenges

The experts’ critique of the fiscal reform whipped up the resistance of all sectors to all the measures. It was even suggested that the increase in rum, beer and cigarette prices was just one more neoliberal brutality that deprived the poor of even these consolations to forget their misery.
Taxing the savings accounts of institutions, be they international cooperation, NGOs or businesses, is a fair measure aimed at the big depositors and is implemented all over the world. The country’s big capitalist interests certainly did not applaud it, but they also did not make a big fuss about it, since they had bigger fish to fry. The NGOs took that task upon themselves, as a bloc.

Deeply rooted resistance

There are certain analogies between the resistance triggered in the country by the fight against corruption and the resistance deployed against the fiscal reforms. Understanding why society is resisting both is a necessary step on the road towards developing a real sense of civic consciousness. The opposition to the tax reforms is even stronger and angrier than the opposition to the anti-corruption fight. The social consciousness in Nicaragua that condemns corruption and links it to the national impoverishment is barely taking its first unsteady steps—until very recently a politician who "robs but gets things done" was beloved and a politician who didn’t rob was considered a fool. By comparison, a culture that accepts the need for taxes and is willing to pay them is still in diapers. We need a lot more schooling in both of these two expressions of an authentic civic culture.
Everyone in Nicaragua is demanding that the state provide good social services, but no one thinks about how they are going to be paid for. The culture of tax evasion—the most frequent form of corruption in the private sector and among individuals—is very deeply rooted. And another, equally rooted albeit more recent culture exists among those with more resources: Nicaragua’s wealthy believe that international aid should pay for social services, that the government should finance them with donations from the international community.

Bolaños has more allies in the fight against corruption than in the tax fight. By heading up the anti-corruption struggle, he has won allies both among the poor who are indignant at the squandering, and among the big capitalists, for whom a corrupt state perverts the ground rules to such a degree that they lose control. They are not, however, interested in seeing changes in the rules of a game that has tolerated their historic tax evasion. Big capital has no desire whatever to share its wealth or to invest in the country’s future by helping to pay for good social services for the poor.
Even among the Central American elite, historically known for opposing any tax reform proposed to them, traditional Nicaraguan capital is further characterized by never even having philanthropic tendencies. No matter how technically well crafted Bolaños’ tax reform proposal was, it still would have come up against tremendous opposition from the country’s big business.

The bureaucratic caste

With the fiscal Pandora’s box now open, further opposition surfaced from among the privileged bureaucratic caste that is governing the country from luxurious offices. In the midst of the controversy various sectors justifiably recalled how much the Ortega-Alemán pact has burdened the national budget by unnecessarily increasing the number of high-level officials with even higher-level salaries in the Supreme Court, the Office of Comptroller General, the Supreme Electoral Council and other less visible institutions. Why not reduce the number of these top posts again? Why not review the parasitic positions in so many other state institutions, where privileges and fat honoraria persist? Why not establish a "maximum salary" for this whole caste?
Those pointed at preferred to make no comment, as if the accusation had nothing to do with them. The National Assembly representatives are the worst and most brazen evaders in the country. They have confessed to paying no income tax on their salaries of over US$5,000 a month and have done nothing to correct this irregularity. They are also exempted from paying taxes on the two vehicles they are permitted to buy during their five-year elected term. In addition, they awarded themselves nearly US$30,000 annually for "social works" that no one has any control over. This ends up financing a corrupting political proselytism and personal projection that help perpetuate the historic problems of caudillismo, while the local governments are starved of resources. On top of all that, they awarded themselves another US$70,000 per head as a "prize" for having legislated the privatization of the state telecommunications company last year. Luckily, the Treasury Ministry froze the amount and is not going to let them have it.

"Close the National Assembly"?

The mayors of the poorest municipalities demanded US$2.5million from the National Assembly representatives, which is the sum of the $30,000 each one gets for "social works." Civil society backed the mayors’ demand, while the agricultural producers asked that the additional US$70,000 they got be used to create a fund to promote rural production. But nothing happened; not one legislator even blinked, much less shared any of the wealth.
How can an equitable tax reform be drawn up if those who approve it pay no taxes? The executive branch, ethically very weak because it rewarded the representatives for approving the fiscal reforms, was in no position to question or even mention any of the privileges they enjoy. It was not about to assume the political cost of confronting them.
A frank confrontation in this area would have been exemplary, worthy of a New Era. It was not for nothing that in a national survey conducted in mid-July, in response to a question on what they would recommend President Bolaños do to solve the current governance crisis, 51.9% s aid, "Close the National Assembly." The reality is that a "Fujimori maneuver" would receive a standing ovation in Nicaragua.

A disappointing pension

President Bolaños himself fell into the generalized bad example that accompanied the debate on the tax reforms. As all opinion makers were going around, calculator in hand, to see where to cut $40 million and where to get $40 million more, the media recalled a "detail": the annual budget earmarks over $440,000 for lifetime pensions to former Presidents and Vice Presidents.
The privilege gives pause for reflection. Alemán receives his pension as a former President, a salary for being a lifetime National Assembly representative and another salary for being a representative to the Central American Parliament. Ortega "only" receives the first two, but virtually never steps foot in the Assembly. Bolaños receives his salary as a sitting President and his pension as a former Vice President, even having resigned a year early, as required by law, to run for presidential office. Why should he receive a pension as a retiree if he not only did not retire from his political career but now occupies the highest step on the political ladder?
The controversy hit all three, especially Bolaños, who has claimed to be and to want to be exemplary. The President’s argument to justify his roughly $6,000 monthly pension as a former Vice President and his unwillingness to renounce it seriously eroded his image. First, he said his pension was legal. When journalists began to argue back that the question was more whether it was legitimate and ethnical given the country’s poverty, he said he "deserved" it because he and his family had been "robbed" of $9 million when the Sandinista government confiscated properties and other possessions in 1985, and because he is "fighting to recover democracy." Apart from the fact that Bolaños received much of his property back from the Sandinista government itself prior to the 1990 elections and was compensated by the Chamorro government afterward, such an argument reveals that atavistic conception among our politicians who consider the state as their personal treasury.
When the media reported on the US$200,000 cash compensation, as well as the indemnification bonds and return of some of these properties to Bolaños, he insisted that he had been a "multimillionaire" and still did not feel compensated for all the money he had lost. This is a country in which most rural producers and laborers receive no pensions whatever, and most of the thousands of pensioners who contributed to the system through state or private sector jobs only receive a little more than $60 a month. It was thus very disappointing and even demoralizing to discover that Bolaños is receiving so much—and on top of an even larger salary as President, to boot—and that he defends it to the death on the grounds of a sacrifice for democracy that in fact virtually all Nicaraguans have made.

In the end, the executive branch announced that it is sending the National Assembly a bill reforming the sections of the Immunity Law that regulate the granting of annuities to former Presidents and Vice Presidents of the Republic. First, it would exempt those still holding remunerated public posts, thus eliminating Alemán, Ortega and Bolaños himself from receiving this pension. The bill specifies another exception as well: "Former Presidents and Vice Presidents whose actions have resulted in the State of Nicaragua being condemned for violating Human Rights by any international body recognized by our judicial order…." This clause seems to anticipate the Inter-American Human Rights Court condemning the Nicaraguan state for denying Zoilamérica Narváez’s right to justice in her case against Daniel Ortega.

We are woefully
short of good examples

It was regrettable not only that all sectors opposed the tax reform during the debate, but also that no one wanted to give up anything to contribute to something. It was just like the struggle against corruption: no one has recognized anything or repented a single action. No one wants to step forward, least of all to give a good example to the others. No one says, "Yes, I did it; I regret it and I will not do it again." In a country that claims to be so Catholic, with politicians and political leaders who always speak in the name of God, and now of Sister María Romero, the recently sainted Nicaraguan, heartache, the confession of sins, the idea of making amends and fulfilling the penitence, offering restitution to repair the sin—all classic steps to reconcile with God—seem to have no place.

No one stepped forward on the tax issue either. The ministers did not announce that they were willing to reduce their still astronomic salaries by some percentage given that things are so difficult for Nicaragua. The business leaders who belong to COSEP—those who have most publicly opposed the reforms—proposed nothing other than to defend themselves. Neither legislators nor politicians nor the President renounced anything. Not even the NGOs, which also defended their exonerations like a mother protecting her young, suggested giving any of them up—not even the card that allows them to eat in fancy restaurants without paying tax. Although many NGOs handle enough resources to collaborate with the country by paying some taxes, and many obtain income from their activities or pay their officers quite lucrative salaries, all put on the face of "little sisters of charity" who only provide services and thus do not pay taxes.

Not only rights but also duties

As the fiscal reforms were not accompanied by symbols of austerity and solidarity, bold gestures that are so necessary right now, an opportunity was lost to make progress along the road that must take us to a civic culture, in which we fulfill our duties with the same energy as we defend our rights. Such a culture would have no need for caudillos and would be immunized against corruption. Only such a culture will lead us to want to share a national project and to know how to compete in a world that is increasingly complex.

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