Nicaragua

USAID's Strategy in Nicaragua

In three years AID has brought about in Nicaragua a real and nearly complete counterreform, and not only in the economic sphere. On this topic interviewed expert in the field Angel Saldomando, economist and political scientist.

Envío team

With President Bill Clinton's arrival at the White House and the strengthening of the Democrats in Congress, information and speculation about changes that the US Agency for International Development (AID) could undergo have been on the rise. Among such possible changes are a de politicizing of US assistance to Latin America's governments and more attention to sustainable economic development.

In a seminar on AID's role in Central America, held in Managua in February, there was wide agreement on the need for changes. The participants noted that AID's officials in each country are not the most appropriate interlocutors, that US aid breeds corruption and that, if the goal is stability and development, nationals should have greater participation in discussions about the focus of assistance.

During the three years of Violeta Chamorro's government in Nicaragua, the old AID has had a heavy hand in the country's political and economic arenas, without even a hint of the changes now in the air. Given the still uncertain "change at the helm" in AID, we offer an evaluation of the role of US cooperation in Nicaragua, based on an interview with economist and political scientist Angel Saldomando, a researcher at the Regional Coordinator for Economic and Social Research (CRIES) who has specialized in the topic. The boxes accompanying the interview are taken from his book, El retorno de la AID: el caso de Nicaragua, published by CRIES in 1992 as part of a five volume series on AID's role in Central America. CRIES plans to publish a synthesized compilation of the five books in English in the coming months.

envío: How was AID's arrival in Nicaragua after the UNO electoral victory?
AS: It returned at a very unique and unexpected moment. With the elections, a political space opened up for US cooperation that AID, like many others, had considered very improbable. It quickly had to recruit people to come here to set up its programs. The majority were officials with experience in other Central American countries, and some had even been here before, during the Somoza period. All of them, some 50 in total, were strongly influenced by the anti Sandinista US policy of the 1980s.

Because it was caught off guard, AID didn't get its master plan for Nicaragua drawn up until nearly a year after the elections. It was very prudent at the beginning, but even then it was clear that its reinsertion into Nicaragua would give it a unique opportunity to push what I've called a "counter reform."
AID hadn't had such an opportunity anywhere else, because what happened in Nicaragua wasn't just a change of government within a stable political system, in which AID would have to support certain projects already underway or, at the very best, change them gradually. Here things were totally different; it was a completely exceptional situation. At the beginning, AID's expectations for a counter reform were high, and its first reports to the Senate Foreign Affairs Committee very optimistic; it was sure that all the money it was bringing $300 million in exceptional aid and another $200 million in programs and projects would rapidly allow it to consolidate UNO and force the Sandinistas into an irreversible retreat.

AID's profile in Nicaragua was thus very ideologized, very political from the outset, and it became quite controversial. AID officials didn't come to Nicaragua to build consensus or strengthen consensual policies. They came to give their full support to a counter reform strategy, which necessarily involved them deeply in Nicaragua's internal politics right from the start.

envío: How did the reality that AID found here affect this counter reform strategy?
AS: Its strategy forced AID to find interlocutors that could make such a broad and deep project viable. At the beginning, the government wasn't very coherent. It was a mixture of expectations also in favor of a counter reform and political interests very linked to specific personalities. Even today much of that initial mixture still remains.

Everything was very uncertain and the government was politically inconsistent about what tactics to follow, how to make the counter reform politically viable, how fast to implement its elements, what problems it would raise, and the like. Up until September 1990, when the first phase of the concertación got underway, everybody in the government was pulling in different directions, trying to impose their own rhythm and objectives. The launching of the March 1991 economic adjustment plan was a signal that at least some tactical aspects had been resolved, such as where to begin, at what speed, what the plan's political implications were and in which areas consistency would have to reign. Consistency was achieved around the economic stabilization program, and, with that, the counter reform began in earnest, and with more coherence.

envío: Does counter-reform mean economic counterrevolution?
AS: The term counterrevolution has other connotations. Counter reform is broader. In addition, part of the counter reform's economic policy implemented by this government actually began in 1988 with the adjustment the Sandinistas initiated. But the counter reform of today isn't just economic, it's total. AID's master plan covers virtually all areas: institutionalization, reform of the state, legal reform, reforms to the Constitution, reforms in the police, economic reform, recomposition of business class hegemony, accelerated restoration of the market, etc. In AID's logic, such a sweeping plan would obviously lead to a restructuring of the country and, naturally, to a change in the correlation of forces. AID officials thought that if they could show economic successes, Sandinismo would sink into an irreversible political crisis, into a definitive retreat, which would lay the basis for the further advance of their own project. It was a very mechanical, very automatic scheme. Later, when they realized that things weren't so simple, they changed their discourse, and their reports began to admit that all the money they brought wasn't enough to change Nicaragua completely and end Sandinista influence, and that they hadn't imagined how much remained to be done.



envío: Was AID's program for Nicaragua similar to what it has applied in other Central American countries?
AS: In certain ways it's similar to the standard counter reform package they've been applying in the region. It follows basic master lines: liberalize and deregulate the economy, support sectors of the business class that can insert themselves into the foreign market, financial reforms, support nontraditional exports and see how these economies can fit into the US market and the Caribbean Basin Initiative. But in Nicaragua, many more political aspects have been added to this standard economic package.

AID wasn't flexible toward a situation as exceptional as Nicaragua's a revolution, a war of such magnitude. What happened here clearly revealed AID's fundamental problem: it isn't a development institution that plugs into national processes and uses the feedback from them to formulate its projects. US officials don't adapt their focus, their methods or their work style to national situations, nor do they concern themselves with national priorities.

AID didn't come to take in Nicaragua's reality in order to improve it. It came to apply its standard policy, designed according to US foreign policy interests. And that policy came with lots of strings attached. In Nicaragua, AID's strings have been tied to two key points. One is that the Chamorro government comply with the projects that AID designs. The other is linkage with the International Monetary Fund and the World Bank: if the government doesn't comply, it won't receive funds from those multilateral lending agencies. It should be remembered that congressional law prohibits AID from putting conditions on its cooperation with any country, but it has never complied with this law, as AID itself shamelessly admits.

In El Salvador and Costa Rica, AID had to pull the strings of its assistance more gently. In Nicaragua it came to "kill the patient." It was really crude. Naturally, this could happen because the Chamorro Lacayo government totally agreed with AID's conditions, and still does. While this is also true in other Central American countries, interest in the counter reform wasn't as strong or as specific as it was here. Costa Rica's National Liberation Party, for example, knows perfectly well that its survival depends on not sacrificing the social gains that had been won in the country, and this gives it more consistency in negotiating with AID.

envío: What was AID's relationship with the new Nicaraguan government like?
AS: From the very beginning the relationship was marked by this focus on counter reform. AID supported the government because it had the legitimacy to head the counter reform. It also saw the government as an instrument that could unite the right. AID knows only too well that the Nicaraguan right is not socially and politically organic. So the only way to promote the counter reform was to support the Chamorro Lacayo government. In other Central American countries AID supported one sector of the business class, so that it would push the reforms. In Nicaragua, AID had good reason to act differently. It didn't have any confidence in COSEP [big business' organizational umbrella] or in its administrative capacity, and feared that it might lose its money down that road. Besides, it viewed COSEP as an inconsistent institution, lacking the ability to propose or develop policies. It also recognized a very important political consideration: it realized that if it gave significant resources to COSEP, it would be giving it so much power to pressure the government that it could destabilize the political game, leaving AID with a government that was a weak interlocutor.

envío: But US assistance has never excluded either COSEP or other ultra right sectors or figures...
AS: No, never. From the very beginning, AID maintained interlocutors outside the government so as to pressure it any time it became necessary. Proof of that abounds: support to the mayors' movement, AID's relationship with [former National Assembly president] Alfredo César, a similar relationship with COSEP and with UPANIC [the big growers' association within COSEP], its insistence on the issue of the confiscated property owners, the substantial aid to Managua's mayor. AID and the US government has played all of these cards at moments in which it became possible or necessary to pressure the government on some issue for example, that of privatization.

The government realized that AID was playing a double game, using double language, exerting pressures outside official relationship channels. Although it was annoyed by this, the government never did anything to remedy it.

The focus on counter reform framed the AID government relationship, and AID's desire to move the counter reform forward as quickly as possible framed its relationship with the ultra right. But it must be said that the coincidence between the government's expectations of the counter reform and those of AID were such that it was unnecessary for AID to have much political visibility. A Mayorga, a Silvio de Franco and a Pereira [former or current members of Chamorro's economic Cabinet] and even Lacayo himself had and have the same vision as AID, which means that they never had any serious conflicts. There were occasionally different viewpoints regarding the speed of the counter reform and how to gain greater political viability to carry it out. And that, only because the government knows the Nicaraguan reality better. Also because the government needs to govern, and, to do so, it needs political viability. And it only gets that in sufficient measure by negotiating with and making concessions to Sandinismo. AID wouldn't have wanted any of that, and, in fact, it only permitted the government certain room to maneuver at a specific moment in the privatization business.

envío: How far has the counter reform project advanced?
AS: In my judgment it has advanced quite a long way. It is incredible what has been done in three years here. Or what has been undone, depending on how you look at it. New things have been done, although many in areas that the Sandinistas had already created. Things have been dismantled and new spaces have been opened with new rules of the game and new institutions that provide the norms for them. I would say that AID's counter reform project has had great success so far.



AID thinks so too. The majority of the counter reforms included in its master plan are already installed, as the government has been announcing. Almost all the conditions have been fulfilled and those that haven't yet will be. Government capitulation? Yes, in the sense that the capitalist sectors that govern want to internationalize the country to the core, and in that option there's no space for national producers or for small and medium sized growers or for a peasant economy or for anything else on that order. The government has put all its money on international accords and commitments that give it the correlation of forces abroad that it doesn't have domestically. The reality is that this government has permanently held the conditions of AID, the IMF and the World Bank over people's heads like an ax: if we don't do this, the foreign resources won't come, we won't have money, there's no choice but to comply...

envío: Could Nicaragua then be considered an economically intervened country, one that has economically lost its national sovereignty?
AS: It could. There has been a growing loss of sovereignty in the sense that national actors have ever less space to make national policies as a function of national priorities.

envío: That's exactly what neoliberalism is in poor countries...
AS: That it is; it's even more serious here, because there has been no respect for the country's weakness after a war.

envío: So, then, it's all achieved, all fulfilled. No pending problems?
AS: On the contrary. AID's problem is very serious, because, for all that it has done, this country is no more politically stable or democratic. Up to now it doesn't even have anyone who can guarantee that these counter reforms will be sustainable over time. There's a big paradox in Nicaragua: despite the counter reform's success, no social sectors exist that can plug into that success and sustain it over a long enough period for it to be said that Nicaragua is re stabilized on the basis of this counter reform and this new social subject.

AID has a problem here that it doesn't have in the rest of the region. Nicaragua doesn't have a sufficiently vigorous business class such as exists in Costa Rica, El Salvador, Guatemala or Honduras to guarantee the reforms. In those countries, AID has forced the grassroots worker and peasant oganizations that oppose the adjustment policy to step aside, and by supporting certain business strata has managed to consolidate the adjustment. In Nicaragua, where a revolution changed the country's correlation of forces in many respects, this hasn't been achieved. And it will be hard to achieve. The government, as the spearhead, has opened spaces to the business class, but this class is still very weak; it's still convalescing from the revolution and has been unable to fill the spaces offered it as fast as the reforms have been made. I think that, at this point, AID already knows that this will take much more time, that it's the dark side of the moon. Three years after the change of government, AID can say: the counter reform was made. But it cannot say: 1) there's a hegemonic and consolidated rightwing business class in the country; 2) the market economy is showing results; 3) the country is politically stable, at least in the style of the other regional "democracies"; or 4) Nicaragua is no longer a security problem for the United States. It still can't say any of this.







envío: Does the ultra-right have any problems with the counter reform of the government and AID?
AS: None whatever. The ultra right's problem with the government is political: who administers the counter reform, who benefits most from it, who heads it up with the opportunities that state control offers. Beginning in September 1990, with the concertación, the government took the reins with the support of Sandinismo. With FSLN support, Lacayo has been resolving the problem both of political viability for the counter reform and of who leads it. He needed that support. Besides, the army and the Sandinistas let him know from the outset that if, by chance, leadership of the counter reform fell into ultra right hands, they would make the country ungovernable. The government knows the FSLN can do it and knows that its own head is on the chopping block if it loses control of the process.

The ultra right's problem is its lack of political coherence. But it can't make anyone believe that it has a different perspective on the counter reform. None of them, not César or Alemán or Godoy, has any other economic policy. The only ones that could have it are the Sandinistas, but so far they don't have one either, even though they've been drawing up some suggestions.

What's being played out in Nicaragua today is not only the issue of how far the counter reform will be pushed, but also something else that remained a bit hidden during Sandinismo: whether or not a social sector will come together that can establish a certain political and economic equilibrium in this country, a nationalist, although not extremely progressive business sector that isn't the grassroots, but isn't the old oligarchy either. Will such a business sector emerge that's determined to found a national developmental approach, one that the Nicaraguan bourgeoisie never had either the opportunity or the desire to create?



The contradiction between the ultra right and the government is between the old Somocista oligarchy, with all its vestiges of vintage anti communism, and a sector of the business class that wants to economically administer the country with a more modern political vision and generate a period of economic development that strengthens it as a social class. In my judgment, the resolution of this contradiction between two sectors of the bourgeoisie inevitably involves coopting a sector of Sandinismo.

envío: Can the solution to this contradiction be predicted?
AS: From the economic viewpoint, it isn't easy, because the national pie is very small. This country has virtually no economic growth. Thus the resources that come from abroad plus the few that are produced here have to be at the service of only one project. These resources are either used to build this new sector, or the old Somocista oligarchy uses them to rebuild their agro export model, or the grassroots sectors use them to start creating a more participatory economic strategy, with more equitable redistribution mechanisms, with social investment, with investment in human capital. But there isn't room for everybody on the same train, and there's no way to stretch it. This country would need 10 or 20 years of incredibly intense accumulation to be able to say: there's enough for everybody, compete to see who comes out ahead. But not now; now you can only establish priorities, and that's the problem. The essential fight between the ultra right and the government lies there, although it isn't completely visible yet, because the process is still very embryonic. For the moment, what's most apparent is a conflict of personal interests, political infighting.

AID hasn't known enough to see this problem because it worked with a simplistic logic: counter reform equals liquidation of Sandinismo equals the strengthening of a business class that can begin to accumulate again and develop the country. AID has wanted to stabilize the country politically to create conditions for accumulation and development, and that's putting the cart before the horse. Because in Nicaragua, a quick, simple stabilization leads to repressive inclinations. Or it leads to the features Nicaragua's crisis is acquiring: a slow motion social upheaval. Social unraveling and political skepticism. The complexity of the situation isn't within AID's mental horizons.

envío: And what is now on its horizon?
AS: Since it's already made the economic counter reform, the time is coming for political reforms, especially given Nicaragua's electoral calendar. That's AID's scenario. The National Endowment for Democracy, which interfered so much from Washington in Sandinista times, just opened an office in Managua, and from what is known, NED isn't bringing a new perspective. The only reforms pending are fundamentally in the army and in the Constitution. There's nothing more for AID to do other than assure the right a political base, of course, and create a viable right that can win the 1996 elections. Is that foreseeable? I don't think so.

envío: Won't it be a coalition of the more modern right and a more flexible Sandinismo that can make things function starting in 1996?
AS: It's one possibility, but not the only one. With all the limitations that polls can have, they show that Arnoldo Alemán, the mayor of Managua, is the one who is moving up and that his is the rightwing party that's consolidating. AID has helped that happen. It can't feign ignorance of what it has meant to support Alemán so openly from the very beginning. The North Americans are fully aware of Alemán's role in the ultra right mayors' movement. And they've supported him both directly and through CARE, which channels AID money to Alemán's office. We've never been able to find out exactly how that works, but we know that there are confidential accounts in the mayor's office, unknown to other municipal council members, and that Alemán moves with great financial discretion, handling a lot of resources and using them to favor his own image and influence. AID isn't unaware of any of this. It helps him with legitimacy and resources because the United States has always followed a policy of putting its eggs in different baskets.

envío: Could the far right's current offensive as a whole be due to how drawn out the Bush Clinton transition stage is turning out to be?
AS: Certainly; a lot remains undefined in the new US administration. There could be a change of focus in AID or not, but what is already clear is that its funds are going to be cut. It will be very important who is named to head AID if it's someone steeped in the cold war mentality or is someone more adapted to new development theories who could change some of AID's erroneous past practices.

The State Department announced its plan to present an evaluation of the work of AID, which is one of its dependencies. It's not yet clear what slant that evaluation will take. If it isn't very critical, that will mean that the Washington bureaucrats are preparing to resist the changes that Clinton wants. Otherwise, it will mean that they're willing to make way for a change. But it's all still confusing and Clinton doesn't seem to have clear ideas about this problem, which is also not a priority for him. His priorities are the domestic economy, and in foreign policy the situation of the former USSR.

With greater or lesser definition, the Nicaraguan ultra right is forging ahead with its offensive to wear down the government. From its perspective, it has to play all its cards, because we're half way through the electoral calendar and it wants to make gains in presenting itself as an alternative. To achieve that, it not only has to increase its social base, but also to resolve the problem of being a gelatinous right. That's a problem that the right that's in government has to resolve as well.

envío: Meanwhile, will Sandinismo be strengthened by the economic power it got with the Area of Workers' Property (APT) the state enterprises privatized to the workers?
AS: It's a pipedream to think that's the only way you can accumulate economic power. The problem is a national one. And it's a dream that can cost dearly. In this ocean of poverty, tying yourself down with these niches of property is like lashing yourself to a shipwreck victim's raft. And besides, the APT doesn't offer any solutions or possibilities to the rest of the population, the majority of which is not included in the APT. I think that it's more viable to think about joint efforts by a sector of businesspeople, UNAG and the APT, depending on their entrepreneurial strategies. There perhaps an economic and political focal point could be brought together, but all this is still very green.

Given the condition of the national economy, space is at a premium; it's only space for survival. And it will be won at a very high cost because the business strategies that many Sandinistas will have to apply to survive won't have anything progressive about them. It's not so much because they'll fall into being some "vulgar neoliberal entrepreneurs," but because they'll have to employ some very competitive strategies just to stay afloat, and this won't leave them much maneuvering room for being progressive. The counter reform already made is very broad and is on the road to consolidation.

If this counter reform framework is consolidated and business sectors that acquire power based on it end up defending it, it will be very difficult for the FSLN, even if it wins the elections, to change that policy. The problem is that to have a different policy, it's not enough just to have good ideas that are just; you also have to have a social base that backs those ideas. If the APT is a successful experience, that could probably give Sandinismo a shot in the arm. But it's still an open question. We have contradictory information. On the one hand it's being said that the APT is a self management project, almost a kind of micro socialism in a micro world. On the other, it's said that all kinds of maneuvers are going on and a top down structure prevails. Some things don't smell too good and others have a lot of potential. We'll have to just keep analyzing things as they go. The phenomenon is completely new, and the next three years will be key in its development.

envío: In any case, was the APT a victory by the workers and a concession that the government had to make against AID's will?
AS: What the APT proves is that it's possible to pry open some internal space, where national interlocutors can discuss things with each other. Although their relations are not always the most amicable, at least a space is generated, an understanding can be reached and something can be accomplished.

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