Alemán in a Race Against Time

With the rains of May, Arnoldo Alemán’s government must apply the harsh measures that the ESAF II imposes on Nicaragua. Alemán has no funds to ease these measures and no time to postpone them. Time is running out.

Nitlápan-Envío team

In its first three months, the government of president Arnoldo Alemán has simultaneously -- and unnecessarily -- opened several fronts of confrontation: with the media, national and international nongovernmental organizations, the women's movement and Protestants, to name just a few. It has also done little or nothing to heal other, older fronts of tension, such as those with the indebted producers, all the beneficiaries of the property transformations, etc.

Even though these conflicts send up sparks, and several of the affected sectors were preparing for the first protest demonstration against the new administration (or uprising, depending on who one listened to) as this issue went to press, the more essential tension, the one underlying many of the others, was barely visible. Alemán is in a race against time to resolve it, and the International Monetary Fund (IMF) is holding the stopwatch.

The IMF Mission: Just an Exploratory Visit?

Alemán's economic Cabinet met several times with a visiting IMF mission in the first week of March. Leonardo Cardemil, the IMF's Western Hemisphere chief, told the Nicaraguan press that the delegation he headed was on an "exploratory visit." But it was much more than that: the IMF sent the mission to apprise the Liberal government of the economic policy rules that must be respected if the new Enhanced Structural Adjustment Facility (ESAF II) is to be signed. As ESAF I was for the Chamorro government, ESAF II is for the Liberal government the door that opens on to international financing under favorable conditions (long-term, low-interest loans) and to a further reduction of the weighty foreign debt that is preventing Nicaragua's economy from getting back off the ground. Scheduled payment on that debt will cost Nicaragua 35% of the total value of its exports in 1997, while international parameters recommend that it not exceed 25%.

Signing ESAF II will give the new government the possibility of getting more money. And money is what Arnoldo Alemán needs most right now. According to some estimates, the Liberal government needs to assure $480 million, not for the country's development, but just to guarantee that the national economy can function "normally" in 1997.

The IMF and the Agricultural Cycle

The Alemán government not only must adjust its economic measures to the requirements of the multilateral financing agencies (the IMF, the World Bank, the Interamerican Development Bank, etc.), but must do so immediately. The second round of meetings with the IMF take place in mid-May, and those will be the truly definitive ones. At that time, the IMF delegation will analyze the measures Nicaragua's new government must propose in writing, but will also take strongly into account what it does in practice in the two months between the first and second IMF visit.

With the clock ticking against it, the economic Cabinet will have to "put the cart before the horse." It will be forced to start implementing certain "economic prescriptions" before having fully prepared its own economic policy assuming it even had a real policy before the IMF's visit, which is a hypothesis supported by very little evidence.

If the government gets a green light from the IMF, the next step will be to sign the ESAF II. If it doesn't, the agreement will be put off. Should the latter happen, it would affect not only Alemán and the Liberals, eroding a good part of the political legitimacy they acquired with their recent electoral victory. It would affect everyone, the entire country, which needs the resources that ESAF provides to reactivate production, especially in agriculture, and to maintain the levels of price stability and macroeconomic balance that have been achieved.

Another time factor is also pressuring Alemán to work quickly: the new agricultural cycle. The cycle doesn't start with the rains and can't wait for the IMF findings, both of which should come in May. It should be starting several months earlier, with the repair of roads, the provision of credit to producers, soil preparation, acquisition of animals and equipment and the purchase of seeds, fertilizers and pesticides.

Nicaragua has thus already entered the 1997 agricultural cycle, but for a variety of complex technical and also ideological reasons, the new government has been lagging behind the calendar ever since it took office on January 10. Many of the measures for the agricultural sector, the spearhead of this government's proclaimed economic reactivation scheme, were only announced on April 3, and are still being implemented with delays. Together with the improvisation and incoherence inherent in the government's attempt to play catch-up ball, these delays could endanger the much heralded take-off of the agricultural sector, which, according to the Liberals' promise, would again make Nicaragua the "granary of Central America." Some signs are already appearing that suggest either serious failures or far more modest achievements in this sector than the President and his economic Cabinet have forecast.

Chamorro's Legacy: An Unfulfilled ESAF

The three-year ESAF I was signed in mid-1994 and originally scheduled to conclude in June 1997, but by September 1995, the Chamorro government could no longer meet its requirements. From that point on until Chamorro's term in office ended, Nicaragua was denied the soft loans and any chance to reduce its foreign debt still more. The government lost US$75 million in 1996 due to its non-compliance. The failure to fulfill ESAF's terms led to its substitution with a "Monitoring Plan" in June 1996. According to that plan, the government pledged to meet certain conditions of ESAF I, even though it would get no financial assistance or debt reduction in return.

This was another of President Chamorro's legacies to her successor. The Liberal government is now saddled with renegotiating much of what the Chamorro administration promised but failed to do, as well as much of what it could have obtained had it used a negotiation strategy less tied to IMF dictates. Unlike the former government, the new one has publicly insisted that it will not follow the recipes of the IMF and other multilateral lenders to the letter. It will try to get some of its own economic recommendations into the new ESAF, and in fact has already been putting out feelers in that direction. Any significant success will depend on how much increased negotiating power with the IMF the government can rally both inside the country and out. Such support is still an open question for a government that has so far shown authoritarian and exclusionary tendencies.

Economic Cabinet vs. IMF?

The government has going for it an economic Cabinet with at least two different kinds of functionaries willing to do battle with the IMF. Neither of these two groups are the Oxford cloth button-down shirt technocrats of the Chamorro administration; both are, in fact, rather "homespun."
One group is made up of agricultural producers who oppose a submissive application of the IMF recipe because they lived under six years of it during the Chamorro administration, when it was applied unilaterally and at the discretion of their adversaries, the financial and commercial oligarchy in cahoots with a circle of Sandinista business leaders.

The other group is made up of professionals in economics, administration and finances who were working in academia, research centers or nongovernmental institutions between 1990 and 1996. The independence from the country's political parties that they enjoyed in those jobs allowed them not only to criticize ESAF I but also to propose alternative economic measures, which of course were never welcomed by the Chamorro administration.

These professionals aren't linked to any of the four most recent political regimes, including the present one. But despite the Alemán government's demonstrated authoritarianism, its sympathies for the Somozas and its alliances with Somocistas and anti-Castro Cubans in Miami, the professionals believe that it offers them some space to put their knowledge at the service of national economic development. Furthermore, Alemán had to turn to them for pragmatic reasons: within their ranks are found people whose capacity is amply recognized by the multilateral agencies, which makes them excellent mediators between the agencies and the government. Alemán also had a political reason, which was that he was not about to turn over the design of his economic policies to technocrats from either the FSLN or Chamorro administrations.

What Does the IMF Require for ESAF II?

It's hard to summarize in a few pages what the IMF requires from the Alemán government as conditions for signing ESAF II. We will try to do so, at the risk of simplifying some things and leaving many others out completely.

The three themes the IMF insists on most are the fiscal deficit, tax reform and the state banking system. With respect to the fiscal deficit, the IMF proposes raising by another percentage point the 2% of the gross domestic product that the government contemplates earmarking to reduce that deficit.

Regarding tax reform, the IMF wants legislative approval before June 30 of the new tax law that the Chamorro administration was unable to push through. In compliance, the executive has already sent the bill to the National Assembly without consulting the productive associations or other social sectors on its text. Among other things, this law, which will readjust the whole tax system, should promote a widening of the tax base, setting taxes of between 2.8% and 3% on business assets and putting a flat land tax of 14 córdobas (roughly $1.50) per acre on all land with an area greater than 12 acres. The government had proposed a threshold of just under 60 acres to avoid affecting peasant production, but the IMF disagreed. The IMF also proposes that the municipal governments collect this land tax, which is a transitory tax until the property problem is completely ironed out. This idea, while an attractive source of municipal government income, is complicated by the absence of any institutional infrastructure to enforce the collection of such taxes from thousands of unwilling and impoverished smallholders.

As to the state banking system, the IMF wants the National Development Bank (BANADES) and the Housing Bank (BAVINIC) closed, and privatization of the commercial Nicaraguan Industry and Commerce Bank (BANIC) speeded up, as the Chamorro government had agreed to in 1995. The justification for these measures is that the losses these state banks generate increase the fiscal deficit, but an underlying principle is that banking activity ought to be in the private sector's hands in any case.

The IMF gave the government up to 18 months to close BANADES, a period which ends in March 1988. The IMF's proposal is to replace it with an Institute of Peasant Promotion, a smaller financial intermediary that would handle funds only to rural credit and savings cooperatives and for NGOs promoting non-conventional credits to small rural production. It wants BAVINIC replaced with a low-cost housing construction program whose operating costs will be included in the national budget to avoid public cost overrides in this sector that would increase the fiscal deficit and trigger additional macroeconomic imbalances such as increased overall demand for goods and services.

IMF Also Targeting Other State Enterprises

The IMF's requirements for both the profitable Nicaraguan Telecommunications Enterprise (ENITEL, formerly TELCOR) and the state petroleum company (PETRONIC) are categorical: the privatization started during the last administration must be carried through. The sale of 40% of ENITEL's stocks, announced for the end of March, was postponed once again, perhaps until 1988. Cuban-American businessman Jorge Mas Canosa, who together with his son has amassed a personal fortune totaling almost $600 million, has expressed interest in purchasing this operation. Already a major stockholder in Telefónica Española, he visited Nicaragua on March 6. The economic group linked to Mas Canosa financed a large part of the electoral campaign of Arnoldo Alemán, who apparently decided to thank him for this political favor by facilitating his group's investment in Nicaragua.

In the case of the Nicaraguan Electricity Enterprise (ENEL), the IMF wants more energetic measures implemented to reduce its deficit, estimated at 100-120 million córdobas annually. After slow but continual rate hikes, these losses are no longer due to subsidized prices, but to illegal connections and the arrears of major consumers such as government entities, big companies and private homes in upper-class residential zones where the rate base is particularly high. The IMF also proposes passing on to the public ENEL's cost for street lights, which is reportedly the cheapest and most subsidized service in Central America, as well as for the "thermal factor," which are the costs incurred in using oil to generate electricity. Application of these two requirements will undoubtedly become a source of future unrest in the population. As for ENEL's employees, the IMF proposes eliminating supernumeraries, freezing salaries and doing away with the package of rice, beans, sugar and other goods provided as a salary supplement, a legacy of the Sandinista years.

The Nicaraguan Institute of Aqueducts and Sewage (INAA) is also in the IMF's sights. According to IMF estimates, this company has uncollected bills dating back to 1994. As in ENEL's case, the majority of these bills don't belong to the poorest, but to wealthy consumers and various state agencies. The IMF proposes that those in arrears pay up and that collection and control mechanisms be improved so that all water used is paid for. It is calculated that 45% of the water produced is not paid for by those who consume it. The IMF also proposes that water rates be adjusted to keep up with production costs, which will add to popular discontent. And finally, it proposes that investments be made to improve the network of aqueducts and pumping equipment, since 30% of the tubing is in bad condition and 40% of the equipment has been operating for over 10 years.

As for the Social Security Institute (INSS), the IMF proposes recovering its arrears portfolio, whose (INSS), largest debtors are once again the state entities and big business. These uncollected employer contributions are estimated at a bit more than a billion córdobas (nearly $100 million). The IMF is concerned about INSS' 100-million córdoba deficit increase in 1996, and has a number of proposals to reduce it. First it wants to boost the collection of employer contributions to over 90%. It also suggests that no benefits to those insured be increased without first considering the fiscal implications of those increases and proposes allowing the private sector to participate in preventive health programs and incorporating special pensions into the government budget to avoid them being financed by the institution's surplus. It wants differentiated salary adjustments made to INSS employees instead of the 35% increase that the administration planned to apply across the board. It would like to see the institution's computerized information infrastructure improved and an international auditing company hired to determine the company's real situation at this point. Finally, it wants the INSS to pay market prices for use of its new building, which was built with international financing and which Alemán wanted for his presidential offices.

Budget and Property

In addition to reducing the fiscal debt by closing the state banks and cleaning up the losses the state agencies have been carrying, the IMF proposes slashing the number of state employees even further. It is requiring the elimination of the 2,500 job posts that the previous government agreed to and wants a program prepared by May to reduce the non-financial sector for 1997-99, which could mean the loss of several thousand more public jobs.

As regards the country's general budget, the IMF is requiring quarterly (instead of annual) programming and implementation of spending and financing. The point of this measure is to improve the control mechanisms so as to guarantee the state's budgetary discipline. The IMF has also strongly insisted on how spending should be recorded. For example, in the case of the public jobs being eliminated, it proposes that their numbers be posted with the corresponding fiscal cost/benefit.

With respect to monetary policy, the IMF proposes going back to auctioning the National Investment Certificates (CNIs) issued by the Central Bank, but phasing them out with bonds issued by the Ministry of Finances, which, according to the IMF, could be used by their owners to pay their taxes. This proposal may not work in practice if the new ID card process is not completed (half of the population was left without cards at election time and the Supreme Electoral Council's budget to finish the job was drastically cut this year) and due to the irregularities in the property registry, among other reasons. In addition, the CNIs issued by the Central Bank are still more attractive than those issued by the Ministry of Finances. Another proposal of the IMF is to unify the reserve requirements of all banks.

Last but far from least, the IMF has its own plan for the crucial, controversial and bogged-down property issue. It wants all of the still-pending confiscation claims resolved by 1988, and proposes applying two forms of compensation to those who were confiscated. In a first phase, this would be done either by returning the properties or with indemnification bonds. In a second phase, the properties would be revalued and mortgages to the bank would be "collateralized." The IMF has set May as the deadline for the government to begin taking visible steps in this direction. In legal terms, this would imply prompt approval of the new property law by the National Assembly.

Uncertainty in the Agricultural Sector

At the beginning of April the Ministry of Agriculture and Livestock (MAG) announced the first lines of its package of economic measures aimed at reactivating agricultural production in 1997. In general these measures, if put in practice, would benefit the majority of producers. What is not so clear is which measures will become reality, since the future ESAF II is already straight-jacketing any attempt to implement an economic plan in Nicaragua that would give small producers an important role.

The credit issue illustrates this very clearly. With great fanfare the Liberal government announced that the state and private banks would make available over 1.35 million córdobas in credits to agricultural producers in 1997. But with the failure of a plan to restructure the back debts of some 14-16,000 producers, most of them peasants and small farmers (not even 1,000 of them appeared to request the restructuring), this mass of producers will have no access to credit this year. Leaders of the producer associations attribute the failure of the restructuring plan, which replaced the similarly failed "Cobra" collection scheme, to two reasons. One is that the producers have no money to start amortizing the balance of a refinanced debt, and the other is that they don't have the property deeds or other collateral that the banks are requiring from them (some of these debts predate 1990).

The rural sector is suffering a vicious circle (no credit-no liquidity-no production-no legal security-no credit) that the government has been unable to break this year and will find hard to break in future years. The "culture of non-payment" that the revolution introduced in the 1980s by repeatedly forgiving debts is now deeply rooted. According to some producers, the current plan to restructure the back agricultural debt has in practice tended to stimulate traditionally good payers to hold off cancelling their loans in the hope of being included in the restructuring-pardoning of debts that they artificially put in arrears. The inability of this plan to get around the hated "Cobra" put the Liberal government at a disadvantage in its negotiations with the IMF, which had made quite clear its opposition to any writing off or easing of the farm debts because of the pressure it would put on the fiscal deficit.

Even if the peasants and small farmers could meet all the eligibility requirements for bank credit, other obstacles are getting in the way of MAG's 1997 plan. One is the insufficient amount of financial resources available to producers. At first glance, 1.35 million córdobas seems like a lot of money-too much, some say-to finance all the agricultural producers, but it's not really a lot. The president of UNICAFE, the coffee growers' association, says that coffee growers alone need around one million córdobas to reactivate production this year, never mind rice growers, cattle ranchers and others. And, of course, never mind the tens of thousands of peasants and small and medium farmers who will remain without any credit to finance their production in 1997 because "money follows money" and "money talks." It doesn't take a fortune teller to predict that state credit will go to those who talk the loudest.

The private bankers in Nicaragua unanimously say that they don't believe small agricultural production is profitable. Who if anyone, then, will channel credit to the peasants and small farmers if the IMF continues demanding the imminent closure of the state banking system?
The government is gambling on getting the IMF to postpone the deadline for these closures. The most optimistic officials are confident that they can persuade the IMF with economic and political arguments not to close BANADES but to turn it into the Institute of Peasant Promotion. But neither the IMF nor the private bankers like this idea, the IMF for the reason of principle it always argues and the bankers because they have their eyes on BANADES' 43 branch banks around the country, which they think they will be able to acquire at fire-sale prices.

MAG's Package Isn't a Policy

The other big challenge MAG faces is to take control of the baton and direct the orchestra in preparing the agricultural sector's future economic policy. What it has designed in these three months isn't yet an economic policy but just a package of measures to be applied mainly during this agricultural cycle. Some of these measures do, however, constitute part of the foundation for a more long-term agricultural policy.

The fact that the MAG doesn't yet have an economic policy for the agricultural sector is not due only to the speed at which it has been forced to work. It's also due to the fact that the design of a true policy implies the participation of more than just the MAG. It needs the whole orchestra of state entities, whose actions or omissions have a strong effect on what happens or fails to happen in the countryside.

Getting this broad governmental coordination is no small problem for the MAG. It means persuading, horse trading, resisting and pressuring so that the "packages" of the other ministries, state agencies or branches of the state are coherent with what it is proposing-or has already begun to implement on the assumption that the other institutions it has talked to have now formulated coherent economic plans, which remains to be seen.

In the process of constructing its own package of measures, and later its own agricultural policy, the MAG is also faced with the challenge of creating ongoing institutional consultation mechanisms with the widest possible array of associations existing in the agricultural sector. Since the new government took office, many producer associations have been complaining that the MAG didn't consult them or consulted them very perfunctorily during the process that led to the drawing up of its package of measures for 1997. We will soon be able to see whether this failure to consult rural civil society was due to the race against time or to an intellectual work style that may have been valid in the academic world but isn't in the world of public policy.

Policy or Patronage?

Yet another hurdle the MAG has to clear in preparing its package of measures and its later economic policy are the personal debts that President Alemán has already acquired or will acquire in the future with his circle of political allies and cronies inside the country and abroad. Since the President boasts of being a man of his word, he will have a hard time resisting the temptation to put fulfillment of his personal pledges before the implementation of economic measures and policy that the MAG is beginning to apply in the agricultural sector after serious study, reflection and discussion.

It would seem that there have been no major disagreements so far between the Presidency and the MAG, as there have been with other ministries. Among the clashes that could not be hidden behind the fabric of images woven daily by the Liberals is the one with the Ministry of Foreign Relations. Foreign Minister Emilio Alvarez Montalván has had to put up with a series of decisions made impetuously by President Alemán that have undermined the legitimacy and coherence of this vulnerable country's foreign policy.

The "Rearmed" Aren't Disarming

Another source of instability and uncertainty in the agricultural sector is the presence of bands of rearmed veterans and of common criminals in large areas of the country. According to the army, about 400 of the "rearmed" have moved into peace zones defined by the government while a similar number have still not done so. No significant group has actually turned in its weapons. In addition, another 200 or so common bandits continue to wreak havoc in the countryside, rustling cattle, threatening and robbing producers, kidnapping them for ransom, etc. The first three months of 1997 saw 12 clashes between army troops and rearmed bands, which left 10 army members and 11 rearmed veterans dead, together with 12 civilians.

The government has had to postpone its final deadline for disarmament four times: February 28, March 11, March 28 and April 10. Each time, it announced that those who did not take advantage of the peace plan by the deadline would feel the "full weight of the law" since the army would move into action. Despite such saber-rattling, however, the rearmed didn't disarm, the army didn't attack and no one applied the full weight of any law. Why not?
The rearmed veterans, many of them former contras, have lost confidence in the government, which they accuse of failing to do what it promised-provide lands, create security conditions for those who disarm, etc. For the government's part, it feels that its hands are tied since any military or legal actions against these groups would only stir up a hornet's nest, creating greater instability and insecurity in the countryside and endangering the already uncertain results of the agricultural cycle.

If some agreement isn't reached soon, the problem could go on forever: the veterans will not disarm and new groups will opt to rearm. There are already signs of this.

A Weak Government that Believes Itself Strong

The case of the rearmed groups isn't the only one that President Alemán has been forced to ease up on after announcing heavy-handed measures. As President, he has been unable to carry out many of the energetic actions that he promised during his campaign, not for lack of will but for lack of enough strengthen to be able to apply a heavy hand. Even though the Alemán government's alliance with the Catholic hierarchy strengthens it, the government is weak. It has to weave images each day to appear stronger than it really is.

Its greatest weakness is not having strong and unconditionally loyal armed forces. In this respect, Alemán knows that he doesn't now and may never have the real power that the Somoza dynasty had, based on a repressive apparatus built by the dynasty in its own image. Alemán also knows that his stability in power depends on maintaining mutually respectful relations with the army and the police. That is why he has repeatedly insisted that neither the executive nor legislative branches will touch the legal framework that provides institutional norms for both of these forces.

Legislature and Judiciary: Two Fragile Pillars of Strength

Perhaps because Alemán is a jurist, but above all because his lack of control over the army and police leaves him no other out, he has tried to make the legislative and judicial branches the two pillars on which to consolidate his platform of power. But both of these pillars are fragile, because Alemán has built them based on pacts with legislators and with judges or Supreme Court magistrates whose political loyalties are not insensitive to swings of the political tide. These first three months of the year have already seen these pacts weakened by strong political tugs of war by both Liberals and non-Liberals.

The first public example was a legislator from the Liberal Alliance who, together with several others supposedly allied to the Liberals, turned a deaf ear to Alemán's clear orientation that they vote against the assignment of 6% of the national budget to the universities. Instead they bent to the pressures from students, approving the 6% on March 11 by 47 votes to 46, and even including extraordinary as well as ordinary spending in the total. In 1997 this will amount to 333 million córdobas (some $35 million). This approval was the Liberals' first National Assembly defeat. President Alemán's immediate response was that he would give the money not to the universities but directly to students, in the form of scholarships to the university of their choice. He later reneged, saying he will veto the legislative decision because it would seriously upset his budget plans.

Another, less public example was that some Supreme Court justices presumed to be Alemán allies have responded to discrete pressures from the oligarchy and to the political bonds that unite them to it by ignoring Alemán's request to try top-level Chamorro administration officials who were videotaped engaging in suspicious activities around the privatization of two sugar refineries. This Court's decision was to have been a centerpiece of the artillery that Alemán and his economic allies fabricated out of this corruption scandal, one of the biggest and most public of many cases.

The Honeymoon's Over

A third major pillar on which Alemán is trying to shore up his power is the electorate that voted him into office. But this pillar is not sunk into firm ground either. Alemán very probably still has the backing of a majority of the Nicaraguans who gave him the vote last October 20, but only because he has not yet implemented any economic measure that has drastically affected the population as a whole. So far the negative measures have had very pinpointed targets: prohibiting children from working at the traffic signals, evicting some small property holders without titles from their homes or farms, etc. But starting in May Alemán will have to put an end to this honeymoon with his electorate. Even before the May rains come he will have to meet the other IMF requirements, increasing water and electricity rates, laying off even more public employees than those swept out with the Liberal broom, raising taxes and the like. It is to be expected that this will cause a major drop in Alemán's popularity, weakening his government even more.

If he takes with one hand, he'll have to give with the other. In this context, the massive provision of titles he is planning for once his new property law is approved could bring his popularity rating back up a few points, particularly among the rural and urban poor.

Going After NGO Money

Yet another of the Alemán government's weaknesses is its lack of funds to implement a social policy that could compensate for the negative affects that application of ESAF II will bring, deepening unemployment and lowering the population's living standard even more. The budget cuts in the social compensation programs have been so large that the government has had to set its sights on another sector: the nongovernmental organizations.

There are political reasons for wanting to control NGOs that sympathize with Sandinismo, or that don't sympathize with Alemán. But the government also wants to assure that the funds that all these organizations receive for social projects are used for that end, absorbing the increased poverty that his economic policy will cause. Even if the government can't fully accomplish this, it seeks to effectively reorient these NGOs through administrative mechanisms: authorization requests to the Ministry of Foreign Cooperation (MCE) each time an NGO solicits funds from abroad, presentation of an annual economic report to the Ministry of Government, imposition of fines on NGOs that don't meet established norms, audits by the Ministry of Finances, etc. These new dispositions are found in a new general bill on non-profit entities (Law 147) that the Liberal bench is promoting in the National Assembly at the request of the executive branch.

A La Prensa columnist succinctly synthesized the government's motives for approving this bill, which has caused perplexity, uncertainty and anger in the world of international cooperation: "The NGOs represent an immediate alternative source of fresh resources for the government of Nicaragua's new social agenda over the next 10-12 months, since previously pledged resources cannot be diverted from their use for already established original programs and new multilateral and/or bilateral initiatives take at least 8-14 months before a single dollar comes in to the new projects."
According to MCE data, based on information provided by 126 registered NGOs, these NGOs alone channeled aid equivalent to $67 million in 1996. The Ministry of Government says that there are about a thousand NGOs in the country.

Approval of a law like 147 could boomerang badly against Alemán, since the foreign donor organizations could decide to reduce or cancel their cooperation with Nicaragua's NGOs or could pressure directly or through the governments of their own countries for Alemán to abandon this attempt to control the nongovernmental organizations, which in effect turns them into "governmental" ones. Going ahead with this project could cause the Liberal government serious reversals at an international level, not only because the country would lose the very money it needs so much to promote social programs, but also because Alemán himself would appear in the world's eyes as "tin-horn third world dictator" interested in controlling everything rather than as a democratic President.

Alemán's Strength Resides in Alliances

Because of his weakness, Alemán is a President who needs allies. They are his only true source of power, since he has neither abundant financial resources nor control of the army and police. If he had the latter, it would give him a relatively autocratic power, like the Somozas, or like the Sandinistas were able to count on once they began to lose the consensus generated in the first years of the revolution.

Alemán has been a man of alliances in his short political career. As mayor of Managua during the Chamorro government, he finally achieved some measure of alliance with the Sandinistas, and as head of his tiny party, the Constitutionalist Liberal Party, he built a political coalition -the Liberal Alliance- that was almost as broad as the one the FSLN built in its time. Nonetheless, everything indicates that after having received the presidential sash he has begun to see himself as stronger than he really is. As a consequence, he has begun to think that he has the luxury of sloughing off his allies and acting on the impulse of this arrogance.

Some think that the presidential office has gone to his head. Others believe that he has simply moved too fast on a decision to break the opportunist and electoral bonds that he made with the oligarchy -that is, with the Conservative Party and the capital of the Pellas family and with Antonio Lacayo's PRONAL. Whatever the case may be, the one certainty is that his loss of allies is translating into a loss of power and increased weakness. His overestimation of his own power and underestimation of that of his adversaries has already led him on several occasions to reverse decisions that he had just announced or actions he had actually begun to get undertake.

Dangerous Allies And Low Blows to Adversaries

In his three months of government, Alemán has tried to increase his limited power by delivering "low blows" to his adversaries, and hitting out everywhere at the same time. But this strategy has tended to increase his weakness, because it obliges him to use up his waning strength on sterile battles and scares off current or potential allies. With the new dynamic that will be ushered in with ESAF II, Alemán will need alliances more than ever. He will need the army, the police and the other branches of state on his side if he has any hope of keeping ESAF's worsening effects on jobs and the population's living standard from turning into a source of uncontrollable social instability. He will also need alliances with the other associations of civil society, the parties, labor and business associations and the NGOs. Alemán also needs to win over these forces if he wants to achieve the minimum consensus needed to strengthen his negotiating hand with the inflexible multilateral financing organizations.

Some of the allies that Alemán probably thought would back his effort to break up or weaken the oligopolies of the Conservative non-Somocista oligarchy pose a multifaceted risk. One such facet, for example, is the unhappiness of many US business leaders toward the Helms-Burton Law, so strongly defended by Alemán allies like Cuban-US entrepreneur Jorge Mas Canosa. This unhappiness is obviously not because these business leaders are pro-Castro, but because they are capitalists. The law prevents them from doing business with Cuba, forcing them to just sit back and watch their colleagues from Europe, Asia and the rest of the world benefit from such business dealings. By choosing the wealthiest but also the most infamous and coarse representatives of Miami's powerful Cuban exile community, has Alemán chosen the best or the worst possible ally in the United States?

The FSLN: For or Against the Little Guy?

Ever since the FSLN's strongly questioned co-government with the Chamorro administration, its has been acting more and more like a party of businessmen. It is constantly trying to strike some balance between defending its own business interests-which include significant ill-gotten gains -and those of Sandinista professionals, producers, peasants and the huge mass of poor- which include the wealth that was justly redistributed to them by the revolution.

This is inevitably an unstable balance, since these two sets of interests are seldom compatible. This has often led the FSLN to put its own business interests and those of the urban middle strata before those of a good part of its grassroots sympathizers, especially among the most impoverished and the rural sectors in general.

Since 1990, this tension caused the FSLN to repeatedly demobilize grassroots protests against the neoliberal economic measures being implemented by the Chamorro-Lacayo government. Today the FSLN is denouncing "neosomocismo" in the government, and its leaders have begun talking again about taking up arms to confront it and defend the current property scheme against any reversal.

How far can the Sandinista leadership go with this, and how far does it want to go? A climate of uncontrolled political instability would adversely affect many FSLN leaders who are now powerful businessmen. The ongoing climate of violence and instability has already weakened many social sectors, who have grown tired of participating in revolts that always end up in deals hammered out by the upper echelons, including their own Sandinista leaders.

In the conflictive property affair, Alemán is gambling on a legal offensive and thus on his allies in the National Assembly and the Supreme Court. The FSLN, however, is putting its money on a grassroots uprising, trusting that the social discontent already being generated in the country by the abrasive style of Alemán and his Liberal team and by the application of ESAF II will create the conditions to halt Alemán and safeguard Sandinista business interests.

Any Way Out Has a Price

At this point, after such a long accumulated history of confrontation and dishonesty, and a far briefer but similar history with the Liberal government, any reasonable and stabilizing solution has a price. There's no genuine way out that doesn't involve costs for both the Sandinista leadership and the government.

A solution to the property tangle has to be found soon, but not an unjust one that turns the Sandinista "piñata" properties into the sacrificial lamb of the three other big groups of "piñateros" over the past 64 years: the Somocistas, the Chamorristas, and now the Alemanistas. The latter began swinging at their own wealth-filled piñata when Alemán headed Managua's municipal government.

It's important to balance accounts among the past piñatas. All the beneficiaries should somehow be obliged to give back what they stole from the state and the people, who are the real victims of confiscation. But it's equally important to begin to strengthen the institutional mechanisms that guarantee Nicaraguan citizens that no state functionary can promote or be an accomplice to any new piñata. The Comptroller General's office is one of the most important of these mechanisms, and it is now engaged in a tough battle just to begin to fulfill that role.

The Way Out Is Abandoning Clientelism

Many sectors of Nicaraguan society still find it hard to abandon the Manichean schemes that interpret everything the FSLN says and does as good and everything Alemán says and does as evil, or vice versa. No effort to carefully examine the content and results of actions by either of these two groups will ever spring from this simplistic perspective.

It's difficult to change these ways of thinking in a country with an incipient civil society and a half-built nation, in which institutions generally and political parties specifically function as clientelist spaces where people only organize to follow loyally whoever is directing, in exchange for the favors the leader promises or actually provides. The basis of clientelistic power anywhere always depends on two things: the size of the clientele and the size of the favors (goods or services) that the big boss (or caudillo or godfather or lord or master) can come up with for those under his protection. From that arises the interest in any such boss to increase his power and wealth and thus have more goodies to share, in turn giving him a much broader clientele hovering around to do his bidding.

In extremely impoverished countries like Nicaragua, backwardness and unemployment, the weakness of civil society's own institutional infrastructure and the absence of the rule of law all come together to feed this clientelistic culture. It is paradoxical that the international agencies, not the national leadership, are the ones that are today proposing measures against discretionality and other state vices in an attempt to reduce this culture.

It is evident that several generations of tireless work for the development of civil society and the formation of human capital will have to pass before the models of thinking and behavior of today's national political culture disappear or at least lose the force they have today. It is a huge task, but the only one that offers any real way out.

The Property Conflict:
From Dialogue to Demonstration... And Hopefully Back

FSLN general secretary Daniel Ortega announced on March 17 that the government-FSLN dialogue on the conflictive issue of property, interrupted since February 27, would remain suspended unless the National Assembly approved an interim law to stop judges from ordering evictions from disputed properties before accords are reached in the dialogue. A week earlier, the Liberal majority in the Assembly refused to pass such a law, which Ortega said the FSLN interpreted as a "declaration of war."
To unilaterally break the stand-off in the dialogue with a blow for show, President Alemán sent a bill to the Assembly on April 3 that would speed up the deeding of 112,000 "minimal" property cases (small houses, lots and rural plots). Alemán confirmed that this law would leave untouched some fifteen hundred cases of "the big guys," whose properties will not be legalized unless they pay for them at the market price. Parallel to this statement, Liberal functionaries announced that the government will carry out a "new" agrarian reform, which will begin by annulling 14,000 supposedly "fraudulent" titles.

At the same time, CORNAP, the state holding company, proceeded to annul 248 contracts for state farms leased to army and National Resistance veterans with an option to buy as part of the Concertación Accords signed in 1990 and 1991. CORNAP claims that the new occupants owe the state $63 million on these excellent cattle, coffee and tobacco lands. The lessees say that this back debt is the result of the previous government's detrimental economic policies. CORNAP's decision introduced a new and extremely tense element into the political scene.

By the end of that week the National Union of Farmers and Ranchers (UNAG) and other organizations in the popular movement linked to the FSLN were calling for a national work stoppage on April 14 to protest the government's economic measures, which do not resolve the agricultural and livestock sectors' indebtedness, their demand for credits, or their property insecurity. With the stoppage, the FSLN is seeking to strengthen a national agreement that could favorably and definitively resolve the complex property problem.

As envío went to press on the eve of the protest, it was unclear how large it would become, though UNAG head Daniel Nuñez stressed that the major activities were planned for the rural departments, not Managua. It was also far from clear what the nature of the protest would be. While demonstration leaders spoke of peacefully blocking inter-regional commercial traffic on the Pan American Highway, the rightwing media stressed the term asonada (riot or mob uprising), portraying the Sandinistas as terrorists and the population as fearful of violence.

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