The Wind in Its Sails, Adrift or About to Run Aground?

Though the winds of economic crisis are buffeting Nicaragua, the government ship is sticking doggedly to its original course. Does it have the wind in its sails, “complying,” as the government hype claims? Is it adrift, as some desperate signals from its helmsmen appear to indicate? Or is it about to run aground, as the dispersed and fragmented opposition so fervently hopes?

Nitlápan-Envío team

From the outset, Daniel Ortega’s new government charted its course according to economic and political coordinates. Economically, it concentrated on ensuring that the macroeconomic balances remained within the International Monetary Fund’s parameters. The endorsement and resources of the multilateral lending institutions would give the governing FSLN credibility, demonstrating to one and all that it could administer the neoliberal model better than the preceding governments, combining macroeconomic balances with real social programs to reduce poverty.

Politically, meanwhile, it gambled on the FSLN being able to stay in government much longer than just one term. Ortega would be reelected indefinitely thanks to his control of key state institutions gained through the pact with former Liberal President Arnoldo Alemán and to the Venezuelan resources that would allow him to organize party patronage networks. But while the course has not varied, reefs and shoals loom ahead.

In a roiling sea

The international economic crisis is severely affecting the Nicaraguan economy, leading to sharp reductions in investments, money sent home by emigrants and exports. Domestic consumption has also dropped, and since the government’s main source of tax revenue is the 15% point-of-sale tax on almost all items except foodstuffs and medicines, the government’s tax collection has plummeted as well. The official calculation is that tax revenue will be down US$250 million by year’s end. Absolutely no one is venturing any optimistic forecasts. Other problems are budgetary under-execution, due both to the freezing or outright canceling of disbursements for internationally funded projects such as the Millennium Challenge Account and to state inefficiency in running those projects still being funded. On top of all this, $97 million in budgetary aid was frozen by the donor countries following the fraud in last year’s municipal elections.

The helmsmen refuse
to adjust the course

After already having cut the 2009 budget twice this year (the equivalent of $60 million in April and $40 million in late June), $30 million more will be cut before the year is out. The fiscal deficit has continued to undermine the balances agreed to with the IMF. During the government’s first two years, Ortega’s economic team presented the macroeconomic equilibrium as an unarguable achievement, but this is now at risk and the government has been negotiating with the IMF for eight months without getting its approval.

The fiscal deficit could be alleviated if the ship’s helmsmen were to adjust the course a few degrees. Including Venezuela’s aid in the budget would balance the deficit, but the government has steadfastly refused to do so, preferring to channel these hundreds of millions to areas where no public institute has control or even receives any information. There is increasing evidence that this money is helping bolster the capital of the Ortega family, which is increasingly confused with the state and the FSLN.

It would also help to acknowledge to the international community that there was at least some degree of fraud in the 2008 municipal elections and provide guarantees that nothing similar will be repeated in the 2011 general elections. This could also alleviate the fiscal deficit by encouraging international cooperation to release the aid suspended due to the fraud and perhaps even resume its support of the national budget. But here again, the compass setting hasn’t varied at all.

Voices from across the sea and contradictory answers back

The government is still refusing to bow to the European Union’s insistence on the presence of both international and national observers when the Caribbean regions elect their autonomous authorities in March of next year and in the general elections in November of the following year. The government’s refusal focuses on national observers, specifically the Ethics and Transparency Civic Group (E&T) and the Institute for Development and Democracy (IPADE), the two national observation organizations with a decade of proven experience and expertise under their belts and the capacity to cover virtually all polling stations. In a fine example of the pot calling the kettle black, Supreme Electoral Council (CSE) President Roberto Rivas, CSE Magistrate José Luis Villavicencia, FSLN legislative bench chief Edwin Castro and Deputy Foreign Minister Manuel Coronel Kautz all claimed this month that the two organizations “lack impartiality.” The latter added, as if it were definitive proof of this allegation, that both are financed by foreign countries.

On August 28, E&T responded by challenging the CSE to put closure to the fraud accusations by publishing the definitive results of the November 8, 2008, municipal elections, which it has never done; in fact, it has never published even provisional results for 30% of the voting tables in Managua. “If they publish the results table by table and it turns out that all the authorities they declare were elected are backed by votes, then we in E&T pledge to close our mouths, keep quite and never observe elections again in Nicaragua or any other part of the world. But if it doesn’t publish them, we will continue pointing out the violations of the popular will here and anywhere else.”

The situation of democracy in Nicaragua remains “worrying,” to use the word heard from the European Union in Brussels as we moved into September. The day after hearing from those voices across the sea, and just before Stefano Sannino, the European Commission’s deputy director-general for External Relations, arrived in Nicaragua, First Lady Rosario Murillo commented to official media that “we are a small country under a blockade from the US and European empires, which are trying to impose their cooperation designs and require Nicaragua to respond to their models rather than our own, which we are succeeding in promoting: making revolution by strengthening consciousness with the participation of everyone.”

Is the voice of Murillo—who also holds the key public post of secretary of communication and citizenship for development and social welfare—from the bow of the ship a sign that the government has failed to convince the Europeans? It the government counting on sailing out of the budgetary turbulence without the EU’s help because it has unconditional Venezuelan aid and knows the IMF doesn’t want the country to founder?

One sign this month that the IMF is trying very hard to avoid precisely this is its delivery to Nicaragua’s Central Bank of $150 million in “special drawing rights” to bolster its international reserves and thus contribute to the macroeconomic balance. This money is from resources approved in the G-20 meeting in London to help the poorest countries weather the effects of the international crisis.

A tossed ship

While the ship’s helmsmen have given no signs of shifting course, the roiling economic sea is tossing the national ship dangerously. In a desperate and jerking tack on August 7, the government announced a “tax concertation” to close the fiscal gap with more tax collection of a different type.

The time was ripe to reform Nicaragua’s inequitable tax system in 2007, with the FSLN newly in office. Most national sectors would have given Daniel Ortega a blank check to demonstrate his experience as a statesman in his second opportunity in government, this time without war and well before the economic crisis appeared on the horizon. A “comprehensive” reform was one of his campaign promises and was also constantly demanded by different leftist sectors, which argued the urgent need to increase social spending and couched their demand in the government’s proclaimed “regime change” or “second stage of the revolution.” The redistribution of wealth through taxes is a still a pending “revolution” in Nicaragua. But that year the helmsmen put their faith in the money from Venezuela and in the presumably unconditional European cooperation. Moreover, they didn’t want to make waves in the alliance they were forging with big business leaders in the Supreme Council of Private Enterprise (COSEP), one of the FSLN’s archenemies in the eighties.

Nor was the tax scheme reformed in 2008, which was a municipal election year, after all. Misguided, incompetent? Perhaps only unimaginative. At that time no Central American government imagined the size of the economic torment building off the region’s shores. In one of his cordial meetings with COSEP as late as the end of June this year, Ortega and his economic team promised the representatives of big national capital that there would be no change in the tax system in the next two years, in other words for the remainder of his term.

How will we get to port?

Without a genuine tax reform to distribute the nation’s resources more equitably and change the regressive nature of the existing tax structure, Nicaragua will never seriously reduce the poverty levels afflicting the majority of its people. Nor will it come anywhere close to meeting the Millennium Development Goals by 2015. But the tax adjustments proposed now by the government are coming at the worst possible time: added to the impact of the economic crisis, they will only cause more recession without even achieving their short-term goal of covering the fiscal deficit.

They are being presented in an attractive package—“concertation”—but if one thing has characterized this government, it is its inability to concert anything or include everybody in authentically participatory efforts. Initiating a genuine debate, dialogue and consensus process on specific goals—everything expressed in the word concertation—would thus deserve applause and celebration. But is it possible to engage in such a process with the urgency the government has called for in its proposal? Everything must be “concerted” by September 20 and the reform sent to the National Assembly by October 15.

The official excuse for the bad timing and the urgency of the tax reform was fobbed off onto the IMF. But the IMF didn’t specify a tax reform; it’s only asking for macro-economic equilibrium to keep the ship from going down. That’s also the reason for the $150 million in special drawing rights, which provides substantial ballast to help keep the ship afloat but won’t resolve the fiscal deficit, given that it’s for the reserves and not public spending. The IMF isn’t at fault. It’s the ship’s helmsmen who want to correct the budget imbalance only through a confusing tax reform that could end up throwing a lot overboard.

Dangers athward ship

The government’s tax concertation was originally summarized in some 40 transparencies shown only to COSEP’s big business leaders. It was later shown to other sectors, always behind closed doors. Fiscal experts and economists have criticized it because it will affect all business liquidity and profits, particularly hitting micro and small enterprises, and thus worsen the current recession.

Its logic is simply to collect more taxes: the government target is some $180 million (equivalent to 2.41% of the gross domestic product (GDP). The reform would go into effect on January 1, 2009, and its affects would only begin to be felt months later.

Tax law expert Julio Francisco Báez decided to investigate the inconsistencies in the government’s proposal. To his shock he found that the proposal doesn’t even mention the municipal sphere. He also noted that its claim to prioritize those who don’t pay is “ambiguous,” given that many, many more simply pay far less than required by law. He pushed for the design of a contributors’ list, which Nicaragua doesn’t have; warned that the reform isn’t accompanied by a thorough assessment of the tax system; and charged that the proposal’s most popular-populist measure—raising the tax-free wage floor from 50,000 to 75,000 córdobas a year ($2,500 to $3,750) was just a way to hype the proposal as equitable and socially responsible.

Báez emphasized the proposal’s “kid glove” treatment of exonerations (which currently represent a tax loss of almost $250 million to the benefit of areas such as tourism, free trade zones, mining and the agricultural stock exchange), suggesting that the government doesn’t want to “tangle with sacrosanct economic interests.” Might at least some of these interests be linked to the family in power and functionaries of the governing party?

Báez released an alternative proposal on September 3 that he claims would allow the government to collect as much taxes as the reform if not more by simply following the existing laws, which are currently obeyed more in the breach than in the observance.

Shipping water astern

With the governmental ship starting to take on water over the stern due to the crisis in the macroeconomic balances, it’s getting harder for the helmsmen to hold the political course, i.e. to ensure the FSLN government’s indefinite continuity in power.

President Ortega’s plan to push through constitutional reforms that would transform the existing presidentialist system into an abstruse parliamentary one dominated by himself, his pact partner and their two parties, is now an admitted failure. Despite all the propaganda Ortega and his spokes¬people—not to mention Alemán—dedicated to the new system, the government’s most frequent mouthpiece, Supreme Court Justice Rafael Solís, finally acknowledged on August 20 that the project isn’t going to happen, attributing its failure to the “fear and ignorance” of the opposition.

Nonetheless, Solís reaffirmed that the objective of reforming the Constitution is still on, even if only to change the article that prevents Ortega from a second and even indefinite reelection. As bait to attract votes for this change, Solís said that reelection could be included in a broader package in the parliamentary debate that would include the electoral reforms the opposition wants and establishing in the Constitution the new idea of a revocatory referendum, applicable to all elected authorities halfway through their term.

Shoals ahoy

The polls have been showing strong resistance to Daniel Ortega continuance in office. But legislators, not public polls, will decide on the reform. Although the FSLN doesn’t have a National Assembly majority, that body is still controlled largely by the interests backing the Ortega-Alemán pact. Nonetheless, the clock has been ticking for some time now, and so far Aleman has failed to come up with the six to eight more Liberal representatives needed to push through the constitutional reform.

No one doubts Alemán’s determination to deliver them—clandestinely, not openly, with one of those surprise deals we’re used to from the political class, but he still hasn’t found the when or the how. Alemán and Ortega both dream of a rerun of the 1996 presidential race, when they ran against each other. But if this is ever actually repeated, it will be more like a nightmare to the rest of us.

The closer we get to the electoral period the more obstacles Alemán is encountering in pulling off his camouflaged vote-facilitating operation. It appears that the Liberal base can forgive Alemán his government’s hyper-corruption, but not his bed-fellowing with Ortega. They blame him for the power Ortega has today and it’s a hard debt to pay.

How will the FSLN ship avoid the shoals if it doesn’t get the votes for reelection? In an interview in La Prensa, long-time FSLN insider and former Sandinista mayor of Managua Dionisio Marenco agreed that there’s a possible squal on the national horizon and offered the following reflection: “There might be a variant that hasn’t been analyzed in any great depth, which is that one of the following solutions has generally occurred in such critical circumstances in Nicaragua’s history: Constituent elections, a pact, a kupia kumi deal; a triumvirate... I wouldn’t rule out something like that happening. The Somozas were never reelected in their whole life; neither the father nor the two sons. They always sought an interim or provisional President, a coup d’état, the earthquake, a government junta… then Somoza just reappeared.”

The view from the bridge

From Ortega’s perspective, the main thing is to keep the ship from veering off the reelection course. Although it won’t be easy, he does have a number of things working in his favor. And they encourage the helmsmen to keep their eye on the horizon.

For one thing the opposition, while reiterating daily that uniting to defeat Ortega is imperative, remains fragmented and trapped in unending leadership squabbles, with no one ever staying on top for very long. Even the bishop of Estelí, Abelardo Mata, has taken on the task of trying to pull the Liberal factions back into this imperative unity.

Alemán continues to demonstrate his ability to stay afloat and win back spaces. Having retaken the initiative from Eduardo Montealegre’s group, he’s now “modernizing” and “retooling” his Constitutionalist Liberal Party (PLC), touring the country and promising primaries to select candidates. Although he’s still a junior partner in the pact with Ortega, he’s again projecting himself as the leader of a Liberalism based only on its opposition to the Sandinista movement.

The Liberals outside of the PLC remain divided and fighting for leadership. Montealegre’s leadership doesn’t appeal to all non-Alemán Liberals and is no longer as convincing nationally as it was: with no national vision, he rejected the tax reform with the customary reasons of a socially insensitive Right; furthermore, his visit to de facto, post-coup President Micheletti of Honduras was an unnecessary error; and fighting the accusation that he was a key actor in CENI bond fraud, however exaggerated, is taking up a lot of his time and energy.

Montealegre most recently hoped to recover his stature by beefing up the seriously divided and shriveled Independent Liberal Party (PLI), turning it into another dark horse electoral contender like the Nicaraguan Liberal Alliance (ALN), which beat the PLC for second place in the 2006 elections just two years after it was founded. But the pact-controlled Supreme Electoral Council could make both the PLI and the ALN disappear with the wave of an administrative wand, just as it did in 2008 when it annulled the legal status of the Conservative Party and the Sandinista Renovation Movement simply for being thorns in the respective side of the PLC and the FSLN.

So who’s waiting
in the hatchways?

Those Sandinistas opposed to Ortega are experiencing a mix of malaise and patience, in unequal proportions. Those who haven’t left the FSLN are unhappy about the lack of internal democracy. In his interview, Nicho Marencho confirmed the lack of organizational life in the governing party: “Control, authority and the organizational mechanisms are completely centralized. In very top-down parties like the FSLN, you only see the symptoms of malaise when they explode.”

The contradictions can now be discerned, so why aren’t they exploding? For the moment, the fear of political reprisals or losing one’s job could be the determining factors, although others who know what’s happening in the ship’s hatchways whisper of a major split being concocted that could end up isolating Daniel Ortega in 2011.

Unfavorable winds

The divided opposition is a big advantage in ensuring the government’s political course, but the economic crisis is causing giant waves. Apart from being tainted with accusations of vote buying and populist-paternalist motives, the Venezuelan funds being used for social projects simply can’t cover so many needs. Zero Usury and Zero Hunger, the government’s two insignia programs, are facing increasing limitations because they depend on budgetary resources that are feeling the knife. The government is trying to explain the crisis in Zero Hunger, which also has evident under-implementation problems, as “programmed deceleration.” Perhaps the program’s viability wouldn’t be so fragile had it been implemented as originally planned, through NGOs already working in the countryside rather than the inexperienced Councils of Citizens’ Participation.

One question wafting on the sea air is whether the hundreds of millions in Venezuelan resources aren’t showing greater impact because the family-party’s reportedly voracious capital accumulation has entered into competition with the party-government’s clientelist objectives. It was certainly telling that Murillo felt obliged to give one of her classic responses: “There’s no proposal here to privilege capital so we can become millionaires; what we so want here is to be millionaires in terms of consciousness, of values.”

The government unquestionably still has expressions of social consciousness and sensitivity that sit well with many people. While the lack of resources is visible in the health system, health care is still free; the Cuban-Venezuelan ophthalmological program known as “Operation Miracle” is continuing very successfully; and the “Yes, I can” literacy program also supported by Cuban solidarity, has reduced illiteracy to under 4%. While all this deserves recognition, having so many people who have just crossed the illiteracy threshold also implies new challenges for the government, which should be expressed in a budget increase for education rather than the cuts currently being pushed through.

To avoid running aground

The government is responding to the discontent and uncertainties provoked by the economic crisis with more intense political control, rather than tolerance or inclusion. This authoritarian, exclusionary attitude is perhaps the most dangerous reef, and appears to be growing with time.

The FSLN is already designing its 2011 electoral strategy with its activists. It is sending out detailed surveys to fine-tune it, holding meetings two years ahead of time to insist on Ortega’s reelection and giving out FSLN membership cards in state institutions and neighborhoods, trusting they will transmute into votes through various coercive mechanisms or economic perks. But this guarantees nothing. The municipal elections were preceded by intense patronage and pressure, yet the FSLN had to turn to a clumsy electoral fraud to “win” 40 mayoral seats—the most important in the country—it would otherwise have lost.

That’s why the political control also includes intimidating repression. Lacking institutional repressive apparatuses, the government has had to organize shock troops out of what it has at hand: unconditional state-party hacks and easily fanaticizable youth groups willing and able to use sticks and stones to frighten off or attack anyone who thinks differently and dares say so publicly.

These winds won’t abate

Any social network with its own critical thinking, resources and a certain degree of leadership and autonomy is a potential target of this form of organized repression by a government determined to accumulate political control. It is from this perspective that we should interpret the attack suffered by a small group of Civil Coordinator leaders on August 8 on Managua’s Cathedral grounds, which indicates a certain fear and even desperation in the government

That day, over 500 people from the territorial networks and thematic organizations and networks that make up the Civil Coordinator participated in its August Assembly. At the end of the meeting, when the participants were heading back to central Managua on a protest march to the grounds around the Cathedral, where they planned to hold a cultural event, the governing party acted with unrestrained fury, ignoring the immense political cost this skirmish would predictably entail. The demonstrators were attacked, humiliated and prevented from mobilizing by a government shock group waiting for them with rocks and clubs. During a speech in Chontales that same day, President Daniel Ortega, not only failed to condemn the unjustifiable aggression, but called those attacked “groups of rabble rousers” dedicated to “wishing ill on the government” that had set out that day to “shout their support for the coup in Honduras and confront young people who were singing and planting trees.”

Meanwhile, the police’s repeated passivity toward those who alter the public order, damage private property or attack individuals is increasingly suspect, given that those heading up the disturbances represent the governing party and are trying to neutralize others who refuse to move in their orbit. Army chief General Halleslevens has minimized the actions of these groups, attributing them to “political fever,” while National Police Chief Aminta Granera denied the existence of “paramilitary groups” because by definition they always act in league with, protected or sponsored by military institutions, which isn’t happening in Nicaragua. Vilma Núñez, president of the Nicaraguan Human rights Center (CENIDH) responded to Granera’s technicality by redefining them as “party and para-state groups that use paramilitary methods.”

CENIDH has now filed charges against these shock troops—responsible for what some have dubbed a “big stick policy”—with the Inter-American Commission on Human Rights: “We stress the growing organization of said violent groups that answer to one leader and now organize like genuine troops, as well as having buses, motorcycles and walkie-talkies. This attests to a reinforcement and radicalization of this new form of repression, and could open the way to the reappearance of illegal armed groups that Nicaragua had managed to put behind it.”

Two voices in the bow

If the repressive option is intensified to neutralize the discontent, the governmental ship could indeed go aground. It’s logical to think that such a scenario could come about only if discontent translates into organization and passivity into mobilization, if a civic national movement emerges with a credible, honest leadership able to articulate a national strategy, a national project that reaches beyond the simple terse slogan “all against Ortega.”

This month, we heard contradictory opinions from two of the nine helmsmen who steered the ship of the revolution in the eighties. In an interview with the Venezuelan channel Telesur, former Interior Minister Tomás Borge, who speaks incessantly, reiterated the political determination to stay the course. “Anything can happen here, other than the FSLN losing power. The possibility of the Right returning in this country is inconceivable to me. I was telling Daniel Ortega: we can pay any price, let them say what they want; the only thing we can’t do is lose power. They can say what they want, but we’ll do what we must. The biggest price would be to lose power. There will be an FSLN today, tomorrow and forever!”

Seemingly on the other side of the fence, former Army chief Humberto Ortega—who only speaks out when he senses the risk of a full-blown storm—spoke of the need to correct the course in a televised interview with journalist Carlos Fernando Chamorro in which he appeared to be talking directly to his brother Daniel; similar interviews followed in El Nuevo Diario. The retired general denied that the current government is a “revolution,” questioned the reelection idea, suggested there were fraudulent irregularities in the municipal elections, said that changing the electoral branch authorities would be healthy and advocated tolerance as the only way of achieving development in Nicaragua.

“History,” he said, “has shown that rather than providing continuity to the correct exercise by a leader at the head of a party and strengthening liberty, which is what most interests the majority, re-elections have served simply as a mechanism for the leader’s power…. Imposing a change in the Constitution to achieve that through legality and not legitimacy, in lieu of strengthening the national stability the country requires, could make it more difficult and weaken it more than it already is…. It is intolerance and a huge lack of real democratic life that is doing us the most damage.”

The mariner’s compass
shows us the way

We’re all on board this ship and can’t get off. If we don’t throw off the weighty ballast of an increasingly negative political culture, we could go down with it. If we don’t pay attention to history, written in a ship’s log that suggests other routes, we could find ourselves cast up on some unknown shore.

But we could also drop anchor in a safer port. In the middle of this storm we continue to believe in the mariner’s compass, which indicates that the only way to change course is with genuine Sandinistas and genuine Sandinista values and principles. Anything else heads us toward the same dangerous reefs, as it always has.

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