Nicaragua
The government and its allies are calling Washington’s cards
Last December 21, President Donald Trump,
responding to the urging of a group of US legislators,
added Nicaragua’s electoral branch president Roberto Rivas
to a new executive order sanctioning 14 other foreign officials
under the Global Magnitsky Human Rights Accountability Act.
Next day, four Republican and three Democratic senators
introduced an even harsher Nica Act bill into the Senate
than the version passed by the House on October 3.
In those two days, Washington upped the stakes,
but President Ortega wants his business allies
to stand with the cards he holds.
Envío team
Never in Daniel Ortega’s presidency these past 11 years has his government experienced the level of tension with Washington it has in the last year or so. And never has his firm alliance with the Superior Council of Private Enterprise, the big business umbrella better known as COSEP, felt so shaky, particularly now that it is no longer buttressed by Venezuela’s generous cooperation. Up until now, spokes- people for both the government and COSEP have insisted that the crisis with Washington was “manageable,” but given the moves coming out of the US capital in late December, no one’s saying that anymore. But while they’re surely wishing it were still true, the new reality hasn’t driven either COSEP or Ortega into action so far. Ortega in particular seems to be gambling on the cards in his hand.
Those in Washington who with greater or lesser vehemence and urgency want to see Ortega out are putting their money on eroding his alliance with Nicaragua’s business elite, his main economic bulwark following the loss of Venezuela’s generous support. Both the State Department and the congressional Right are working to drive a wedge between the two, playing both the corruption card and the Nica Act card.
PDVSA sanctioned; Nicaragua suffers
The intensifying of Venezuela’s economic and political crisis and the attacks from Washington are continuing to have direct repercussions in Nicaragua, which no longer receives the amount of oil from Caracas it did starting in 2007 and no longer pays concessional prices for the little it does get. Moreover, the US sanctions for alleged fraud and money laundering applied against Simón Zerpa, the financial vice president of PDVSA, Venezuela’s state petroleum company, have affected all businesses related to ALBA de Nicaragua S.A (Albanisa), a nominally private joint venture between PDVSA and Petronic, Nica¬ragua’s state oil company, created to manage the distribution of Venezuela’s oil and invest the proceeds.
In September of last year, the US government warned Nicaragua’s banks that they could be sanctioned if they had any financial relations with Albanisa. In response, all money from Albanisa businesses deposited in three private banks in Nicaragua was quickly transferred to the coffers of Banco Corporativo (BanCorp), which also openly belonged to Albanisa prior to the US warnings, but several of its board members were quickly changed to disassociate it from the consortium. According to official data, BanCorp’s deposits increased 236.5% last year, with nearly half a million dollars deposited a day in December alone, holidays included.
In addition to financial problems derived from the fear of sanctions, medium and large Nicaraguan exporters of beef, dairy products, coffee, tobacco and other products to Venezuela have also been hurt by that country’s crisis. In 2007, when the massive oil deal was signed and trade relations with Venezuela began growing significantly, Caracas agreed to use Nica¬ragua’s exports to offset part of its petroleum bill. At that time, the Ortega government determined that all exports to Caracas would be channeled through a new member of the Albanisa stable: ALBA Alimentos (Albalinisa). Over the years Venezuela became the second largest market for Nicaraguan exports (the record year was 2012 with $437 million in exports). By 2015, Albalinisa had become the country’s lead export company, according to the Nicaraguan daily newspaper La Prensa, but the very next year it was reported to be closing due to a massive unpaid debt by Venezuela resulting from the falling price of oil. While Albalinisa has still not officially closed, it currently exports nothing to Venezuela, as no Nicaraguan business wants the risks associated with the sanctioned PDVSA, which owns 51% of both Albalinisa and Albanisa.
Goodbye, Venezuela; hello, Russia
With the umbilical cord with Venezuela now nearly severed, one of the cards the Ortega government seems to be betting on is Russia. During a recent economic event in Moscow, Nica¬ragua’s ambassador in Russia reportedly proposed that the Putin government set up branches of Russian banks in Nicaragua, which would allow Nicaragua to “flee from the dollar and the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network.” Part of the bait Nicaragua held out to Russia is that this would extend the circulation of rubles and Russian products in Nicaragua and the rest of Central America.
Does the proposal reveal government distress at Washington’s mounting harassment or is it just a novel response to the possible sanctions that could affect its system of private banks, all of which are correspondents with US banks, thus mollifying its bank allies? Mario Arana, former Central Bank president and former treasury minister, who seems to have better diplomatic sensibilities than the ambassador, says it’s not really about “fleeing from the dollar,” but rather “improving the country’s democratic institutionality.” At a minimum, Nicaragua’s private financial sector doesn’t seem bothered by the idea.
Washington also has other cards in its hand
Most US lawmakers have shown little interest in the Ortega government over the years, given that it was cooperating with Washington on drug enforcement and migration issues and doing nothing to endanger either direct or indirect US business interests. But they certainly have no inclination to defend it given mounting evidence of Ortega’s close relations with Russia; his total control of all state institutions, perhaps particularly the military ones; and finally the country’s democratic deficit expressed in the allegedly repeated electoral frauds and post-electoral violence.
But these none of these seem to be driving issues for the hypocritical rightwing Republican legislators, particularly the fervently anti-Communist Cuban-Americans. They have expressed no public dismay over the fraudulent reelection of Honduran President Juan Orlando Hernández and the violence convulsing that country, the Russian government’s brazen interference in the US elections or President Trump’s apparent ties with Putin. They are just congenitally gunning for Cuba, Venezuela and Nicaragua, and as such are the ones particularly pushing the anti-Nicaraguan legislation known as the Nica Act (short for the Nicaraguan Investment Conditionality Act).
Last year, the new man in the White House made their actively aggressive game plan look more hopeful. In May, President Trump proposed a 98% drop in aid to Nicaragua from $10 million to $200,000, albeit for his own reasons as he cut aid to Guatemala by nearly 40% and to Honduras and El Salvador by nearly a third at the same time. Then in November, he cancelled the Temporary Protection Status (TPS) for some 5,000 Nicaraguans who sought that migratory benefit after Hurricane Mitch devastated much of the country. Again, however, Nicaragua wasn’t Trump’s only target. Later that month he cancelled it for some 59,000 Haitians and this January for nearly 200,000 Salvadorans, more recently calling both “s—hole” countries together with the whole of Africa. He has yet to make his final decision on whether some 57,000 fearful Hondurans will be next to lose their TPS.
Is Washington in a hurry?
There has been talk for months that Nicaraguan officials might find themselves on a US State Department sanction list if the Nica Act is passed. That legislation establishes that once Congress approves it and the President ratifies it, the US secretary of state has 90 days to publish a list, prepared in consultation with intelligence authorities, of “the involvement of senior Government of Nicaragua officials, including members of the Supreme Electoral Council [CSE ], the National Assembly, and the judicial system, in acts of public corruption, money laundering, or human rights violations in Nicaragua.” Interestingly, the bill, whose second version was passed unanimously by the House of Representatives last October 3, doesn’t specify what will be done with the list, but it doesn’t really need to. Sanctions await.
It seems, however, that passage of the Nica Act in the Senate isn’t proceeding fast enough for its House sponsors, Cuban-American Representatives Ileana Ros-Lehtinen (R-FL) and Albio Sires (D-NJ). On December 1 they sent a bipartisan, bicameral letter to the administration urging the Departments of State and Treasury to investigate whether CSE president Roberto Rivas and Albanisa vice president Francisco López (also the FSLN’a treasurer and president of Petronic as well as of Eniminas, Nicaragua’s new state mining company) met sanctioning criteria under the Global Mag¬nitsky Human Rights Accountability Act. The letter was also signed by Senators Marco Rubio (R-FL), Robert Menendez (D-NJ), Ted Cruz (R-TX), and Bill Nelson (D-FL), and House Representatives Ed Royce (R-CA), Eliot Engel (D-NY), Paul Cook (R-CA) and Debbie Wasserman Schultz (D-FL).
On December 20, President Trump ordered that Rivas and another 13 people from various countries be added to the Global Magnitsky Act’s list of “Specially Designated Nationals” managed by the US Treasury Depart¬ment’s Office of Foreign Assets Control (OFAC). The sanctions and their consequences are similar for an array of OFAC sanction lists, including the one deriving from the original Mag¬nitsky Act passed in 2012, which only applied to Russians, and the global version, passed two years ago. Canada and three other countries have also since passed their own versions of the Global Magnitsky legislation, with Canada alone already applying it to 52 officials from three countries: Venezuela, South Sudan and Russia.
As for Francisco López, there has been no further news about his possible inclusion on the list. In her note commending the Trump administration for sanctioning Rivas, Nica Act author Ros-Lehtinen added that she hoped Lopez would be designated in the next round. Meanwhile, Nicaragua’s El Nuevo Diario newspaper reported on December 27 that López was leaving his post as vice president of Albanisa and president of Petronic “after having lost the confidence of the presidential couple.” He had already departed the board of BanCorp. There was no mention of the fate of his posts as FSLN treasurer and Eniminas president, both of which require significant trust as well, suggesting that there might be another motive in distancing him from Albanisa-related organizations.
A shotacross the bow?
Roberto Rivas is one of the best known and least respected public officials in Nicaragua, not only because for at least 9 of the last 17 years he has headed the electoral system, he has been responsible for a chain of alleged frauds and illegitimate treatment of opposition parties and their leaders. Even more galling has been an ostentatious private life that can only be explained by a long list of never investigated corruption scandals dating back to even before Rivas’ tenure in the Supreme Electoral Council (CSE). The OFAC sanctions prohibit access by Rivas, his close relatives and financial front men to any bank that has a correspondent relationship with US banks, which includes all Nicaraguan banks and most of those in the rest of the world. All his goods and assets in US territory are also frozen, and he is denied the right to enter the United States.
Rivas is the son of a woman who is Cardinal Miguel Obando’s assistant and Obando has always publicly protected him. He is also the brother of Harold Rivas, who has been Nica-ragua’s ambassador to Costa Rica since Ortega took office in 2007. In January, having been informed by the US government of Roberto Rivas’ sanctioning, the Costa Rican Attorney General’s Office opened a criminal suit accusing him of having committed what it calls the “legitimation of capitals”—another term for money laundering—in that country. Rivas reportedly has numerous bank accounts and three luxury mansions there.
The sanctions convert the very wealthy and until now all-powerful Rivas into an international financial pariah, cut off from bank relations, credit cards and securities, and with difficulty crossing borders. It is both a severe humiliation and a harsh moral blow for the Ortega government given Rivas’ willingness to do Ortega’s bidding as head of one of the four branches of the Nicaraguan State. It was also a shot across the bow of others who could follow in his wake. After the announcement, the 63-year-old electoral magistrate disappeared from the public stage, including the January inauguration of the new municipal mayors elected in November, even though he has not officially resigned or been dismissed as CSE president.
Virtual silence from the government side…
For the first five weeks after the sanction was made public, President Ortega and his wife, Vice President Murillo, didn’t utter a word on the subject. Some saw their silence as a sign of caution and others as reflecting their difficulty in finding the best way out without worsening the panic the sanction triggered in the circle of power. Ortega’s first and virtually only public reaction came on January 27, when he curtailed the tenures of both Harold Rivas and his wife. He had held his post in Costa Rica since right after Ortega took office in January 2007.
Nor have any other governing party officials or legislators commented publicly on the case, with the exception of Comandante Bayardo Arce, President Ortega’s economic affairs adviser. Arce called the sanction an “imperial outburst” and berated journalists who asked him to comment on Rivas’ alleged acts of corruption.
Although it should fall to Nicaragua’s institutions to open an investigation, none has done so. Comptroller General Luis Ángel Montenegro told an insistent journalist that his institution would not be investigating because it’s not his job to “go around speculating” about Rivas’ inexplicable fortune.
…and diplomacy from both the business and US sides
Comments weren’t much more forthcoming from the business side in Nicaragua. COSEP’s president José Adán Aguerri tersely suggested—and only once—that Rivas should resign, an idea a few other business leaders echoed. But in general the business elite has tried to sell the idea that sanctioning Rivas won’t significantly affect Nicaragua’s economy, calling it nothing more than “political noise.”
Cut to US ambassador to Nicaragua Laura Dogu. Interviewed on January 12, she diplomatically said “it is important to understand that this sanction was against a person, not a country,” a claim also echoed by the businessmen. While claiming that “the goal is to protect the US financial system from money coming from sources of corruption,” she added when pressed that “Yes, it could have an impact [on Nicaragua] because outside investors might ask themselves: if he’s corrupt and has benefited from it, who else might have the same problem?”
The OAS doesn’t seem to be in a hurry
On December 20, the day before the electoral branch president made it onto the US sanctions list, Wilfredo Penco, who headed the OAS observer mission for Nicaragua’s November 5 municipal elections, presented the mission’s final report to that regional institution’s Permanent Council. The report either didn’t mention or else minimized the more than 200 denunciations it had received together with evidence of fraud in a number of municipalities. Ortega’s control of the electoral apparatus explains many of the municipal results favoring the FSLN despite—or perhaps thanks to—visibly high abstention in the most populated municipalities. Moreover, pro-opposition municipalities were militarized before, during and after the voting, resulting in seven deaths and none of those responsible being punished. Nonetheless, the report concluded that “while some of the findings of this report are targets of recommendations for elimination or improvement, they did not substantially affect the popular will expressed through the vote in the vast majority of Nicaragua’s municipalities.” With regard to the violence, the mission expressed “its solidarity with the families of the victims and the people of Nicaragua,” and called on “society as a whole to resolve its differences through peaceful means.”
Not too surprisingly, Kevin Sullivan, the US interim permanent representative to the OAS, was more critical of the irregularities committed in Nicaragua’s latest election process. He was also harsher about the lack of response by government authorities to the acts of violence, criticizing them for acting only against followers of the opposition parties. Although present in the session, Nicaraguan Foreign Minister Denis Moncada opted for the same silence prevailing in other government circles these days.
Back on November 8, the same day the mission issued its preliminary report, the State Department issued a press release that struck a somewhat more diplomatic note, albeit using its faint praise to damn. It congratulated the mission for providing “much-needed transparency,” and “concurred with its recommendations focused on strengthening balance within the political party system, improving the selection of election councils at all levels, establishing an adequate legal framework for civil society, and promoting broad and inclusive domestic electoral observation.” At the same time it expressed concern with “persistent flaws in the Nicaraguan democratic process,” and “credible reports of irregularities throughout this electoral process,” presumably from other sources. It also condemned the post-electoral violence, lamented the loss of life, and called for an investigation that will bring those responsible to justice.
Almagro’s differences are mainly in the timeline
Both the preliminary OAS report issued in Managua 48 hours after the voting and this one, published a month and a half later, ratified the organizational strategy of Secretary General Luis Almagro, which is longer term than some in Washington seem to have the patience for. The two reports also demonstrated the diplomatic tone with which Almagro hopes to avoid run-ins with Ortega, an objective that doesn’t always overly concern Washington. The report’s conclusions praised the CSE for providing the mission “all the help it needed to perform its work” and for the “smooth and direct communication with this electoral body throughout,” expressing special gratitude “for the assistance and cooperation it received from the President, Vice President, magistrates and staff of the CSE.”
On December 20, Almagro implicitly acknowledged that he had consulted its contents with the Ortega government both before and after its presentation, and tweeted that the “first stage” of his agreements with the government of Nicaragua had been closed in a “positive” manner. He also announced that Penco, like himself a Uruguayan, will head up the next stage of the accords, which should lead to the touted electoral system transformations. Penco has long been viewed askance by the opposition in Nicaragua for his endorsement of the fraudulent elections of 2008, 2011 and 2016, when he was one of the friendly “electoral experts” Ortega invited for precisely that purpose. Almagro has defended Penco, even saying he had “put his hands in the fire” for his compatriot.
Almagro is betting that Ortega will end up accepting a profound transformation of Nicaragua’s electoral system in time for the next presidential elections, in 2021. That objective pairs up nicely with Washington’s. Both are putting their money on substantially changing Nicaragua’s deteriorated electoral system, in Washington’s case because it is the pivot around which any other interests could achieve or force further changes in the country’s political model.
The difference is not in objectives, but in the timeline. At least some in Washington seem to be in more of a hurry than Almagro, who is complacently maintaining the three-year target agreed to with Ortega at the beginning of last year.
Some Nica critics also have different levels of patience
Some Nicaraguan critics of Almagro’s position complain that Ortega is gaining time and the OAS is continuing to lose credibility thanks to the mission’s report. Others who spoke out about the elections noted the contrast between Almagro’s firm attitude toward the recent electoral fraud in Honduras, in which he has called for new elections, and his tolerance in the Nicaraguan case. Still others are more cautious about criticizing Almagro, trusting that a “comprehensive” electoral system reform will in fact come out of his longer-term strategy.
Panorama Electoral, the Nicaraguan consortium in which the 21-year-old election observer organization Ética y Transparencia is participating, concluded its own final report by defining the November 5 election as “the fifth consecutive process with tinges of fraud and farce.” A few days later, Gerardo Baltodano, speaking as president of the Nicaraguan Foundation for Economic and Social Development (FUNIDES), said “the process of these elections was tainted. The positive measures implemented only a few days before the voting could not repair the damage already done.” That damage is nothing other than the lack of independence and professionalism with which Nicaragua’s electoral system has functioned for the past decade, during which time the CSE has become a fully corrupt and inefficient institution.
The US Senate takes up the Nica Act
The “two days that shook Nicaragua” in late December didn’t end with Rivas’ sanction on December 21, though that brought the greatest tremor. The next day, Sen. Cruz introduced a new version of the Nica Act into the Senate, one a bit tougher than either the version the US House of Representatives passed in October, or the previous versions he presented in September 2016 and the following April. In addition to adding the sanction against Rivas to the already long list of justifications for the law, it calls for a report on “activities of certain regimes” in Nicaragua, specifying Russia and Venezuela.
But more novel than the tougher language and conditions is the bipartisan backing Cruz mustered this time. Whereas both earlier versions were co-sponsored only by Marco Rubio (R-FL) and David Perdue (R-GA), this time he got six co-sponsors, with the three Democrats including the prestigious 77-year-old Patrick Leahy of Vermont, who has been a progressive senator for 42 years. Together with his current Senate colleague Bernie Sanders, who was mayor of Burlington in the 1980s, Leahy actively defended the Nicaraguan revolution from the attacks by President Reagan back then. He has also defended other just causes in the continent and the world with similar energy over the years. A Quixote Center blog says his co-sponsorship “makes it very possible that this version could pass in the Senate.” Former Nicaraguan ambassador to the United States Francisco Aguirre Sacasa believes that this bipartisanism, unusual in the Trump era, “demonstrates the strength the Nica Act now has.”
Leahy’s words when presenting the bill to the Senate were also significant. He said its intent is to send the message to the Nicaraguan government and business community that “corruption and impunity have a price.” It was the first implicit allusion to Nicaraguan business leaders also potentially being sanctionable by the Nica Act.
Still no response from Ortega
The Ortega government has also said nothing about this second sign of escalation from Washington in two days. It’s very unlike his old style of anti-imperialist comebacks, which this time fell to Bayardo Arce. The stakes are higher now that Venezuela’s situation has left Ortega bereft of the luxury of arrogance toward countries that make demands on him. He’s also no longer surrounded by functionaries who know US policy well and were once among his close advisers. The COSEP business elite have been his main policy consultants over the past ten years, but he has drawn a clear line between their economic counsel, which he usually listens to, and their political views, which he doesn’t. Is his current silence a way to cautiously avoid any false step with Washington, his business allies, his party grass¬roots and even possibly his inner circle?
Three days after November’s municipal elections, Ortega, under pressure, declared: “When the next elections come around, and the next ones will be the regional authorities in the North and South Caribbean Regions [in November of this year], we will have an improved, more perfected, stronger and more secure electoral system. We are going to begin improving, perfecting the system insofar as our possibilities allow.” It was a subtle positing of a quid pro quo, which the OAS election report released that same day had already seconded in its recognition that reforms require economic resources. But the moves made in Washington weeks later indicate that the gamblers there are putting their expectations on other “resources.”
Since Ortega doesn’t seem to have the advice and support of a reliable trusted expert on such issues, might he now be thinking he misjudged the mood in Washington when he did absolutely nothing after making that promise? Could he be thinking it would have been better to take a first step, even if only a cosmetic one, by removing Rivas as the CSE president and even from its seven-person executive leadership? Perhaps doing so would have at least delayed application of the Magnitsky Act.
His business allies are nervous and worried
Not even Ortega’s allies in the upper echelons of the business community seem to know how to respond to Washington’s one-two punch. Their greatest worry is that more names could appear on the list of “sanc-tionables.” If that were to happen, and particularly if it happens sooner rather than later, it could make the scenario increasingly unstable, thus affecting the economy both faster and more than previously estimated.
The government’s big business allies haven’t stopped lobbying in Washington. Their main gambit is to present open-minded senators a positive narrative: Nicaragua’s continuing close alliance between the government and private enterprise has resulted in a stable country and strong economic growth. Destabilizing the country would only jeopardize the economic achievements and—what is surely a greater attention grabber in Washington, particularly these days—promote more emigration.
Although the business elite aren’t letting up on the lobbying and appear calm, they’re nervous, as FUNIDES’ periodical surveys have been increasingly showing. A chart of the assessment by big business executives close to Ortega shows that the perceived “political investment climate” has been worsening in the last two years, from a positive high of 77% in April 2016 to only 45% in October 2017, the month of FUNIDES’ latest published economic report. In the paragraph just before that chart, the survey notes without comment that a June 2017 Nicaragua country report by the International Monetary Fund called the political uncertainty a “high-risk” factor, specifically given its negative impact on investment and short-term growth. Among the most important negative factors for investment, those surveyed listed the same ones as always: corruption, the price of electricity and the cost of raw materials and credit, as well as the political environment mentioned by the IMF.
Since Nicaragua’s own largest investors (i.e. the roughly 200 who reportedly have a personal capital wealth exceeding US$30 million) have always been disinclined to invest much in productive growth at home, the more telling figure about the investment climate is the behavior of foreign direct investment. The FUNIDES report says it was US$569.7 million in the second quarter of 2017, a 4.5% reduction from the same period the previous year.
If the noose tightens... it will choke big business too
It remains to be seen whether the Senate will vote to definitively approve the Nica Act, which requires US representatives to the international financing institutions (IFIs) to oppose any new loans to the Ortega government. It also remains to be seen whether the State Department will apply sanctions to more public officials, either through the Magnitsky Act or an approved Nica Act.
If either happens, it would likely trigger a significant reduction in national and foreign private investment and the flight of capital abroad, again both national and foreign. It would also reduce the capital flow from the IFIs, although the Ortega government claims to have received approval of sufficient loan requests from several of them to last at least until 2020.
Ortega’s business allies are in a tough spot
The business elite know an economic model with less unfair competition—resulting from the group in power keeping for itself key economic sectors such as electricity and trying to do the same with telecommunications—would be better for them in the longer run. They also know they would benefit more from a political model with greater real possibilities for some group other than Ortega’s to have a shot at winning the government. In their view, the embryo of such a group is the new Citizens for Liberty (CxL) party, which ran in the municipal elections, albeit with limited results in part due to the electoral system’s fraudulent maneuvers.
Those who have worked closely with the government are banking on the Trump administration thinking twice before including any of them on some list. They believe Washington prefers that they distance themselves from Ortega and the sanctionables in his group.
But it’s not easy for them to do that. They have interests at stake, as they have spent a long time enjoying tax, customs and other kinds of privileges; they were taken into account in the approval of 38% of the laws—most of them economic—approved in the country these past 10 years; and perhaps most importantly right now, they don’t see any clear short-term alternative if they decide to cut the cord, as they are being asked to do by the power in the north.
Can the business elite play the role of interlocutor?
Feeling themselves less vulnerable to the sanctions list than Ortega’s public officials, several business leaders have declared that, beyond investing in Washington lobbying firms to persuade the Senate to at the very least postpone passage of the Nica Act if not reject it, they can be direct political interlocutors Washington will listen to.
They aspire to be a key go-between in the discussion about reforms to the electoral system precisely because they, like everyone else, see it as the first step to any other change in the national situation. But if they want to be listened to in Washington, they’ll first have to demonstrate that they’re listened to here.
They can’t even present a united front
It won’t be easy to achieve either unity among themselves or success with Ortega, as the January 30 elections of the new board of the American-Nicaraguan Chamber of Commerce demonstrated. On one side was the slate of national business groups under the COSEP umbrella, which are closer to Ortega, and on the other the representatives of US businesses in Nicaragua.
The latter’s victory, giving the board chair post to Nelly Rivas. a top executive in Cargill Inc., one of the US companies with the greatest investment in Nicaragua, augurs a new balance of forces in AMCHAM. And it’s based on reality: US investors in Nicaragua can take freer positions than national ones with respect to the national crisis and can distance themselves more from the Ortega government.
Ortega’s risky gamble
The “betting mode” in which President Ortega is operating is a risky one. He’s probably already feeling out some offer that will halt the assault of those in Washington who are impatient. But what could it be? Ending the crisis at its root would mean accepting a genuinely reformed electoral system with competitive and transparent elections, which he might win but could also lose. Would Ortega risk such a possibility?
Until it becomes clear whether he will concede something, what it might be and when or how he would unveil it to convince both Washington and his own loyal followers, Ortega is maintaining at least the appearance of assigning little importance to what’s happening. He may be banking on Nica¬ragua’s insignificance. And he may also be assuming that the political and economic sanctions won’t have much effect on the investment climate; that Nicaragua’s low land and labor costs and greater public safety than the rest of Central America will compensate for any increased political risk of investing in Nicaragua. If that’s his thinking, he’s probably prepared to continue running that risk.
A difficult year ahead
Ortega may have access to an informed economic analysis that goes beyond the measures and sanctions imposed up to now. But based only on the negative effects of the cessation of Venezuelan cooperation and corresponding reduction of government spending, Nicaragua has already been unable to avoid a drop in economic growth.
Both the Central Bank of Nicaragua and the IMF are already projecting lower economic growth for 2018 than last year’s estimated 4.3%, itself lower than in the six previous years: 6.2% in 2011, 5.6% in 2012, 4.5% in 2013, 4.6% in 2014, 4.9% in 2015 and 4.5% in 2016. This means unemployment will increase and income from the sprawling informal sector in which 8 out of every 10 employed Nicaraguans eke out a bare living will shrink.
Any stagnation or fall of economic growth would oblige the government to undertake a fiscal adjustment that would have a high social and political cost, particularly if it touched the sacred tax exonerations and exemptions enjoyed for so long by big business.
Although economic deterioration will increase discontent in the population, the government calculates that it will be able to assuage it with its social programs. But in fact the discontent could become much harder to palliate. It might have to resort to greater social control, which is already passing from intimidation to more open repression, not only in rural zones, which is nothing new, but also in urban ones. In this predictble scenario, the “revolution” might actually have to “radicalize” to stay in power, which would be the business sector’s greatest nightmare.
The first step is electoral reform
All those who have tossed in their ante—the various actors in Washington, Ortega and his close circle, and his fair-weather business allies—are fully aware that the first step to resolving the Nicaraguan crisis is a reform of the electoral system. What divides the gamblers around the table is how deep the reform will have to go.
Daniel Ortega is gambling on only a cosmetic reform, while Washington and Nicaragua’s business class want something more. Nicaragua’s genuine political opposition is putting its hopes on a lot more: competitive and transparent elections that allow the popular will to be truly expressed, which they obviously believe will favor them.
We’re only at the beginning
Everything is still uncertain. By the time 2021, the long-term deadline set by the OAS, rolls around, much more will have become clear. For now all are more alert to what might become clearer this year, possibly even in the coming months, since the evolution of Vene-zuela’s crisis could accelerate the way various hands are played.
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