A year with the Bolivarian republic

19 de Julio en la plaza

The Sandinista government has become part of daily life in Nicaragua.

A year has passed since the old hero from the revolution, Daniel Ortega, after 16 years out in the cold, regained the presidency with 38% of the votes, with promises of everything to everybody: to the Americans, confirming the CAFTA free trade agreement; to the farmers, promising to renegotiate the same. To the trade unions, confirming the right to collective bargaining; to the Korean and Taiwanese factory owners, understanding their continuing need for a a low paid, obedient, and disciplined workforce.

How are things in this, the newest Boliviarian Republic?

Daniel Ortega’s wife and chief of communication, Rosario Murrillo, still talks every day about the ongoing “spiritual revolution”. Daniel Ortega is still be seen on bill boards all over the country, with fist raised on a pink back ground (the new Sandinista color, replacing the traditional red and black), exhorting “Up with the poor people of the world”, taken from the Spanish version of the Internationale, to mark Nicaragua’s enrollment under the banners of the Boliviarian revolution and it´s new socialism.

Ortega enjoys favorable conditions for his term of office: the IMF and the World Bank are a pale shade of their former might and glory, his government has the unconditional support of Hugo Chavez, in return for outspoken support of the Venezuelan cause at international meetings, the US and the EU are showing good will, or at least forbearing patience, and he enjoys public support for several of the key planks of his political platform. So what is going on in the renewed revolution ?

For a hint, In this post I explore three recent economic initiatives: The case of the Spanish multinational Union Fenosa, the Budget proposal for 2008, and the negotiations with the International Monetary Fond.


Confronting the multinationals?

At the Latin-American summit in Santiago de Chile in November of last year Daniel Ortega called the Spanish energy conglomerate Union Fenosa a Mafia. A short time before, at secret meetings, with Union Fenosa´s Spanish CEO, he had agreed to a 10% hike on energy prices during 2008, to guarantee Union Fenosa it´s profit on the distribution of electricity in Nicaragua.

Afterwards a spokesman for Union Fenosa said to the paper El Nuevo Diario that the company and the government are 90% in agreement.

-What about calling you a Mafia?

-Well, that’s included the 10%….

The situation has become well known in Nicaragua: the government makes harsh statements to please the voters and its Venezuelan allies. The victims of these attacks don’t make a fuss, since the government already has given promises that takes care of their needs.

Union Fenosa is without comparison the most hated concern in Nicaragua. Ten years the privatization of it´s energy sector, Nicaragua has the most expensive and the most inefficient power supply in the region. The company sells the energy that it buys from producers to the consumer with the largest markup in the region. Never the less, the company has never been able to afford to invest in new lines (the energy loss is 30%), people in rural districts wait years to be connected to the system, and more than 10% of the consumers complain over incorrect bills every month. High energy prices haven´t lead to investment in more energy production, on the contrary; national water power plants have to sell energy at a loss in order to subsidize Union Fenosa. Despite ample potential for water, geothermal, and solar energy, the country has become totally dependent on expensive oil generated plants, which have not been maintained for years. The country has for a year suffered from power black outs for 3-6 hours per day as a result.

Union Fenosa claims that they are losing money because of rising oil prices. But consumers can not get this to square with the fact that the company´s billing has risen during the massive black outs despite rates being officially fixed.

An International People´s Tribunal recently convicted Union Fenosa of massive errors in billing, bad service, discrimination between rural and town costumers, and favoritism towards companies with connections with the former president. The energy crises has created a massive backing among large sectors of the population for any initiative that could reverse the results of this failed privatization The government has, despite campaign promises during the election, and hard rhetoric at meetings with Hugo Chavez, chosen to back off instead, asking the Iranian and Venezuelan governments to foot the bill for the necessary massive investments in new energy production, and allowing Union Fenosa to pass the buck to consumers.

Lluvias en Carreterra Sur

Pursuing new priorities?

The government is currently negotiating it´s budget proposal for 2008 with the opposition parties in parliament. This is the first national budget drawn up by Ortega´s own team, the 2007 budget was by and large taken “as is” from the outgoing conservative government. Even so, this budget is not decisively different from any of the previous 16 years of neoliberal budgets.

The budget for education is one example. Many people see education to be the single most decisive bottleneck for the country’s development: Today textile factories in the country’s export zones demand six years of public schooling of a sewing machine operator. The average schooling among the adult population is five years, so more most of the population is not even be able to apply for the, by and large, only industrial job available in the country.

Today Nicaragua spends about $200 million a year on education. For this money Nicaragua gets an educational system that brings 55% of all children through six years of elementary school and gives about 15% a high school education.
In order to live up the UN´s millennium goals, by 2015 all children must pass sixth grade and six out of ten must pass a high school examination. To achieve this, it has been calculated that Nicaragua needs to double it´s education spending, to $400 million a year. This means that education’s share of the gross national product must rise to 6%. The government only plans to raise it to 3.9% up until 2010.

Critics point out that the money can be found. The Ortega government has set aside almost 300 million $ a year to off a debt in government bonds, most of which are held by three Nicaraguan banks – a renegotiation of this debt would more than pay for the the necessary increase in education spending.

These government bonds come partly from the state’s financing of a coffee and financial crisis in 2000, when five banks went bankrupt, and partly from compensations issued during the 90´s to land owners that were confiscated during the Sandinista revolution.

The civil society umbrella-organization Coordinadora Civil thinks that the Aleman and Bolaños governments´rescue of the bankrupted financial sector was one big swindle for the enrichment of a group of Nicaraguan financiers: the state sold 500 million dollars worth of bonds at 21% interest in order to cover assets, which in reality were only worth 100 million. Many of the confiscation compensations from the 1990s were very shady, too.

The fact that Ortega does not want to renegotiate this debt, even though he during the election campaign accused the previous corrupt bourgeois governments of imposing the debt on the people, is by some explained as a revealing government’s class bias (Sandinista also own shares in the three banks that the state presently subsidizes through these bonds). Others explain it as the price demanded by the private sector for the truce the Ortega government enjoys with investors and employers.

After the hurricane Felix devastated Eastern Nicaragua in the beginning of October, Ortega proposed a two year’s moratorium on state bond payments (only those related to the bankrupted banks), in order to rebuild the devastated areas. But he has, since then, let the proposal sleep in the parliament, and has put no political force behind the proposal.

You don’t have to agree on investing in education as being main government development strategy. But the budget does not reveal any other major investments, either:

  • The pet program of the government is the program Hambre Cero (Zero Hunger), aimed to secure food self-sufficiency for 75.000 small farmers over the next five years. This is a social project more than a development project and gets $15 million.
  • A program to compete with private loan sharks for the small credits used by women to neighborhood finance stores and other small businesses, Usura Cero (Zero Loansharking), receives $5 million.
  • A national developing bank, which is the top priority of the farmers’ movement, and which was the movement’s price for giving the Sandinista support during the election campaign, will get the meager sum of $2 million. It is to be capitalized later on by foreign donors, including Venezuela.

Balbino's farm, flag and store

A blow against imperialism?

Nicaragua has since 1990 lived under the rules and recommendations of The International Monetary Fund. The Sandinista have for years condemned the neoliberal governments for their compliance towards IMF’s poverty creating demands. Even so, ever since he took office Daniel Ortega has used much energy negotiating a new deal with the Fund. The negotiations have been secret, without any possibility for an influence from civil society or popular organizations. In October 2006 the new agreement was finally unveiled.

In return for a loan of $100 million Ortega obligates himself to keep the public wages down, raise electricity prices and ensure that the payment of both the domestic and foreign debts gets a higher priority than other expense the state may have.

The government boasts that this agreement, contrary to the preceding agreements, was written not by a delegation from the IMF, but by Nicaraguan government officials.

-This is correct, writes the economist, Adolfo Acevedo in the magazine Envio, – But that only means that the government no longer gets to blame the IMF for its policies.

The need for this agreement is not obvious: Venezuela has promised Daniel Ortega much more than the $100 million that the government gets from the IMF in return for pawning its economic policy. And during the negotiations with the IMF the group of European donor countries said that they would not demand an agreement with the IMF as a condition for further co-operation with Nicaragua.

The IMF was for many years a straitjacket for the development of almost every poor country in the world. An agreement with IMF was a condition for a loan from the World Bank, from Europe, from the USA. But to day this is a thing of the past. The Argentinean economic collapse in Argentina in 2001 destroyed confidence in the IMF’s economic commandments, the so called Washington Consensus. And when Argentina in 2005 redeemed all it´s debt with money from Venezuela – it made short work out of IMF’s economic power. To day only 26 countries in the world (only 6 are Latin American) have an agreement with IMF. None of the heavy weight countries have it: neither Chile, Brazil, Venezuela, nor Argentina. IMF is now in both a political and economic crisis (it was interests from loans to the big countries that paid for the bloated bureaucracy in the Fund).

Contabilidad campesina

The Boliviarian revolution

Daniel Ortega has made himself a faithful supporter of Hugo Chavez, and has in return received promises worth millions of dollars: a giant oil refinery (which is meant to break Esso’s monopoly), an oil power plant, and the financing of the national bank for development.

After a year the great development projects have yet to see the light of day in the landscape and in the state budget. It is too early to estimate if the Ortega government will be able to make good use out of the Venezuelan oil millions. But Venezuelan money is already visible in the financing of the Cuban designed video-alphabetizing project Yo Si Pueblo (Yes I Can! ) and a program for cataract operations that has already given more than a thousand poor Nicaraguans their sight back. Venezuela buys beans from Nicaraguan farmers and sells them cheap fertilizer.

Why hasn’t Ortega done like the social democratic Kirchner in Argentina and used the oil millions from Venezuela to buy himself out of IMF’s clammy hand? Maybe because the Venezuelan support has not yet solidified. And maybe because Ortega doesn´t see the Venezuelan money as support for a national project as such, but more as brotherly support for Ortega´s own political project. At any rate Ortega chosen not to to let the money from Chavez enter the state budget. Instead, the money is channeled into private or public enterprises under Sandinista control. The Venezuelan national bank is meant to capitalize the national development bank, not through the Nicaraguan state. The Venezuelan oil, of which nobody yet has seen very much, because Esso owns the refining and distribution capacity in Nicaragua, is sold through the state owned oil company, Petronic. The 40% share of the price which comes back to Nicaragua on generous credit terms, and which will run up to several hundred million dollars a year, are not managed by the State, but by a mutual Venezuelan-Nicaraguan company. The parliament will not see this money and it will not appear on the state budget ).

This semi-privatization of Venezuelan solidarity ensures that Ortega can use the money as he pleases without political interference and without public insight, much like the way Danish governments have used public and semi-public companies to avoid public influence in energy-, housing-, and traffic-policy. But since this is Nicaragua, many also fear that the whole idea is to make the Ortega family and it´s friends into a new, independent, economic power group. The Government’s defense is that, if the money went through the state, it would mean crossing the the limits that the IMF sets for government expenses and loans. But the same money could have made Nicaragua independent of the IMF.

19 de Julio en la plaza 8b

The revolution back in power?

So in three key cases, where The Sandinista government could have acted differently, it chose to:

  • use the subsidies from Venezuela for building up an independent economic empire, in stead of ensuring independence from IMF
  • subsidize the country’s financial sector instead of increasing the social budgets
  • ensure the profit of foreign multinationals instead of working to reform Nicaragua´s sick energy economics.

There are no signs that the Sandinista government is following anything as old-fashioned as an economic development plan, policies are invented as the government goes along, apparently following the dictates and ups and downs of Ortega´s power plays rather than any development logic. This opens up new and important spaces for popular pressure and influence. But one can faintly see the contents of an implicit strategy for development in the types of initiatives coming from the government: an alliance with Venezuela to develop an oil driven energy supply, an alliance with Iran about solar energy and housing construction, an alliance with the Mexican multi-billionaire Carlos Slim about installing a jeans-factory, a cotton mill, and to re-establish cotton production (a hard blow for environmentalists), co-operation between Brazil and the country’s largest family-owned concern, Casa Pellas, about sugar for energy production.

These large projects are supported by the social programs like No Hunger, a labor market policy that on the whole seeks to keep on creating low pay, low skill jobs in the foreign owned textile industry, and better state service education and health sectors (though the lack of serious changes in budget priorities raises doubts about the ability to keep the big promises of free medicine and free schooling for all).

The strategy, if it is a strategy and not just a row of partnerships between rich Sandinista and foreigners, can be discussed: the high priority programs show the same focus on large, capital intensive, top-down state or privately run companies, that we saw during the revolution in the1980s. Experiences from the last 16 years have apparently not made an impact on policy: experiences from environmentally sound farming, from developing small farmer´s productive and economic potential, from bottom-up policy development, from local democracy and organization, from the development of alternative trade- and export-niches. Maybe because many of these experiences were made by NGOs and popular organizations outside part control. The government doesn’t trust either one of these groups.

Emigration – one out of six of all Nicaraguans live abroad and have brought half of all the high school diplomas in the country with them, the money they send home accounts for one fourth of the GNP – is an economic and a social problem on which the government doesn’t have a position. Maybe because this problem didn’t exist when they last were ministers and were forced to apply themselves to real problems, not only to win next election.

Of the programs that the government has started, only one, the state-run development bank intended to finance small farms and support the co-op movement, has a chance of poking at the economic class-structure in this country. It is still more an untried promise without capital than a reality, but it is definitely still a possibility.

But even if the country only gets a refinery, a reasonable school system and a health service that actually works, out of the Ortega government, many would find this to be a huge step forward compared to the previous disastrous governments. So huge that some would describe it as revolutionary. But even these minimal results of a government where “The people is the President” are still in doubt.

(Published in Danish on September 3)

19 de Julio en la plaza 6


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s