Nicaraguan President Daniel Ortega boasted for years that his handling of the economy was superior to that of his neighbors in Latin America. From 2007 to 2017, the government focused on attracting foreign companies to install manufacturing plants, which boosted growth at rates above the regional average. But the political crisis that erupted in 2018 had its roots in the pension system and was fed by the condition of poverty in which the majority of Nicaraguans live. Three years later, with the crisis still in process and the persecution of opponents intensifying, confidence in the management of the economy is cracking.
At least 18 opponents, including journalists and former government allies, have been apprehended by the National Police, a body that responds to Ortega and the vice president, and his wife, Rosario Murillo. Five of them aspire to be presidential candidates in the November elections, but Ortega seeks to remain in power. International organizations have demanded that transparent and fair elections be held.
Despite the fact that the climate of repression and uncertainty has been escalating since 2018, businessmen have remained mostly silent. Today, the persecution has reached them with two arrests, frozen accounts and a threat of expropriation. Specialists agree that this has generated a lot of uncertainty and is exacerbating the economic crisis caused by the covid-19 pandemic, erasing the advances in investment made in the first years of Government.
The first decade
During the two periods in power, between 2007 and 2017, President Ortega focused on strengthening international reserves and public finances through loans and aid from multilateral organizations such as the Central American Bank for Economic Integration (CABEI) and offsetting the decline tax collection with the oil aid sent by the Venezuelan Government. His relationship with businessmen was cordial while, abroad, he promoted the country as an investment destination.
The efforts paid off and foreign companies installed maquiladora plants in the country. In those 10 years, the average annual economic growth was 5.2%, well above its peers in the region, according to estimates from the Central American Institute for Fiscal Studies (ICEFI). “It is a paradoxical fact, let’s say, because Ortega supposedly entered as a socialist”, recalls the economist Francisco Aguirre, who was president of the Economy Commission in the Legislative Assembly between 2007 and 2012, “but, in reality, in his management of the economy was definitely extremely pragmatic and, as a result, Nicaragua had one of the highest economic growth rates ”.
But when you start from a very low gross domestic product, large leaps in growth do not necessarily translate into a better quality of life for workers. Nicaragua is the second poorest country in the region, after Haiti. And, despite the fact that macroeconomic management was good in those years under Ortega, the government did not make an effort to raise the educational level so that the country could offer better-qualified labor for which better salaries are paid.
“Remuneration is not enough for Nicaraguans,” explains Abelardo Medina, an economist at ICEFI, “so they emigrate to other realities, not only to the United States, but also to Costa Rica. We are talking about a systematic expulsion of workers because the country reproduces schemes of low wages and exclusion of production groups ”.
The Nicaraguan private sector approached the Ortega government during those years and had a great impact on the management of the country’s economy, says Aguirre, who was also Foreign Minister and worked at the World Bank. “This is an issue that is very controversial in Nicaragua, because there are many people who criticize the private sector for not giving more importance to political considerations, but the truth of things is that nobody in Nicaragua, nobody, imagined that they would explode the repudiation that occurred in 2018 ”.
The repression begins
The good economic performance ends in 2018, when there is a spontaneous and peaceful uprising against the Government. One of the central demands was against a change in the pension law. “These mobilizations were violently repressed by public authorities and groups affiliated with the Sandinista Youth, which not only caused around 400 deaths and many displaced to other countries,” says an ICEFI report, “but also deepened the climate of political polarization. that severely impacted the country’s economy ”. That year, GDP fell 3.4% and the situation did not improve for 2019, when a 3.7% drop was seen.
In this context, the covid-19 pandemic reached Nicaragua, accompanied by hurricanes Eta and Iota, which also wreaked havoc on national production. The companies that were able to remain open kept their employees afloat while the lack of a program of fiscal support or transfers to those most in need affected informal workers. The World Bank estimates that poverty – defined as living on an income of less than $ 3.20 per person per day – increased from 13.5% in 2019 to 14.7% in 2020. This translates to 90,000 people who fell into poverty from one year to the next.
The political crisis turned into a wave of persecution of the opponents of the Government of Ortega and Murillo under the accusation of violating sovereignty. Among those detained are José Adán Aguerri, businessman and former president of the Superior Council of Private Enterprise (COSEP) and Luis Rivas Anduray, executive president of the main bank in the country, Banco de la Producción, which has a presence in Central America, the Caribbean and Ecuador. . In addition, in May, the Federation of Chambers and Industrial Associations of Central America and the Dominican Republic accused that the Government of Ortega “silently” expropriated the facilities of a liquefied natural gas plant of a Guatemalan company and that the Administration has not expressed itself around the case.
“We hope that the Nicaraguan government will have the same president and, unless there is a new high-level trigger, we do not see that in the short term, in essence, nothing will change,” Medina analyzes. “This instability also makes it impossible for economic growth to return to the same dynamics as in previous years because businessmen stop coming.”
“Any businessman, before arriving in Nicaragua, already thinks about it,” says the expert, “because he is not sure that there will be the legal certainty that there was in the past.”
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