Marketing himself as a completely redesigned 2007 model, with sleek new lines and reassuring sound bites, Sandinista leader Daniel Ortega persuaded 38 percent of Nicaraguan voters to elect him president in November 2006 on his third try since leaving office in 1990. Ortega, now 62, assumed the presidency for the second time in January 2007. As he approaches the first anniversary of his inauguration, however, many design flaws in the clunky 1979 model Ortega are beginning to manifest themselves again.
Across South America, a number of countries are backsliding into a variety of long-discredited socialist models. In some cases, countries are being ruled by despotic hard-leftist and populist caudillos (strongmen). The leaders of this resurgent Latin leftist wave generally fall into two camps: "vegetarian" democratic socialists, who see the many benefits of capitalism and are willing to work within the market-based economic system to create good and sustainable private-sector jobs, and "carnivorous" hard-left socialists (e.g., Fidel Castro and Hugo Chávez), who oppose and appear determined to tear apart market-based democratic capitalism and replace it with a form of "neo-communism."
Daniel Ortega certainly has a carnivorous pedigree. He led the Sandinistas when they seized power in 1979 after a long, bitter, and violent guerilla war against the Somoza dictatorship. Yet Ortega's performance since taking office in January 2007 does not indicate a clear preference between the vegetarian and carnivorous socialist camps. The former Comandante is walking a tightrope, appearing to support capitalism and the U.S.-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) and maintaining relations with the U.S. while seeking close relations with and cash from world troublemakers such as Iranian President Mahmoud Ahmadinejad, Chávez, and Colonel Muammar Qadhafi of Libya.
What the U.S. Should Do. The U.S. should carefully monitor the situation in Nicaragua and give Ortega every encouragement to continue down the path of democratic governance and neoliberal market reform. If he chooses to follow the Chavista path instead, the U.S. should take every opportunity to counter Ortega's influence and steer Nicaragua back onto the right track.
Specifically, the Bush Administration should:
- Conduct a review of the U.S. Millennium Challenge Corporation's $175 million, five-year compact with Nicaragua to determine whether or not the Ortega government is complying with its terms and then report its findings to Congress. If needed, the MCC compact should be renegotiated to keep the Nicaraguan government and economy headed in the direction of market-based democratic institution-building.
- Review all U.S. Agency for International Development programs in Nicaragua. USAID programs should be revised if the review determines that USAID funds are not producing the market-based democratic institutions and policies that Nicaragua needs.
- Seek additional funding from Congress for more democracy and governance programs to encourage the development of strong, transparent, and pro-democracy political parties and institutions in Nicaragua. The Administration should request this additional funding regardless of the results of the review of existing USAID programs.
- Request that the Office of the U.S. Trade Representative and the U.S. Department of Commerce conduct a study of Nicaragua's participation in and benefits from CAFTA-DR and then report those findings to Congress. If, as is expected, Nicaragua is found to be benefiting from CAFTA-DR, the U.S. embassy in Managua should launch an aggressive public diplomacy campaign to inform all Nicaraguans of the proven benefits of free trade and CAFTA-DR.
- Ask the Inter-American Development Bank, World Bank, and International Monetary Fund to conduct detailed studies on the effectiveness of their programs in Nicaragua. The Administration should request that they change any program that is failing to achieve goals that are consistent with U.S. policy.
- Increase and enhance the State Department's public diplomacy efforts in Nicaragua to encourage the development of strong, transparent, market-based, and pro-democracy political parties, economic policies, and institutions. New programs should take advantage of the success that nearby countries, especially El Salvador, have experienced in making the transition to stronger market-based democratic systems.
For its part, Congress should:
- Increase funding for public diplomacy efforts in Nicaragua and
- Hold hearings to assess the situation in Nicaragua and to determine whether or not the Ortega government's actions constitute any threat to U.S. national security.
Conclusion. Ortega has walked a tightrope since taking office in January 2007, appearing to support capitalism and DR-CAFTA and maintaining relations with the U.S. while seeking close relations with and cash from world troublemakers from Ahmadinejad to Chávez to Qadhafi.
U.S. officials should carefully monitor Ortega's high-wire balancing act while still working to maintain and expand democratic and free-market institutions in Nicaragua. The U.S. needs to be prepared to act promptly if Ortega jumps (or is pushed) off the tightrope and moves closer to Venezuela and Iran.
James M. Roberts is Research Fellow for Economic Freedom and Growth in the Center for International Trade and Economics at The Heritage Foundation. Caroline Walsh, Research Assistant in the Center for International Trade and Economics, made many valuable contributions to this report.