January 15, 2008
By James M. Roberts
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
the U.S. and appear determined to tear apart market-based
democratic capitalism and replace it with a form of
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 Muammar
Qadhafi of Libya.
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.
THE COMEBACK COMANDANTE
In their amusing but deadly serious recent book El
Regreso del Idiota, Plinio Apuleyo Mendoza, Carlos
Alberto Montaner, and Álvaro Vargas Llosa analyze the
unmistakable slide of a number of South America countries back into
socialism. In some cases, these countries are led by despotic
hard-leftist and populist caudillos, and the authors capture the
ridiculous and sobering results. They divide the new wave of Latin
leftists into two camps: the "vegetarian" democratic
socialists and the "neo-communist" carnivores.
The vegetarians include President Michele Bachelet of Chile,
President Luiz Inacio Lula da Silva ("Lula") of Brazil, and
President Álvaro Colom of Guatemala. These leftists 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. Although they tend to favor overregulation,
rigid labor markets, and bloated bureaucracies, they do not pose a
threat either to market-based democracy or to the United
On the other hand, totalitarian dictator Fidel Castro has
spawned younger "carnivores," including Presidents Hugo
Chávez of Venezuela, Rafael Correa of Ecuador, Evo Morales
of Bolivia, and Nestor Kirchner (and most recently his wife,
Cristina Fernandez) of Argentina. All of them are, to varying
degrees, "21st century" socialist populists who oppose the U.S. and
are determined to tear apart market-based democratic capitalism and
anyone who stands in their way. In place of the
"neoliberalism" that they despise, the carnivores would
Unlike his friends Hugo Chávez, dictator and would-be
President for Life of Venezuela, and the socialist presidents of
Bolivia, Argentina, and Ecuador, former
Comandante Ortega did not return to office on a
wave of populism. During his long run in power in Nicaragua
(1979-1990), he and his Sandinista National Liberation Front
(FSLN) party commandeered so much private property and
pocketed so much taxpayer money that they literally became the
Although Ortega left office in 1990, he and the FSLN have
remained a powerful force in Nicaraguan politics. Nicaragua's
impoverished masses have remained faithful to the
Comandante, and he exerted influence on the
democratic governments that followed his by threatening to call for
strikes and violence in the streets.
Lacking a populist base, Ortega patiently finagled his victory
by scheming with former President Arnoldo Alemán, who was
sentenced to a 20-year prison term in 2003 for embezzling $100
million while in office (1997-2002). He and Ortega negotiated
"El Pacto," in which the two former enemies shared power by
changing the constitution to give the Sandinistas "almost an equal
number of seats on the Supreme Court, the Comptroller's Office and
in the Federal Electoral Council." Consequently, when Alemán
was sentenced to prison, "Ortega used his influence over the
country's courts to get the obese and ailing Mr. Alemán
released from prison to serve his sentence at home." A senior State
Department official explained that the Sandinistas have remained
powerful "because they got to keep what they stole, they got to
keep their guns, and they use democratic processes and their
corruption of Nicaragua's judiciary, in cahoots with Arnoldo
Alemán, to extort the country." El Pacto has also permitted
Alemán to keep what he stole and move about freely, out of
With support from legislators and judges in Alemán's
Liberal Constitutional Party (PLC), the Federal Electoral
Council changed the election rules in 2005 in a way that favored
Ortega and the FSLN. Under the new election rules, a candidate can
win in the first round of voting with only 40 percent of the vote
(down from 45 percent) or 35 percent with at least a 5 percentage
point margin over the closest opponent. Not coincidentally, the
"courts released Alemán from house arrest" in 2005. In
2006, the rule change, coupled with a split in the center- right
opposition between the Nicaraguan Liberal Alliance (ALN) and the
PLC, opened the way for Ortega to win in the first round with just
38 percent of the vote.
Venezuelan President Chávez is rumored to have sent the
Sandinistas as much as $50 million during the campaign to secure
Ortega's victory. It is a matter of public record that "Mr. Chavez
gave the Ortega campaign significant support by sending subsidized
oil to Nicaragua and distributing it through Sandinista
SOMEWHAT PROMISING START
In the first days and months after his victory, Ortega seemed
ready to "give peace a chance," as his campaign theme song
promised. He proclaimed himself a born-again Roman Catholic who
opposed abortion. At his inauguration, he claimed to be
committed to a capitalist Nicaragua but warned against the
"neoliberal" economic model that the United States has promoted in
Ortega painted a hopeful picture of the prosperity he would
bring to Nicaragua, emphasizing access to education and loans for
youths. Despite his disparaging of American-style capitalism,
Ortega pledged that his government would continue to
participate in CAFTA-DR and to maintain good relations with the
U.S. At the beginning of his term at least, Ortega paid lip service
to market-based reforms as the best way to stimulate economic
development in Nicaragua, the second poorest country in the Western
Hemisphere after Haiti.
Since taking office in January 2007, Ortega has walked a
tightrope. He has stressed his maintenance of a pragmatic business
relationship with the United States while spewing the
populist-socialist-leftist rhetoric of his Venezuelan counterpart
Hugo Chávez. However, in the year since his election,
Ortega's actions suggest that he yearns to return to his old
caudillo ways, consolidate power, and sign onto Chávez's
21st century socialist vision for Latin America, which would
include an anti-American at the helm in every Latin American
The Sandinista Debacle. The 1979
insurrection by the Sandinistas ended 40 years of
dictatorial, feudal, and increasingly corrupt rule by
Anastasio Somoza, who liked to say that "Nicaragua is my
farm." At first Ortega ruled Nicaragua as one of three FSLN
members in a Government of National Reconstruction, with the rest
of the FSLN's nine-member directorate filling the cabinet posts. He
was later elected president and served from 1985 to 1990.
Regrettably, once in power, the Sandinistas proceeded to
behave in a manner much like that of the corrupt dictator that they
replaced. Backing from the Soviet Union helped them to maintain
power. Just before leaving office in 1990, Ortega and his closest
commanders carried out the famous piñata property grab in
which the FSLN looted the government and the private sector before
handing over power to President-elect Violetta Chamorro. The FSLN
expropriated private property worth millions of dollars on the
slimmest of pretexts, including more than 100,000 businesses,
homes, and farms.
During the Contra War in the early 1980s, the Sandinistas lived
large and ostentatiously while Nicaraguan hospitals ran short
of aspirin. Once, on their way to the U.N., Ortega and his wife
Rosario Murillo stopped their 17-car motorcade at a Manhattan
boutique, where they spent $3,500 on sunglasses. Meanwhile,
the Sandinistas under Ortega drove the country into the ground. By
1986, the average lower-income family of six had to work more than
twice as many hours each month to maintain its 1979 standard of
living. Between 1981 and the end of the Contra War in 1992, gross
domestic product (GDP) per capita decreased by roughly half,
dropping to a dismal $425.
Post-Sandinista Democracy and Economic Growth.
After Ortega left office in 1990, Nicaragua's economy
rebounded. A recent State Department report summarized:
For the 16 years between Ortega administrations
(1991-2006), three successive Liberal Party administrations
focused on free market reform as [the] path to recovery from 12
years of economic free-fall under the Sandinista regime and civil
war. During this 16-year period, characterized by steady GDP
growth, the government made dramatic economic progress. It
privatized more than 350 state enterprises, reduced inflation from
33,500 percent in 1988 to 9.45 percent in 2006, and cut the
foreign debt by more than half. In 2006, the economy expanded by
3.7 percent as GDP reached $5.3 billion.
Nicaraguans Demanding Results, Not
Promises. Ortega won the presidential election in
2006, but he did not win a mandate. Unlike his Andean friends, he
is constrained both by that reality and by the success that
post-Sandinista, pro-democracy governments had in developing a
broad base of support and an economic recovery. Even with help
from the disgraced Alemán, the Sandinistas can no longer
dominate politics in Nicaragua.
This reality has come as something of a surprise to the aging
Ortega. He has to be more careful. As one observer put it, Ortega
is "a master caudillo but a stranger to statesmanship." In the
future, Ortega's failure to engage all of the people of
Nicaragua might strengthen his democratic opposition.
The state of the economy is another reality confronting
Ortega, and it is forcing him to operate--at least to some
degree--within the democratic system of post-Sandinista Nicaragua.
Since Ortega took office, the economy has slowed, and his approval
rating has dropped. In the June 2007 CID-Gallup poll, only 26
percent of those surveyed approved of Ortega's performance, a sharp
drop from his 61 percent approval rating in February.
According to the Nicaraguan Central Bank, Nicaragua's
economy grew at an annualized rate of 5.5 percent in September
2007, up from 3.1 percent in September 2006. This good news
reflected in part the worldwide rise in commodity prices, but it
was offset by flat or deteriorating performances in the
all-important agriculture and construction sectors, which account
for most job creation. The agricultural sector grew at a slower
rate of 3.9 percent in September 2007, although better than its 2.7
percent growth rate in September 2006. However, the
construction sector declined by 11.0 percentage points, from 2.3
percent in September 2006 to -8.7 percent in September 2007. This
steep drop reflects a lack of investor confidence in Ortega.
Ortega has met often with COSEP, the leading private business
group in Nicaragua (similar to the U.S. Chamber of Commerce).
During the campaign, Ortega promised to respect private
property and meet Nicaragua's foreign and domestic public debt
obligations. Leading businessmen in Nicaragua report that in
his meetings with them, Ortega has been a model social
democrat--very professional and straightforward--and has
worked with them on steps that the government can take to
create more private-sector jobs, such as creating free trade
zones, negotiating additional free trade agreements with other
South American countries, improving public infrastructure, and
establishing private-sector investment banks.
Ortega reportedly has also been scrupulous to ensure Nicaraguan
government compliance with the CAFTA-DR agreement. From April 2006,
when CAFTA was implemented, to December 2006, total trade with the
U.S. was up nearly 20 percent over the same period in 2005.
However, in March 2007, Ortega asked the United States and the
European Union to create" compensation funds" to counteract the
"negative consequences" of free trade and globalization on poorer
nations like Nicaragua. He also threatened to end Nicaraguan
participation in CAFTA-DR without such a fund, even though
Nicaragua has fared well thus far under the agreement.
To address the challenges presented by CAFTA- DR, the World Bank
approved a $17 million zero-interest loan to Nicaragua in August
2006. Six months later, the World Bank declared Nicaragua
eligible for additional debt relief under its Multilateral
Debt Relief Initiative, which would provide $1.148 billion in
additional funding. The United States has given Nicaragua
millions in foreign aid and may send more over the next five years
if the Ortega government is willing to work constructively
with the U.S.
The U.S. Millennium Challenge Corporation (MCC) signed a $175
million, five-year compact with Nicaragua in 2005. Although more
than $60 million was scheduled to be disbursed during 2006 and
2007, less than $10 million had been disbursed as of October 2007.
According to the MCC, this delay was due largely due to Nicaraguan
officials not adequately calculating the time demands and burden of
starting such a large program from scratch in difficult operating
The U.S. Agency for International Development (USAID) has
allocated more than $165 million since 2004 to programs to increase
the stability of Nicaragua's democratic institutions and to develop
its impoverished economy. In addition, the International
Monetary Fund (IMF) reactivated its economic program with
Nicaragua in January 2006 and extended IMF-sponsored poverty
reduction and growth facility until the end of that year.
Notwithstanding Ortega's seemingly pro-business efforts,
observers attribute the recent economic sluggishness to an overall
lack of confidence in Ortega among the business sector elite.
Nicaraguan economist Sergio Santamaria told La Prensa that
the economic slowdown is due in part to the uncertainty of
Ortega's economic policies: "The problem in Nicaragua is a problem
of management, not of resources." As recently as October
2007, rising yields on Nicaraguan debt have been signaling
outside investors' lack of confidence that the debt will ever
Pulled in Opposite Directions. President Ortega
is caught between conflicting priorities: a mix of economic
policies that would boost investor confidence and be good for
Nicaraguans versus his goals of consolidating power and building a
socialist state. Some Sandinista backers want more radical change
from Ortega, not just his eloquent and provocative speeches.
While working with private capitalists and foreign investors
in the background, he has been condemning "savage capitalism" and
has kicked off a traditional campaign to buy votes among the poor
with handouts promising "a cow, a pig, poultry and seeds to 75,000
Ortega demonstrated his Sandinista roots during the campaign by
promising Nicaraguans suffering from extensive poverty and
illiteracy a return to the "free education, health care and
medicine" that he claimed existed under the Sandinistas in the
1980s. Of course, Ortega did not mention that such free services
were never actually delivered, nor did he explain how he would pay
for his new initiative. Ortega's 2008 budget, announced in
October 2007, did dramatically increase funding for education
and health care, but it also projects a large deficit. The
government has not yet explained how it will cover the deficit and
could be tempted to suspend debt service and default on Nicaragua's
Keeping people dependent on the state is the oldest trick in the
caudillo's bag of tricks. In the short run, it might give Ortega
enough popular support to change the constitution so he can run for
reelection, but it will not happen without resources. Ortega
also needs domestic political support and is said to be in trouble
on that front. The FSLN party holds only 38 of 92 seats in the
National Assembly, and a number of his former FSLN
comrades-in-arms resent that he has delegated responsibilities to
his wife Rosario, who is rumored to be even more power-hungry than
he is. There are allegations that Rosario is blackmailing Ortega to
gain power by threatening to go public with details of his sexual
abuse of her daughter Narvaez, which Narvaez says began in 1979
when she was only 11 years old.
As soon as Ortega assumed office, and pushed by his ambitious
wife, he took another page from the Castro/Chávez political
playbook and established new political and social entities called
Consejos de Poder Ciudadano ("citizen power" councils, or CPCs).
The CPCs are essentially Ortega's version of Chávez's
Bolivarian Circles in Venezuela; similar entities are being created
in the Chávez satellite states of Ecuador and Bolivia. The
Ortegas claimed in July 2007 that "more than 6,000 such [CPCs] had
been formed," that "around 500,000 people participated in CPCs,"
and that "this number would double by late 2007."
The CPCs were created not to "lobby local governments," as
the Ortegas insist, but to short-circuit them and concentrate all
executive power in Managua with the Sandinistas.
The existence of the councils can be expected to be a
constant source of tension with the opposition and to generate
substantial suspicion about the Ortega administration's
Critics in the opposition parties and civil society argue that
the CPCs are incorporating mainly members of the ruling Frente
Sandinista de Liberación Nacional (FSLN) while excluding
other members of the population. In addition, they argue that
the CPCs have been designed both to supplant other bodies for
citizen input enshrined in existing legislation and to dictate
policy to local mayors, transmitting orders from the president.
Given the difficulties with his FSLN cronies and Nicaraguans'
general unhappiness with his government's performance, Ortega
appears to be having problems staying balanced on his political
Chávez and Ahmadinejad to the Rescue?
Ortega has been counting on Venezuelan financing to solve some of
his problems. Venezuela has already agreed to forgive more than $30
million in Nicaraguan debt and to open an office of
Venezuela's development bank in Managua to offer low-interest
loans to small businesses. Chávez also pledged to build a
pipeline across Nicaragua to the Pacific to carry Venezuelan crude
oil for shipment to refineries in China and Japan, but to date this
has been just another empty Chávez promise, similar to the
much-discussed idea of a transoceanic canal across Nicaragua.
Building a canal would be difficult, given that Nicaragua has
no ports along its swampy Caribbean Mosquito Coast and very few
potential ports along its rocky 150-mile Pacific coastline.
While promises of aid from Chávez have been predictably
grandiose, actual payments and deliveries have been haphazard.
In 2006, Chávez made much of his "gift" of two dozen
diesel-powered electric generators. It turns out, however,
that they were not gifts after all. When they finally arrived, they
came with a bill from Caracas for $100 million. Chávez is
said to enjoy belittling the Sandinista hero in private, and
Nicaraguans are reportedly resentful of the obnoxious Venezuelan
"advisers" sent by Chávez. This is similar to the hatred
that many Venezuelans, in turn, feel toward Chavez's
insufferable Cuban advisers.
In a budding relationship that has alarmed the Bush
Administration, Iran has promised to help finance a new $350
million ocean port and build 10,000 houses for the leftist
Nicaraguan government. Ortega met recently with Iranian Deputy
Energy Minister Hamid Chitchian to urge Iran to help build several
hydroelectric plants in Nicaragua to help end the power crisis.
Iran has committed to just one plant for now. Chitchian pledged to
select a site for a $120 million hydroelectric project.
Nicaraguans have to cope with blackouts nearly every day.
According to some reports, Iran is constructing one of its
largest embassies in the world in Managua--much larger than
Nicaragua's size would dictate. Some observers suspect that Iran
intends to use its big new embassy as a base for intelligence
operations against the United States.
An Iranian-funded deepwater port on the Caribbean coast
would be a first for Nicaragua. In return, Nicaragua hopes to
increase its farm exports (mainly coffee, meat, and bananas) to
Iran. Venezuela would also provide money for the Caribbean
port, Ortega told reporters. According to Ortega, the Venezuelan
president promised that Nicaragua "can count on me" to co-finance
infrastructure projects that a visiting Iranian delegation is
interested in developing in Nicaragua. "Nicaragua can forget
about fuel problems," Chávez said during a recent visit to
Ortega said that he had also sought Brazil's aid to end the
energy crisis. Brazilian President Luiz Inacio Lula de Silva will
visit Nicaragua in the near future.
Adjusting to the New Reality. Times have clearly
changed. In a single week in July, Ortega appeared with
Chávez in Managua, while Nicaragua's vice president
welcomed a U.S. Navy hospital ship to nearby Corinth to provide
free medical care to Nicaraguan citizens.
So far, Ortega has maintained this delicate balancing act
between the Cold War firebrand and his alter ego, the pragmatist
who campaigned in 2006 on a platform of reconciliation. Yet both
his allies and skeptics say that the diplomatic juggling act can go
only so far. U.S. officials and business leaders are saying that
Ortega's coziness with Venezuela and Iran could scare off foreign
investors and hurt the economy, and the country needs foreign
investment. Much of the infrastructure was damaged during
the civil war of the 1970s and 1980s and still must be rebuilt.
Nearly half of the residents must subsist on less than $1 a
Back to Old Habits. Since recapturing the
presidency, Ortega and his wife Rosario Murillo, who many say
is acting as co-president behind the scenes, have cloaked their
policymaking in secrecy. Venezuela's aid, including subsidized oil,
is off-budget, which allows the Ortegas to dole out millions
to their FSLN inner circle from the shadows.
The CPCs will soon be constituted as venues of "participatory
democracy," allowing Ortega to bypass constitutionally established
municipal government agencies and reward his supporters
directly. In fact, the citizen councils are nothing but FSLN
fronts. They are not needed. In the post-Sandinista years,
Nicaragua enacted laws on citizen participation and encouraged
civil society programs that are succeeding.
The Ortega-Alemán pact stirred the wrath of human rights
organizations. The president controls the national prison system.
Since taking office, Ortega has continued to grant Alemán
freedom to move about Nicaragua, effectively commuting his prison
sentence. In exchange, the PLC is cooperating with the FSLN on
Supreme Court nominees and a proposed constitutional reform that
would allow Ortega to run for reelection in 2011--a seeming quid
pro quo for the rumored forthcoming annulment of
Alemán's sentence. The FSLN would like to see
Alemán's sentence legally expunged so that he can again run
against Eduardo Montealegre's ALN and thus replicate the
center-right vote split of 2006 and ensure Ortega's reelection in
Ortega's attempt at a constitutional reform mirrors one of
the first steps that Chávez took in subverting
democracy in Venezuela. That Ortega has been stymied suggests that
the carnivores are not yet completely free to feed at the public
CENIDH, a prominent Nicaraguan human rights organization,
released a report that harshly criticized Ortega's first 100
days in office and expressed concern that the government had not
explained to the people how much time its planned reforms would
need before starting to function properly. The report characterized
Ortega's government as "authoritarian, centralist, and nepotistic."
The paper described a blurring of the lines between party, state,
and family that has occurred since Ortega took power, epitomized by
his refusal to occupy the presidential palace and his preference
for running the government from FSLN headquarters while he is
still FSLN secretary-general.
Ortega's delegation of so much power to his wife Rosario, who
holds the newly created position of communications and citizenship
coordinator, further blurs those lines. Rosario has shuttered
the press communications offices of all other government
ministries, claiming that they are no longer necessary because all
government communication with the press will go through her office.
When the closures were protested, she explained that her new post
made all other governmental press offices irrelevant and that
the government preferred to spend that money on health care and
education. Furthermore, Ortega has refused to name a defense
minister, and the army acts as his personal security detail,
feeding speculation that he wants to keep the army under his direct
Critics on both the left and the right are criticizing the
secretive nature of the Ortega administration and its tendency to
favor only media on the left while withholding information from
center-right media outlets. On February 22, 2007, the centrist
newspaper La Prensa reported that the government's
communications strategy involves communicating the government's
actions only to outlets that are sympathetic to the FSLN. The
Ortega administration often does not share public information
with "hostile" media outlets, the newspaper reported.
STIRRING UP TROUBLE
Although Ortega is constrained by domestic politics and
economic realities, he has not restrained himself when fashioning
an assertive, far-left foreign policy for Nicaragua. To a large
degree, Ortega's foreign policy comes down to money.
Chávez and Ahmadinejad are benefiting from the windfall
resulting from oil prices near $100 per barrel and are tempting him
with cash to follow their lead.
Not surprisingly, Ortega has flitted about the Middle East,
stopping in Tehran and Tripoli, aboard a presidential jet lent by
Colonel Qadhafi. In Tehran, Ortega pledged solidarity with
Grand Ayatollah Ali Khamenei and the Iranian revolution. Exactly
what Iran promised in exchange for that pledge matters not only to
Nicaraguans, but also to the U.S. The renewed Nicaragua-Iran
relationship has revived memories of the 1980s Iran- Contra
Ortega visited Cuba on his way home to pay homage to the Castro
brothers, the intellectual authors of the "Bolivarian 21st century
socialism" that Ortega surely would like to extend to
Nicaragua. For his part, Chávez has encouraged his
Latin American allies to strengthen ties with authoritarian Middle
Eastern governments such as Iran and Libya. Ortega has also signed
a partnership agreement with Algerian President Abdelaziz
Ortega reportedly told Qadhafi that, emulating Libya's system of
"direct peoples' democracy," he wants to return to a system similar
to what existed under the Sandinistas in the 1980s with the
creation of the CPCs. During Ortega's first presidency, pro-FSLN
organizations such as the Committee for Sandinista Defense
exercised authority in both urban and rural areas, similar to Hugo
Chávez's Bolivarian Circles of the present day.
The State Department refers to the Caribbean as the U.S.'s
"third border. In July 2007, Ortega accused the U.S. embassy in
Managua of meeting secretly with opposition groups, manipulating
the media, and paying people to demonstrate in order to subvert his
government. He alleged that the American embassy's conspiracy
included "some media outlets, print and television...which
supposedly are told what issues to use to discredit the
Sandinista Front." U.S. Ambassador to Nicaragua Paul Trivelli
denied the accusations and insisted that the U.S. was committed
only to the Nicaraguan people and to promoting democracy, social
investment, and regional security.
ALBA: COMECON for the Western Hemisphere.
Fulfilling another campaign pledge, Ortega signed an agreement
bringing Nicaragua into the Alternativa Bolivariana para las
Américas (ALBA), Chávez's socialist trading bloc,
which includes Cuba and Bolivia. He has also pledged to end
Nicaragua's affiliation with the IMF within five years.
Chávez and Castro created ALBA (which means "dawn" in
Spanish) as Latin America's answer to the U.S.-inspired efforts
toward a Free Trade Area of the Americas (FTAA). The ALBA ploy is
of a piece with Chávez's broader effort to harm the United
States and increase his own political power in the region. In
reality ALBA, which Chávez has billed as a socialist
trade scheme, is merely a Latin American echo of the Soviet Union's
Council for Mutual Economic Assistance (COMECON), which the Soviet
Union used to control its Eastern European satellites.
The anti-trade and anti-free market rhetoric was intense at an
April 2007 ALBA meeting in Venezuela attended by representatives
from Cuba, Nicaragua, Bolivia, and Haiti. At the summit,
Chávez announced an ALBA financial cooperation fund of $250
million. Nicaragua's Ortega claimed, "The enemy is still the same:
capitalism. Only the form of struggle has changed." Not
coincidentally, ALBA includes the poorest nations in the Western
Hemisphere. It is unlikely to change their status.
ALBA members are to receive petroleum-funded benefits even more
generous than those in the PetroCaribe program.
Chávez's hidden agenda is to use ALBA to coordinate common
defense, economic, and foreign policies and to control the
education and health ministries in every ALBA country. At the heart
of ALBA is a rejection of capitalist values, which the member
countries would replace with "solidarity" and "complementary"
Emulating his role model Chávez, who has boasted of plans
to rule Venezuela for the next 20 years, Ortega dreams of a long
run as president of Nicaragua. His renewed anti-American rhetoric,
destabilizing economic policies, and friendship with Chávez
and Ahmadinejad bode ill for both Nicaraguans and Americans.
The U.S. should monitor the situation in Nicaragua
carefully 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. The Nicaraguan government should be informed
that the MCC compact will be renegotiated if the review determines
that MCC funds are not producing the needed changes and policies in
the Nicaraguan government and economy that will help to keep
it headed in the direction of market-based democratic
Review all USAID programs in Nicaragua. The
Nicaraguan government should be notified that USAID programs will
be revised if the review determines that USAID funds are not
producing the needed changes and policies in the Nicaraguan
government and economy that will help to build democratic and
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. The USAID should
periodically report progress toward strategic goals in
democracy and governance to Congress, and the programs should be
revised as needed to achieve these goals.
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
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. Public diplomacy
programs should include numerous citizen-to-citizen exchanges
between El Salvador and Nicaragua involving students,
educators, civil servants, politicians, and business people.
These programs should also increase exposure to U.S. best
practices in all these areas.
For its part, Congress should:
Increase funding for public diplomacy efforts in
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
The Sandinistas remained powerful during Daniel Ortega's years
out of office and, through corruption and intimidation, were
able to retake the presidency for Ortega. The former
Comandante has walked a tightrope since taking
office in January 2007, appearing to support capitalism and DR-
CAFTA and maintenance of good 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
Roberts is a research fellow in economic freedom and growth in
the Center for International Trade and Economics at The Heritage
First appeared in the Latin Business Chronicle
Daniel Ortega's renewed anti-American rhetoric, destabilizing economic policies, and friendship with Chávez and Ahmadinejad bode ill.
James M. Roberts
Research Fellow For Economic Freedom and Growth
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