Taking stock of Daniel Ortega’s first year in office

by José Luis Rocha
Nicaraguan political analyst

When it returned to power after 17 years, the Sandinista Front brought along an important package of social promises. Inspired by the premise that the economic blockade and the war were the only determining factors in the failure of the socio-economic project of the ‘80s, the FSLN is promising a new version of the social policies of the revolutionary period. The essence of the FSLN’s interpretation of the last thirty years of Nicaragua history and the reforms it proposes was laid out by Orlando Núñez (the director of the Center for Research and Studies of the Agrarian Reform in the ‘80s, who has now emerged as the principal ideologue of Sandinismo) in The Oligarchy in Nicaragua (2006) and in “The Assault on the Nation-State.” The latter is an essay that accuses the traditional elite and NGOs (largely ex-Sandinistas) of having dismantled the State and minimized its ability to provide social services.

Will “Zero Hunger” live up to its name?

In practical terms, the most important initiative so far has been the “Zero Hunger” program, which aims to benefit 75,000 impoverished campesino families in five years, using funds from the World Bank, Venezuela, the Nordic countries, and other donors. In its first year, Zero Hunger will distribute loans of $2000 to 15,000 families, nutritious food to children under two, and snacks to schoolchildren. Following the pattern of CIPRES, the NGO that Núñez directed, there will be in-kind credit: a cow and a pig (both pregnant), poultry, seed, fruit trees, and a “biodigester” to produce natural gas from natural wastes and other sources. The credit will go to women, and they will have to pay 20% back, either in cash or in kind, into a revolving fund. The program seeks to improve the families’ nutrition, and also improve their income by letting them sell any surplus. They will have “the capacity to provide food to urban and even foreign buyers, thereby contributing to improving the way the whole nation eats.”

This program is designed holistically, taking in health, education (including literacy), and housing credit. The underlying supposition is that “small and medium-sized rural producers are the greatest creators of employment, wealth, and exportable production, which means that investing in them is profitable.”1 This program, while it corrects the urban bias of the FSLN’s policies of the ‘80s, prolongs the emphasis on agro-export development policies of previous governments. Given that it is directed at the “55% of small producers who own agricultural and forest plots managed directly by their families, and who generally live on their own plot or farm,” it explicitly excludes landless families, who are the poorest of the poor.

Additionally, distributing benefits (at least partly) based on the population of each municipality brings about two problems. First, some municipalities will receive benefits that are insignificant compared to their needs. Over its five years, Zero Hunger is meant to benefit 75,000 families, only 16 of which are in Corinto, 13 on Corn Island, six in Prinzapolka, and one in San Juan del Norte. These last three are on the Caribbean Coast, the region hit hardest by poverty. This minimal attention is not at all likely to start a positive chain reaction in these municipalities. What good will it do to loan to one family in San Juan del Norte, a municipality of 1,762 square kilometers and with 1,307 inhabitants (311 families)? Second, the program proposes a connection with agroindustry. But how is agroindustry going to develop in the municipalities with insignificant numbers of benefitted families?

Only time will tell if Zero Hunger will achieve significant coverage and if it will manage to pull families out of poverty and promote rural development, or if it will operate as a substitute for citizen rights, and for the benefit of a political clientele. The key liaisons for the program are cooperatives, which are one of the few groups that represent the interests of the poorest campesinos. The president of the National Federation of Cooperatives (which is made up of over 40,000 campesino families), said the government is not holding a dialogue, but rather making demagogic speeches, buying off labor leaders, and turning people into partisan cronies.

Education and health — have things changed?

The new government decreed the “de-privatization” of health and education. Over recent years, enrollment in primary education has been slower than the rate of population growth. Primary-school attendance decreased by 5.21% between 2002 and 2005 from 85.47% to 80.26%.2 To turn this around, the new Minister of Education immediately abolished “school autonomy” and fees at all State-run schools, proclaiming a return to the principal of free and universal coverage. But, this by itself does not guarantee greater coverage. Abolishing school autonomy without providing additional financing is just a rhetorical exercise. There are many costs the families must pay, even if they no longer have to contribute to the functioning of the school. These other costs can be prohibitive in a country where 80% of the population lives on less than two dollars a day. They include transportation, school supplies, and a loss of labor in the home or fields. Additionally, students are inheriting schools in terrible condition, after an era of minimal investment in infrastructure. This requires all the greater financial and organizational effort.

A basic condition for improving education is a pay raise for teachers. In 2007, teachers received a pitiful raise of $16 a month, far less than the $30 they were demanding. The $135 they make monthly, on average, is 38.6% of the average salary their Central American colleagues receive. Nicaraguan teachers who go to Costa Rica to work as maids can double their income. Due to this, the first months of the Sandinista administration were tainted by strikes by teachers and health workers, demanding the raises promised to them during the campaign. The recent agreement with the IMF, however, includes among its conditions a wage freeze on the entire public sector. This avoids setting a good example for private business, especially sweatshops, and maintains the comparative advantage of low salaries.

It is not known what changes will take place in health care. In March 2007, the Board of Directors of the National Institute of Social Security (INSS, in Spanish) proposed two measures that were labelled as populist, which provoked angry reactions from experts. The first was to eliminate the requirement of showing a Social Security pay stub when seeking attention at a Provisional Medical Clinic (EMP). The second was to set a fixed rate of 8% for Social Security deductions earmarked for EMPs to use for patients with diseases that are not covered. The first encourages evasion and defaulting on payment, because the pay stub guaranteed that the employer was up to date on deductions. The Office of the Mayor of Managua (which is in the hands of the FSLN) is one of the most indebted employers. The second favors the biggest EMPs, and could unfairly concentrate resources in them. Both measures are risky for the fragile finances of the INSS.

The budget: facts in figures

Spending on health and education could rise incrementally through a renegotiation of the internal debt, which absorbed an ever-growing part of the HIPC (Highly Indebted Poor Countries) debt relief money specifically meant to increase public spending. However, this would mean making enemies of bankers and other sectors of the traditional economic elite, with whom FSLN leaders have been strengthening commercial and family bonds for almost three decades. Some analysts have warned that in its 2008 budget, the FSLN is repeating the thinking of the previous budget, negotiated with the IMF — the same fiscal policy, the same policy of prioritizing debt payment. Service on the public debt was assigned $298 million, while only $6 million was sent to the Caribbean Coast for the emergency after Hurricane Felix, and $15 million for Zero Hunger. The government’s position consists of obeying the orders of the IMF, and not renegotiating debt payment, in order to maintain its credit rating. The 2008 budget reflects that, and keeps social investment low. Two million dollars was designated to capitalize the Development Bank, an amount dwarfed by the $40 million portfolio of just one microfinance institution. The medicine budget for 2008 is identical to that of 2007. The portion of the national budget that goes to the Ministry of Health declined from 14.26% in 2007 to 14% in 2008. The Ministry of Education, for its part, went from 13.7% to 13.27%.3 While these aren’t large drops, they do undermine the FSLN’s boasting about its social priorities. Projections are not encouraging. The Ministry of Education’s percentage of the GNP will only climb from 3.7% in 2008 to 3.9% in 2010. The government does not plan to meet the goal of 7% of the GNP for education.

The first year of this government has not seen structural changes. Nicaragua’s participation in ALBA [a Latin American trading bloc meant to compete with NAFTA] is a marginal component in the economy, as the US continues to be primary commercial partner. The US buys almost 50% of Nicaraguan coffee, and 30% of its total exports. MINSA (the Ministry of Health) continues to depend on foreign aid in a time when aid is diminishing. With the end of Swedish aid (announced in August, 2007), MINSA is losing one of its biggest financial supporters, and lacks sources to compensate for this, unless its share of the budget increases.

The FSLN is repeating its promises to increase social investment, but making no vital changes, like implementing tax reform, negotiating a restructuring of the internal debt, or beginning a dialogue with the largest unions in the country. In this context, the FSLN’s self-declared “social mission” has had no chance to crystallize.

(Translated by Steve Herrick)

Notes

1 Orlando Núñez, interviewed by Iván Olivares, available here.
2 Presentation by Miguel de Castilla Urbina, Minister of Education.
3 Its own calculations are at here and here.