I realized that I was coming across conflicting stories from sources that I more or less trust concerning Nicaragua. So I did some further digging in hope that I could construct a narrative that would help explain the situation and reconcile the conflicting reports. Here is what I came up with.
Prior to 2018, the economic performance of Nicaragua was strongly positive. Real GDP increased about 4.9 percent in 2017, supported by buoyant agricultural exports, tourism and remittances. The external current account (CA) deficit declined sharply to 6.1 percent of GDP (8.6 percent of GDP in 2016) and gross international reserves (GIR) rose by US$297 million to US$2.59 billion, reaching a coverage of about 4.2 months of imports. According to the 2016 Standard of Living Survey by the National Development Information Institute, general poverty in Nicaragua dropped from 29.6 to 24.9 percent between 2014 and 2016; while in the same period extreme poverty fell from 8.3 to 6.9 percent.
Politically, Daniel Ortega had won re-election by what is on first glance an improbable 71% of the vote. This lop-sided margin is explained by the opposition boycott of the election. Instead of finding viable opposition candidates to support, opponents of the regimes simply did not vote. So those that did vote were more prone to support Ortega. Despite the boycott, some 65 % turned out in the election. Unless one believes charges that the election was rigged, clearly Ortega retained massive support.
So, what happened in 2018 that caused many to wonder if the country was on the verge of social collapse?
Nicaragua’s social security system, INSS, faced a budget shortfall. The IMF called for urgent reforms. The shortfall is actually running at about $75 million a year, or about 0.5 percentage points of GDP.
In response to this situation, President Ortega presented proposed reforms that would raise employer and employee contributions to the INSS system over a few years by 3.5 percentage points and 0.75 percentage points, respectively, and a 5 percent cut to pensions. Yes, benefits would be cut, but by far lower amounts than what the IMF and COSEP (the country’s main business organization) had been proposing.
Reaction to these proposals followed. A wave of protests broke out on April 19, 2018. By July, other protestors took to the streets in support of the regime. The initial protests against the government were followed by repressive measure by the state to quell the protests. If there is any criticism to be made, it is in the nature of that response. Apparently, many protestors were killed, an appalling development. Condemnations followed from organizations such as Amnesty International1 and Human Rights Watch.
Counterpunch (see article linked in preceding post) claims that these protests were the work of American supported mercenaries. While I could find no corroboration of that claim, it is clear that the U.S. government did provide significant support to opponents of the regime. This aid came in the form of aid through the National Endowment for Democracy – a NGO created by the U.S Congress in 1983. Even if such meddling contributed to the crisis, this is no excuse for the repression undertaken.
Many pundits are predicting grave trouble for Ortega, while others call for his ouster. Clearly, the protests and the government response to those protests has not helped Ortega’s cause. Still, the military and significant segments of the population appear to continue to support Ortega. One hopes that political differences will be settled through relatively peaceful democratic processes. Perhaps then, Nicaragua can get back upon the path to continue economic improvement that it was on prior to 2018.