Nicaragua struggles for economic survival. Planning mistakes, 4-year war with `contras' fuel crisis
Six-and-a-half years after Nicaragua's Sandinistas seized power, promising economic betterment for the impoverished masses, the government is struggling just to keep the country afloat. ``We have had to pretty much abandon development, to focus on survival,'' laments Vice-Minister of Planning Ligia Elizondo.Skip to next paragraph
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The balance sheet of key economic indicators makes depressing reading for government planners.
Inflation has spiraled to 300 percent, the gross domestic product fell 2 percent last year, government income covered only half of expenditures, and exports slumped 14 percent, widening the nation's trade deficit.
For Agriculture Minister Jaime Wheelock Rom'an, though, ``just having got through 1985 was a victory. To have arrived this far should be considered acceptable.''
Sandinista leaders and independent experts concur that matters have reached this point because of a mix of external factors over which the government had no control and economic policy mistakes at home.
While critics stress the Sandinistas' own errors, the government heaps much of the blame on the war they have been fighting with United States-backed rebels, or ``contras.'' The four-year war has undoubtedly taken an enormous toll on the Nicaraguan economy, foreign economists monitoring developments here agree.
For a start, the government now devotes more than 50 percent of its budget to defense, according to official figures, draining funds from much needed investment projects.
At the same time, President Daniel Ortega Saavedra reported last month, contra attacks did $121 million worth of damage to the economic infrastructure last year -- equivalent to 40 percent of export earnings.
And what the authorities here call ``economic aggression'' by the US has also had its impact. International lending organizations such as the World Bank and the Inter-American Development Bank -- in which Washington has decisive influence -- have lent Nicaragua nothing since 1982 when the Sandinistas imposed a state of emergency as the contras began carrying out attacks from across the Nicaraguan-Honduran border. This has deprived Nicaragua of hundreds of millions of dollars in expected credits.
But other external factors, unrelated to the war, have hit Nicaragua just as hard.
The country's terms of trade have slumped 35 percent since 1980, the heaviest fall in Latin America, according to the most recent Economic Commission on Latin America report.
This means that Nicaragua has to export one-third more of its coffee, cotton, sugar, or beef to buy the same amount of imports.
These problems on the world financial and trade markets have prompted the Sandinistas to seek succor from Comecon, the Soviet-bloc trading group. The Soviet Union and its allies covered some 60 percent of Nicaragua's trade deficit last year with credit lines, says Foreign Trade Minister Alejandro Mart'inez. Among other things, these credits paid for all of Nicaragua's oil imports, which came from the Soviet Union. Nicaragua has been unable to pay back the credits thus far.
On the domestic front, President Ortega acknowledged recently that the country's dire economic straits ``cannot all be blamed on the war. We, too, are responsible for them.''
One of the economy's most glaring problems is skyrocketing inflation. This has been fueled by the government's policy of printing money to cover the 50-percent fiscal deficit instead of the more politically awkward policy of raising taxes.