Nicaragua struggles for economic survival. Planning mistakes, 4-year war with `contras' fuel crisis
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Although the government regularly orders wage rises, which it tries to keep in line with price increases, real salaries are estimated to have dropped as much as 50 percent in the last two years.Skip to next paragraph
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``When you print money and try to maintain official prices at the same time, the result is black markets with higher prices,'' explains one foreign expert. ``That really squeezes popular living standards.''
The Sandinista policy on wages, which are fixed across the board for state and private sector workers alike in 28 scales, has been blamed for falling production. This led the government to change the rules last year. Where wages were set according to job description, regardless of seniority or output, the new scale rewards higher productivity. ``To each according to his needs'' has been replaced by ``to each according to his work.''
Production also suffered, economic policymakers agree, from grave problems of administration.
``The Sandinistas made a clear political choice not to allocate resources through the market, which would have meant that people with money would have had easiest access to them. So they needed a good administration, and they didn't have enough good administrators,'' the Western economist said.
This has shown up in the system by which the government allocates foreign exchange to businesses that need imports.
Not long ago, for example, the agriculture minister was given dollars with which to import machetes. Meanwhile, a machete factory lay almost idle because it had no hard currency with which to import steel.
But the Sandinistas' bent for economic planning, efficient or not, has by no means given their policy decisions a doctrinaire Marxist flavor, independent economic experts here say. The state, they point out, has taken over only 30 percent to 35 percent of production and distribution, leaving the vast bulk in private hands.
``The complete nationalization of the economy was neither politically desirable nor economically possible,'' says one Western economist. ``Production is spread among so many small farmers and artisans, distribution is in the hands of so many small shopkeepers, they just could not have done it.''
Although all exports and imports go through the government, as in many third-world countries, the authorities are seeking to ensure that prices paid to farmers are remunerative. This came about after they saw production fall during the early years of revolutionary rule for lack of incentives.
The big private farmers who raise most of Nicaragua's critical export products -- cotton, sugar, beef, and coffee -- have generally been guaranteed a 25-percent profit margin with their deals with the government. Although many of them complain that they are paid in cordobas, the Nicaraguan currency, dollar incentives have recently been introduced. Observers suggest that the fact that these farmers replant each year means that they find business worth doing, despite the difficulties.
So long as the civil war continues, foreign and local economists say, inflation will continue to spiral and economic normalization will be impossible. Ortega warned recently that ``this year will be marked by the same or greater tensions than last year.''
Meanwhile, says a foreign economist, the Sandinistas' attempt to blend planning with market regulation will mean ``continued irrationalities and inefficiencies, and they will just have to keep constantly juggling, trying to survive the war.''
Last in series. The previous articles appeared March 25 and 26.