Quick Aid to Nicaragua is Vital, But ... [ cf. ... US Can't Buy Out of Its Duty to Panama ]

By , Benjamin Crosby is a visiting fellow at the Overseas Development Council in Washington, D.C., and professor at the Center for Political Economy at the Central American Institute of Management in San Jose, Costa Rica.

THE chief economic adviser to Nicaragua's government-elect, Francisco Mayorga, came to town a couple of weeks ago looking for money. With President Bush's request for $300 million to Nicaragua and $500 million to Panama, it appeared that he would get part of what he wanted. Mr. Mayorga also wanted quick disbursement. But the resistance shown by Senators Leahy and Byrd of the Appropriations Committee, and their intention to divert over 60 percent of the request to Eastern Europe, indicates Nicaragua may not get the amount requested. The process will probably take much longer than Mayorga would like.

Timing is critical since the planting season in Nicaragua begins around the same time as Violeta Chamorro's late April inauguration. If the money does not begin to flow to farmers then, the country will risk further disastrous economic deterioration, and the political viability of the newly elected government will be seriously threatened.

Mayorga's plan for the money raises eyebrows and challenges Washington's conventional economic wisdom. Rather than immediately attempt to tame a raging inflation rate of 9 percent per week by dampening demand, he intends to stimulate supply to catch up with demand, what he calls ``supply shock.'' His strategy banks on activating the immense, tremendous idle capacity in the agricultural sector. (In 1978, 425,000 acres of cotton were cultivated; in 1989, only 85,000.)

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Funds from the United States would purchase fertilizers, insecticides, farm implements, spare parts. It is vital that the money begin to arrive in early May.

Nicaragua's economy does not have the resources to get production moving on its own. The economy is a basket case: gross domestic product (GDP) is half of what it was before the Sandinistas took over in 1979 and real minimum wages are one-tenth of what they were. Per capita food production has fallen by 25 percent since 1981, and exports are one-fourth their pre-1979 level.

Foreign assistance (mostly from the socialist bloc countries) has equaled about 25 percent of Nicaragua's GDP since 1985. With the end of Sandinista rule, Castro has announced that nearly all Cuban assistance will end. Renewal of the vast Soviet assistance agreement, which will end in June, cannot be assumed.

In order to consolidate Nicaragua's fledgling democracy and Chamorro's UNO coalition (a motley group composed of communists, conservatives, labor, and business), the new government must show positive results quickly.

By electing a democratic government, Nicaraguans also voted their expectations of a better future.

But the new government lacks much real control and will depend on successful actions to increase its authority.

Unlike the collapsed communist parties in Eastern Europe, the Sandinistas remain the strongest, best mobilized political group in the country and appear to be gearing up for a role of hostile opposition.

Their moves to quickly pass legislation designed to protect the privileges of Sandinista officials and give them amnesty from any crimes committed over the past 10 years, as well as Daniel Ortega's statements that the FSLN would continue to ``govern from below,'' give every indication that the Chamorro government will have tough sledding.

Numerous obstacles stand in the way of speedy approval and disbursement of major funding to Nicaragua:

First, because of arrearages, funding flows from the World Bank, the Inter-American Development Bank, and United States Agency for International Development will be blocked.

Second, Mayorga's plan is highly unorthodox and risky by the standards of many of those in the Washington economic and financial community who hold the purse strings. Nevertheless, it is the Nicaraguans' plan and they are highly committed to it.

Third, as the Panamanians have discovered, congressional procedures for supplemental requests, getting agreement over where the funds will come from, the waiving of arrearages restrictions, and de-authorization and re-authorization of funds from non-AID sources can be excruciatingly slow.

The $500 million for Panama was originally requested by Bush in late January. Should the pattern of delay be repeated in the case of Nicaragua, the planting season will pass. So, too, will the brief and unique moment during which the new government can demonstrate a greater capacity for solving economic and social problems than its predecessor.

The administration and the Congress must bear in mind that such windows of opportunity are few. While the amount of money is important, it is more essential that it be made available quickly.

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