Economic Reforms Split Nicaragua

PERHAPS nowhere are the changes in Nicaragua more evident than in its capital city. Bleak and barren during the Sandinista era, Managua now buzzes with activity, its sidewalks lined with new shops, banks, and some of the priciest restaurants in Central America. Streets that were previously deserted are jammed with traffic as the sparkling new luxury jeeps of returned exiles angle by aging Soviet-made Ladas.

But at each stoplight the cars confront dozens of grimy-faced, barefoot children selling television antennas, birds, fruit, even an occasional baby deer in an effort to make a few cordobas.

A year after implementing a tough economic austerity program, the government of Violeta Chamorro has made significant progress in stemming Nicaragua's economic slide. Since the initiation of the program with a sharp devaluation of the cordoba last March, Nicaragua's balance sheet has vastly improved.

Inflation is down to less than 1 percent a month from the annual rate of 13,500 percent in 1990. Negotiations with lenders resulted in cutting of Nicaragua's staggering debt to $9 billion from $10.8 billion in 1991 and restructuring of much of the remainder on highly favorable terms.

By clearing arrears owed to the World Bank and International Development Bank, Nicaragua restored relations with multilateral lenders, paving the way for an unprecedented $1.2 billion in foreign assistance in 1991.

Yet despite such gains, most Nicaraguans are poorer than ever. Coming on the heels of eight years of consecutive economic decline, austerity has worsened an already dire situation. Poverty levels in Nicaragua now approach those of Haiti, the poorest country in the hemisphere. Crime has increased dramatically and city lots that were previously vacant are now strewn with thousands of dilapidated wooden shacks.

"You can't even go into the markets these days without people robbing you, they're so hungry," says Alejandro Gonzalez, who washes cars at the Intercontinental Hotel.

More than half the population is now unemployed.

"Everything is available in Nicaragua now except work," says Silvio Solis, who lost his job two months ago when the government closed the state factory he worked in. The father of nine now sells mattresses in a shack along a Managua highway. "At times we only eat beans now because we don't have enough money for rice," he says. "And we're doing better than a lot of people."

The worsening situation of the poor has sparked controversy here as Nicaraguans look worriedly to Venezuela, a country far richer than theirs with a much longer history of democracy, where austerity has recently contributed to social unrest.

Concern has surfaced on both the left and the right. Writing in the newspaper La Prensa last month, Conservative Party politician Emilio Alvarez stated that the government "should have foreseen the social consequences [of the policies] to reduce the impact ... on the weaker sectors of the population."

Those on the left warn of dire consequences should the crisis continue. "The economic plan is correct from a technical point of view. The problem is that there is no safety cushion," says Danilo Abud, former Nicaraguan ambassador to Honduras.

Adds Arturo Gallese, an economist with the Nicaraguan research institute CRIES: "If this keeps up I think the country is going to blow. I don't think they have three months."

Others say Nicaragua cannot afford a safety net and argue that the country should move even faster to restructure the economy before foreign aid declines. While about $741 million in foreign assistance is expected in 1992, that number is likely to drop dramatically in 1993 amid competition for funds from the former East bloc and neighboring El Salvador.

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