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Nicaragua Government Promises To Help the `Forgotten' Peasants

But skeptics say Chamorro's hands are tied financially, politically

By David R. DyeSpecial to The Christian Science Monitor / February 9, 1994



MANAGUA, NICARAGUA

AFTER three years of conservative economic policies that have helped the wealthy without sparking significant economic growth, Nicaraguan President Violeta Barrios de Chamorro promises that 1994 will witness the beginning of recovery and that the recovery will include the little guy.

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Mrs. Chamorro said last month that Nicaragua's economy would increase 4 percent in 1994 after years of negative per capita growth. She also referred to some of the forgotten workers in Nicaragua's fragile free-market economy, the mostly poor peasants who grow staples such as corn and beans.

``In 1994 we will emphatically support the small producer so that he may assume a more dynamic role in economic development, the same way the large producer does,'' Chamorro said.

Her promises have met with considerable skepticism, both about the sincerity of the government's commitment and its capacity to reorient policy. Over the last four years, the semi-socialist economy left over from the Sandinista government has been converted into one that runs on free-market principles.

The wrenching conversion has created a few winners - namely the new private bankers who lend money to import firms and to a thin stratum of wealthy farmers. It also has resulted in many losers. The losers are comprised of the unemployed and underemployed (now 54 percent of the work force) and small farmers.

As the government has revamped financial institutions and scaled down its economic intervention, it has largely left small farmers adrift in an alien market, some experts say.

``The change that has had greatest impact has been in credit,'' says Alfredo Ruiz, a researcher at NITLAPAN Institute at Managua's Central American University. ``The government has closed a lot of bank branches in poor rural areas, and raised loan requirements for the rest.''

Out of an estimated 75,000 small-farm credit recipients in the 1980s, when the Sandinistas were in power, fewer than 15,000 have access to credit now. Few currently receive technical assistance or help in marketing their products.

In Nicaragua's countryside, the effect is dramatic. The fall in peasant incomes in recent years may be gauged by the decline in prices paid to bean growers, which have fallen from $24 for 100 pounds in the late 1980s to $6 now. This is combined with mass rural unemployment in areas where cotton growing has collapsed.

The impact is also felt in land-tenure changes. Impoverished peasants have been forced to sell much of the land they received under the Sandinistas' agrarian reform in the 1980s, according to sources in Nicaragua's cooperative movement.

Government officials admit that the policy so far has helped the large grower and businessman and shortchanged the poor. The government insists this is about to change.

``We are going the invert the champagne glass so that the large producers don't absorb all the resources,'' says William Baez, the government's social action minister, referring to a program to shift the burden of servicing Nicaragua's large farmers.

Under the program, the state-run National Development Bank would sell off part of its loan portfolio to private banks that have sprouted up over the last few years. This would free up public loan capital for smaller growers.

National Bank manager Luis Angel Montenegro says he expects to cut off about 120 wealthy borrowers and add 12,000 new small-farm clients to the current pool of 14,000.

Complementing this, the Chamorro government has outlined a number of other programs aimed at helping the rural poor, from nonconventional credit schemes and land titling to creation of the National Institute of Agrarian Technology, funded by the World Bank to help small producers. Mr. Baez describes the changes as part of a grass-roots ``social agenda'' that responds to the demands of rural communities, which are troubled by banditry and rearmed bands of ex-Contra soldiers.

``We hear the same rhetoric over and over, but the government does not have a clear strategy for making the peasants into recipients of credit, technical assistance, or marketing help,'' counters Daniel Nunez, head of the pro-Sandinista National Farmers and Ranchers Union, which has about 60,000 members.

The International Monetary Fund and the World Bank are insisting on financial reforms by the government as terms for three-year loans. Given this constraint, economist Jose Luis Medal, a government adviser, calls the planned increase in small-farm credit in just one year as ``very difficult.''

Nor can the government force private banks to take on high-risk farm loans if they do not want to. ``Currently they don't,'' says one bank regulator. The alternative, simply cutting the big growers off from the public credit tap, is a politically risky move which sources say the Chamorro government will probably not make.

If formal bank credit is not increased, more nonconventional credit programs will be channeled through cooperatives and non-governmental organizations. Although the InterAmerican Development Bank is spending $20 million on such a program, there are fewer than 1,000 recipients in its first year.