Nicaragua's Ortega defiant after US, Europe yank aid

The Sandinista leader has long complained about the nature of "conditional aid" from the US and Europe, and has dismissed the MCC suspension by saying it makes Nicaragua feel "a little bit freer." Others in the Ortega administration have gone so far as to say the loss of US aid will make Nicaragua "stronger."

Mr. Chávez, meanwhile, congratulated Nicaragua for "taking off the chains."

Chávez is the Sandinista government's closest ally in the hemisphere and has been Ortega's bosom buddy in the Venezuelan-led Bolivarian Alternative of the Americas (ALBA). The Venezuelan leader is now offering to pick up the bill left behind by Uncle Sam.

"Comandante President Hugo Chávez told me that if the United States were to cut the Millennium Challenge Account I could tell the people of Nicaragua that we can count on the resources of the Venezuelan people, of ALBA, to continue those programs," Ortega said in his speech.

Chávez's ability to pick up the tab has become increasingly questioned as oil prices tumble from historic highs.

The Venezuelan government has already announced that its once ballyhooed plans to build and finance an oil refinery in Nicaragua are now under "evaluation," and that many of the other projects that Chávez has promised the Ortega government have yet to pan out.

Europe also reconsiders aid

Meanwhile, three of the six European countries that traditionally have given direct budget support to the Nicaraguan government have suspended their funding due to concerns over the Ortega administration's handling of human rights and democracy.

With only weeks left to go in the year, the European Union has yet to turnover millions in promised budgetary support for 2008. In total, the EU has only disbursed 10 percent of the $115 million pledged this year for budgetary support, according to the budget commission's Aguirre.

Bayardo Arce, Ortega's top economic adviser, has dismissed the foreign aid flow problems as "bureaucratic" glitches, rather than political punishment.

Still, Nicaragua's internal political crisis is also contributing to the country's cash-flow problems.

An additional $92 million in budget-support loans and development projects are locked up in the National Assembly, which has been gridlocked by opposition lawmakers since the elections. The government paralysis has also prevented approval of the 2009 budget, straining the country's program with the International Monetary Fund, which canceled a scheduled visit to Nicaragua last month.

Ortega, however, is confident that his friends will come through. In the past few months, the leader has spoken wistfully of the former days of Soviet cooperation during the heart of the cold war.

Dmitry Medvedev was reportedly a fan of the Sandinista revolution and a proclaimed "admirer" of Ortega, when the Russian leader was still a university student.

Now Ortega hopes that admiration will translate into a rekindling of Russian aid.

Nicaragua's vice foreign minister told government media this week that the two countries will sign agreements in the areas of tourism, energy cooperation, industry, military cooperation, mining, agriculture, and fishing.

The official also said that Russia has expressed interest in building an inter-oceanic canal across Nicaragua – an idea that has been batted around for more than a century.

Economists, however, say that falling oil prices are affecting Russia as much as Venezuela.

"With the collapse of oil prices, they will not be able to bail Ortega out," Aguirre said. "And anyone who believes they will do so also believes in the tooth fairy."

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