Nicaragua's Reform Teeters After Top Economist Resigns

THE resignation of President Violeta Barrios de Chamorro's top economic official last week is placing new strains on her relationship with conservative business leaders. It may also signal a shift in economic policies. Francisco Mayorga's departure Oct. 31 as head of the Central Bank followed disagreements with other members of Mrs. Chamorro's Cabinet over how to deal with Nicaragua's severe economic crisis. It also came less than a week after the government signed an agreement with opposition Sandinista labor union leaders which softened many of the measures Mr. Mayorga had adopted to reduce runaway inflation.

Leaders of Nicaragua's business community, however, refused to sign the agreement, known as concertacion (consensus-seeking). As a result, while appeasing the Sandinistas to avoid labor strikes, Chamorro faces a challenge from the right wing.

``We have to ask just what this government is doing, as they move closer and closer to the Sandinistas,'' says Ramiro Gurdian, a leader of the Council on Private Enterprise (COSEP). ``They go into these talks and just concede, concede, and concede some more. Then Mayorga is out. If they continue like this, the government may not last.''

Mr. Gurdian represented COSEP at the concertacion dialogue, which drew together dozens of government, business, and labor union leaders. He says Chamorro officials are reneging on promises to privatize the economy and dismiss thousands of state workers to reduce a monthly budget deficit estimated at $7 million. Although the deficit had been reduced from roughly $28 million a month in May, Mayorga wanted it eliminated entirely to spur economic recovery.

Mayorga, the architect of Nicaragua's monetary reforms, reduced inflation from more than 100 percent when Chamorro took office six months ago to about 30 percent last month. But these policies, particularly the efforts to fire thousands of state employees, earned him the wrath of the Sandinistas, who dubbed him the ``czar'' of the economy.

``He even tried to dismiss employees within the bank itself, in an attitude of revenge against the former government,'' says Alejandro Martinez Cuenca, minister of planning and budget with the former Sandinista government.

Some critics say the Sandinistas are holding the threat of new labor strife over Chamorro to prevent economic stabilization and to build on discontent for political gain. But Sandinista leaders have repeatedly insisted they want economic recovery.

Mayorga's attempt to remove certain bank employees generated much publicity. The former bank head says it has been difficult working with ``holdover employees'' from the old government, whose jobs are protected by a law passed before the Sandinistas left power. Other ministers echo his complaints, saying Sandinista workers block attempts to carry out changes.

The disagreement leading to Mayorga's resignation also pivoted on what some call the ``centerpiece'' of his plan, the gradual introduction of a new currency to help stabilize the ravaged economy. Called the ``gold cordoba,'' the new money is pegged on a par with the United States dollar and is to replace the old, devalued cordoba by early next year. Mayorga fears, however, that the government may speed up the process, under Sandinista pressure, and touch off a new inflationary spiral.

``Our hope was to introduce it gradually, because it will only devalue, just like the old cordoba, if there's nothing to back it up,'' the economist says. ``Then the public will lose confidence that things were finally beginning to stabilize.''

Mayorga says he will continue to serve as ``economic adviser'' to Chamorro while Ra'ul Lacayo, vice president of the Central Bank, replaces him.

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