Nicaragua: Central Bank says economy up 30 percent under Sandinistas

Though growth for Central America's smallest economy is good news, some economists say it is still insufficient to reduce poverty in Nicaragua.

Oswaldo Rivas/Reuters
A soldier stands next to a Nicaragua national flag during the celebration of the 191st anniversary of Central America Independence at the Revolution Square in Managua Sept. 11.

Nicaragua’s economy has grown 30 percent since the Sandinistas returned to power in 2006, according to new numbers published this week by the Nicaraguan Central Bank.

Though Nicaragua’s economy remains the smallest in Central America, it is making up ground on its neighbors thanks to the government’s economic policies and social programs, according to Central Bank President Alberto Guevara.

“The model of economic and social development promoted by Comandante Daniel Ortega Saavedra is working and has the powerful virtue of incorporating people and their own economic initiatives,” Mr. Guevara said.

According to Central Bank, Nicaragua’s Gross Domestic Product (GPD) per capita has grown from $1,239 to $1,582 just in the past year. While that is a notable improvement, it’s not enough to move Nicaragua out of last place in Central America.

Indeed, even with that growth, Nicaragua’s average GDP per capita is still less than half of the Central American average and only about one-sixth of Costa Rica’s GDP per capita ($8,876), according to International Monetary Fund estimates.

Insufficient growth

Independent economist Néstor Avendaño says Nicaragua’s estimated 4.1 percent economic expansion projected for this year is still insufficient to reduce poverty.

“Nicaragua is growing at a good rate, but it is insufficient because we are still very far from the 8 percent or 9 percent growth we need to really start to reduce poverty in Nicaragua,” the economist says.

Mr. Avendaño says economic growth under the Sandinista government has been based mostly on private investment and exports, which have doubled just in the past three years. But 2013 could be a belt-tightening year, he warns.

Avendaño says Nicaragua’s economy next year will most likely experience decelerated growth (around 3.1 percent) and accelerated inflation, due to pending tax reforms that are scheduled to happen in the first quarter of 2013.

“I don’t see any possibilities of us getting above 4 percent growth next year,” the economist says.

Avoiding the 'pinch?'

Not everyone will feel the pinch. According to opposition congressman Carlos Langrand of the National Assembly’s Economic Commission, the ALBA (Bolivarian Alliance for the Americas) business group funded by Venezuelan oil imports and controlled by President Daniel Ortega’s inner circle is doing better than ever.

“From 2007-2011, Venezuelan oil imports by Nicaragua totaled $3.7 billion, 50 percent of which, or $1.86 billion, is used by ALBA for Nicaragua,” the lawmaker told The Nicaragua Dispatch.

That means that the various ALBA businesses have nearly $1.9 billion at their disposal – money the opposition has tried to get the government to include in the national budget.

Unemployment is 'biggest problem'

While the administration spends its Venezuelan oil money how it sees fit, Avendaño argues that the Sandinistas’ poverty reduction efforts is not money well spent.

For instance, he says, the government’s “Christian, Socialist, and Solidarity” cash bonus handout to state workers every month is costing the government $59 million a year, but has not resulted in any increase in production or a single new job.

“If that money were used to generate public works instead of increasing the consumption of public employees, it would create jobs and reduce poverty,” Avendaño says. “Plus, if the aid from Chávez disappears, how are we going to even pay for that bonus?”

The government argues that the cash bonuses are helping Nicaraguan families meet the rising cost of living.

But Nicaragua’s biggest economic challenge, Avendaño says, is unemployment.

“Unemployment is our biggest problem and it is one that has not been improved; it is stagnate, and that is serious problem,” the economist said.

Avendaño says 25 percent of Nicaraguans who are economically active are not able to find jobs to generate an income. Creating jobs should be the focus of the government’s poverty reduction strategy, which has not been made public, the economist says.

“As long as unemployment remains the same, poverty increases,” Avendaño says.

Tim Rogers is editor of Nicaragua Dispatch

You've read  of  free articles. Subscribe to continue.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.