Nicaragua Protests

May 14, 2018

The protest was initially sparked by a government proposal to increase taxpayer contributions to social security while cutting payouts to beneficiaries. But it spiralled into widespread civil unrest when a brutal police reaction killed an estimated 60 people, sparking nationwide anger. For the first time since the former Marxist leader democratically returned to power in 2007, president Daniel Ortega’s rule seems under threat.

Strong economy

In recent years Nicaragua had emerged as Central America’s surprise success story. Despite his revolutionary past, Ortega proved remarkably adept at attracting international investment to one of the region’s poorest and smallest economies. More than a decade of stable macroeconomic management, shrewd investor incentives and ambitious national projects, such as the country’s transition to renewable energy, helped Nicaragua grow its GDP at an annual average of 5% between 2007 and 2017.

Despite his revolutionary past, Ortega proved remarkably adept at attracting international investment …

Perhaps ‘peak Nicaragua’ came when the government announced an audacious, China-financed plan to rival the Panama Canal by digging its own transoceanic trench. The $50billion-project seemed set to rewrite global trade maps and upend the geopolitical balance in the western hemisphere by giving China a strategic foothold in the ‘America’s backyard’. Many analysts, including LatAm INVESTOR at the time, hailed it as another potential triumph for Nicaragua. Yet amid local environmental protests and shaky Chinese funding, the project didn’t advance much past the ceremonial groundbreaking ceremony.

Political uncertainty

Ortega deserves praise for fostering strong economic growth and steering Nicaragua clear of the gang violence that mars many poor people’s lives in Honduras, El Salvador or Guatemala. Yet, even before the protests, criticism of his family’s increasingly authoritative grip on power – his wife is vice president – was starting to mount. The recent unrest undermines one of the popular selling points of the new Nicaragua, namely that it is politically stable and is building the type of political consensus that allowed Central American peers like Costa Rica and Panama to grow richer. Protests have been quelled for now, yet the strong undercurrent of anti-Ortega feeling suggests investors must now factor in more political uncertainty.