Nicaragua Crisis Continues

August 23, 2018

Nicaragua is currently experiencing a political crisis the likes of which has not been seen since the 1980s. The crisis began with protests triggered by the regime’s unilateral reform of the National Social Security Institute on the 16th of April.  This increased the contributions paid by employees and employers, while reducing pension pay-outs. However, the regime’s disproportionate response to the protests – including the deployment of anti-riot police, as well as thugs associated with the ruling Sandinista National Liberation Front (FSLN) – provoked widespread and vehement opprobrium, particularly among university students and grassroots organisations. The protests also revealed deep-rooted antipathy towards the regime in general, and President Daniel Ortega and First Lady and Vice-President Rosario in particular.

Other gripes quickly surfaced as the protests escalated, despite Ortega’s decision to revoke the reform within a week. Some of the issues were short term: for example, the regime’s botched response to a wildfire that devastated one of Nicaragua’s most important bio reserve. While others were more fundamental: most notably, the erosion of democracy in the country since Ortega returned to power in January 2007.

The private sector – including the Superior Council for Private Enterprise (COSEP) – was quick to denounce the regime’s conduct and display solidarity with students leading the protests against it. Whether this is temporary fissure, or a permanent fracture in the relationship between the regime and the private sector, one thing is clear: the consensus-based management of the economy led by COSEP and Ortega’s chief economic advisers – which fostered sustained levels of economic growth and increasing levels of foreign direct investment over the last decade – has come to a close. The relationship had already been placed under strain by the government’s perceived failure to consult with the private sector before agreeing a new minimum wage with government-aligned unions in March, and ratifying a new anti-money laundering law in the unicameral and FSLN-controlled National Assembly in April.

National dialogue

The Nicaraguan Episcopal Conference (CEN) – the official leadership body of the Catholic Church in the country – convened a National Dialogue between the regime and the Civic Alliance for Justice and Democracy, which comprises representatives of student, farmers and the private sector, to resolve the political crisis. This followed the regime’s decision to allow a delegation from the Inter-American Commission on Human Rights to investigate alleged human rights abuses. Despite nominal concessions such as this, Control Risks does not expect the dialogue will lead to a swift resolution of the political crisis. Indeed, we believe the limited concessions made to date are not a sign of good faith; rather, they are part of the regime’s broader strategy to draw out the dialogue process in the hope that the protest movement against it will ‘run out of steam’.

To date, at least 290 people have died in the protests and violence….

As a result, the dialogue has thus far failed to provide a platform from which the crisis can be resolved. The regime’s intransigence on key issues, most notably its apparent reluctance to date to consider seriously a proposal by both the CEN and the Civic Alliance to bring forward the general election from 2021 to 2019, is a particular impediment. This reflects both Ortega and Murillo’s evident unwillingness to countenance a move that would lead to their departure from office, a key demand of some members of the Civic Alliance. Continued acts of violence perpetrated by both supporters and opponents of the regime further preclude a prompt resolution to the situation.  To date, at least 290 people have died in the protests and violence.

In the regime’s favour is the fact that all branches of the government and the police remain firmly under its control. A further boon is the lack of a political opposition, which Ortega and Murillo have systematically decimated over the last decade or so, meaning there is no credible figure to unite the disparate elements of the protest movement. The private sector, which has been tarnished by its close relationship with the regime, appears unable to provide such a leader

Gamechanger

In a noteworthy development in July, Humberto Ortega, founder of the now-defunct Sandinista People’s Army (EPS) and a former defence minister, called on his brother President Daniel Ortega to bring forward the 2021 general election and disband regime-aligned paramilitary groups. Humberto made the comments in a letter addressed to the participants of the National Dialogue. The latter is a direct reference to regime-aligned paramilitaries – known colloquially as ‘turbas’ – that are alleged to be gang members, off-duty police officers and members of the youth affiliate of the FSLN. Humberto’s comments reflected increasing concern, both locally and among the international community, over the use of paramilitaries to repress opposition to the regime. The regime’s use of paramilitaries in turn points to Ortega and Murillo’s desire to remain in power whatever the consequences.

The letter also comes amid increasing calls from civil society and political organisations for the army to intervene in the crisis, including by disarming the paramilitaries. In late June, 13 different political organisations sent an open letter to head of the army, General Julio César Avilés, directly quoting the 1987 Constitution, which states that ‘no more armed units may exist in the national territory than those established by the law’.

Although Control Risks believes a swift resolution to the political crisis is unlikely, a gamechanger in this respect would be if the army were to renounce the regime and support the protest movement against it. However, while it has attempted to distance itself from the regime in recent weeks, it has not given any indication that it intends to intervene directly in the crisis. A public declaration unequivocally denouncing the regime’s conduct would likely presage such a move.

Political instability

In this context, anti-regime protests will continue throughout 2018. Whether they ‘run out of steam’ or not, Control Risks believes the relative political stability that has characterised Ortega’s term in office is over. A recent survey by regional pollster CID Gallup found that 63% of Nicaraguans want Ortega to leave power. This is a remarkable fall from grace for someone who had persistently enjoyed approval ratings among the highest of any president in the Americas. Amid their declining popularity, Ortega and Murillo will look to tighten their grip on power, while continuing to repress demonstrations against them. This in turn will likely prompt the further imposition of sanctions on high-profile government figures by the US, as it did in December 2016 when it sanctioned then-president of the Supreme Electoral Council (CSE) Roberto Rivas under the Global Magnitsky Act. Indeed, as this edition went to press, the US had just sanctioned a further three high-profile members of Ortega and Murillo’s inner circle.

Challenges for business

At the end of June, the Central Bank of Nicaragua (BCN) revised down its economic growth forecast for 2018 – to between 0.5 and 1.5% – due to the political crisis currently engulfing the country. This follows an earlier BCN downgrade in May, which saw the 2018 forecast cut to 3.0%-3.6% from 4.5%-5%. The move reflects the adverse impact the political crisis is having on the economy. This state of affairs will persist throughout 2018 with companies in the service sector, as well as those with nationwide supply chains, to be most affected. Street barricades and roadblocks – known colloquially as ‘tranques’ – currently erected across the country are causing particular disruption. This situation will likely be compounded by a longer-term economic downturn as tourists and investors that were hitherto attracted by the perception of political stability and national consensus go elsewhere.