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Finance Minister: How US Sanctions Impact Nicaragua’s Poor

Above photo: Iván Acosta (right) speaking with the author. Camila Escalante.

Is it true that 50% of Nicaraguans want to leave their country owing to a climate of repression and economic decline, supposedly resulting from socialist policies? This was the allegation in a report published by AmericasBarometer, a research agency based at Vanderbilt University, which failed to note that it’s previous forecast, that 30% of Nicaraguans would leave after 2018, proved wildly wrong.

In reality, the so-called repression is the government’s reaction to a violent coup attempt backed by the U.S. The AmericasBarometer report also ignores the fact that many of Nicaragua’s remaining economic difficulties are attributable to U.S. sanctions, which have been illegally applied under false pretexts.

Despite the enormous damage caused by U.S. intervention, Nicaragua’s economy has improved dramatically under the rule of Daniel Ortega, a leader of Nicaragua’s 1979 socialist Sandinista revolution who has been in power since 2007.

Nicaraguan Finance Minister Iván Acosta gave an interview detailing how Nicaragua fits the broader pattern by which sanctions negatively impact working class people and the poor while doing little to affect a change in government policy.

U.S. sanctions have been applied against Nicaragua based on the false claim that Ortega committed grave human rights abuses, when his government largely reacted with restraint to the violent political uprising in 2018 which caused Nicaragua’s GDP to decline by over 4%.

In 2024, Nicaragua will enter the 45th year of its revolution. The first U.S. sanctions—nothing less than a complete economic blockade—accompanied the U.S.-sponsored Contra war of the 1980s.

The then-Sandinista government took legal action against the U.S. government, but it has not received any of the $17 billion in reparations awarded by the International Court of Justice when, in 1986, it won its case.

Impoverishment and the loss of 30,000 Nicaraguan lives in the war led to electoral defeat for the Sandinistas in 1990, heralding 16 years of neo-liberal administrations. Washington, which had threatened that the war would continue if the Sandinistas were re-elected, appeared to have won.

However, Sandinistas are resilient and rebuilt their popular support as neo-liberal policies unraveled. Since returning to power in 2007 after winning the 2006 election, the Sandinistas have largely rebuilt Nicaragua after the neo-liberal disaster.

One example of their achievements, cited by Iván Acosta, will suffice. He pointed out that the different governments that held power from 1990 until 2006 built only two hospitals and started one other. In contrast, over a similar time span, the Sandinistas have built 17 hospitals, among them three advanced ones, and are currently constructing four more. Altogether, also counting health centers, there are 77 public health facilities, more than in any other Central American country (see chart).

Except when neo-liberal governments are elected, Washington consistently claims that Nicaraguan elections are manipulated or fraudulent. This was the case in 1984, then in 2006 and in every election since.

As WikiLeaks and other sources have revealed, the U.S. resumed its anti-Sandinista plotting well before the party’s return to power in 2007, and this culminated in U.S. sponsorship of the attempted coup in 2018 (the story of which has been told in four articles jointly written with Dan Kovalik). After the failure of the coup, Washington redirected its efforts toward attempting to discredit the country’s 2021 elections. It failed again, the elections had a 66% turnout and Sandinista President Daniel Ortega was returned with 75% of the vote.

While it conducts a sustained campaign of denigrating his government, Washington no longer has the organization within the country—an extensive network of NGOs, media outlets and “human rights” bodies funded from U.S. sources—that facilitated the attempted coup. These have been dislodged by the Sandinista government and, in a deal struck with the Biden administration, most opposition leaders have been exiled (although several of them continue to receive funding from Washington). Some NGOs now operate from Costa Rica but can no longer easily recruit adherents in Nicaragua as they did before.

This means that sanctions are the main weapon that the U.S. has available in its efforts to damage economic and social conditions within Nicaragua itself. Conceived well before the Sandinistas returned to power, they were eventually formalized in the “NICA Act” of 2018 and later strengthened in the “RENACER Act” of 2021.

As is the case with most sanctions, U.S. allies such as Canada, the UK and the European Union have largely followed the U.S. lead.

Broadly speaking, the sanctions are of three kinds. First are those aimed at restricting Nicaragua’s access to finance from international bodies such as the International Monetary Fund (IMF) and World Bank. Second are trade restrictions, directed at Nicaraguan exports.

Third are personal sanctions, now covering dozens of individual Nicaraguan officials. Because the effects of the third group were examined in an earlier article in CovertAction Magazine, jointly with Erik Mar, my interview with Iván Acosta focused on the first two.

The minister first pointed out that Nicaragua has an excellent track record of making effective use of and accounting for the different forms of international financial assistance it has received. It therefore never expected negative responses from these institutions if it needed assistance.

For example, well before 2018 the IMF had agreed with the government that, under normal circumstances, its economy would no longer need their help, because effective fiscal management was in place and, by 2017, the country had enjoyed a decade of sustained growth. At that point, Nicaragua’s economy was only subject to the IMF’s regular monitoring, known as “Article 4.”

The attempted coup, which began in April 2018, lasted for almost four months. As well as its significant human cost, it pushed the economy sharply into recession, raising fears of a run on Nicaragua’s currency (the Cordoba) which would damage its finances still more. Iván Acosta explained that, given their good relationship with the IMF, it was natural to look to it for help.

However, while officials were very sympathetic, they made it very clear that any formal application would be turned down at Washington’s behest. To spare embarrassment on both sides, assistance was never requested. Fortunately, a run on the Cordoba never took place.

Nicaragua has also had an excellent reputation for implementing successful projects using financing from bodies such as the World Bank and Inter-American Development Bank, which had raised their funding from $70-80 million annually in the early 2000s to around $300-400 million by 2017. From 2018 onwards, Acosta believed, Nicaragua could have expected at least $500 million in multilateral funding annually, but sanctions cut this drastically. Even before the passage of the NICA Act, Washington began to use its influence within these banks to reject most of the proposals that Nicaragua put forward.

This continued even during the pandemic: Nicaragua only received help after the main effects of Covid-19 had already been felt. Therefore, despite its being a member country of these large financial institutions, and also despite having a population with one of the lowest incomes per head in Latin America, Washington effectively closed doors to Nicaragua’s Sandinista government.

Iván Acosta explains the effects as follows. Over the five years from 2018, Nicaragua might have expected to receive a total of $2.5-3.0 billion in development funding from these bodies as their programs continued to grow. In fact, it has only received perhaps 10% of this amount (limited funding related to the pandemic and to the damage caused by two severe hurricanes in November 2020). What might it have done if the funds it has been denied had instead been made available? Acosta gives two examples. One is that more new hospitals would have been built (with each 450-bed unit costing around $130 million). Another is that one of the frozen projects, submitted but never approved, would have enabled the country’s huge Lake Nicaragua to become a new source of drinking water for the capital, Managua.

Acosta gives particular emphasis to the government’s main economic and social priority, which is to reduce poverty (it has already reduced general poverty from 48.3% to 24.9% and extreme poverty from 17.6% to 6.9%). As he points out, these objectives are shared with the international institutions which, paradoxically, are now preventing Nicaragua from doing even more to achieve them. He says it is ironic that countries whose per capita incomes range between $50,000 and $70,000 are denying help to a country whose GDP per capita is about $2,500.

Only one of the international bodies—the Central American Bank for Economic Integration (CABEI)—continues to assist Nicaragua at the same level as before. This has funded hospitals, new roads and many other schemes because Nicaragua, along with the other member countries in the region, hold more than half the shares. During the pandemic, CABEI’s help to Nicaragua was second only to its assistance to El Salvador.

To explain this, Acosta makes use of the Mexican saying—that the bank “is far from the United States.” Despite Washington’s efforts and a sustained but evidence-free campaign by Nicaragua’s opponents to discredit CABEI as a “bank of the dictators,” it continues to put money into the country’s development projects.

If Iván Acosta is pessimistic about the prospects of relief from the sanctions being imposed via the big banks, he has a rosier view of Nicaragua’s ability to overcome trade sanctions.

While Washington has, so far, attempted to damage the country’s sugar and gold exports, its efforts have had little effect. Threats to coffee and meat exports have also been made, but Acosta believes that Nicaragua’s position in the Central America Free Trade Agreement (CAFTA) offers some protection.

He foresees a likely reluctance on the part of the CAFTA member-countries in the region to take joint action against one of their own, even under pressure from Washington, given the continuing importance of intra-regional trade and the close ties between peoples separated only by land borders. Nicaragua also has another weapon up its sleeve: In January 2024 a new trade agreement with the People’s Republic of China takes effect, and exports of coffee, seafood and sugar are already being planned.

The minister’s optimism comes from his knowledge that Nicaragua’s economy is recovering quickly from the damage done by the coup attempt and then the pandemic. Over the three years 2020-2022, its 15.8% growth was the highest in Latin America, and he believes it might have reached 20% over that period if no sanctions had been in force. Recently, the IMF forecast 4% growth in Nicaragua for 2023. He points to a range of reasons for investors to come to Nicaragua: It is currently the safest country in the region, has Central America’s best roads (mainly built in the last 16 years) and has a government which, although described by Washington as “communist,” in reality promotes a mixed economy, particularly favoring small businesses.

Iván Acosta’s optimism is tinged with regret. “How much more could we have done,” he asks, “were it not for the coup attempt and Washington’s hostility?”

The persistent irony of U.S. sanctions, he points out, is that, while the Biden administration claims that they will not be applied to schemes that alleviate poverty, in fact their effects are greatest on those with the lowest incomes. “I’m not going to be the one to lose out because of sanctions,” he declares, “…it’s going to be somebody who needs help, because they will get the help much later than should have been the case.”

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