Nicaragua

Politics:

• Analysis

  Nicaragua politics: Alleged irregularities spark municipal election violenc

  Violent-and in some cases deadly-confrontations broke out in several small towns in the interior of Nicaragua following largely orderly and peaceful municipal elections held on November 4th. Anger over allegations of tampering with the electoral roll boiled over in a few places.

  The underlying cause of the unrest is the lack of trust among opponents of the governing Frente Sandinista de Liberacion Nacional (FSLN, or Sandinistas) in the work of the election authority, the Consejo Supremo Electoral (CSE). The CSE's credibility as an arbiter has been severely damaged by fraud in previous years from which the Sandinistas have benefited.

  The ruling FSLN wins by a wide margin

  On November 5th the CSE declared the FSLN the winner in 134 of the country's 153 municipalities. The remaining 19 municipalities were split between four opposition groupings. According to the CSE, the FSLN won a landslide 67% of valid votes cast, against 21% for the Partido Liberal Independiente (PLI, the main opposition force) and 8.5% for the Partido Liberal Constitucionalista (PLC). Widespread voter apathy made for an unusually low turnout, at an estimated 45%, down from 57% in the previous local elections.

  Although the Sandinistas' victory had been widely predicted, their winning margins in the most important cities were very wide. For instance, in the capital, Managua, the incumbent mayor, Daisy Torres, won a credibility-stretching 83% of the vote. Suspicions of tampering emerged as some voters found their names were not on electoral lists. A perception that some people were voting more than once, or were voting in places where they were not registered, appears to have been the main factor fuelling the violence.

  The opposition alleges vote-rigging

  Press reports suggested that what spurred both violent and non-violent protests was anger among opposition supporters over incomplete election lists, suspicion of double voting organised by the FSLN and, in some cases, non-counting or alteration of vote tallies. Tensions erupted into violence in several hotly contested races after voting ended. In the town of Ciudad Dario in Matagalpa province, two people died in street fighting between PLI and FSLN supporters after rumours spread that results were being falsified in the FSLN's favour. In La Paz Centro in Leon province, militant FSLN supporters trashed the party offices of the PLI opposition, whose activists responded by burning down the town's railway station, used by Sandinistas to hold events. Irate supporters of the PLC, meanwhile, ransacked the mayor's office in the small town of San Nicolas, Esteli, in protest at supposed fraud by the FSLN.

  In a presentation to the media on November 5th, the Instituto para la Democracia y el Desarrollo (Ipade, a non-governmental organisation), which monitored the voting but without official observer status, appeared to lend support to claims of irregularities. Ipade's director, Mauricio Zuñiga, noted that in 11% of a sample of 110 municipalities covered by his 1,300 observers, polling station officials illegally permitted people to vote even though their names were not on the rolls. Conversely, in 22% of polling stations surveyed, would-be voters were turned away because their names were not on voter lists. Ipade has said it will analyse its data more fully before drawing any firm conclusions.

  Opposition parties are now seeking to overturn the CSE's verdicts in a significant number of (mostly small) towns. PLI deputy Eliseo Nuñez claimed that his party's tally sheets did not coincide with the official ones in at least six towns, including Dario and another town in Matagalpa province, Matiguas, where tensions also ran high. Once all of its data sheets are gathered, the PLI expects to appeal against as many as 12 local outcomes. If the PLI gets satisfaction in all these cases, it would double the number of town halls the CSE has so far granted it. In another case, the defeated PLC mayor of Nueva Guinea, an important town in the South Atlantic region, asserts that by his tally he won re-election with a 3,114 vote majority over the FSLN.

  The CSE has clearly failed to convince many Nicaraguans that it can preside over a free and fair election process. A final verdict on the reliability of the municipal results and the processing of the various appeals could take several weeks. In the interim, voter apathy-rather than anger-is likely to prevail. The risk of an ongoing upsurge in violence is therefore a small one.

  November 07, 2012

• Background

  Nicaragua: Key figures

  Daniel Ortega

  Daniel Ortega is both a former and current president, and leader of the Frente Sandinista de Liberacion Nacional (FSLN, known as the Sandinistas). After ruling from 1985 to 1990, Mr Ortega lost successive presidential elections in 1990, 1996 and 2001 but maintained his party's share of the vote. He then increased its quotas of power in important institutions of state through the 2000 pact with Mr Aleman, leading many Nicaraguans to view him as the country's most powerful figure even before his re-election in 2006. In Latin America, he is an ally of the presidents of Venezuela and Cuba.

  Rosario Murillo

  Rosario Murillo, who is a poet, writer and the wife of Mr Ortega, led the Asociacion Sandinista de Trabajadores de la Cultura (Sandinista Culture Workers' Association) during the 1980s revolutionary regime. Architect of her husband's successful 2006 election campaign, Ms Murillo has been named to head a new citizenry and communications council, which oversees the government's relations with the media and is organising consejos ciudadanos (citizens' councils) at the local level. Ms Murillo is also known to have wide-ranging organisational responsibilities in the FSLN.

  Arnoldo Aleman Lacayo

  Leader of the Partido Liberal Constitucionalista (PLC), president of the National Assembly (the legislature) for most of 2002, and a former president (1997-2002). Following widespread corruption during his presidency, he was stripped of his immunity as a deputy in 2002 and sentenced to 20 years' imprisonment one year later—the case is awaiting an appeal. Although discredited internationally, Mr Aleman remains a major political figure, as he retains his grip on the PLC's National Assembly bench and most party branches.

  Eduardo Montealegre

  Opposition leader in the National Assembly as head of the Alianza Liberal Nicaraguense-Partido Conservador (ALN-PC) bench and currently campaigning to become mayor of Managua, the capital, in the November 2008 local elections. Runner-up in the November 2006 presidential election, Mr Montealegre was minister of finance in the government of Enrique Bolanos. He was minister to the presidency and minister of foreign affairs under Mr Aleman. After losing to Mr Bolanos in the party primaries in December 2001, Mr Montealegre ran his presidential campaign.

  December 11, 2008

• Structure

  Nicaragua: Political structure

  Official name

  Republic of Nicaragua

  Form of state

  Presidential democracy, with National Assembly

  The executive

  The president is head of state, head of government and commander-in-chief of the armed forces. He or she is elected for a period of five years and appoints a cabinet

  National legislature

  National Assembly: a 92-member unicameral legislature, elected by proportional representation for five years

  Legal system

  Supreme Court, at the apex of a subordinate court system, elected by the National Assembly for five years

  National elections

  Next elections: November 2016 (presidential and National Assembly)

  National government

  The president, Daniel Ortega, governs with the support of the Frente Sandinista de Liberación Nacional (FSLN), which holds 63 seats in the legislature

  Main political organisations

  Government: Frente Sandinista de Liberación Nacional (FSLN, the Sandinistas)

  Opposition: Partido Liberal Constitucionalista (PLC); Partido Liberal Independiente and the Union Nicaragüense de la Esperanza (PLI-UNE ); Alianza Liberal Nicaragüense (ALN, formed by ex-PLC members); Movimiento Renovador Sandinista (MRS, formed by ex-FSLN members)

  President: Daniel Ortega Saavedra

  Vice-president: Omar Hallesleven

  National Assembly president: René Núñez Téllez

  Key ministers

  Agriculture & forestry development: Ariel Bucardo

  Defence: Ruth Esperanza Tapia Roa

  Development, industry & commerce: Orlando Solórzano

  Education: Miriam Soledad Raudez

  Environment & natural resources: Juana Argeñal

  Family: Marcia Ramirez Mercado

  Finance & public credit: Ivan Acosta

  Foreign affairs: Samuel Santos López

  Health: Sonia Castro

  Interior: Ana Isabel Rosales Mazón

  Labour: Jeaneth Chávez

  Mines & energy: Emilio Rappaccioli

  Presidency: Paul Oquist Kelley

  Tourism: Nubia Arcia

  Transport & infrastructure: Pablo Martínez

  Central Bank president

  Alberto Guevara

  December 14, 2012

• Outlook

  Nicaragua: Key developments

  Outlook for 2013-17

  • The president, Daniel Ortega, holds an overwhelming legislative majority that will provide policy stability during the outlook period, but also increased authoritarianism, corruption and concentration of power in the executive.
  • Weakened democratic governance will keep the risk of political unrest high. Electoral considerations will begin to come to the fore in late 2015 as presidential and National Assembly elections are due in late 2016.
  • Real GDP growth will slow slightly to 3.6% in 2013 (from an estimated 3.7% in 2012) before gathering pace in 2014-17 to average 3.9% per year, on the back of strengthening credit growth, investment and trade.
  • The government's main policymaking challenge will be to renew an IMF accord and maintain multilateral support, thereby bolstering confidence in fiscal and macroeconomic stability.
  • The government's budget projections for 2013 assume real GDP growth of 4.1% and year-end inflation of 7.3%. We are less optimistic, forecasting 3.6% growth and a rise in year-end inflation to 7.4%.
  • Inflation will ease to an estimated 5.6% at end-2012, but rising food prices will push it back to 7.6% at end-2013. Weaker growth will keep consumer demand muted in 2014 before inflation rebounds to average 6.9% per year in 2015-17.
  • At an average of 16.1% of GDP, the current-account deficit will remain very wide in 2013-17. Continued inflows of multilateral aid and foreign direct investment will provide sufficient financing.

  Review

  • A huge expanse of the Caribbean Sea is now under Nicaraguan control after a ruling by the ICJ on the maritime boundary between Nicaragua and Colombia, raising frictions and policing concerns.
  • The EU and 11 Latin American countries including Nicaragua signed a historic agreement in November to settle eight trade disputes taken to the World Trade Organisation (WTO), ending a 20-year "banana war".
  • Inflationary pressures declined in 2012 to an annual rate of 5.9% in October.
  • The trade deficit narrowed in the third quarter as surging agricultural exports and a lower oil import bill curbed a previously growing trade imbalance.
  • Debt indicators are improving, according to the latest Central Bank data. The ratio of debt to exports of goods and services has declined markedly from 83% at end-2009 to an estimated 55.6% at end-2012, owing to strong export growth.

  December 14, 2012

Economy:

• Background

  Nicaragua: Economic background

  Real gross domestic product by sector
  (% share of GDP)
  	2003	2004	2005	2006	2007
  Agriculture	16.3	16.6	16.8	16.6	16.9
  Industry	25.5	26.6	26.0	26.0	25.8
  Services	58.3	56.8	57.2	57.4	57.2
  Source: Economist Intelligence Unit.

  Download text file (csv format)

  December 11, 2008

• Structure

  Nicaragua: Economic structure

  Data and charts: Annual trends charts

  
  

  

  December 14, 2012

• Outlook

  Nicaragua: Country outlook

  Nicaragua: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: The president, Daniel Ortega of the leftist Frente Sandinista de Liberación Nacional (FSLN, the Sandinistas), will enjoy a strong political position over the course of a second consecutive five-year term until the next general election in 2016, allowing him to pursue his agenda unhindered while ensuring relative stability in economic policy management. Despite some recent signs of internal divisions, the FSLN is expected to remain cohesive. This will allow Mr Ortega to push through legislation without support from the opposition, including measures that require a 60% majority, such as constitutional reforms and the appointment of officials in other branches of government, thereby easing policy implementation in the forecast period. It will also deepen the concentration of power in the president's hands and reinforce his authoritarian tendencies. The control of all organs of state will allow Mr Ortega to bolster his dominance over opposition parties as well as the private sector, and to continue to boost his electoral base. However, these developments, together with repeated irregularities in electoral processes, will mean a further deterioration in public confidence in Nicaragua's already weakened institutions. This is particularly the case for the Corte Suprema de Justicia (CSJ, the Supreme Court) and the Consejo Supremo Electoral (CSE, the Supreme Electoral Council). In the immediate future, Mr Ortega will focus on strengthening control of public institutions such as the CSE, the CSJ and other state bodies for which elections have been pending since early 2010. The president will try to strengthen the dominance of his Sandinista party by ousting its erstwhile ally, the centre-right Partido Liberal Constitucionalista (PLC), from positions of influence. In tandem, Mr Ortega will allow a token representation by the Partido Liberal Independiente-Union Nicaragüense de la Esperanza (PLI-UNE) alliance, which is now the principal opposition.

  ELECTION WATCH: Despite widespread irregularities in electoral processes, Mr Ortega's re-election in 2011 confirmed that he remains Nicaragua's most popular political figure. His position (and that of his party) will continue to be bolstered by the implementation of populist measures and an expanding economy. The opposition continues to be hindered by competing interests and will see its influence weakened as divisions persist. The next general election is not due to be held until November 2016, and will again pit the ruling FSLN against a coalition of centre-right parties. Mr Ortega will try to change the constitution so that he can run for a fourth term, but if he fails, or chooses not to run owing to his advancing age, he might sponsor someone from his political entourage, very possibly his wife, the first lady, Rosario Murillo, who has been positioning herself to extend her control over the FSLN and its local organisations.

  INTERNATIONAL RELATIONS: The Ortega government will maintain a pragmatic approach to foreign policy and remain firm in its commitment to the Dominican Republic-Central America Free-Trade Agreement (DR-CAFTA)--involving the US (Nicaragua's main trade and investment partner)--and to Central American integration. Relations with the US will remain strained at times. There is a persistent risk that, if the administration does not adopt measures to guarantee electoral fairness in future elections the US will put pressure on multilateral bodies in which its influence is strong (such as the World Bank) to restrict aid flows to Nicaragua. The Economist Intelligence Unit's baseline assumption is that Mr Ortega will do just enough to maintain a working relationship with the US and multilateral lenders--as has been the case for many years. We expect that Nicaragua's ties with Venezuela will remain strong and that that country's president, Hugo Chávez, will continue to provide significant aid (around US$500m per year). There is, however, a risk that Venezuelan largesse could fall considerably if Mr Chávez, who secured another six-year term in October, were to leave office prematurely, owing to health problems. Relations with Colombia will remain tense following an arbitration ruling on the disputed maritime boundary between Nicaragua and Colombia, which has extended by more than 90,000 sq km Nicaragua's territorial waters in the Caribbean Sea. Nicaragua's navy and air force has scant capacity to patrol the newly acquired areas. We expect Colombia will aid Nicaragua in its new security responsibilities, in particular over maritime drug control efforts. In return, Nicaragua will not act against the fishing interests of islanders on the Colombian-controlled San Andrés archipelago.

  POLICY TRENDS: There is a modest risk that Nicaragua will fail to renew an extended credit facility (ECF) with the IMF, but this is not our central forecast. The cutting of bilateral aid from the US in June, owing to Nicaragua's lack of fiscal transparency, could also evolve into a more serious US embargo on credit and aid flows, although we attach a low probability to this development. Multilateral funding will remain essential to maintain economic confidence throughout the outlook period and to allow the administration to continue strengthening the public finances through tax reforms and better targeting of spending, while increasing social programmes to combat poverty and unemployment. Ongoing problems with fragile institutions, a weakened judicial system, regulatory uncertainty and excessive red tape will continue to affect the business environment.

  ECONOMIC GROWTH: Steady foreign investment flows, buoyant exports of agricultural and livestock products, manufactures and minerals, and firm domestic demand will all remain supportive of Nicaragua's economic prospects in the medium term. We estimate GDP growth of 3.7% in 2012, but with only slow improvements in productivity, further GDP expansion will be limited to an annual average of close to 4% in 2013-17, below 2010-11 levels (when growth averaged 4.6%). There are downside risks to this forecast, mainly emanating from weak US growth and uncertainty in the euro zone. As a result, any faltering in US growth (which is forecast to average a modest 2.2% in 2013-14 and 2.4% in 2015-17), a sharp rise in oil prices or a deepening recession in the developed world would all have an impact on Nicaragua's growth potential. Assuming that Venezuelan import demand and financial support continues, this will boost agriculture and manufacturing--and provide some cushion against external volatility. In the longer term, the domestic outlook will improve, owing to a pick-up in credit growth, and the investment and trade benefits brought by preferential access to US markets under DR-CAFTA.

  INFLATION: Consumer price increases in the ten months to October 2012 were lower than projected, with falling commodities prices offsetting a sharp increase in the minimum wage (12.5%). As a result, we estimate that inflation will end the year at 5.6%. Provided that our forecasts for non-oil commodity prices are met, inflation should not rebound to double-digit levels (as it did in 2007-08), but rising food prices will add to inflationary pressures and we now expect an end-2013 inflation rate of 7.4%. There are risks to our medium-term forecasts--namely, a surge in oil or food prices, owing to possible supply shocks--but we forecast that average annual inflation will decline to 6.3% in 2014, before rising again to an annual average of 6.9% in 2015-17. This forecast assumes that the currency does not overshoot the 5% annual crawling-peg depreciation rate. Despite the limited ability of the Banco Central de Nicaragua (BCN, the Central Bank) to control inflation, the government will continue to stabilise prices through subsidies.

  EXCHANGE RATES: The nominal depreciation of the crawling peg has been set at 5% per year, a level that policymakers see as the best trade-off in balancing the twin objectives of keeping inflation in check and maintaining external competitiveness. The easing of inflation differentials with Nicaragua's main trading partners (in particular, the US) has ended expectations of a slight real appreciation in 2013. We now forecast a steady but gradual depreciation of the real exchange rate in 2013-17, restoring some lost competitiveness to exporters. We do not attach any significant risk to a devaluation, provided that inflows of concessional finance and international aid remain uninterrupted.

  EXTERNAL SECTOR: Nicaragua's structurally large current-account deficit will be determined by trends in the trade balance. The slowing but still positive outlook for exports in 2013-14 will see the deficit narrow as a percentage of GDP to 16.3% in 2013 and 14.5% in 2014, down from a recent peak of an estimated 19.6% in 2012. Growing import demand and an easing of the rapid export expansion in the latter half of the forecast period will lead the deficit to widen again to an average of 16.6% of GDP in 2015-17. Export growth will continue to accelerate modestly in 2013-14 but the current double-digit rates will begin to tail off after 2015 as recent export drivers moderate. The trade deficit will narrow marginally in 2013-14, as growth in the import bill is outpaced by export growth. The services deficit will also remain stable, at an average of 3% of GDP in 2013-17, as tourism income offsets higher transport and freight costs, while the income deficit will gradually widen from an estimated 4.1% of GDP in 2012 to 5.1% of GDP in 2017, driven by larger profit repatriations from foreign companies. The current transfers surplus, the bulk of which is contributed by remittances income, will rise slightly over the outlook period, from 18.1% of GDP in 2013 to 18.6% of GDP in 2017, as employment conditions in the US and Costa Rica (home to most Nicaraguan migrants) improve only gradually. Although inward FDI provides support to the capital account, multilateral and bilateral borrowing will remain a key source of financing support. Assuming that both sources of capital remain available, the level of foreign reserves will stay steady, averting a balance-of-payments crisis.

  December 09, 2012

• Forecast

  Nicaragua: 5-year forecast summary

  Outlook for 2013-17: Forecast summary

  Forecast summary
  (% unless otherwise indicated)
  	2012a	2013b	2014b	2015b	2016b	2017b
  Real GDP growth	3.7	3.6	3.9	3.9	4.0	3.7
  Gross fixed investment growth	11.5	6.6	4.2	6.5	7.0	5.8
  Unemployment rate (av)	7.4	7.2	7.1	6.9	6.7	6.5
  Consumer price inflation (av)	7.2	7.5	6.4	6.9	7.2	7.1
  Consumer price inflation (end-period)	6.1	7.6	6.3	7.4	7.1	6.9
  Lending interest rate	11.5	13.0	14.0	15.0	15.0	15.0
  Central government balance (% of GDP)	0.6	0.9	0.7	-0.4	-1.7	-0.7
  Exports of goods fob (US$ bn)	4.2	4.8	5.5	6.1	6.7	7.4
  Imports of goods fob (US$ bn)	6.5	7.0	7.7	8.6	9.6	10.5
  Current-account balance (US$ bn)	-1.5	-1.3	-1.2	-1.5	-1.9	-2.0
  Current-account balance (% of GDP)	-19.4	-16.2	-14.3	-16.9	-20.1	-19.7
  External debt (year-end; US$ bn)	5.2	5.6	5.9	6.3	6.7	7.0
  Exchange rate C:US$ (av)	23.59	24.75	25.97	27.24	28.58	29.98
  Exchange rate C:US$ (end-period)	24.12	25.30	26.54	27.85	29.21	30.65
  Exchange rate C:€ (end-period)	31.11	31.75	32.78	34.95	36.77	38.48
  Exchange rate C:SDR (end-period)	37.29	38.46	39.75	41.81	43.75	45.90
  a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts.

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  November 21, 2012

View detailed map

Country Briefing

Land area

121,428 sq km; mountainous upland in the central area, with a wide plain on the western coast and tropical forest on the eastern coast

Population

6.6m (2010 official estimate)

Main towns

Population in ‘000 (2005 census)

Managua (capital city): 1,263

Matagalpa: 469

Chinandega: 379

León: 356

Masaya: 290

Nuevo Segovia: 209

Estelí: 202

Climate

Semi-tropical; tropical rainforest on the Atlantic coast

Weather in Managua (altitude 83 metres)

Hottest month, May, 27-32ºC (average daily minimum and maximum); coldest month, January, 23-30ºC; driest month, January; wettest month, October

Languages

The official language is Spanish. Miskito, Mayangna, Garifuna and English are spoken on the Atlantic coast

Measures

Metric system, but imperial measures are in popular use. Other measures include:

Quintal = 46 kg

Manzana = 0.7 ha

Currency

Córdoba ©; average exchange rates in 2011: C22.42:US$1; C28.18:¥100

Time

6 hours behind GMT

Public holidays

January 1st; Maundy Thursday; Good Friday; May 1st (Labour Day); July 19th (1979 revolution); September 14th (Battle of San Jacinto); September 15th (Independence Day); November 2nd (All Souls' Day); December 8th (Immaculate Conception) and December 25th

March 09, 2012