Nicaragua

Politics:

• Analysis

  Nicaragua politics: Ortegas seek to mold model citizens

  After six years of accumulating power and climbing to record levels of popularity, Nicaragua's First Lady, Rosario Murillo, and the president, Daniel Ortega, have embarked on a new campaign to bring about a social revolution. Under the slogan "Vivir Bonito" (live nicely), the state and ruling Sandinistas are preparing to employ a mixture of moral suasion and coercion to encourage citizens to live more orderly patriotic lives, respectful of authority and willing to participate in voluntary community tasks. However, the social re-engineering being proposed has the potential to build resentment and spark resistance, undermining the political dominance the Ortegas have so carefully crafted.

  Ms Murillo has growing influence and sway over the government's political agenda. Her somewhat eccentric plan is to forge a new type of Nicaraguan citizen able to contribute more to resolving some of society's ills. Her idealistic vision for the future is one of moral self-improvement and a willingness to accept social duties and the existing economic order, even if you are poor.

  Report cards for parents

  In February, Nicaragua's 46,000 teachers were summoned to weekend workshops for retraining in their new role as implanters of the Murillo vision. In future teachers will not only issue reports on the children they teach, but also on the performance of the parents. The reports will record everything from parental compliance with child vaccination requirements to the number of hours of "voluntary" labour the parents contribute. The implication is that a child's advancement in school and his eventual grades will be directly influenced by how much parents co-operate with the new regime.

  A second plank of the plan is a family code, currently being debated in the National Assembly (the legislature). The code will create gabinetes de la familia (voluntary family associations) in which parents and local residents will club together to carry out community projects. The improvement and cleaning of schools and parks-in order to set an example and build a sense of civic pride in public infrastructure-are two areas that get a mention. The monitoring of domestic disputes is another element, as reducing violence in the family is one of Ms Murillo's priority goals.

  The Ortegas' thesis is that disciplined and responsible citizens will contribute to freeing public spaces of crime and rubbish, and public services like schools and health centres will be kept in good repair by an army of volunteers. Cheerleaders for the scheme claim many benefits will emerge, including greater family stability and healthier children. The ideas are not entirely new, as they represent an extension of the "Citizen Power" councils that the Ortegas set up in 2007, in which Sandinista activists took a leading role in pushing for community participation. However, the latest proposals go farther and have an enhanced capacity to demand the active participation of community members as penalties may be applied to those who try to opt out.

  The third leg of the campaign to "live nicely" is an insistence on public orderliness. Here the state's power will be employed more conventionally to coerce an improvement in public cleanliness. Examples being given include the removal of street vendors, fines levied against food-sellers if they fail to clean up rubbish left by their clients and, for the first time, the towing of illegally parked vehicles by the municipality. Even horse-drawn vehicles will have to obtain a license.

  Resistance and failure are likely

  While the plan has many laudable goals it has also sounded alarm bells and harbours a strong potential to incite political unrest. The 1980s Sandinista government tried and failed to dictate conditions to bring about such kinds of social change. The Catholic Church and right-wingers have voiced concern that it will usher in a totalitarian state that might invade people's privacy and meddle with their freedom of choice.

  Local media sympathetic to the political opposition argue that Ms Murillo's education plans are simple indoctrination, reminiscent of the 1980s revolutionary mind set. The announcement that advisors would come from Cuba to assist with the social reform effort has bolstered this impression. Critics of the scheme fear that once such mechanisms are established they will be used to intrude ever deeper into people's personal lives and choices. The first acts of resistance have come from the teachers, with around 20% failing to attend their training sessions. Others have vocally objected to being forced to work on Saturdays without additional pay.

  Another stumbling block is the fact that many of the agents for change are poorly trained and remunerated teachers and other public officials who make poor role models. Depending on just how far the Ortegas try to pursue their goals using such dubious methods, sullen discontent could boil up into a real test of the government's authority.

  Post-Chávez era

  Events in Venezuela are at least partly responsible for the renewed sense of urgency over social reform. After years of being supported by Venezuelan largesse, worth around US$500m annually since 2006, the Nicaraguan government is looking ahead to a time when it will have to become much more self-sufficient.

  The death of the Venezuelan president, Hugo Chávez, will have little impact in the short term, given our baseline assumption that, after an early election called for April, Venezuela will remain under the rule of Mr Chávez's heir-apparent and interim president, Nicolás Maduro, of the ruling Partido Socialista Unido de Venezuela (PSUV). However, in the medium term, support from Nicaragua's most stalwart ally is bound to fade. Venezuela faces huge economic and social difficulties that will absorb the energies of its new leadership to the detriment of its international agenda and influence. In the absence of the charismatic Mr Chávez, the potential for a power struggle within the PSUV and a decline in popular support for the government at home will require the PSUV to focus far more on domestic policy issues.

  Without the security of large and indefinite aid flows from Venezuela, the Ortegas face a far less certain future. Off-budget spending to maintain the loyalty of party members and businesses is now threatened and, with no obvious alternative source of income, a return to the more authoritarian range of tools of the past is being sought to keep the lid on dissent.

  March 13, 2013

• 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 Ráudez

  Environment & natural resources: Juana Argeñal

  Family: Marcia Ramírez Mercado

  Finance & public credit: Iván 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

  March 28, 2013

• Outlook

  Nicaragua: Key developments

  Outlook for 2013-17

  • The president, Daniel Ortega, holds an overwhelming legislative majority that will provide policy stability in the outlook period, but also increased authoritarianism, corruption and concentration of power in the executive.
  • Weakened democratic governance will keep the risk of political resentment high, but the popularity of the president will limit dissent. Electoral issues will come to the fore ahead of a national election in late 2016.
  • Real GDP growth will slow to 3.8% in 2013 as external demand and investment softens slightly, before gathering pace in 2014-17 to average 4.2% on the back of strengthening credit growth, investment and trade.
  • Slow progress on a new IMF facility and weak recent tax reforms are weighing on the fiscal outlook. Public spending growth ahead of an election in 2016 will lead to a further deterioration of the fiscal position.
  • Rising food and commodities prices combined with a low base of comparison will push inflation to 7.6% by end-2013. Weaker growth will keep consumer demand muted and price pressures will ease again in 2014.
  • Trends in the current account will keep the deficit stable in 2013 at 17.9% of GDP, before rising to average 22% in 2014-17 owing to waning export growth. The deficit will be financed by steady inflows of multilateral finance and FDI.

  Review

  • Buoyed by rising popular support and a weak opposition, Mr Ortega has embarked on a campaign to coerce Nicaraguans into improving their civic participation. The scheme risks a political backlash.
  • According to Central Bank data, the total stock of nominal public debt rose by 3.2% to US$5.4bn in 2012. However, firm growth has improved debt indicators, with foreign and domestic debt levels declining as a percentage of GDP.
  • Sharply rising monthly consumer price increases averaged 1.3% in November-January owing to VAT being applied to some food products. Annual inflation reached 7.7% before falling back in February to 7.1%.
  • A sharp widening of the trade deficit in 2010-11 tailed off last year as total goods export earnings (fob) rose by 18% in the year, to US$2.7bn, while weaker oil prices helped to contain the import bill.
  • Growth of net international reserves held by the Central Bank stagnated in 2012, owing to buoyant commercial bank lending to the private sector that led to a drawdown of reserves.

  March 28, 2013

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

  
  

  

  March 28, 2013

• 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 his second consecutive five-year term until the next general election, in 2016. This will allow him to pursue his agenda unhindered while ensuring relative stability in economic policy management. Despite occasional episodes of internal division, the FSLN is expected to remain cohesive, allowing Mr Ortega to advance legislation without support from the opposition. This includes 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 control over all the organs of state. This 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 remain detrimental to 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 electoral council). Mr Ortega will focus on strengthening control of public institutions and implementing a programme of populist measures aimed at expanding his grass-roots support base and strengthening the dominance of his Sandinista party.

  ELECTION WATCH: Despite widespread irregularities in electoral processes, Mr Ortega's re-election in 2011 and subsequent opinion surveys in 2012 confirm that he will remain Nicaragua's most popular political figure. His position (and that of his party) will continue to be bolstered by an expanding economy. However, one recent policy initiative "Vivir Bonito"--a campaign intended to use moral suasion to improve civic responsibility--is at risk of being seen as an overbearing political intrusion into private life and will provoke a degree of political backlash that could bolster the opposition. 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 may sponsor a candidate from his political entourage--possibly his wife, 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)--including the US (Nicaragua's main trade and investment partner)--and to Central American integration. 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 assumes 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 the country will continue to provide significant aid in the short term, despite the death of its president, Hugo Chávez. We anticipate that the firm grip on power of Venezuela's ruling Partido Socialista Unido de Venezuela (PSUV) and its complete control of the country's institutional apparatus, including the Supreme Court, will ensure that the interim president, Nicolás Maduro, wins the presidential election scheduled for April 14th, thereby preventing a marked shift in policy on aid to Nicaragua. In the longer term, however, there is a risk that Venezuelan largesse will gradually decline, given that country's mounting economic woes and the potential for political splits to emerge. 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. While Colombia is studying a strategy to have the ruling overturned, it will abide by the decision and even 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 in 2013 after a previous agreement expired in December 2011 and little progress was made in 2012. However, this is not our central forecast, as both sides continue to plan to progress during the year. We expect the government to continue to pursue a new three-year ECF with the Fund in order to ward off financing or balance-of-payments problems in the event of external financial shocks. The facility is largely precautionary but is needed to provide confidence in government fiscal management and maintain relations with major multilateral sources of finance. The cutting of relatively minor bilateral aid from the US in mid-2012, due to Nicaragua's lack of fiscal transparency, could also evolve into a more serious US embargo on credit and aid flows. 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.

  ECONOMIC GROWTH: 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. GDP growth slowed to 4% in 2012, and with only slow improvements expected in productivity, further economic expansion will be limited to an annual average of 4.1% in 2013-17, below 2010-11 levels (when growth averaged 4.6%). Downside risks to our forecast include any faltering in US growth (which is forecast at a mild 2.1% in 2013, rising only slightly thereafter to not exceed 2.4% in 2014-17), a sharp rise in oil prices or a deepening recession in the euro zone. Assuming that Venezuelan import demand and financial support continue, this will boost agriculture and manufacturing, and provide some cushion against external volatility. In the longer term, the domestic outlook will be supported by modest credit growth and the investment and trade benefits from preferential access to US markets under DR-CAFTA.

  INFLATION : Consumer price increases in 2012 were lower than projected, with falling commodities prices offsetting a sharp increase in the minimum wage (12.5%). However, a sharp pick-up in price pressures in the fourth quarter carried over into January 2013 and lifted annual inflation to 7.7%, above the 2012 average of 7.2%. 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). We expect inflation to average 8.1% in 2013, partly owing to a low base of comparison. Our forecast is for average annual inflation to decline to 6.4% in 2014, before rising again to an annual average of 7.2% in 2015-17. There are risks to our medium-term forecasts--namely a surge in oil or food prices due to possible supply shocks. This forecast assumes that the government will continue to stabilise prices through subsidies and that the currency does not overshoot the 5% annual crawling-peg depreciation rate.

  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 that the real exchange rate in 2014-17 will remain broadly stable. We do not attach any significant risk to a devaluation, provided that inflows of concessional finance and international aid remain uninterrupted.

  EXTERNAL SECTOR: Movements in Nicaragua's structurally large current-account deficit will be determined by trends in the trade balance. The weaker but still positive outlook for exports will see the deficit remain stable as a percentage of GDP at around 18% in 2013. However, growing import demand and an easing of recent rapid export expansion will lead the deficit to widen again to an average of 21.2% of GDP in 2014-15 and 22.9% in 2016-17. The services deficit will remain broadly stable, at an average of 2.8% of GDP in 2013-14, before rising gradually to 3.2% in 2017 as growing 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 4.9% 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 stay relatively stable in GDP terms over the outlook period, at an average of 17.9%, as employment conditions in the US and Costa Rica (home to most Nicaraguan migrants) improve gradually. Although inward foreign direct investment (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, keeping the risk of a balance-of-payments crisis low.

  March 28, 2013

• 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	4.0	3.8	4.0	4.2	4.5	4.0
  Gross fixed investment growth	10.0	11.0	5.5	5.5	8.0	7.2
  Unemployment rate (av)	7.4	7.2	7.1	6.9	6.7	6.5
  Consumer price inflation (av)	7.2c	8.1	6.4	7.0	7.4	7.2
  Consumer price inflation (end-period)	6.6c	7.6	6.4	7.6	7.2	7.1
  Lending interest rate	11.5	13.0	14.0	15.0	15.0	15.0
  Central government balance (% of GDP)	0.4	0.1	-0.2	-1.3	-2.3	-1.5
  Exports of goods fob (US$ bn)	4.3	4.5	4.9	5.6	6.3	7.0
  Imports of goods fob (US$ bn)	6.5	6.9	7.6	8.5	9.5	10.4
  Current-account balance (US$ bn)	-1.4	-1.5	-1.8	-2.0	-2.3	-2.4
  Current-account balance (% of GDP)	-17.9	-18.0	-20.6	-21.7	-23.0	-22.7
  External debt (year-end; US$ bn)	7.4	7.8	8.1	8.5	8.9	9.2
  Exchange rate C:US$ (av)	23.59c	24.78	26.03	27.34	28.71	30.16
  Exchange rate C:US$ (end-period)	24.13c	25.34	26.62	27.95	29.36	30.84
  Exchange rate C:€ (end-period)	31.69c	33.45	34.73	35.08	37.01	38.83
  Exchange rate C:SDR (end-period)	37.07c	38.44	40.18	41.53	43.69	45.85
  a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. c Actual.

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  March 28, 2013

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): 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, 27-32°C (average daily minimum and maximum); coldest month, January, 23-30°C; 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

January 17, 2013