Arce: “We have to generate wealth”

President's economic advisor says Sandinistas have learned from mistakes of the past, and now there's only one way forward

MANAGUA – On city walls throughout the capital, opponents to the Sandinista government have expressed their feelings about the ruling party with the simple spray-painted message: “F$LN.”

The graffiti protest, meant to be an ironic, capitalistic twist to the Sandinista National Liberation Front’s initials, is a clear jab at the former socialist party’s keen interest in managing private businesses and making money.

But that’s reality, insists Comandante Bayardo Arce, President Daniel Ortega’s top economic advisor.

“The experience of the ‘80s taught us that you can’t achieve social justice or eradicate poverty by distributing what we have. We have to generate new wealth for social justice,” Arce, one of the original nine comandantes that led the revolutionary government in the 1980s, told The Nicaragua Dispatch in a recent interview. “We have to look how to generate more to benefit more people.”

Despite the government’s revolutionary rhetoric, Arce says the administration’s handling of the economy has been far more practical and dramatically less ideological than the past. He says Ortega’s economy is more open than the free-market economies of the previous three administrations, which he claims tried to exclude the Sandinistas.

“Our economic policy is to support growth and reactivate the economy to generate wealth and create jobs. And what does that mean? We have to support the economic sector without discrimination,” Arce said.

Setting a new course

The Sandinistas’ economic team – captained by Arce, Central Bank President Antenor Rosales, and retired Gen. Alvaro Baltodano – has set Nicaragua’s ship of state on a dramatically different course from the 1980s.

The administration’s treatment of the business sector as partners in development – and at times competitors, but not enemies – has helped Nicaragua weather the world economic crisis with remarkable deftness, and recover quickly afterwards. While much of the world continues to lick its wounds, Nicaragua has set new records in exports, foreign-direct investment and bank deposits over the past two years.

As a result of the administration’s unexpectedly smooth handling of private business, the Ortega government has managed to cut an impressive economic wake in relatively calm seas, despite the constant grumbling of political storm clouds overhead.

“We are all in the same boat,” Arce said. “Even though we have some political differences, on economic matters we are doing well, moving forward.”

Indeed, while Nicaragua’s political noise may seem ruckus and chaotic from the streets, behind the closed doors of Nicaraguan boardrooms and society events, the captains of industry – some of whom are the same politicians who bicker in public – exchange jokes, slap backs and get drunk together.

“In Nicaragua it’s one thing to be in front of a camera, and another thing to be with someone in person,” Arce explains. “The politician in front of the camera has to appeal to journalism in Nicaragua. And to get in the newspapers, he has to say something against somebody else.

“If someone only talks about good things, they won’t get in the press because journalists here think journalism is about criticizing,” adds Arce, who started his own professional career as a journalist. “The politician knows that to get in the media he has to criticize something, but in private they are hugging and slapping backs. You know how it is. So we maintain an imperfect democracy still.”

But the reason Nicaragua’s imperfect democracy has been able to function at all over the past five years is because there is consensus on the economy, Arce says. The days of communism and socialism are over, he says, despite some of the president’s ambiguous political allusions to Nicaragua moving towards socialism.

Arce says, “The president has a concept [of the government being] Christian, socialism, how is it? Socialist, Christian and in Solidarity, right? So we’re not talking about the classic concept of socialism.”

In reality, Arce says, the Sandinista model is a market economy with a preferential option for poor people who have been excluded from the traditional capitalist system. That’s where Venezuelan aid, provided under the ideological banner of ALBA (The Bolivarian Alliance for the Americas) and based on the premise of fomenting small production and “fair trade” while offering social subsidies, helps fill in some of the gaps, Arce said.

Acknowledging mistakes of the past

Arce is not the first to admit that the Sandinistas’ economic policies in the 1980s, especially the wide-ranging confiscations of private property, “got a little out of hand.”

When the Sandinista Front came to power following the triumph of the revolution in 1979, it tried to implement a government based on three principles: mixed economy, political pluralism, and international non-alignment. Within a matter of years, it had failed all three tasks. Arce, however, claims it wasn’t necessarily all the Sandinistas’ fault.

“The world wasn’t ready for this project. The world was too polarized,” Arce said. “On one side the United States always accused us of being an extension of the Soviet Union, and on the other side and the Soviets never accepted us as part of their camp.”

In addition, Arce says, “We were victims of the war policies of [U.S. President Ronald] Reagan. And that led us to commit several errors in our economic policies.”

Confiscations top the list of errors, Arce said. At first the Sandinistas confiscated all the family-owned properties belonging to the Somoza dynasty, thinking that would be enough to make them players in the new mixed economy.

But after they had taken all the Somozas’ land, they kept going, passing new laws to justify the further expropriation of more businesses and properties belonging to others.

“We committed errors. It got a little out of hand and that’s where we started to butt heads with the business sector,” Arce said.

He said the revolutionary government tried to correct some of its mistakes while still in power in the late 1980s. But it wasn’t enough to save them from electoral defeat in 1990.

Ironically, once the Sandinistas were out of power, forcing many former revolutionaries to earn a living in the private sector, they begin to establish a better understanding of the market economy. That’s when the Sandinista Front began to form a constructive relationship with the traditional business sector, Arce said.

“In the opposition, we contributed to the reestablishment of a certain economic dynamic that disappeared when we were in office, such as the banking sector,” Arce said. “This gave us a bridge of communication with the private sector. And it was beneficial to both. For them, they saw that we recognized that we had gotten carried away in certain aspects during the heat of war. And it allowed us to better learn the reality of the business sector.”

As an opposition party, the Sandinista leaders began to understand the world wasn’t so black and white –- or red and black, as the case may be.

“When one has a very simple view of things, and that happens on our side too – even now – you think that everyone who owns a business is a rich exploiter. We come from the leftist school of thinking, but life has taught us, both from the administration of public sector and the relationship we have with private sector, that not all business means getting rich or exploiting others,” he said.

That relationship, built over 16 years in opposition –- a period Ortega now refers to for rhetorical purposes as the “neoliberal nightmare” –- was actually an informative and constructive time for the Sandinistas. It helped them establish an institutional relationship with the International Monetary Fund (a relationship that has been of paramount importance to the success and economic stability of the second Sandinista government) and it helped create a solid foundation for the administration’s ongoing dialogue with the private sector today.

Unlike the 1980s, when the Sandinistas lorded over and persecuted the private sector, today it’s more or less a relationship of equals, Arce says.

“It’s not a relationship where the government controls business or vice versa. It’s a relation where we look for mutual solutions,” he stressed.

The ‘great highway’ towards the future

Looking ahead to another term in office (assuming Ortega gets reelected Nov. 6), Arce says the government’s economic strategy will continue along the same track with improvements along the way. He insists there will be no dramatic change of course, but warns that important and controversial tax-code reforms and social-security reforms – two important initiatives that have been pushed off for the past five years – are coming in 2012.

 “We are going to do the same, while overcoming errors and improving achievements. There is no other path forward for us. We have to live in the reality of the contemporary world,” Acre said.

Nicaragua, he says, has to promote its advantages: massive amounts of productive lands and citizen security. Yet on the other hand, Arce is quick to downplay the country’s main weaknesses: fragile rule of law and judicial insecurity.

“I tell investors, Forget our judicial system, here there is a system for arbitration and a system for mediation, so you can forget about our judicial system to resolve your problems,” Arce said, in a less-than-ringing endorsement for Nicaragua’s judicial branch.

 The economic advisor insists that dialogue will continue with the private sector in the years to come. And he says Nicaragua will continue to maintain its program with the IMF. The biggest goal, he said, will be to attract more investment and increase production by extending credit to the 60 percent of small farmers outside of the national financial system.

If that can happen, Arce said, Nicaragua should have the tools and conditions to double economic  growth to 6 -7 percent, and really start the move the country out of the slough of poverty and underdevelopment.

“The project that we need in Nicaragua is like a giant highway towards the future, where everyone is heading in the same direction,” he said. “Some are in the left lane, others in the right lane, and others are in the center. Some go slow and others go fast. But everyone moves in the same direction. And that’s not easy.”


  • Greg Olsen

    I won’t trust anyone who says “Forget our judicial system, here there is a system for arbitration and a system for mediation, so you can forget about our judicial system to resolve your problems,” Is this guy for real? Anyone who visits Nicaragua learns very quickly that nothing moves without the extortion system (bribes and hand outs for police, lawyers and authorities) and this guy confirms it!! Very unfortunate for a beautiful country like Nicaragua

  • Robin Baillies

    If the law in Nicaragua won’t resolve my problems as an investor, who will? Who will make business with a “mediation and arbitration system” above the law? What kind of baloney is that?

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