MANAGUA—The electoral turbulence that normally rattles Nicaragua’s economy at the end of every presidential quinquennial, forcing investors to return to their seats and strap themselves in for a bumpy ride, has failed to materialize this year despite the political cumulonimbus gathering over the country’s democracy.
“The investment climate has been very stable and favorable this year,” Gen. Alvaro Baltodano, president of the government’s National Free Trade Zone Commission, told The Nicaragua Dispatch. “This year (investors) are not worried (about the elections). They are very calm. The private sector has a lot of confidence in the Sandinista government.”
The surprisingly stabile business climate is an election-year first for Nicaragua. Traditionally, investors put their projects on ice during election season, waiting to see what the change of government will mean for the economy.
But this year’s continued growth in foreign direct investment and exports is bucking that trend. And it can mean only two things: private sector leaders are comfortable with the Sandinista government; and they don’t expect Ortega to be dethroned in the Nov. 6 elections.
While opposition civil society groups focus on the illegality of Ortega’s reelection bid and its implications for Nicaragua’s democracy, the business class is focusing on what Ortega’s continuance in power will mean for the economy. Between the moans of democratic agony and the hoots of economic approval, Nicaragua is increasingly becoming a tale of two countries.
The diverging economic and political realities may seem conflicting, but it’s not the first time Nicaragua has enjoyed economic growth in a shrinking democracy.
“Corruption and progress go hand in hand in Nicaragua,” says veteran political analyst Arturo Cruz Porras, 87. “Our political culture is horrible. We need to change it.”
To be fair, leaders of the private sector have also raised concerns about the country’s withering democracy and dubious rule of law. But the economy is on the right track, they say; so don’t throw the baby out with the bathwater.
“We are convinced that Nicaragua is doing things well,” says Carlos Hernández, president of Guacalito de la Isla, the $250 million tourism development being built by Grupo Pellas in the southern Pacific coastal region of Tola.
Hernández says there are still things that need fixing— “opportunities” for improvement, he says kindly. But overall, he says, the government’s efforts to coordinate its economic agenda with the private sector are paying off handsomely.
And the numbers reflect that sentiment. Since the Sandinistas returned to power in 2007, exports have doubled and foreign-direct investment has grown nearly five-fold. Nicaragua is the only country in Central America to recover all the free-trade zone jobs it lost during the global economic slump of 2008-’09. And it’s even grown beyond previous employment highs in the free-trade zone sector, on track to reach 97,000 factory jobs by end of the year.
In the first semester of 2011, Nicaragua attracted $284 million in foreign-direct investment. While investment doesn’t appear to be growing at a rate to meet Ortega’s ambitious goal of $1 billion by year’s end, it’s still up 32 percent from last year, according to Veronica Rojas, vice minister of the Ministry of Industry, Commerce and Development (MIFIC).
Rojas says most of the investment has been in telecom, energy, mines, and trade and services, distributed throughout most of the country.
“We are diversifying the type of investment we are getting, where it’s coming from, and the markets to which we are exporting,” said Gen. Baltodano, who also serves as Ortega’s presidential delegate to ProNicaragua, the government’s investment-promotion agency.
Baltodano attributes Nicaragua’s economic growth, stability and diversification to the government’s teamwork with the private sector.
“We are convinced that this is working because we have reached important consensus about the economic development of this country,” Baltodano said. “The public and private sectors need to walk together to develop the country, generate jobs, and seek new investment, which is fundamental because without investment there are no jobs.”
After all, he says, the government is only a “facilitator” for business. “The fundamental investment must come from the private sector.”
Baltodano says important investment continues to come into the country even in the months and weeks ahead of the presidential elections. He says U.S. companies, too, are showing that they are no longer as leery about the Sandinistas as they once were. For example, Ball Horticultural Company announced as recently as last month that it is going to invest $15 million in a hydroponic production facility that will employ some 900 workers in Estelí.
Other big projects in renewable energy and petroleum exploration are also planned for next year, as well as the continuation of megaprojects such as the oil refinery in León and phase I feasibility studies on the proposed deep-water port at Monkey Point, on the southern Caribbean coast.
“The investment climate has been very stable and favorable this year,” Baltodano said.
However, Nicaragua’s challenge moving forward will be to continue to improve upon its economic growth without letting politics get in the way of development.
It’s a difficult juggling act to maintain and—one might argue—a needlessly risky one to attempt in the first place.
Democracy and economy might not be natural dance partners, but history has already shown that when dictatorship cuts in, it invariably ends up stepping on economy’s toes and ruining the song.