Did Ortega overreach?

For the past five years, President Daniel Ortega has done an artful job of preventing his “socialist” political project from seriously interfering with Nicaragua’s free-market economy, which continues to grow under the Sandinistas’ watch. Yet following the Nov. 6 general elections, there is new concern that Ortega’s economic and political projects are starting to collide. The Nicaragua Dispatch has asked a group of leading investors, analysts and economists how sustainable the Sandinista economy is moving into 2012. Part II: Will the Sandinistas’ aggressive political project, and the noise it has caused, effect Nicaragua’s business and investment climate?

The low-wire balancing act that the Ortega Administration has managed between politics and the economy has not been without a few serious missteps along the way.

The biggest stumble came in November 2008, when the Sandinista government and its duplicitous allies in the Supreme Electoral Council (CSE) were accused of cooking the municipal elections and stealing 40 mayoral seats won by the opposition. That incident led to the immediate cancelation of new development funds from the U.S. Millennium Challenge Account and began the slow bleed of foreign aid from traditional European donors.

Still, the Sandinista government recovered from the 2008 electoral spoof with remarkable deftness, replacing traditional aid and budget support with Venezuelan petro-dollars and loans from international lending institutions whose appreciation for Nicaragua’s macroeconomic stability trumps their concerns for governability issues.

For the most part, the parody poll of 2008 may have put a temporary sour taste in the mouths of foreign investors, but it didn’t seem to ruin anyone’s appetite for Nicaragua. Indeed, the economy has continued to grow, setting new records for exports and foreign direct investment, despite nagging concerns about the future of democracy here.

Now, another election and another scandal. Only this time the house claims it won all the chips on the table, even though no one saw the dealer shuffle the cards.

The international community, Nicaraguan civil society, the opposition, religious leaders and the business chambers have all cried foul. Electoral watchdog group Ethics and Transparency claims the Sandinistas stole 150,000 votes and as many as eight to 12 seats in the legislature.

So the question is: Can the Sandinista government sweep another electoral scandal under the clumpy carpet and keep the economy moving forward? Or is President Ortega’s political project starting to trip up his government’s prized economic success?

“So far Ortega’s balancing act between economics and politics has worked, but it is likely to face limits,” says Michael Shifter, president of the Inter-American Dialogue in Washington, D.C. “In the long run, there is an inherent tension between complete political control and a dynamic private sector.”

Shifter added, “Ortega may be a cagey operator but he has a tendency to overreach, as he showed in his recent reelection. Serious questions of legitimacy have been raised. That could well complicate the alliance Ortega has forged with parts of Nicaragua’s business community in recent years.”

Cracks in the mirror

Indeed, the Sandinista government’s solid relations with the private sector have started to show a few cracks since the Nov. 6 elections.

Nicaragua’s most important business chamber, The Superior Council of Private Enterprise (COSEP), released a statement two days after the elections demanding a “legitimate and transparent” vote count, with full discloser of the results from all voting stations, as required by law. So far, the Sandinista-controlled CSE has refused to publish the complete results, and instead rushed to declare a Sandinista victory and close the books on the dubious process—drawing grunts of disapproval from virtually everyone who still believes democracy has some merit.

Even COSEP, which has tip-toed carefully around politics for the past five years, can no longer bite its lip when it comes to the CSE’s complete disregard for the rules of propriety.

“The authorities of the CSE have been an obstacle for the democratic development of this country,” COSEP said in its Nov. 8 statement. “All their irregular behavior and anomalies have affected electoral institutionalism and been a detriment to the confidence and security people have in the electoral process. For this reason, COSEP deplores the institutional behavior of the CSE, which once again has been characterized by a lack of transparency and neutrality.”

The Nicaraguan-American Chamber of Commerce (AMCHAM) has also expressed its concern over the election process, which it claims was “From the beginning, invalidated by all the different anomalies.”

Following the elections, AMCHAM released a statement saying the process was “Not transparent and as a consequence the election results are not credible enough to assure they represent the genuine will of the people.”

“Our country needs an appropriate climate to promote investment, both national and international, and unfortunately the electoral process has not satisfied the majority of Nicaraguan citizens,” AMCHAM said. “As a result, we have to consider the application of Article 168 of the Electoral Law, which allows for the possibility to declare the election null.”

The Sandinistas, meanwhile, have tried to shrug off the criticism with sheepish excuses about an imperfect electoral system in a democracy in training wheels.

Now what?

Despite the private sector’s letters of protest, few believe the Nov. 6 elections will be a watershed in the Sandinista government’s relations with the business sector. In fact, some think the crescendo of political tensions has already passed, and everybody can now get back to worrying about less democratic issues like making money.

“It is in the interest of the local business community to make the best of a bad situation,” said Francisco Aguirre, former vice-presidential candidate for the opposition Liberal Constitutional Party (PLC) and a member of the congressional Economic and Budget Commission. “What COSEP did, with their letter of protest, is as far as they can go.”

Internationally, however, Ortega might not yet be out of the proverbial woods. Aguirre says Ortega’s repeated political knavery continues to resonate in the international community and act as a deterrent to foreign aid and private investment.

“As the world tips into recession, donors are becoming more picky about who they give money to,” Aguirre says.

He claims that Nicaragua’s democracy no longer passes the litmus test for many foreign donors, and that will mean less aid and fewer development projects for the country. And that foreign aid pullout will only weaken confidence among private investors, Aguirre said.

“Two consecutive election frauds are going to be felt in the private sector,” the PLC lawmaker predicts. “Private investment spooks easily if Nicaragua is viewed as unstable, without rule of law or an electoral democracy.”

Other economists claim complaints of election fraud won’t hurt the investment climate as much as the post-electoral violence and instability—especially if the whoop-up is not over yet. But for the most part, the momentary unrest appears to have calmed quickly.

“National and international businessmen want a climate of stability; no one is willing to support an opposition that is determined to destabilizing the country,” said economist Francisco Mayorga. “On the other hand, there is an international effort to impede any climate of tension and violence that could favor narco-trafficking or terrorism. And in those efforts, Nicaragua has been exemplary. The Nicaraguan society and the international community are not going to allow that to change.”

Mayorga insists that when all is said and done, “There are no national or international investors who are interested in questioning Ortega’s victory.”

Indeed, he predicts, “Within a few months, as Ortega proves his dedication to a new economic model of a market economy with social justice, even the most timid investors will look how to take advantage of the investment opportunities that Nicaragua has been providing for the past five years.”

Next: Part III: The Sandinistas promise stability, continued growth

  • Pedro Arauz

    La unica razon por la cual Ortega tiene que “gobernar desde abajo”, robarse las elecciones, asesinar oponentes y rotularse como la mas solicitada prostituta en todas las paredes del pais es porque sabe que son detestados en Nicaragua sobre todo por aquellos seguidores que se tienen que prostituir para sobrevivir y que lo unico que estan provocando es el impulso para ser finalmente defecados…

  • Pedro Arauz

    C’mon, there is no next election.
    Apparently you don’t know who you are dealing with….

  • Pedro Arauz

    The truth is incontrovertible, malice may attack it, ignorance may deride it, but in the end; there it is. ~Winston Churchill