What’s the future of ALBA?

Ortega’s top economic advisor admits ALBA probably isn’t sustainable, but says it shouldn’t be discounted in a world where capitalism – as wobbly as it may be – is all that’s left.

MANAGUA – For the past five years, President Daniel Ortega and his Sandinista officials have talked about ALBA in fanciful and religious terms, comparing Venezuelan aid to the “project of Christ” and suggesting it’s somehow helping to build “the Kingdom of God on earth.”

The religious hyperbole has done little to clarify the opaque, off-the-books manner with which the Ortega government manages Venezuelan aid, offered in the form of private loans and donations under the ideological banner of the Bolivarian Alliance for the Americas (ALBA).  Even after five years of being pressed repeatedly by opposition lawmakers and international lending institutions, the Sandinista government remains tight-lipped when it comes to the billion-dollar question (literally): Who will have to repay the $1 billion in loans when Venezuela comes collecting?

Despite its mystery, there’s little secret that ALBA has helped the Ortega administration gain political traction by bankrolling social programs, party handouts and gas-pump subsidies. In addition to consolidating his traditional base of support, the polls show Ortega and his deep pockets have started to pick up independent voters for the first time in his 27 years of campaigning for president.

In addition to helping Ortega’s political cause, ALBA has also helped Nicaragua’s economic cause, according to independent economists.

“All of Nicaragua’s macroeconomic indicators are excellent. And why? We have to admit it, it’s because of Venezuelan financial assistance,” said economist Néstor Avendaño. “We have a balanced budget because Venezuelan funds are managed privately. And the IMF is content, even though they want more details. Macroeconomic stability has reduced economic and financial risk in Nicaragua to a minimum.”

The relative success of ALBA has put opposition candidates in a pickle. Since Venezuelan aid is more ideological than institutional, opposition candidates understand that if they win the presidency ALBA will disappear as fast as the Christmas trees in the Managua rotundas. Or, worse yet, ALBA will continue to funnel hundreds of millions of dollars to Ortega, allowing the Sandinistas to once again “govern from below”— only this time with enough financial clout to make Nicaragua’s economy tremble.

As a result, opposition candidates uncomfortably— and unconvincingly— have pledged to continue Venezuelan aid, only without the ideological trappings of ALBA. But they probably aren’t even fooling themselves with that hollow promise.

“Yes to help from the people of Venezuela, but with transparency, budget inclusion and without any political obligations! The aid has to be from one country to the other, and used for development!” Francisco Aguirre, vice presidential candidate for the Liberal Constitutional Party (PLC), bellowed during a recent political rally in Estelí, drawing scattered applause.  

Independent Liberal Party (PLI) challenger Fabio Gadea, meanwhile, says his government “Would accept ALBA, but without any of the political or ideological conditions.”

But when pressed on the matter, even Gadea admits that’s probably not realistic.

“I don’t think Chávez will continue the relationship as is,” Gadea told The Nicaragua Dispatch. “He’ll probably have to continue with the petroleum arrangement, but all the ALBA money he sends here for handouts and political propaganda will leave.”

Former President Enrique Bolaños (2002-2007) agrees it would be difficult for anyone other than Ortega to negotiate a similar arrangement with Chávez. And Bolaños should know, considering he tried repeatedly and failed in 2006, during the peak of Nicaragua’s energy crisis.

Bolaños says he sent several of his top ministers to Caracas to try to negotiate a deal with Chávez in 2006, but they all came back empty handed.

Ortega and Chávez hatched ALBA in the early hours of Ortega's presidency (photo/ Monica Quesada)

The shotgun nature of the accord, which is worded more like a political manifesto than an economic agreement between states, has Bolaños and others worried that debt is collecting in the shadowy grey areas. They also worry that the agreement is making Ortega too economically powerful for the cozy confines of Nicaragua’s fragile democracy.

 “If Fabio [Gadea] wins the presidency, Ortega could close the oil tap and cut off electricity because he owns the electrical plants. The next day Fabio falls,” Bolaños said. “Ortega will continue to govern from below.”

Bolaños says the situation could get even more complicated if Venezuela comes collecting on a bill that could be more than $1 billion.

“How is that money invested?” Bolaños demands. “And who is going to pay the bill when it comes?”

Campaigning on ALBA

According to a Central Bank report from last April, Chávez has provided Ortega with more than $1.6 billion in ALBA funding since 2007. By now, that sum could easily be over $2 billion— an amount greater than Nicaragua’s annual budget. So if the money were to stop entering the country, a lot of people— including Nicaragua’s recently fattened banking system— would notice the loss.

The opposition argues that most of the Venezuelan money is going into Ortega’s personal coffers. They claim ALBA’s full impact was never felt in the economy, since most of the money was pilfered into private projects run by party leaders. Still, the Venezuelan money has made enough impact to benefit both poor beneficiaries and rich capitalists—Ortega’s two constituencies.

To date, Ortega has used ALBA aid to provide zinc roofing material to more than 267,000 families, property titles to 136,000 people and new homes to 38,347 families, as well as provided micro-credit to 683,000 borrowers, agricultural assistance to 100,000 farmers and scholarships to 120,000 students. ALBA also subsidizes public transportation costs with fixed bus fares and gas subsidies for taxi drivers.

If reelected, Ortega promises to increase all those social assistance programs, and in many cases double or triple their results over the next five years. But if Ortega’s presidency ends, so too ends ALBA.

“ALBA is not for neoliberals. ALBA is for revolutionaries, because what it guarantees is preciously Christian, socialist and in solidarity,” said first lady Rosario Murillo, forcing her favorite catchphrase awkwardly into the sentence.

The president’s top economic advisor, Comandante Bayardo Arce, says the opposition, which has criticized ALBA and the Sandinistas’ handling of the economy for five years, sounds desperate when they claim they’d be able to manage Venezuelan aid better that Ortega.

“The opposition’s discourse is that they are going to continue with ALBA, but not ideologically. So all that says is that things are going well in the country. Things are going well,” Arce told The Nicaragua Dispatch.

“The other candidates say, ‘I can do better.’ But who can do better? The guy who has been doing it for five years already, or the guy who has spent all that time criticizing? That is what is going to decide the vote,” Arce predicts.

Will ALBA collapse under its own weight?

Regardless of what happens in Sunday’s elections, factors such as Chávez’s recovery from cancer and world oil prices could also affect the future of ALBA’s largess.

Economist Avendaño predicts that even if Ortega and Chávez both remain in power, ALBA will weaken in the years to come. But his reasons are more psychological than economic. Avendaño thinks that Chávez, like an ailing old man who tries to make peace with his family, will focus his efforts more on Venezuela, rather than trying to save the world.

“I think Chávez is going to start looking more at the socio-economic problems of his own country and try to leave a good legacy for himself among his own people. And that will mean decreasing aid to all the other countries of Petrocaribe (a Venezuelan-supplied oil alliance for Caribbean countries) and ALBA,” Avendaño predicts.

Indeed, ALBA is already weakening, the economist notes. Prior to 2010, Chávez gave Ortega loans and donations under the umbrella of ALBA. But for the past two years, it’s been all loans.

“Now they don’t give anything away,” Avendaño says.

Arce agrees that Nicaragua needs to start thinking beyond ALBA.

“We have to anticipate that ALBA is not going to be permanent,” Arce told The Nicaragua Dispatch.

Regardless of Chávez’s health condition, ALBA’s long-term sustainability is questionable because the weight of the project falls almost entirely on Venezuela, Arce says.

“The other countries don’t give much to (ALBA),” Arce admits.

Still, the economic advisor says ALBA is providing valuable assistance to Nicaragua right now, “So we’ll continue to bet on ALBA as long as it lasts.”

And in a world where the capitalist system is showing serious cracks in the foundation, any alternative projects such as ALBA should be considered, especially if they are beneficial, Arce insists.

“Communism doesn’t exist. Socialism doesn’t exist. What’s left is capitalism. Nothing more,” Arce said. “But capitalism has a bunch of contradictions and we don’t know where they will end. So if someone has the possibility to promote an alternative project, that’s a good thing. I hope it works out.”