Will chicken controversy peck holes in business confidence?

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 III: COSEP accuses Ortega administration of populism and unfair business practices, as government promises continued cooperation with private sector.

Despite President Daniel Ortega’s promise to continue cooperating with the private sector, Nicaragua’s largest business chamber claims his government is already ruffling feathers in country’s poultry industry.

On Tuesday, the Superior Council of Private Enterprise (COSEP) accused the Sandinista government of unfair business practices, just two weeks after Ortega’s reelection on a pro-business platform.

COSEP president José Adán Aguerri said the government’s surprise decision to dump 600 tons of cheap U.S. chicken meat on the Nicaraguan market this week is a “populist” move aimed to benefit Sandinista market vendors. The dumping will mean some $1.3 million in lost sales for Nicaraguan poultry producers and could jeopardize jobs in the 30,000-employee industry, COSEP says.

But even more worrisome is the precedent this sets for Nicaragua’s fragile economy, Aguerri says. The government’s decision shows the administration has no qualms about interfering with the free market to score political points with populist policies, he says.  

“This sends a horrible signal to national industry, to national investors and to Nicaraguan workers,” Aguerri told The Nicaragua Dispatch.

Aguerri said the government’s unilateral decision was “totally contrary to the president’s speech” (about working with the private sector), and represents a violation of the anti-dumping agreement COSEP signed with the administration right before the elections.

The flap over the cheap chicken chunks comes just two weeks after COSEP released a statement criticizing the Sandinista-controlled Supreme Electoral Council (CSE) for its “irregular behavior and anomalies” in managing this month’s elections.

While it may be premature to say COSEP’s relationship with the Ortega Administration is suddenly chilling, it does mark an inauspicious start to the next chapter in the Sandinista government.

Will political capital make Ortega restless?

President Ortega’s sweep in the general elections will arguably give the Sandinista leader more political power than he’s ever had in his 40-year political career. When the new government is inaugurated in January, the Sandinista leader will have complete political control over all four branches of Nicaragua’s government, and all its lower institutions.

The question is: What will Ortega do with all his political capital?

The president and his economic team insist there will be no radical changes, especially in their dealings with Nicaragua’s private sector. In his low-key victory speech on Nov. 8, Ortega promised more of the same.

“We are not going to provoke dramatic changes. If things are working well … why are we going to change?” Ortega said. “If we are working well with the business class, why are we going to change? On the contrary, if there is anything we need to work on it’s to strengthen the path we are on, which is Christian, Socialist and in Solidarity.”

But the devil may be in the details, says economist Néstor Avendaño. Since only Ortega and his wife have any idea what it means to have a government that’s “Christian, socialist and in solidarity,” it remains anyone’s guess how that project will evolve in the coming years.

“Without a doubt, the government is going to institutionalize its model that they call “Christian, socialist and in solidarity,” and we are going to find out what that means over the next five years,” Avendaño says. “Legislating to formalize this model will become easier now with the National Assembly in the president’s hands.”

The private sector has reason to be concerned, he says.

More Christian, more socialist and more in solidarity?

The president and his wife offer ambiguous clues about what their model of government means, and what changes one might expect from its full implementation over the next five years.

“Nicaragua will keep changing for the good. All for the good, for fraternity, liberty, dignity, for love with cordiality and life. For light and truth,” trifled First Lady Rosario Murillo. “Nicaragua decided to continue with triumphs, on the good path, with unity, stability, more security. Nicaragua decided to continue with a good government, and a good project of everyone, with everyone and for the good of everyone. You have chosen to continue with this project that is Christian, socialist and in solidarity. Nicaragua decided to be more Christian, more socialist and more in solidarity.”

Ortega didn’t offer much in terms of clarification.

“Production without soul is savage capitalism, but production with soul is Christian, socialist and in solidarity,” Ortega said, raising the awesome albeit unlikely possibility that the Sandinistas are considering piping late 60s Funk music across the countryside to give the harvest more soul.

Even Ortega’s economic team is hard-pressed to elucidate the presidential couple’s rhetoric. But they insist the administration’s slogans are not as important as its actions.

Presidential economic advisor Comandante Bayardo Arce insists Nicaragua is not a socialist country, despite executive rumors to the contrary.

“The president believes in a project that is socialist, Christian and in solidarity and he promotes this through his social programs. But we are a country with a market economy,” Arce told The Nicaragua Dispatch, when asked how Nicaragua can consider itself a socialist country while having a regressive tax code.

Mandate for status quo

Arce insists the government has no intention of making any sharp-left turns and will not try to make Nicaragua more socialist. And says he’s not aware of any plans to institutionalize the administration’s peculiar style of Christian-fundamentalist free-market socialism.

“I can assure you, it’s not an issue we have talked about,” he says.

Rather than making any revolutionary changes, Arce said, Ortega is going to preserve the status quo.

“We are all clear that the (election) results have to do with what we have done (already in office), and if we started to do stuff to change the direction of the country people would say, Man, that’s not what I gave you my vote for. And that could put at risk the stability that we need for the country to move forward,” Comandante Arce said.

“We have a mandate to continue doing what we have been doing,” Arce says. “The truth is that the Nicaraguan people recognize that Daniel Ortega, despite the campaign against him saying he is a dictator and a Marxists-Leninist and whatever else, has led a government of permanent consensus with the business sector and with the labor unions. We have maintained economic growth during the international crisis, and distributed that growth with certain equality. And the business class feels that its risks are compensated.”

Arce says Ortega’s 62 percent victory is a message from voters saying, “Man, you have done things well for the past five years, keep doing it the same.”

“And that’s a message Daniel is getting,” he said.

Time to move forward

For Javier Chamorro, executive director of investment-promotion agency ProNicaragua, Ortega’s reelection victory was a vote for continued growth and stability. He says the government wants to put the elections and its recent fallout behind them and get back to work.

“I believe the most important message that the election left us is that what Nicaraguans want is economic opportunities, jobs, security, and support from their government—all things that this administration has successfully offered. And that should be a good message to investors, because what we are saying is that we want to work,” Chamorro told The Nicaragua Dispatch.

Chamorro said the foreign investors he has met with in recent weeks are ready to put the elections behind and move forward. So too is the government.

“Our message to investors is that the elections have passed, and the country is working to move forward, positively and in reconciliation,” Chamorro said. “The population has spoken and has said it wants to improve their lives through hard work. We’re ready to move forward and work to help investors take advantage of the many opportunities our country has to offer. We’re already doing that with those who, like us, are not wasting time.”

  • sayayuca

    How does an association of farmers, producers, vendors, or the like, increase their profits? One way is to produce more, to have more to sell. If that recourse is not possible (it can be due to many factors), one other way is to hold the product from the market, therefore creating a bigger demand and better prices for the goods. When you do the last with products like food you are directly affecting the life and health of people. I’m not saying this is what the poultry producers in Nicaragua are doing, but somebody has to fill that hole in the offer to keep the prices from escalating. In Nicaragua that role is assumed by the government, who has the obligation to protect their citizens. It is true that we live in a market economy, that we have to create richness before we can distribute anything, but we can not fall in the exclusive rule of the offer-demand law, regulations have to be implemented to avoid a collapse like the one we have seen in the big capitalistic societies in Europe and the USA. How can producers in Honduras sell eggs to Nicaragua at better prices than the local producers? How can chicken imported from the USA compete in price? The COSEP has the responsabilty to look after their members, the COSEP has the right to ask the government for certain protection, but in a way that does not affect the stomach and the pocket of thousands of Nicaraguans. What the COSEP needs to do is ask the poultry producers to work in finding ways to be more productives, to be more efficients, to modernize their equipment, to invest more and grow.

    • nicoya

      Why is this not the case with gas prices? Is it because “your” government and president use for personal gain? The precendents all point to a big fat YES! How is it possible for Nicaragua to have the highest gas prices in the region, as well as electricity costs, when we receive all that oil from his majesty and cancer striken Chavez? Populism will end up destrying everything you claim your government has advanced.

    • Fred Cressman

      The problem is that the huge US Market does generate surpluses which their capitalists would rather dump into external markets so as not to undercut their domestic pricing. Often these products are sold at below the cost of producing them so there is no way that a Nicaraguan Producer can match that pricing.

  • sayayuca

    I forgot to add, that even with the import of eggs and chicken, no local producer is gonna go bankrupt. You can bet on that. They will survive like they have done before. All they want to do right now is call attention to themselves and create a little scare in investors to have something to pressure the government with. An agreement will be reached pretty soon about all of this hub bub, you can bet on that too.

  • GringoLoco

    It is instructive to look to Whoretega’s chief benefactor, Hugorilla. Another round of price controls were announced and Hugorilla said yesterday the aim was “to protect people from capitalism”.

    “Firms, including multinationals like Colgate and Pepsi-Cola, will have to report production costs so officials can set what is deemed a fair price.”

    Yeah, that will work. Fearless prediction that Nicaragua will see the same thing by this time next year.

    COSEP main beef now is that the government’s interference with open markets is a slippery slope. Ancillary to that is only F$LN comrades will benefit from the government’s interference.

    All the rest (including the comments above about the “need” to “protect The People” is just more populist/socialist screed.

    If Whoretega REALLY cared about protecting “The People”, he could start by selling his fleet of Mercedes — fair market value would certainly buy several hundred quintales of arroz y frijoles!

  • Hoppy

    Gracias Tim!

    Este parte,

    “raising the awesome albeit unlikely possibility that the Sandinistas are considering piping late 60s Funk music across the countryside to give the harvest more soul.”

    …casi me muero de la risa!

  • Chris

    PLEASE, Please, please make it a likely possibility that the Sandinistas are giving very strong consideration to more soul in the economy….James Brown, Dyke & the Blazers, Charles Wright & the Watts 103rd Street Rhythm Band are what the economy needs! “Production without soul is savage capitalism, but production with soul is Christian, socialist and in solidarity,” Ortega said, raising the awesome albeit unlikely possibility that the Sandinistas are considering piping late 60s Funk music across the countryside to give the harvest more soul.”

  • Pedro Arauz

    Para muestra un botón: Esta es la manera (Importación de pollos viejos y grasientos del extranjero en detrimento de los locales) en que la clique Orteguista ira antagonizando a quienes verdaderamente impulsan la economia Nicaraguense y producen bienestar economico. Ya los compinches estan metiendo las manos al igual que apretaron el gatillo para matar desde el cura Pupiro, y tuti cuanti Nica asesinado by proxy: Para quedar bien con el “jefe” ya que “aqui mandamos nosotros” y asi toda la mengalada Orteguista repartiendo Chicha (lo mismo que boto al ultimo Somoza)
    No falta mucho para que esten importando azucar y rones y ya veran a Pellas y Pantaleon pegando brincos….