The Disconcerting ‘Success’ of Nicaragua’s Anti-Poverty Programs

Challenging the notion that poverty has been reduced in Nicaragua under President Daniel Ortega's administration, this rebuttal to the article "Report From a Fact-Finding Trip to Nicaragua: Anti-Poverty Programs Make a Difference," published in December on NACLA's website, proposes to add a broader political and economic context to the debate.

February 17, 2010

A little more than two months ago, an article appeared on NACLA’s website purporting to be “an objective assessment of President Daniel Ortega's government in Nicaragua . . . [and] the programs it has put in place that are improving the lives of the poor.” Solidarity activist Katherine Hoyt wrote the article, which was based, she said, on the findings of a 10-person delegation to the country sponsored by the Nicaragua Network. Unfortunately, the article lacked any discussion of the broader political and economic context of the Ortega government and failed to link poverty to other quality-of-life issues like governance, transparency, democratic rights, and gender equity. I would like to respond.

To its credit, the Ortega government, part of Nicaragua’s Sandinista party, has made some progress in addressing the needs of the poor. Examples in the areas of education and health include reducing the illiteracy and infant mortality rates, and providing free access to health care. Yet these developments do not override certain underlying features of the Ortega government, which has aligned closely with Nicaraguan big business while aggressively confronting and alienating women’s groups, civil society, and non-governmental organizations.

In spite of Ortega’s scorching rhetoric denouncing “savage capitalism,” neoliberalism, and structural adjustment, his government has since 2006 worked hand-in-glove with the International Monetary Fund (IMF) and other multilateral financial institutions to formulate and implement their economic growth and poverty-reduction strategies. Successive injections of IMF aid, in fact, have been contingent on the Nicaraguan government’s strict adherence to the IMF’s policy recommendations. Spending for the poor has been only superficially redistributive and has been merely palliative.

Too often, reconciling growth strategies and poverty reduction aims has meant prioritizing financial prerogatives to the detriment of social programs. In the area of monetary policy, Nicaragua’s Central Bank has proved itself a disciplined steward in the accrual of international reserves, which have more than doubled during the past three years, from $730 million in January 2006 to $1.5 billion by the end of 2009.

Reaching that plateau has exacted a price. The buildup of reserves in the midst of a severe global crisis has accentuated the country’s economic contraction. There has been less growth in money demand, less spending, lower incomes, and less employment. Above all, we have seen a greater impoverishment of the population.

Furthermore, domestic programs are plagued by clientelism. Danielistas (the close followers of Ortega) form the core of Nicaragua’s new wealthy and propertied class, living a life of ostentation that is seriously at odds with the Sandinista’s historical revolutionary aims. Nicaragua’s political class (including many onetime militant Sandinistas) now looks out primarily for itself. All 91 national legislators, for example, enjoy the use of discretionary funds for “social” benefit purposes (read: personal use). The lack of accountability on the end usage of these funds has spurred widespread abuse.

Salaries among Nicaragua’s political elites are disproportionately high relative to the average salary of the common worker. Roberto Rivas, the head of the Supreme Electoral Council, earns more than 17 times what the average Nicaraguan worker does. Paradoxically, Orlando Nuñez, chief architect of Ortega’s anti-hunger and anti-poverty programs, earns 12 times the salary of the average Nicaraguan.

And on the social-policy front, NACLA readers would do well to ask themselves: How progressive can this government be when in the first trimester of 2009, 33 women died because of the government’s policy of criminalizing abortion? This is a policy that discriminates against poor women.

Clearly, Ortega’s rhetoric is outstripped by reality. As he spouts his nostrums on anti-imperialism on an exquisitely flower-arranged, air-conditioned, Perrier-watered stage in tropical Managua, 3,000 miles to the north, his Central Bank president, Antenor Rosales, is diligently working with IMF officials in Washington, trying to decipher the next set of initiatives that Nicaragua must undertake to satisfy the fund.

In December, the National Assembly passed a regressive tax bill drawn up in response to the downturn in economic activity, shortfalls in collecting fiscal revenue, and the withdrawal of foreign aid. Government officials stated that the new tax regime would ensure greater public equity, but their actions belied any claim to transparency as they negotiated key draft provisions solely with the private sector Council of Private Enterprise (COSEP). Accordingly, many of its measures strongly favor big-business interests while hurting salaried wage laborers and the working poor.

The new law, for example, establishes a dual system of income taxation, imposing a higher tax rate on salaried workers than on private businesses; it regressively taxes wage earners’ gross income instead of net income; it imposes a new Minimum Payment Tax based on 1% of annual gross sales. (Tax experts argue that this last measure will seriously hurt small businesses that have low sales volumes and/or generate marginal profits.)

Meanwhile, little has been done to support the landless and migrant workers who typically fall outside the scope of government targets. A microcredit program called Zero Usury was designed to help the rural poor, but its scope is programmatically limited. It principally targets the small subsistence farmers who have access to land. The program excludes the landless, who make up a third of the rural population, as well as temporary migrant workers with weak access to land holdings. It also has locked out campesinos from medium- and large-size land holdings, including many long-standing, loyal Sandinista rural producers who privately complain about the limitations of Zero Usury’s reach.

In this light, Hoyt’s article fails to locate Nicaragua’s anti-poverty programs within the broader context of the country’s economic and social policy. I have tried to provide some of that broader context.

Alejandro Gutiérrez is a Nicaraguan who lived and worked in his country during the Sandinista Revolution. He is currently living in the New York area.


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