Behind Nicaragua's Cycle of Crises

FACING economic turmoil, Nicaragua's government on Tuesday sent police and Army units to forcibly remove strikers who had effectively shut down many businesses and state facilities in at least five cities.

Some strikers were successfully dislodged by force, but leaders of the Sandinista-backed National Workers Front (FNT) said the strikes would continue. Government negotiators and the FNT resumed negotiations over wage and other demands yesterday.

There is a stale familiarity to Nicaragua's woes.

"The Chamorro government," says political scientist Oscar Rene Vargas, "is going around and around the same problems. It goes from crisis to crisis. There's no clear plan on how to get out of this vicious circle."

Indeed, the challenges here have not changed greatly since the Sandinistas were voted out of power in 1990, many observers say. Most of the conservative National Opposition Union (UNO) coalition says President Violeta Barrios de Chamorro has sold out to the Sandinistas - who still control the Army, the police, and the unions. (See story, right.)

The Sandinistas continue to fight market economic reforms. Contra rebels are again causing havoc in the countryside. Disputes over property rage on. And the economy remains stuck in first gear.

Minister of the Presidency Antonio Lacayo, often described as Nicaragua's unofficial president, denies his country is riding some Dante-esque merry-go-round. He describes the war-decimated economy as "a mother who must feed not one newborn but 50. We are 4 million Nicaraguans with an economy that can't yet feed us."

But Mr. Lacayo sees progress in several areas.

"Nicaraguans have made a superhuman effort to eradicate inflation [down from 7,000 percent in 1990 to about 2 percent this year], ... to privatize state-owned enterprises and banks, to open up to imports, to eliminate monopolies in exports, and to reduce the Army to one-fifth the size of 2 1/2 years ago," he says.

This was also supposed to be the year of economic "reactivation." The government says the economy grew this year, but by less than 1 percent. Private economists say it actually slid backward. Either way, on a per capita basis Nicaraguans are finishing their ninth consecutive year of economic decline.

Lacayo says the economic plan was sabotaged by a sharp drop in the price of coffee (a major export) and strikes by unions opposed to the privatization of state-run firms. The holdup of $104 million in promised US aid did not help much either, he says.

To break out of its cycle of troubles, several analysts say, Nicaragua must resolve the polarizing disputes over privatization and property confiscated by the Sandinistas during the 1980s, which have made Nicaragua less attractive to foreign investors.

"Clear and secure title to property is a critical signal needed for Nicaraguan entrepreneurs to invest, secure credits, and produce economic growth," economist Alejandro Martinez Cuenca says.

In September, the government took a step toward resolving the estimated 3,600 claims on homes, farms, and businesses. Claimants will either get back their property or be compensated with government bonds, which can be traded for shares in public utilities as they are privatized.

In principle, the Sandinistas are opposed to the bonds because they reinforce the privatization trend. But the unions have been offered 25 percent of the shares in the 300-odd state firms being privatized. The Sandinistas are pushing a counteroffer: 100 percent labor ownership of 44 government corporations.

"The Sandinistas want the most profitable and politically influential companies," economist Francisco Mayorga says. "They are moving to privatize a large chunk of the nation's wealth for themselves, keeping the socialist rhetoric but becoming a very important capitalist group."

Sandinista officials argue that to win union support for the share plan, they must get effective worker participation in running the newly privatized corporations. To accomplish that they must have majority control.

Nicaragua is likely to face greater economic challenges in the coming year, and cooperation with the Sandinistas will be crucial to avoid further instability.

"The key to 1993 will be political management as much as economic [management]," says Mr. Mayorga, former head of Nicaragua's central bank. "The belt-tightening measures expected will require cooperation from the different sectors."

In the last two years, Nicaragua has received $700-800 million in foreign aid, including a two-year $731 million US package. Next year, US aid is expected shrink to about $60 million.

Mayorga calculates that Nicaragua will fall about $170 million short of what it needs to pay for imports and service its debts. "That's a big gap - about 10 percent of GNP - for a small country to find or finance" he says.

Meanwhile, the legacy of the US-backed contras, who fought the Sandinistas until 1989, has resurfaced. Unlike last year's "recontras," these rebels in the northern mountains are attacking military targets. Last year, the government spent an estimated $12 million to disarm recontras. Similar to last year's recontras, this new group of some 450 guerrillas wants Sandinista Defense Minister Humberto Ortega Saavedra to step down, wants to see the Sandinista-run police force purged, and has several other deman ds in line with UNO.

"These aren't bandits. They're skilled, former middle-level commanders of the resistance and they have a political agenda," says Santiago Murray, director of the Organization of American States office in charge of the contras' transition to civilian life.

The challenge facing this administration, be it in the mountains or in the legislative assembly, Lacayo says, boils down to overcoming a culture of confrontation with historic roots beyond the decade-long civil war.

"This society has never been governed. Its been dominated by the dictator, by the armed party, or by the armed family.... Today, we are in a new stage. We have to have consensus ... but it takes a huge effort."