Glossary of Abbreviations

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10 SOCIALIST ACTION JUNE 1988 CAUS: Federation of Trade Union Unity and Action, affiliated to the Nicaraguan Communist Party CDN: Democratic Coordinating Committee, an umbrella group of rightwing parties, organizations and unions CGTi: Central Federation of Workers-Independent, affiliated to the pro-Moscow Nicaraguan Socialist Party COSEP: Superior Council of Private Enterprise CST: Sandinista Trade Union Confederation CTN: Nicaraguan Federation of Workers, aligned with right-wing Social Christian Party CUS: Federation of Trade Union Unity, supported by AIFLD and CIA. FSLN: Sandinista National Liberation Front, the ruling party in Nicaragua MIDINRA: Ministry of Agrarian Reform of Nicaragua PCN: Pro-Moscow Nicaraguan Communist Party PSN: Pro-Moscow Nicaraguan Socialist Party SCAAS: Building trades union, affili ated to the CGTi SNOTS: National System of Wages and Labor SUTRA-JM: Unified Union of the Julio Martinez workers UPANIC: National Union of Agricultural Producers of Nicaragua, one of largest bosses' associations Enterprise (COSEP), which dominates the grouping.

"The two affiliated trade-union groupings are the Federation of Trade Union Unity (CUS), which is supported by the CIAlinked American Institute for Free Labor Development, and the Nicaraguan Federation of Workers (CTN)."

Robinson continues:

"One important source of U.S. funding is the National Endowment for Democracy (NED), created by the Reagan administration in 1983 to 'promote democracy abroad,' and funded by the U.S. Congress. NED gave more than half a million dollars to the CDN political organizations and the daily La Prensa in 1987 alone.

"Recipients of these funds included the CDN parties, La Prensa, the CUS, and other CDN-affiliated groups. In November, Congress approved another $250,000 for NED to distribute in Nicaragua for the purpose of 'strengthening the internal print money to make up the shortfall. The result: a Weimar-style inflation."

Kinzer's reference to the Soviet bureaucracy's decision to withhold vitally needed aid is also to the point. According to The Boston Globe (Feb. 1, 1988), "The Soviet-bloc countries apparently have signaled to Nicaragua that they will not underwrite the economy. Officials announced last week that in 1988, the Soviet Union and its allies would provide only half of Nicaragua's total requirement of about 900,000 tons of oil."

Even Nicaraguan President Daniel Ortega has publicly complained about the limited character of Soviet aid. According to The Christian Science Monitor (April 7, 1988), Ortega told visiting Wall Street financier John Castle that "the Soviet Union had made promises that they had not kept, such as pledging 800,000 tons of petroleum products but delivering only 300,000.

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For now, the focus has shifted from the military war to the 'class war' inside Nicaragua.

SOCIALIST ACTION JUNE 1988 11 (continued page from 10)

Ortega was also disappointed that he received only 12 armored helicopters. Apparently more were promised."

New foreign investment law Ortega had invited Castle and seven other U.S. executives, all members of the Young Presidents Organization, to visit Nicaragua in March 1988. Ortega was interested in getting this group to invest in Nicaragua, particularly in the Pacific Coast Montelimar tourist complex, which will include gambling casinos and other amenities.

In the hope of attracting investment capital to Nicaragua, the Sandinista-led National Assembly passed a new foreigninvestment law in November 1987. This law was characterized by one foreign economist in Nicaragua as "fitting nicely with the peace process. It legislates for economic pluralism." (Christian Science Monitor, Dec. 1, 1987)

The law sets no limit on an investment's size nor any ceiling on foreign participation in a project. The law will allow up to 100% foreign ownership in a project if there are not enough national resources to fund it. It also guarantees investors the right to repatriate capital and dividends, protects them against devaluation by promising a fixed exchange rate for their operations, and holds out the prospect of tax breaks.

In return, the multinational corporations doing business in Nicaragua are expected to provide jobs, technology, and exports. Already, a number of multinationals operate in Nicaragua.

According to Business Week (Dec. 21, 1987), "Exxon Corp. has the sole oil refinery and is currently the only multinational to repatriate profits in hard currency. Shell, Texaco, and Chevron run gas stations. British American Tobacco makes the country's cigarettes, and a Nabisco affiliate bakes cookies."

"Our economy cannot survive without foreign assistance," said Orlando Nuñez, an adviser to the Sandinista government. "Now the economy can only move ahead if we get aid from the Western world."

But despite these extremely favorable terms, the Nicaraguan bourgeoisie is not satisfied. It wants to remove the Sandinista government's monopoly on political power.

A leader of the Superior Council of Private Enterprise (COSEP), L. Ruiz, explained that the new foreign-investment law, "as perfect and well-thought out as it may bewith all its guarantees, concessions, and privileges—will not have a beneficial effect on the country so long as the socio-political conditions that would renew the foreign investors' confidence in our country are not first put into place." (Inforpress Centroamericana, Jan. 28, 1988)

John Castle's response to Daniel Ortega seems to bear out the comments by this COSEP leader. Castle said he would "wait and see" how Nicaragua's process of "democratization" unfolds before considering investing his money in Nicaragua.

New IMF-type measures adopted On Feb. 14, 1988, in the hope of curbing inflation and propping up the Nicaraguan economy, the Sandinista government decreed a package of monetary and economic reforms similar to the "shock treatment" often imposed by the International Monetary Fund (IMF) on debtor nations.

On a monetary level, the new measures changed the Nicaraguan currency (1000 old córdobas were exchanged for one new córdoba) and established a new official rate of exchange of 10 new córdobas to the dollar. This new rate applies to both imports and exports, thus unifying the exchange rate which before ranged from the official rate of 70-to-1 for some imports, to the parallel rate of 21,000-to-1 for internal spending, to an even higher 50,000-to-1 on the black market.

The introduction of the new currency and the new rates of exchange amount to a devaluation of the Nicaraguan córdoba of approximately 500%. This will make the price of imported fuel, machinery, chemicals, and consumer goods much higher.

At the same time, the Sandinista government announced a 10% spending cut. This will result in a layoff of 30,000 of the 80,000 government employees. These layoffs, which come under the heading of "compactación" (or compacting), result from the consolidation of many government functions, reducing the number of ministries from 33 to 11.

The San Francisco Chronicle (April 4) reported the government cuts in the following manner:

"Some of the biggest shakeups are occurring in the agricultural ministry, which during nine years of Sandinista rule has become a sprawling bureaucracy....

"The Ministry of Agriculture will end its role as an investor. ... It is also opening up to the private sector to give new meaning to the country's mixed economy. Although state enterprises and cooperatives have been set up since the revolution, most of the country's production remains in the hands of private producers.

"Large cotton, sugar, and rice growers will now have a direct voice in the agricultural ministry in setting policies that affect them, the Sandinistas say."

Barricada, the Sandinista Front's daily newspaper, spelled out the character of the economic reforms as follows: "If the economic reforms have had any intention Shortages of basic necessities devastated the Nicaraguan economy.

behind them, it has been to strengthen the system of mixed economy in our country."

Measures hit poor the hardest On Feb. 14, the Sandinista leadership also announced the elimination of government subsidies on 30 basic staples. These measures have already had a devastating effect on the workers and peasants of Nicaragua. While wages were increased by about 400% on a one-shot basis, statecontrolled prices of foods and basic goods have risen even faster.

According to the April-May 1988 issue of Envío, a pro-Sandinista magazine published by the Jesuit Central American Historical Institute of Managua, by March 23, barely one month after the measures were adopted, "the perceived gains in income had already been eaten away by the inflation, leaving the real purchasing power of the wages even below its December Steve Caaan 1987 level."

And in the first week of April, the prices of basic staples went up even further. The price of a liter of milk, for example, increased from 6.60 to 12.50 córdobas; rice increased from 4.10 to 20 córdobas; beans increased from 5.75 to 20 córdobas; a pound of powdered milk increased from 27.90 to 65 córdobas; and a dozen eggs increased from 25 to 40 córdobas.

It is important to keep in mind that an auto mechanic, who is a skilled worker toward the upper end of the new 15-step wage scale, makes only 1700 córdobas per month. Yet according to Nicaraguan government estimates, it takes approximately 4200 córdobas to feed a family of four for and gallopin inflation have one month. An unskilled worker at the lower end of the wage scale may earn as little as 500 córdobas per month, the price of 12 dozen eggs!

But if the measures enacted by the Sandinistas on Feb. 14 were meant to curb inflation, how could it be that prices have not been brought under control?

Envío gives us a revealing answer by analyzing the concessions the Sandinistas made to the capitalist producers as part of the package of economic reforms. The Nicaraguan capitalists control approximately 65% of the production of the major cash crops. The government's concessions were made through the medium of subsidies and guaranteed prices.

Subsidies for capitalists

Envío writes: "This inflationary effect upon the wages [after the adoption of the Feb. 14 measures] has come not so much from speculation (which has been brought under more control by the popular movement) as it has from the private sector, which continues to press for higher prices for their goods."

For example, according to Envío, on Feb. 26, the private Cattle Ranchers' Association demanded a guaranteed price of U.S. $4.54 per pound of beef, whereas the Ministry of Agriculture (MIDINRA) only offered to pay $1.45, even though the price on the international market was only $0.85. After the negotiations, the internal price of beef was set at 22.50 córdobas or U.S. $2.25. Hence, according to Envío, the state made up the difference through a state subsidy paid for by printing more money.

This was also true of the milk producers. They wanted a guaranteed 25 córdobas per liter from the government, when MIDINRA was offering only 10 córdobas, based on their estimates of the average production costs and a small profit. The final price was 13.85 córdobas per liter.

Envío reports that on March 1, with 30,000 bushels of rice in the storage bins of the rice growers and with a real shortage of rice on the market, Mario Hanon, president of the National Association of Rice Growers, demanded "realistic prices" from MIDINRA of 10 córdobas per pound, when the production costs were only 3.50 córdobas per pound. The next day the new price of 6 córdobas per pound was announced, thus permitting a 70% profit to the rice-growers.

According to Envío, it would be much cheaper just to import rice. This could have been purchased at 1.40 córdobas per pound. The implicit rate of exchange offered to the rice growers, Envío states, was 42.3 córdobas to the dollar, not the official 10 córdobas to the dollar.

The state has also given in to the pressures of the large sugar growers, offering them an implicit exchange rate of 50 córdobas to the dollar, "subsidizing the price of sugar and provoking more inflation," according to Envío.

The problem, therefore, according to Envío, is "one of paternalism by the government toward the agricultural (continued on page 12)

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(continued from page 11) oligopolies." [An oligopoly exists when a small number of producers control the market of a given commodity.] And the privileged relationship between the Sandinistas and the large capitalist growers is bound to become more of a burden on the Nicaraguan economy in the coming months.

Orlando Morales, a longtime researcher at the Center for Studies on the Agrarian Reform (CIERA) and currently an economist at the Research Center for Social and Economic Development (CIDES), told Socialist Action on April 4:

"The monetary reforms have failed to achieve their major goal: putting a halt to inflation. Since Feb. 14, prices have gone up approximately 600%. Inflation in the coming months is bound to rise at an even higher rate given that the new agricultural Incentives to the Export Sector was very weak, reflecting the great tensions and contradictions inherent in the Nicaraguan model of the mixed economy."

Concretely, the Sandinistas provided U.S. dollars to the agro-export capitalists at the preferential rate of 70 córdobas to the dollar so that they could buy machinery, fertilizers, improved seed, etc. The capitalists, however, would buy the machinery extremely cheaply and would then sell it on the black market for a gigantic profit. The money, rather than being invested in production, most often found its way into a Miami bank account.

According to the CRIES report, the Nicaraguan Minister of Finance mentioned Barricada (June 7, 1987), also noted the flight of capital due to the two-tier exchange rate. Ortega said:

"This year we estimate we will have a global deficit of 330 billion córdobas and U.S. $225 million. ... The other components of the internal deficit are the financing of public investments, which account for 80 billion córdobas, and the currency loss due to our exchange rates, which amount to 100 billion córdobas. This latter item is the result of maintaining guaranteed prices which are favorable to the agro-export sector."

It is obvious that one of the major reasons for the fiscal deficit-and for the hyper-inflation—is the U.S.-backed contra working class that has to bear the burden.

"But a revolution cannot for long continue to demand that those it recognizes as its social driving force accept a fall in their real income and an increasing decline in their living conditions, if sacrifices are not also imposed on the private landlords and the businesspeople who speculate. [emphasis added—A.B.] "It is only by new advances in the latter direction that what Tomás Borge regretfully called the 'confusion in the minds of the masses about the mixed economy' will be dispelled."

Case of the Julio Martinez group Unfortunately, rather than transfer the sacrifices of the war onto the shoulders of the Nicaraguan capitalists, the Sandinistas seem to have decided to take the opposite track. One concrete illustration of this is the government's decision to return five of seven companies which it had intervened and administered since 1985 back to the Julio Martinez capitalist group.

The Julio Martinez group is the largest