- The Washington Times - Monday, December 25, 2006

MANAGUA, Nicaragua

In the ragged edge of the teeming Eastern Market in Nicaragua’s decaying capital, questions about the International Monetary Fund draw blank stares.

“Do they have money?” asked Jimy Gargan, a man in his mid-50s who was hauling a cart of pineapples over the rutted street. “What do they have to do with us?”

However, the fund’s bankers and other outsiders from Washington to Caracas may have a lot to do with how much President-elect Daniel Ortega can do for Nicaragua’s poor majority — people like Mr. Gargan, who has no electricity or running water, never went to school and has three sons working to help support the family.

Mr. Ortega, a former Marxist revolutionary, left Nicaragua in conflict and economic chaos when his first term as president ended with his electoral defeat in 1990, after a 10-year war with the U.S.-backed Contra rebels. This time, he promises to maintain free-market policies while offering the poor better medical care, free education, jobs, roads and land.

It won’t be cheap. Mr. Ortega, who takes office Jan. 10, will be looking for funding almost anywhere he can get it.

Counting on Chavez, Fidel

He has indicated he will seek help from socialist allies like President Hugo Chavez of Venezuela and Fidel Castro of Cuba. Mr. Ortega has suggested that medical improvements can be financed by the resale of Venezuelan oil and long-term credits “from our brothers, such as the people of Venezuela.”

But he’s also shown readiness to negotiate with institutions such as the International Monetary Fund (IMF) that Latin American leftists have long portrayed as evil for demanding tight fiscal discipline in exchange for aid.

Central Bank President Mario Arana said that next year’s budget probably won’t be much larger than this year’s — about $1.6 billion. Much is already accounted for: Constitutional requirements allocate $256 million for universities and municipalities. The Central Bank gets about $150 million to pay off bonds and build reserves.

Some $207 million a year goes to pay down domestic debt — most of it for land confiscated by Mr. Ortega’s Sandinista National Liberation Front in the 1980s — and to repay Nicaraguans who lost $500 million when five banks went under.

That leaves less than $1 billion to improve the lives of 5 million Nicaraguans, or about $200 a year to spend per citizen, in a country where 80 percent of the people live on $2 a day or less.

About 60 percent of the nation’s children of high school age aren’t in class. Elementary school teachers often make about $120 a month, while officials figure that a family of four needs about $300 to make ends meet.

Nicaragua’s current agreement with the IMF ends in January, and Mr. Ortega will have to negotiate a new package to continue receiving its funding though 2009.

Vice President-elect Jaime Morales said formal talks are expected this month with the IMF, but that the new government won’t accept “impositions.”

Mr. Ortega did not attend a November meeting between an IMF delegation and his transition team, said Humberto Arbulu, the IMF representative in Nicaragua. But he said the president-elect later outlined his plans for representatives of several lending organizations.

“We all left with the idea that our institutions can work with this plan,” Mr. Arbulu said. But a new agreement, he said, “will depend on the agenda of the government.”

Job credits urged

Mr. Ortega has proposed credits for small and medium-size businesses to generate jobs, as well as money for the elderly, handicapped and war-wounded, many of whom gather at the capital’s stoplights seeking handouts.

Departing President Enrique Bolanos nearly eliminated the fiscal deficit and urged Mr. Ortega to follow his example. Foreign debt is down, and Mr. Ortega will inherit a relatively healthy, if austere, economy. But he takes over the poorest nation in the hemisphere after Haiti, with a hunger rate of about 28 percent, nearly triple the Latin American average.

“If the problems of poverty, misery and unemployment are not solved, then what security can there be for those who have the most?” Mr. Ortega wrote in a campaign booklet.

He recently got a break when the Inter-American Development Bank forgave at least $700 million of Nicaragua’s foreign debt, reducing payments to the bank by about $26 million next year.

It isn’t a huge part of the budget, but small differences can loom large in an economy as fragile as Nicaragua’s. The annual value of Nicaragua’s goods and services is about $5 billion — roughly the revenue of Radio Shack Corp., listed as No. 423 on the Fortune 500 list.

The poor have high hopes of Mr. Ortega. Despite widespread economic mismanagement during the Sandinistas’ 11 years in power, they did extend education and medical care to hundreds of thousands who lacked it.

In an open letter to Mr. Ortega in the Nuevo Diario newspaper, economist Ivan Garcia asked if Mr. Ortega is willing to submit to IMF conditions of fiscal responsibility. And he asked: if so, “where are you going to get the money to keep your promises to take care of the urgent needs of the people, especially the poor?”

Eduardo Montealegre, a Harvard-trained economist who finished second in the Nov. 5 presidential election, says that Mr. Ortega has little choice but to accept conditions.

“Here in Nicaragua, our budget depends 35 percent on money from outside, donations or [low-interest] loans,” he said. Countries that balk at their obligations often have trouble getting help from other sources.

If Nicaragua has to look internally to pay its debt, said Mr. Montealegre: “there will be unemployment, devaluation, inflation.”

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