…and not only with the support of the Central American Bank for Economic Integration (CABEI)
According to official data, the Ortega regime has been receiving more foreign funding that ever, and the CABEI is not the only source of support. Analysts explain how the government was able to obtain a record amount in just 3 years.
HAVANA TIMES – In the nearly 3 years since the Nica Act took effect, with the key aim of making it harder for Daniel Ortega to access sources of multilateral loans where the United States has influence and veto power, the official numbers reflect that the regime has received more resources than prior to the approval of that US legislation.
In 2021 alone, the government says that it received $1.162 billion, a level not seen even in the era when the economy grew steadily, without international sanctions and when international financial organizations contributed to the economic results of the dictatorship. In a context of greater repression, with laws that have profoundly curtailed the civil rights and freedoms of Nicaraguans, the Nica Act was not able to prevent foreign loans to the regime from growing by 40% in 2021.
Resources keep flowing
In December 2018, the United States, with the approval of the Nicaraguan Investment Conditionality Act (the Nica Act), legally blocked Ortega’s access to receive fresh resources from financial organizations. Yet data from the Central Bank of Nicaragua shows that the country achieved record numbers in terms of this type of financing.
According to the Central Bank (BCN), Nicaragua received financing for $548.5 million dollars in 2018, a figure that decreased slightly in 2019. In 2020, according to Central Bank President Ovidio Reyes, the government had access to $831.3 million, an increase of 39.7% in a single year.
In addition, the data shows that between 2018 and 2021, in the context of sanctions and international isolation, the regime managed to obtain a total of $3.079.9 billion. This means that Ortega has received more money during the Nica Act era than before. It should be noted that, according to official foreign aid reports, the amount accumulated in 2021 is the highest figure reported by the BCN in the last 15 years, with the lowest amount corresponding to 2008 ($213.1 million).
“The history of responsible fiscal performance and the active management of financial resources, resulted in flows of external concessional loans and placements of Nicaraguan Bonds at lower yield rates than in previous years, thus allowing the healthy financing of the public deficit”, said Ovidio Reyes during a meeting with businesspeople and CABEI president Dante Mossi, who came to the country to inaugurate the bank’s new headquarters. Between 2018 and 2016, when the Nica Act had not yet entered the picture, the public sector obtained $1.451 billion in foreign loans, while the regime received $2.531.4 billion from 2019-2021.
“The pandemic and hurricanes Iota and Eta were Ortega’s lifeline”
How was Nicaragua able to access this type of financing, taking into account the restrictions implicit in the Nica Act? In addition to the support that CABEI has provided the regime, Nicaragua benefited from a clause in the Nica Act regarding financing for humanitarian reasons. This may explain in part why the IMF, the World Bank and the IDB approved significant support funds for Nicaragua over the last two years.
According to specialists consulted, who preferred anonymity for fear of reprisals, Nicaragua, like other countries, took advantage of the Covid-19 pandemic to obtain these resources more easily. A former diplomat and political analyst pointed out that the provisions contained in the Nica Act and in the Renacer law are clear, in terms of the commitment of the United States to use all its power so that those financial organizations, in which it is a partner, do not approve loans to Nicaragua while human rights and democracy continue to be disrespected. “But these laws also take into account exceptions related to humanitarian aid — the pandemic and hurricanes Iota and Eta were Ortega’s lifeline,” he assured.
“Now, that exceptional aid should not mean a blank check. Accountability should be required to insure that the funds have actually been used for humanitarian purposes and have not been diverted. We see complaints from the Caribbean Coast, which has not seen any of that aid. Are these loans compatible with the murders of the Miskito people, by settlers encouraged by the dictatorship? These are questions that should be asked,” he said.
Following this line, he pointed out that “a large part of these funds were approved to be implemented by international organizations and they should also be held accountable. These international organizations disburse these funds through non-governmental organizations, which, as we know, have been persecuted and eliminated by the dictatorship. All this raises serious questions and requires explanations from these organizations.”
CABEI, key to surviving the Nica Act
What financial role have the various multilateral organizations played? Official numbers indicate that in 2021 CABEI ranked first with $413.1 million; an amount higher than 2020 ($321.6 million), 2019 ($216.4 million and 2018 ($318.6 million). In other words, in the 3 years of the Nica Act, this bank has provided the government with $951.1 million dollars of the $2.531.4 billion obtained. In 2018, at the height of the political crisis, that bank was also key to preventing a financial collapse of the regime.
In second place is the International Monetary Fund (IMF) with $353.5 million in 2021, up from the 2020 total ($186.8 million). It should be noted that this organization did not disburse money to Nicaragua from 2012 to 2019.
For its part, the Inter-American Development Bank (IDB) granted financing to Nicaragua in 2021 for a total of $195.7 million, above the $150.2 million disbursed in 2020 and the $131.2 million total in 2019. Over the 3 years of the Nica Act, this bank has approved $477.1 million dollars, according to the figures presented by Reyes. The World Bank has also contributed to Nicaragua in recent years, from $50.2 million in 2018, to $128 million in 2021. In the three years of the Nica Act alone, this bank, where the US has influence, has approved $275.6 million dollars to the government.
Ortega has more cards in his favor
The economist and foreign consultant maintained that, so far, Nicaragua has had no problems obtaining resources and pointed to four elements that favor this situation. “In the first place, the economy had a recovery, even if it just in statistics, above the average of what Central America has had in the region, that is what they say,” he said. Last week, the president of the BCN shared that in 2021 there was a rebound of 10.3% in the GDP, supported mainly by outside factors. For this year, he projected that the growth rate will be around 4 or 5% and also estimated an inflation of between 5 and 6%.
“The data that Reyes presented to CABEI are presented to other international organizations, and since they are official figures, it is a way of convincing the international financial system to offer support. They say that the economy has had a successful recovery and that it will be sustainable,” he said. He indicated as well that it has been shown that the sanctions imposed by the United States and the European Union (EU) on Nicaragua have not had any significant effect on the economy, since they are not disqualifying sanctions – that is, they do not have the impact of cutting foreign financial resources. “The sanctions that the United States and the EU have imposed on Nicaragua have been circumvented in a very clever way by the government. If we assume that Nicaragua ceases to be a member of the Organization of American States (OAS), that is another case, and the organizations could cut resources,” he said.
The management of macroeconomic factors by the Central Bank is another point highlighted by the economist. “They have had good management in the macroeconomic fundamentals …that has affected the control of inflation and has maintained macroeconomic stability. The government has not managed the pandemic well; but it has benefited from the resources coming in and has also managed the economy from a macroeconomic point of view. The failures have to do with economic policy,” he clarified.
“The other important element is that Nicaragua borrows, but not in large amounts as in other countries, it depends on the size of the economy, so with only one bank providing money, such as CABEI, it has enough to be able to safeguard itself,” he noted. In his opinion, all countries have taken advantage of the pandemic to obtain outside resources more easily, and in most of these countries, especially in Latin America, “there is no transparency regarding the use of funds and the management of the pandemic.”
Have the resources really been managed correctly?
The regime has accessed millions of dollars to counteract the pandemic, spark economic reactivation and purchase Covid vaccines, and although the aid imposes conditions of control and scrutiny over the resources, Ortega does not. Why haven’t the organizations asked for transparency to guarantee that the funds are appropriately addressing the needs of the population?
The former diplomat and political analyst believes that the answer is that “the international bureaucracy has its own interests. This bureaucracy lives on these loans and many even earn bonuses for placing them. But those ultimately responsible are the directors of these organizations, placed there by the governments, owners of the money”. For example, “Mr. Mauricio Clarone, current President of the IDB, placed there by former President Donald Trump, has not said a word since then about this situation. He should be asked for an explanation. The same should be done with those governments that partner with CABEI and that shore up the regime so that it continues to violate the human rights of Nicaraguans,” he emphasized. In this he coincided with former Nicaraguan ambassador to the OAS (and now a political prisoner) Mauricio Díaz, who in March last year explained to this newspaper that it seemed highly irresponsible for the international financial institutions to not consider the severity of the acts carried out by the government that put people’s dignity and lives at risk.
“What has caught my attention is that despite the repression, the massacre, we have seen how international institutions continue to send millions of dollars. The Nicaraguan government has taken advantage of the pandemic to obtain resources, including from the IMF, but it does seem to me that the entire international system, the United Nations as a whole, the part that has to do with human rights, the hemispheric organizations such as the IACHR, the OAS, all these organizations require an in-depth evaluation, to see what is happening,” said the analyst.