“The Economist” team predicts that Ortega will order new reforms to Social Security in 2022. They foresee growth in the national debt, but lesser shrinking of the GNP.
HAVANA TIMES – In their November report, the Economist Intelligence Unit (EIU) predicts that Ortega will remain in power for the 2021–2025 term. They caution, however, of serious economic risks as a consequence.
These include a drop in international reserves and possibly the imposition of capital controls. They also foresee an increase in inflation, due to the lack of financing of the fiscal debt. Finally, they prognosticate greater state control of the country’s economy.
Despite loss of popular sympathy for the Sandinistas, the EIU foresees that party retaining control, as they have since 2007. The party has continued its growing tendency towards authoritarianism. The swerve began with reforms that allowed Daniel Ortega to run for president indefinitely.
The analysis links the Sandinista Front’s permanence in power to the lack of unity among the Nicaraguan opposition. This became clear in October, when the Civic Alliance decided to separate itself from the National Coalition.
“Even if the National Coalition succeeds in solidifying and in getting on the ballot, there’s scant probability they’ll compete in free and fair elections. In mid-October, the National Assembly approved a law requiring individuals and organizations that receive funds from a foreign government to register as foreign agents. This will restrict their ability to participate in political activities,” the analysis states.
The law they’re referring to is the “Law for the Regulation of Foreign Agents,” passed last month by Nicaragua’s Congress. Members of the opposition believe it’s merely one more instrument to limit the activities of opposition parties in the country. The law is one of three new repressive laws, including the “Special Cybercrimes Law” and the “Law for Life Imprisonment”.
Despite the EIU’s panorama of Ortega’s continuation in power, they do warn of greater possibilities that this power could weaken. They see this as a possible consequence of the US sanctions imposed on 24 high public officials in Nicaragua. Among those sanctioned is the country’s vice president and first lady, Rosario Murillo.
“If a significant political or economic escalation occurs, Ortega’s permanence in power will be determined by the (…) security forces. The president exercises complete control over the Police and exerts great influence over the Army. The highest military officials have been benefited with access to commercial resources and the earnings derived from these. Meanwhile, the regime has used the active participation of the police forces to repress the political insurrection. (..) But there’s a great risk of fractures within the regime, if political and economic conditions radically worsen,” the EIU warns.
Reforms to Social Security in 2022
The analysis foresees that in 2022, Ortega’s regime could order a new reform to Social Security. This would be aimed at reducing the 3.3% deficit from the non-financial public sector that’s expected for 2021. The predicted reforms would be an attempt to reduce this deficit to 2.5%.
This reform, however, is seen as unlikely to improve the situation over the long term. “We believe that, in the absence of a solution to the political crisis and significant improvements in the business environment, the Nicaraguan Social Security Institute will be unable to grow their contributor base at a sustainable rhythm. Consequently, the deficit from the non-financial public sector will broaden once again, to 3.3% of the GDP, by 2025,” the report states.
Things may go better for the Ortega regime in terms of their capacity to cover “all their financial needs”. The report foresees the regime doing this by acquiring new debts. These loans will add to the funds they’ve already received from multilateral organizations, thanks to policy changes related to the Coronavirus.
The EIU speculates that Ortega was forced to change the way he managed the pandemic in order to access international funding. As a result, the report affirms, he increased vigilance at the country’s points of entry. He also destined greater resources to the purchase of equipment and the modernization of the health infrastructure.
Among the organizations that granted resources to Ortega is the Inter-American Development Bank. In August, they disbursed a loan of US $43 million dollars. The Central American Bank for Economic Integration has also approved two loans of US $50 million each.
Less shrinkage of Nicaragua’s Gross National Product
The initial EIU estimates were for a 7% contraction in Nicaragua’s Gross National Product in 2020. However, the current analysis explains, the latest data from Nicaragua’s Central Bank has altered that prediction. They now affirm that the GNP will contract only 3.2% for the entire year.
“We now predict 1% real growth in Nicaragua’s GNP in 2021, instead of the 1.5% shrinkage previously predicted. This modest growth will come following three years of recession. It implies a continuing stagnation in the standard of living. A number of factors also indicate the risk of complete stagnation of the panorama,” the document specifies.
The factors the EIU refers to are a stabilizing of the rate of Coronavirus infections. There’s also the risk of a new surge in contagions in the upcoming months. The other problem they see is that the economic growth will be affected by a lack of fiscal support. A final element is the political and social instability that could arise during the November 2021 elections.
According to The Economist, in these elections Ortega will make some minor concessions to try to legitimize the process internationally. “It’s probable that these [concessions] will be superficial, since the FSLN maintains control of the Supreme Electoral Council, the justice system and other institutions.”
At the beginning of November, Confidencial revealed that Ortega had ordered the drafting of a proposal for electoral reforms. These reforms don’t contemplate any change in the Supreme Electoral Council, controlled by the FSLN strongman. Instead, the electoral reforms were to focus strictly on technical aspects of the Electoral Law. This will not satisfy the national and international demand for electoral reforms that could guarantee free, fair and transparent elections. It also doesn’t meet the demand for independent observation of these elections.