Nicaragua: Is the IMF an Accomplice or Acquiescent?

An accomplice in the squandering of opportunities and acquiescent with the Nicaraguan Social Security Institute (INSS) and tax exemptions. When did it mention corruption?

By Enrique Saenz  (Confidencial)

HAVANA TIMES – These days a mission of the International Monetary Fund (IMF) is making its customary annual visit to Nicaragua. This mission is relevant because it is the first one that takes place within the framework of the socio-political crisis and the consequences that may derive from its conclusions.

Let us remember that the IMF is an international organization that includes among its attributions collaborating in the solution of the economic imbalances that occur in its member states. For this, it grants financial assistance that is conditioned to a set of economic measures that the government in need commits to comply with.

In the case of Nicaragua, the Fund’s actions are controversial and opinions vary according to the ideological perspective and interests of those that uphold them.

And I am going to express my opinion, without restrictions: I believe the IMF has carried out an acquiescent role towards the Ortega regime. Rather, its actions border on the limits of complicity.

Here are my reasons:

Accomplice in squandering opportunities

When observing Nicaragua’s economic figures, from the beginning of Ortega’s administration, any moderately balanced economist could conclude that the Nicaraguan economy was a bubble subsidized by Venezuela’s oil cooperation. While abundance lasted, the economy developed. When the levels of cooperation plummeted, the economy began to deflate and show its weaknesses.

However, the Fund once again looked the other way from the fraudulent channeling of Venezuelan oil cooperation, and joined the chorus of praise about the behavior of Nicaraguan economy.

The regimen squandered the opportunity that the abundance of resources represented and did not adopt a single measure to modernize the economy. Just review the productivity indexes.

The IMF was complicit in this squandering of opportunities.

Acquiescent with the INSS, exonerations and subsidies

In its latest reports, the Monetary Fund has emphasized the following points: the INSS crisis, fiscal exonerations and a review of subsidies.

Let us begin with the INSS. The binge with the loans, with expenses and the unclear handling of investments were public events, whose obvious consequences were to undermine the finances of the institution. And the IMF did not call a spade a spade about these issues.

On another aspect, from the structural point of view, the root of the INSS crisis has been the inability of the allegedly successful economy to generate stable and formal jobs, in sufficient quantity and quality. Employment is one of the strongest indicators of a “robust economy.” The leaders of the regime and the bureaucrats of the IMF gloated over the figures of economic growth, but they looked the other way at the unemployment figures, the informal economy and the precariousness of small and medium size companies.

As for the review of exonerations and exemptions, it is a reality that a review was needed since some time ago, since the State stopped receiving hundreds of millions of dollars because of the privileges that are granted to companies regarding taxes.

So much so, that the gradual reduction of tax exemptions was incorporated into the Tax Conciliation Law, since 2012, under an approach that was certainly reasonable. In order to preserve fiscal privileges, companies had to follow a program to generate employment, increase investment and modernize technology. However, the regime, in the framework of its business alliances, at the stroke of a pen sent to the garbage those provisions and restored the exemptions indefinitely.

On subsidies, the IMF celebrated the apparent elimination of electricity tariff subsidies. In fact, subsidies in the electricity sector were not eliminated. They remain fully valid, fattening the packets of the energy generating companies, with ALBANISA in the lead, and the distributing company, the not so mentioned TSK. The owners of these companies were and are the true beneficiaries of the subsidies.

The change was that, until before April of this year, the money came from the budget and was channeled, let’s say that, by means of a “bypass,” since it was disguised in the tariff of the consumers. Now the substantial weight of the subsidy was unloaded on the backs of consumers, including businesses.

What will the IMF say now about the INSS (Nicaragua’s Social Security Institute), the exonerations and the subsidies?

We will be alert.

In Conclusion

Finally, let me add that several reports place the regime as the most corrupt in Central America and third among the most corrupt in Latin America, which undoubtedly has economic consequences.

When has the Monetary Fund talk about corruption?

It is notorious that there was an exchange of benefits in two-ways: the regime presented itself as an applied student of the Fund, which served its propaganda. And the Fund, on its side, exhibited the regime as a successful example, as a result of the application of its recipes. A useful file to support bureaucratic careers.

At present, the regime needs resources that will serve to face the economic setback in which it has put the country, and will be willing to make concessions in exchange for an assistance program from the Fund. However, the file of Ortega is now toxic and it is foreseeable that the IMF bureaucracy will respond to its political nature and be more attentive to the course of the Magnitsky Nica Bill, in the US Congress, than to the siren songs of the regime.

We will be awaiting the conclusions of this IMF mission.