Proposals to Reduce the Economic Impact of the Pandemic in Nicaragua

Photo: Carlos Herrera / Confidencial

Restore the previous Social Security contributions, protect the income of the population, budget reform to attend health emergencies

By Enrique Saenz  (Confidencial)

HAVANA TIMES – Unlike other countries, in Nicaragua the economic effects of the pandemic overlap with the socioeconomic crisis the country had already been suffering due to Ortega’s clinging to power.

Increased unemployment and underemployment, the closure of companies, reduction of investments and consumption, increase in the cost of living, and a fall in economic activities was already the state of affairs. This serious situation turns more urgent because of the pandemic.

A blow comes from the external sector, such as the closure of companies in free trade zones, the decrease of remittances and the collapse of tourism. The other blow comes from the internal impact of the health calamity.

This is not the time for petty politics. In fact, morally, there is never a time for petty politics. But politics, yes. Understanding politics as what it really is, and should be: any individual, collective or public action aimed at the well-being of the population. Or of the majority.

Let’s be clear. The crisis will be getting worse day by day due to the criminal irresponsibility of the regime. The worst is yet to come. And this is not alarmism, or stark reality. It is enough to know what is happening around the world where, even, the terms originally foreseen for the emergency are being extended.

It is everyone’s obligation, starting with democratic organizations, to call for and demand that the government adopts immediate measures that help to cushion the most harmful impacts of the pandemic. To this end, the Nicaraguan Medical Unity association and other professional, civic and social organizations have presented proposals. It is necessary to insist over and over on these proposals.

However, it is necessary to fill the gap of proposals in economic matters. This is the purpose of this writing.

Photo: Carlos Herrera / Confidencial

The heart of any immediate-term economic strategy must be to preserve, as far as possible, the employment and income of the majority of the population, in order to favor conditions that help satisfy the most basic needs, beginning with food. And here the majority are workers, including workers in the informal economy, as well as micro-entrepreneurs, professionals and small entrepreneurs.

The following measures are only indicative. Some would correspond to the clique in power and others to economic agents with sufficient solvency to provide solutions. All are viable and could be implemented in the very short-term.

  1. I’ll begin with companies and businesses that are in the formal economy: It is imperative to ensure the survival of these companies and their ability to maintain employment. First of all, you have to lessen their costs. For that, the following measures are at hand:

-Suspend the retention destined for INATEC (The Nicaraguan Technological Institute). This represents 2% of the companies’ payroll.

-Restore the fiscal conditions prior to the reforms of February of last year. This measure will provide liquidity to companies.

-Restore employers’ quota to 19% of the payroll. This represents a 3.5% reduction in the payroll.

–Agree on flexibility of working conditions: advancement of vacations and reduction of working hours, work at home, for example, in order to preserve as far as possible, the stability and work benefits of workers and employees.

  1. Regarding consumers and employees:

-Restore the INSS contribution to 6.75% of salary.

-Eliminate VAT on products from basic food products.

-A 3-month moratorium on the payment of drinking water and electricity services for unemployed consumers, or those with incomes less than the value of the basics. This moratorium would also apply to microentrepreneurs and small entrepreneurs who are in this condition.

-Ensure the fluidity of supply chains.

  1. Measures to protect the income of the population:

-Reduce the cost, for at least three months, of the commission charges for family remittances, both by banks and by companies that do this business.

-Flexibilize credit payments to banks, microfinance institutions and commercial companies, for the cardholders, personal loans, mortgage loans and business loans. BANPRO and BAC are applying relief measures in Costa Rica, it is natural that they also apply them in Nicaragua and be extended to other banks.

-Reduction of communication rates for both companies and individual users. Nicaraguan’s shouldn’t be paying one of the highest rates in Latin America.

  1. A transversal measure of benefit to society as a whole:

Reduction of electricity tariffs and fuel prices in proportion to the decrease in international oil prices.

  1. Budget reform to address the health and food security emergency of the most vulnerable.

It is essential to approve a reform of the national budget in order to redirect resources. It is possible to significantly reduce the 64 billion cordobas (1.8 billion USD) budgeted in current expenditures, mainly from superfluous institutions, in the present circumstances. The 17 billion (cordobas) destined for capital expenditures should also be revised. The priorities for reallocating resources would be as follows:

-Resources to face the health emergency and increase purchases of ventilators and other essential supplies.

-Expand the school snack and its coverage to the family nucleus, in order to promote food security in an orderly manner. This measure involves sending student and teachers home.

-Compensating the loss of income to the INSS (Social Security Institute) by the measures indicated above, in order to ensure pensions; and establish an emergency fund to alleviate the economic impact of the crisis on the population.

This would be facilitated by sending non-essential state personnel to their homes in the emergency. This would significantly reduce current expenses, in addition to reducing the possibility of contagion.

Of course, there could be other viable measures, mainly for the medium term. But the previous ones would promptly generate relief for thousands of families and companies, as long as they are applied without discrimination of partisan origin.

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