Nicaragua Biting Yet Another Hand That Feeds It

peterchristopher's picture

Almost five years ago, I was in Central America for the first time. I wanted to find out which country would be best to choose as my home. In Nicaragua, I saw that the ex-President (Aleman) had been jailed for corruption. I saw optimistic views of the country from several websites. I visited Nicaragua, and I bought a farm and lived there for several years. When I had learned enough about the culture and saw that it was not advancing, but rather declining, I sold the farm. I now live in Costa Rica.

Nicaragua is a country where the economy depends on foreign cash. There is practially no manufacturing, practically no export of agriculture or natural materials. Nicaragua for thirty years has existed primarily on handouts it has received from three directions: the capitalists, the communists, and the expatriates (Nicaraguans living abroad, and foreigners living in Nicaragua).

Nicaraguans don't mind milking these foreign sources (like NGOs, expats, gov't subsidies, etc.) But they also don't mind killing the goose that lays the golden eggs. This latter, is the classic example of short-sightedness.

So here they go again, doing their best to silence opposition - either own opposition politicians and publicists, and even NGOs.  Lack of freedom of speech and press threaten journalistic integrity in Nicaragua again.

It is amazing to me that people like the Chamorros continue to live in Nicaragua. But maybe "home" is "home" for him.

Here you can see the video where Chamorro describes recent actions by the Sandinistas.

http://video.google.com/videoplay?docid=-2935904390580070485&ei=DezxSPiF...

Other recent political arrests:
http://www.laprensa.com.ni/archivo/2008/octubre/15/noticias/regionales/2...

And in this other article(quoted in part), you can read about the latest NGOs raided by Ortega's comrades:

"The Sandinista government has launched a sweeping crackdown on non-governmental organisations, including Oxfam, prompting concerns about freedom of speech and democratic rights.

Police raided the offices of two pressure groups, carting away computers and files, and a further 15 organisations are under investigation for alleged money-laundering and subversion.

Critics condemned the move as a further sign of intolerance and authoritarianism by President Daniel Ortega, the Sandinista leader who was feted as a hero in the country's 1980s revolution.

Several European governments are preparing to axe tens of millions of dollars in aid in protest, a sign of how much international support Ortega has lost since his return to power last year. "It's a response to the deteriorating democratic environment," said one diplomat in the capital, Managua.

http://www.guardian.co.uk/world/2008/oct/14/humanrights-voluntarysector

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good NYT article on chamorro

Interesting... I learned some new info about the Chamorro family.

http://www.nytimes.com/2009/03/22/magazine/22Nicaragua-t.html

Spain Turning Off the Tap

Spain is also in the process of turning off the cash flows to Nicaragua.

http://www.laprensa.com.ni/archivo/2009/febrero/02/noticias/ultimahora/309789.shtml

I remember in my first visit to Nicaragua traveling to Finca Magdalena, a privately-owned farm on Ometepe.  It is a pleasant place to pass a few days, by the way.  It is legally structured as a "cooperative" owned by semi-local Sandinistas, and has for many years been receiving considerable support from a Spanish NGO.  I am not sure whether that funding would be included in what is discussed in the La Prensa article.+

sources and directions

Hi,

Of course after reading your link about the CIA world factbook I read the page with the information you had mentioned.

Actually, respectfully, I think you mixed the numbers up: the 1.2 billion is the government expenditures per year, not total cash spent in Nicaragua, right? The 20% is an estimate I made up that only applies to government revenues/expenditures and doesn't directly relate to GDP/exports/imports.

What I say about politicos earning salary in construction (or other projects) is from first-hand experience with them. Although most politicos - even the local ones - are savvy enough to not speak frankly with foreigners present, on the other hand there are those who are apparently ashamed, hoping that somehow by talking about it, awareness might spread, and the movement as a whole might become more civil.

Online forums, I argue, at best contribute a diverse perspective of personal experiences that then must be verified by the readers. I don't have tape recorded conversations with my friends in Nicaraguan government and wouldn't betray them by putting those conversations online, no matter how corrupt. What is confidential is confidential. On the other hand, I will explain in a general sense the information an intelligent person would need to investigate effectively on his own with his own contacts he develops.

I invite you to contribute to the "Is It Safe" topic or create your own topic regarding safety in Nicaragua. I also invite you to contribute in new forum topics your business tips for Nicaragua, your suggestions for investment, and your comparison of the corruption in successive Nicaraguan administrations. To begin a new thread, you can click on "Create Content" on the left menu then click "Forum".

Invented information?

You say "(For instance, in a typical road-construction, you might have a special salary for a person to be overseeing it who is essentially just the political boss and doesn't go but one time per week, yet gets paid a very, very healthy full-time wage.) So whatever internal revenues exist don't even cover the mafia share. The actual projects are paid for with external monies,."

Where exactly did you learn this what sources, have you worked in the government?

You claim ridiculous things, and mix yourself up. If you only read the past posts we have written you could see that Nicaragua Revenues are 20% Exports, 25% industries. But then you go an state the following "Then we're left with 20 percent that is the revenue collected from purely local production." Your saying that of the 1.2 Billion dollars that Nicaragua spends in a year, only 20% actually comes from Nicaraguan revenues. Please read up on some Nicaraguan economic figures, I would recommend you read CIA world factbook on Nicaragua. Once you have done that, come post back. Thanks

I was referring to past presidents that were corrupt (Aleman). Not business leaders at all. Don't get information someone said and twist it around. Nicaragua is the second safest country in the western hemisphere after Canada. Much safer than any central american country where being mugged is a constant threat, where gangs are everywhere ect. You claim Nicaragua is a terrible place to invest, from whose perspective may i ask? Did some sort of business you have fail in Nicaragua, cause I could give you a few pointer. Nicaragua has huge investment opportunities in tourism, agriculture, technology (calling centers), sports ect. All you have to do is know where to look.

statistics and administrative expenses

Hi,

As I'm sure you know, it's possible to prove anything and its opposite with accounting, statistics and surveys. Neverthess, sometimes it's at least a starting point.

Suppose that there are 200 million of revenues from aduana, 200 million from property transfer taxes, 200 million from VATA value-added tax, and 200 million from all other taxes combined (I'm making those numbers up, real numbers would be welcome). Although not classified as foreign aid, how much of these numbers actually comes from the sources I mentioned: NGOs spending money, Nicaraguans working overseas and sending the money back, foreigners living in Nicaragua spending money, buying land, etc. let's say 80 percent. Then we're left with 20 percent that is the revenue collected from purely local production.

What actually happens when a Nicaraguan government project takes place? Suppose the official funding is 60 percent Japan, 40 percent Nicaraguan gov't. As I said, most of that gov't money comes indirectly from the external sources. There is still a small fraction that comes from internal sources. But about a third of the money spent on any project in Nicaragua is siphoned off in misuse by the mafia governing parties to its ranked members. (For instance, in a typical road-construction, you might have a special salary for a person to be overseeing it who is essentially just the political boss and doesn't go but one time per week, yet gets paid a very, very healthy full-time wage.) So whatever internal revenues exist don't even cover the mafia share. The actual projects are paid for with external monies,.

As you mentioned: corruption. Between that and the daily difficulties of conducting ordinary business in Nicaragua (from natural disaster to sabotage and low education), it's a terrible place to invest in business. That's why it relies on external money.

Nicaraguan foreign aid

Hi,
Well all my data comes directly from The CIA World Factbook and other government agencies. To begin with, the $1.211 billion I talked about is an estimate by the sources stated above of how much the Nicaraguan Government spends in a year. The $471 million I talked about is the amount of money Nicaragua receives in a year of Economic Aid from foreign country. Does that make it clearer?

You ask "would you mind providing some more information about where you think the remainder of that cash comes from?" The remainder of the cash is ($1.211 billion - 471 million) $729 million (estimate). Well that is an easy answer, that money comes from revenues the Nicaraguan government makes, be it from income taxes, sale taxes ect. So I ask you this you say that "every single public project - church, market, bridge, road, police car, etc - is fully funded by foreign aid (In nicaragua)" How exactly is that possible? How exactly does $471 Million dollars in foreign aid pay for $1.211 Billion dollars of Nicaraguan expenditures?? Expenditures that go to the building of roads, schools, markets ect.

The war itself is definitely not responsible for Nicaragua's current economic situation. The factors included are endless: massive earthquakes, corrupt leaders, revolutions, civil war ect.

exports and a graph

Hi, Good morning.

Let me first say that it is an honor to been collaborating together with you, for the first time on this website comparing our ideas about Central America. While I don't expect us to be able to arrive at a single, concise model to which we both subscribe, we are already sharing valuable ideas that at the least certainly contribute to the breadth and accuracy of our own individual models.

You mention that some numbers like 7% and 20% seem huge to you; are you comparing that to something in particular?

Could you alse explain a little more what you mean exactly by1.211 billion? Is this your estimate of officiat gov/t expenses? $471M estimate of official gov/t aid receipts? If I'm wrong in that, please help me understand what you mean. If I'm right, would you mind providing some more information about where you think the remainder of that cash comes from?

Click this gapminder graph for a fascinating chart that you can modify and/or "play" by clicking play in the lower left.

Perhaps it is an interesting chart to consider, when asking the question, "To what extent is 1980-1988 war responsible for Nicaragua's enomic situation 20 years later?" It's interesting, for instance, to compare Nicragua's "bounce back" to that of Poland, Germany, Japan, after their respective war-caused economic devastations.

Once again, thanks for your contributions to this forum!

Peter

ps maybe the graph will also display properly here (but click above for the interactive model in any case)

Nicaraguan self reliance

Hi,
In your last post you stated "There is practially no manufacturing, practically no export of agriculture or natural materials (in Nicaragua)" But then you also state Nicaraguan exports constitute 20% of the GDP and it is steadily growing. 20% of the GDP of a nation is enormous. Industry(Manufacturing) in Nicaragua constitutes another 25.8% of GDP. Together that is 45% of all the GDP of Nicaragua. I am not comparing Nicaragua to Costa Rica (as you do) because Costa Rica is more advance in most aspects: exports, industry, tourism, investment ect; therefore when you compare Nicaragua to Costa Rica, Nicaraguan exports, industries ect seem insignificant when they are not.

You also go on to say that "As to my claim of exports being minor, we are looking at a number around $200 per person of exports annually, roughly 20% of GDP". To any person reading this that might seem small and insignificant, but when you compare that to the fact that roughly 50% of the Nicaraguan people earn less than $400 dollars a year, that $200 of exports is 50% of their total earnings. That same $200 is not insignificant when you compare it to the GDP per capita in Nicaragua which is $2,800. Those $200 per person of exports are a 7% of the GDP per person which is huge.

Of all your statements this is the least true and most farfetched, you state that "all you have to do is look and see that every single public project - church, market, bridge, road, police car, etc - is fully funded by foreign aid (In nicaragua)" Now this is outright ridiculous, for every single public project to be fully funded by foreign aid would mean that every single dollar that Nicaragua spends was given to it. That would mean that the $1.211 billion dollars that Nicaragua spends in a year is paid for by the $471 million dollars in economic aid Nicaragua receives.....

Some perspective: exports as a fraction of imports

Hi,

My analysis comes primarily from living in Nicaragua for several years. However I am comfortable with us looking at some referenced statistics if you wish.

Here are some detailed, referenced figures that we can use for the discussion.

http://www.state.gov/r/pa/ei/bgn/1850.htm

Economy
GDP (2007): $5.7 billion.
GDP real growth rate (2007): 3.8%.
Per capita GDP (2007): $1,023.
Inflation rate (2007): 16.9%.
Natural resources: arable land, fresh water, fisheries, gold, timber, hydro and geothermal power potential.
Agriculture and agricultural processing (33% of GDP): Products--corn, coffee, sugar, meat, rice, beans, bananas, beef, dairy.
Manufacturing (11% of GDP): Types--textiles, paper and wood products, metal products petroleum refining, plastics.
Services (51% of GDP): Types--banking, wholesale and retail distribution, telecommunications, and energy.
Construction (5% of GDP): Types--housing and infrastructure.
Trade (2007 est.): Normal exports--$1.202 billion (f.o.b.): coffee, seafood, beef, sugar, industrial goods, gold, bananas. Free trade zone exports--$1.088 billion, mostly textiles and apparel, automobile wiring harnesses. Markets--United States, Central American Common Market, European Union (EU), Mexico, Japan. Imports--$3.294 billion (c.i.f.): petroleum, agricultural inputs and equipment, manufactured goods. Free trade zone imports--$783.6 million. Suppliers--Central American Common Market, United States, EU, Mexico, Venezuela, China.

Remesas:
Nicaragua also depends heavily on remittances from Nicaraguans living abroad, which totaled $655.5 million in 2006. http://en.wikipedia.org/wiki/Nicaragua

I would love it if we could also find the amount of religious money entering Nicaragua, the amount brought back by returning Nicaraguans not classified as remesas, the amount of NGO and government aid coming in. But even if you can't find that info (I couldn't) all you have to do is look and see that every single public project - church, market, bridge, road, police car, etc - is fully funded by foreign aid.

As to my claim of exports being minor, we are looking at a number around $200 per person of exports annually, roughly 20% of GDP.

Compare to exports of 8 billion for Costa Rica, with a slightly lower population (exports of $2000 per person, roughly 30% of GDP). http://www.state.gov/r/pa/ei/bgn/2019.htm

Essentially, what I come down to in the case of a fair comparison country is:

Percentagewise, In Costa Rica, exports are about 80-90% of imports. In Nicaragua, exports are 30% of imports.

Or on a nominal basis, Nicaraguan exports per person are 10% of Costa Rican exports per person.

While I do agree with you that Nicaragua's economy is growing on a GDP basis, that does not mean they have - or ever will - overcome their reliance on foreign aid, remittances, repatriation, and foreigners with hobby businesses/residence.

What do you think: Is Nicaragua becoming more self-sufficient?

Peter

Nicaragua Biting Yet Another Hand That Feeds It?

Lets set things straight.

You claim the following "Nicaragua is a country where the economy depends on foreign cash. There is practially no manufacturing, practically no export of agriculture or natural materials. Nicaragua for thirty years has existed primarily on handouts it has received from three directions: the capitalists, the communists, and the expatriates (Nicaraguans living abroad, and foreigners living in Nicaragua)."

Where exactly do you get this information? To begin Nicaragua's infrastructure and economy was devastated due to the Contra War which was financed by the United States in the 1980's. Since then, inflation has been reduced from 33,603 percent to 8 percent, and the government's foreign debt has been cut in half. One of the key engines of economic growth has been production for export. Exports were 640 million in 2001 and 1 billion in 2007. Although traditional products such as coffee, meat, and sugar continued to lead the list of Nicaraguan exports, the fastest growth is now in nontraditional exports: maquila goods, gold, seafood, and new agricultural products such as peanuts, sesame, melons, and onions. In the last 12 years tourism has grown 394 percent.

good Nicaruan news filter and chat community

I have to say, I do enjoy my daily visits to TRN. Today I was reminded of this recent prizewinning statement by Daniel Ortega: "The free market is the main enemy of the people." (http://www.laprensa.com.ni/archivo/2008/mayo/07/noticias/politica/258302...)

Finland the first bitten hand to withdraw

Finland doesn't like its hand being bitten. Withdraws millions in aid. Other countries said to be considering similar action. Follow this link to read the original in Spanish:

http://www.trinchera.com.ni/portada.html

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