New IMF Plan Goes Into Effect

Weekly News Update on the Americas, #420, 15 February 1998

In January the Nicaraguan government made public a new Enhanced Structural Adjustment Facility (ESAF) it signed earlier with the International Monetary Fund. The agreement extends more credit from international lending institutions in exchange for new austerity measures, including layoffs for some 1,500 government employees; about 1,800 employees were laid off in 1997. After years of recession--provoked by an earlier ESAF--the economy grew by about 5% last year. But according to Central Bank data cited by a coalition of Nicaraguan citizens' coalitions, the purchasing power of average wages fell from 123.7% of the minimum cost of living in 1994 to 86.3% in 1997. Nicaraguan economist Oscar Rene Vargas says that one of the main positive developments for the economy is the decision by the US to ease residency restrictions for Nicaraguans who arrived in the US before 1996 [see Updates #402, 403]. Vargas believes that this will stabilize the situation for the 150,000 Nicaraguan residents in the US, who send $300-350 million to their relatives in Nicaragua each year. [Popol Na Bulletin 1/23/98, 2/13/98; letter from Center for Democratic Education and the Development GAP to US Agency for International Development (USAID) 1/26/98]

Leftist critics charge that the ESAFs and the neoliberal policies of rightwing president Arnoldo Aleman Lacayo undercut the agricultural producers and the small and medium businesses that form the productive base of the Nicaraguan economy. In early February the government auditing office uncovered an illegal scheme in which the state-owned food corporation, ENABAS, was importing rice from the US for the use of a private firm. It is not clear how high up the scandal will reach; ENABAS head Jose Marenco Cardenal is President Aleman's brother-in-law. But the irony is that Nicaragua's rice-producing sector is currently quite strong, and ENABAS was importing US rice while Nicaragua was exporting rice to other Central American countries. [Popol Na Bulletin 2/13/98]