MCC cuts $64 million in aid to Nicaragua

June 5, 2009

U.S. Secretary of State Hillary Rodham Clinton and the rest of the board of directors for the Millennium Challenge Corporation (MCC) have officially decided to cut the remaining $64 million in development aid for Nicaragua as punishment for President Daniel Ortega´s governance practices.

The MCC aid, which was originally suspended last December due to serious concerns over electoral fraud in the Nov. 9 municipal elections, was irrevocably cut Wednesday. The MCC stressed that it will continue to honor the some $110 million it has in contracts to complete works in progress, but will not issue any new aid to the Ortega government.

Nicaragua is only the second country in the world to have MCC aid cut as punishment for bad governance. The other country was Madagascar, which had its MCC compact suspended earlier this year following a coup.

“Although the Board would like to continue in full MCC´s support for Nicaragua´s economic development, we remain committed to upholding MCC´s founding principles of working with those countries whose governments actively demonstrate a commitment to democracy and the rule of law,” said MCC CEO Rodney Bent in a statement. “Given the lack of meaningful reforms or progress in these areas by the government of Nicaragua, the Board has agreed to terminate these projects.” 

Bent continued, “This decision is made with deep disappointment, as our partnership with Nicaragua has yielded tremendous progress over the past years in reducing poverty through innovative economic growth projects. MCC regrets that the government of Nicaragua has not taken steps to respond to concerns expressed by its people and the international community surrounding the recent municipal elections. This has made it impossible for us to fully continue our collaboration with the government of Nicaragua.”

The Ortega administration wrote off the MCC aid months ago, when it was first suspended. Administration spokesmen accused the MCC of trying to “blackmail” the government.

Ortega has said that Venezuelan President Hugo Chávez will replace the lost aid by providing Nicaragua with $50 million – a promise that already has opposition lawmakers concerned it will come in the form of a new loan, increasing Nicaragua´s debt to Venezuela. The MCC compact was grant money that did not need to be repaid.

Some analysts fear the other shoe could drop later this week. The European donor community, which froze some $70 million for Nicaragua last year due to similar concerns over the electoral process, was scheduled to finish its negotiations with the government on Wednesday. The European donors said they would be watching the MCC decision closely (NT, May 22).

Independent lawmaker Salvador Talavera, a member of the National Assembly´s Economic, Budget and Productivity Commission and a former Contra leader, lamented the MCC ruling and blamed the Sandinista government of selfish governance.

He said the MCC´s aid cut should be viewed as a serious wakeup calls that “things are not going well” in Nicaragua, and be cause for reflection.

“This decision reinforces the popular sentiment that the political class of Nicaragua is not responding to the will of the people,” Talavera told The Nica Times. “Unfortunately, once again, it is the poor people who are going to have to pay for the broken plates.”

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