Analysts: Election Not Affecting Risk Level
MANAGUA – Despite some doubts and last-minute jitters over the outcome of Sunday’s presidential election, the prospect of a return to power by Sandinista leader Daniel Ortega has not had a significant effect on the country’s overall risk level, according to analysts.
Though views on Ortega are mixed, and hypothetical questions about a 2007 Sandinista government impossible to answer, political analyst Luis Humberto Guzmán and veteran economist Néstor Avendaño agree that the possibility of El Comandante’s return to power hasn’t had too much ripple on the country’s political or economic risk-assessments.
“The election cycle has not altered the risk level as much as last year’s open conflict between the National Assembly and the President,” said Guzmán, referring to the 2005 political crisis that was likened to a “creeping coup.”
Using a complex chart of social, political and financial indicators, Guzmán and Avendaño ranked Nicaragua’s third trimester risk-level at 55.5 out of 100 – up four points from the beginning of the year.
While the level is considered “high,” it is still lower than it was last year at this time, when the legislature threatened to impeach President Enrique Bolaños (NT,Oct. 14, 2005).
Broken down into its parts, the analysts rank Nicaragua’s economic risk at 22 (very low); financial risk, 26 (low); and political risk, 63 (high).
The elevated political-risk factor has more to do with current levels of ungovernability, social unrest and judicial insecurity, than the elections, Guzmán claims.
“The electoral campaign has served as a smokescreen to hide the President’s lack of leadership in resolving the serious problems of the country, such as the energy issue,” the analyst argued.
According to Guzmán, the biggest risk posed by the elections is not whether the Sandinista candidate wins, but whether the Liberal challengers accept defeat.
“If we look at history as a gauge of behavior, Daniel Ortega has accepted defeat the last three elections, but the Liberals have not once accepted defeat in the 20th Century,” Guzmán said.
The analyst warned that if Ortega wins, as the polls indicate, the opposition could cry foul and refuse to accept defeat, as occurred recently in Mexico.
“The most critical risk factor in the elections will be how the losers react; four of the five candidates are not going to win,” Guzmán said.
Business Sector Waits
Regarding the prospect of an Ortega victory, Guzmán claims that the business sector is not as worried as some of the campaign rhetoric suggests.
“Prominent business leaders in the country are saying in private that they aren’t panicking about an Ortega victory because they consider that the Sandinista leader understands the reality of what it means to be President today,” Guzmán said. “They also think he understands the new international context of Nicaragua, which is much more dependent on the capitalist world than it was in the 1980s.”
Guzmán added that many Sandinistas are prominent members of the business class, making it “difficult for Daniel Ortega to develop a hostile policy toward the private sector.”
Avendaño agrees Ortega has changed his tune with the times, but he doesn’t share the enthusiasm of his colleague Guzmán, who is considered by some to be a short-list candidate for a possible Sandinista government post.
Avendaño, who worked in the Sandinista government in the ‘80s, warns that there could be a “notable difference” between “candidate Ortega,” and “Comandante Ortega,” once he takes office.
“It appears that the President’s seat provokes a lot of authoritarian behavior in Nicaragua,” Avendaño told The Nica Times.
“We see this also with the current President, though he is limited by his age. But this worries me about Comandante Ortega, who is still relatively young.”
René González, president of the Nicaraguan-American Chamber of Commerce (AMCHAM), admits that the private sector’s fear of Ortega is not what it was in the past, but says there’s still “uncertainty.”
“There’s no panic,” González told The Nica Times. “There’s no capital flight like there was during the 1996 elections; bank deposits are increasing; bank loans are increasing; exports are increasing.
Everyone is going about their economic activity.”
González insists the business class still doesn’t trust Ortega entirely, but says he thinks the Sandinistas won’t try to undo the advances of the past 16 years.
“They’re not stupid; they like money, too,” he said.
Staying with the IMF
Whichever candidate wins, it will be imperative for Nicaragua to maintain good working relations with the International Monetary Fund (IMF), economist Avendaño stressed.
Snubbing the IMF like former President Arnoldo Alemán did after taking office in 1996 would have negative repercussions on the country’s macroeconomic stability and economic-risk levels, he warned.
“Regardless of who wins, he will have to establish a rapid dialogue with the IMF,” the economist said. “The risk level is low right now, but it could be worse the first semester of next year if this doesn’t happen.”
Despite macroeconomic stability and record-high levels of foreign reserves, Nicaragua’s economy has become sluggish in recent months, registering only a 2.2% growth level, according to Avendaño.
The ongoing energy crisis and daily blackouts, plus El Niño weather patterns that have affected the first planting cycle, have tugged on the country’s economy, Avendaño claims.
Plus, the economist charges, the Bolaños government has not taken advantage of historic opportunities to help Nicaragua out of poverty.
For example, he said, while the Bolaños administration has been able to reduce Nicaragua’s foreign debt by $1.2 billion through the Heavily Indebted Poor Country’s Initiative (HIPC), the country’s remaining debt to 15 other countries not belonging to the Paris Club is still $4.4 billion, or 90% of the Gross Domestic Product (GDP).
“It’s inexplicable why the government has done nothing to try to restructure this debt,” Avendaño said. “This will fatigue the next government.”
The economist argues that the government has failed to take advantage of the HIPC program by reallocating 56% of the funds freed by foreign-debt relief to pay down the country’s monstrous internal debt, instead of using the funding for development or poverty-relief programs.
“We can’t say there is a healthy fiscal situation in the country,” he said. “It looks good only when compared to the last year of the Alemán government (2001), when deficit spending reached 10%.”