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Thursday, June 1, 2023

IMF Negotiations Snag on Social Policies

MANAGUA – Central Bank president Antenor Rosales told The Nica Times this week that there is still no clear timeframe to conclude negotiations with the International Monetary Fund (IMF), but says that he hopes a new economic-aid package will be negotiated before the end of the year.

Rosales said that the Sandinista government’s negotiation team, which was in Washington, D.C. last week taking part in its third round of talks with the IMF, has made some advances with the fund. However, he explained, the two appear to be in a stalemate over two issues that are of fundamental importance to the government: energy production and the inclusion of social policies in the IMF program.

“The IMF has taken a very closed position on these issues,” Rosales said.

The Central Bank chief said that the government is negotiating with the IMF based on the principles of the administration’s economic and fiscal plan, which calls for a gradual  but sustained increase in social spending and poverty-relief programs over the next three years. The plan, Rosales explained, sets a series of goals aimed at achieving the United Nation’s Millennium Development Goals of halving extreme poverty and providing universal primary education by 2015.

Rosales says the administration wants to include these social goals within the framework of its program with the IMF, but that the monetary fund has balked at the idea.

“Economic growth doesn’t mean anything if it doesn’t lead to substantial improvements and structural changes to health, education, and access to drinking water,” Rosales said, adding that the Sandinistas’ economic and fiscal plan will work toward these ends with or without the IMF.

The Sandinistas’ economic and fiscal plan, he explained, is designed to reflect the vast diversity of needs and interests in Nicaragua, while creating a climate where production can grow, wealth can be generated and social indicators improved. The state, he said, plays an important role of making sure that the country’s development is integral and takes into consideration the wellbeing of all its citizens.

Power Player

Rosales also stressed the importance of Nicaragua investing – as a state – in energy production. The current energy deficit, he said, has to be overcome in order for investment to come into the country, jobs produced and the economy to grow.

Several business chambers have complained in recent weeks that the near daily blackouts suffered in parts of Managua during the first half of June have started to take a toll on the economy and production.

“The Nicaraguan state must invest as an agent in energy production, and this is not subject to discussion,” Rosales said.

As the Central Bank president gave his June 13 speech to a conference room full of 100 business leaders of the U.S.-Nicaraguan Chamber of Commerce (AMCHAM), the power went out three times. The momentary blackouts provided unintentional exclamation points to Rosales’ call for the country to invest in energy production.

The terms of Nicaragua’s structural adjustment, however, won’t allow it.

The IMF and World Bank urged Nicaragua years ago to privatize its energy sector – both generation and distribution – and lock itself into long-term contracts to purchase petroleum-based power (NT, July 1, 2005). Additionally, the conditions of Nicaragua’s debt forgiveness under the Heavily Indebted Poor Countries (HIPC) initiative prevents the government from being able to take loans to invest in power generation plants.

The results of the “neoliberal” energy plan for Nicaragua have been disastrous.

Nicaragua’s energy sector is now 70% dependent on foreign oil and is running an overall power deficit that has oscillated between 5-28% during the last year. That has translated into energy rationing policies and periods of daily blackouts of up to 10 hours in some parts of the country.

According to Emilio Rapacciolli, the Minister of Mines and Energy, the current power deficit in Nicaragua is around 10%, due to recent technical failures at two major plants. But the problem is still not as bad as the 24% energy deficit that the Sandinista government inherited from its predecessor last January.

Contributing to the gradual improvement, according to Rapacciolli, has been the 60 megawatts of installed energy from the so-called “Hugo Chávez” plants donated by the Venezuelan President in past months.

Also, the Taiwanese government, desperate to keep its remaining friends in the region, announced this week that it will be donating two power plants to Nicaragua by the end of this year. The donation was announced the day after an article in a Taiwanese newspaper predicted that Nicaragua would be the next country to follow Costa Rica’s example and sever ties with Taiwan in exchange for diplomatic relations with China – a move that the Nicaraguan government claims it is not yet ready to follow (NT, June 15).

So for now, although Nicaragua doesn’t have the conditions to invest in its own energy sector, it has some rich friends who can.



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