Costa Rica Coffee Guide

Confusion Over Ortega’s New Biz ‘Contribution’ Plan

April 11, 2008

MANAGUA – President Daniel Ortega said the Sandinista government is planning to ask large Nicaraguan businesses to “contribute” a portion of profits to reduce the rising cost of basic food prices, which has fueled inflation for the past year.

Speaking to reporters March 31, Ortega said the Commerce Ministry is working on a plan to maintain “just prices” for basic food products, instead of the free-market’s “speculative prices” that drove last year’s 17% inflation rate. So far this year, accumulated inflation is not showing any signs of slowing down, reaching 3.3% as of February.

“We’re working on a package of measures that will appeal to producers and to big Nicaraguan businesses that are making large profits and income to contribute so that prices don’t increase, and rather, in some cases, they are reduced so that we can fight inflation effectively,” Ortega said.

Ortega said the government also plans to attack inflation – which hits the poor the hardest – by reducing rising prices for diesel fuel for public transportation and shipping. While some in the private sector say they welcome such controls on diesel prices, José Adan Aguerri, president of the Superior Council of Private Business, argues against the measure on principle.

“We’re totally opposed to any price controls,” he said.

Production costs have increased Aguerri said – energy, gas, salaries have all risen more than 20% in the past year – which is why it’s “impossible for these costs not to translate into the final cost of a product.”

“What has to be looked at is how to increase production and improve infrastructure,” Aguerri told The Nica Times.

He said any attempts at controlling fuel costs for the shipping and transport sector need to be worked out by the private sector and then presented to Ortega, rather than the other way around.

Ortega’s comments about his new “business contribution” plan came a week after a commission from the International Monetary Fund (IMF) visited Nicaragua to study inflation-reduction mechanisms.

The IMF approved Nicaragua’s economic policies in March, including salary increases, and scheduled another visit for May.

“We have to be responding constantly to this situation,” Aguerri said of inflation.

Avil Ramírez, manager of the Nicaraguan-American Chamber of Commerce (AMCHAM), said the private sector supports the government’s inflation-reduction policies “as long as they are within the Constitution and the law.”

“The private sector always backs the government when it doesn’t change the rules of the game,” he said.

He said he hasn’t heard enough details about Ortega’s newest “contribution” plan to comment on it specifically.

Others echoed the confusion over Ortega’s plan, saying there’s a general lack of information from the government.

“At this moment, we have no information about that,” said Carlos Guerra, commercial manager of Chinandega-based vegetable oil company Acietera Real. “We haven’t received anything from the government.”

Juan Ramón Galeano, engineer at the bean cooperative Agronegocios, said he too hadn’t heard any details of the government’s inflation-reduction plan, but doesn’t dismiss it on theory.

He said “if we all agree as Nicaraguans to support the wellbeing of the poorest,” then the contribution should be manageable, “if everyone participates.”

However, he added, if only a portion of the private sector participates in the program, “we wouldn’t be playing fair.”

Ortega, meanwhile, seems confident that the plan will work, even if no one else seems to know the details yet.

“I’m sure we’re going to have the backing of Nicaraguan businesses, because they aren’t going to lose,” Ortega said. “To the contrary, they’ll continue making a lot of profit, but with those large profits they have and the subsidies they’ve historically received, they’re going to contribute so that Nicaraguans can pay a just price for products produced in Nicaragua.”

 

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