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U.S. freezes $64 million in aid to Nicaragua

November 21, 2008

MANAGUA, Nicaragua – Citing “deep concern” over Nicaragua´s democratic process, the U.S. Millennium Challenge Corporation (MCC) announced yesterday that it is freezing $64 million in aid pledged to Nicaragua over the next year and a half.

A day after U.S. Congressman Howard L. Berman, chairman of the House Foreign Affairs Committee, urged the MCC to suspend its $175 million program in Nicaragua due to concerns over the decline of democracy here, the U.S. developmental-aid organization announced Nov. 25 that it is suspending all disbursements for new projects not under contract.

In a press release sent out yesterday afternoon, Ambassador John Danilovich, CEO of MCC, expressed “deep concern and disappointment” over the Nov. 9 municipal elections in Nicaragua, which have been riddled with allegations of fraud, and he ordered MCC to re-evaluate its compact with Nicaragua.

“We had hoped, for the sake of the Nicaraguan people, that the government would continue the country´s trend towards peaceful, democratic and credible elections,” Ambassador Danilovich said. “I am afraid recent evidence shows that this is not the case.” 

Sarah Stevenson, media relations officer for the MCC in Washington, D.C., told The Nica Times in a phone interview yesterday that the MCC has already contracted $111 million of the $175 million it committed to Nicaragua. That means an outstanding $64 million has been frozen.

Stevenson said that most current projects and employees of the MCC in Nicaragua will not be affected, but that the organization will not be disbursing funds for any new projects. However, the “N1” highway under construction from Managua to León could now suffer from some “potential hold ups,” and other projects such as land titling in León and rural business development in Chinandega could be affected, Stevenson said.

César Zamora, president of the Nicaraguan-American Chamber of Commerce (AMCHAM), told The Nica Times yesterday that a suspension of MCC funding for Nicaragua would be a “nuclear bomb for the economy” and urged the U.S. government to give Nicaragua some time to find its way out of the woods.

Danilovich acknowledged that concern in yesterday´s release.

“I am very concerned about the impacts any holds on our program will have on Nicaragua´s poor, so it is taken very seriously and with the hope that the Nicaraguan government will do all it can to reestablish what has been an effective partnership,” he said.

Danilovich added, “We call on the government to return to democratic norms and respect for the democratic process.”

The release said that the MCC “will continue to monitor the situation” and that its board of directors will discuss the next steps for Nicaragua´s eligibility during its next meeting on Dec. 11.

The MCC´s five-year grant for Nicaragua was signed July 14, 2005, and “seeks to support those living in the Departments of León and Chinandega by significantly increasing incomes of rural farmers and entrepreneurs,” according to MCC.

President Daniel Ortega initially mocked the MCC compact for taking a “millennium” to show any benefits, but after a Jan. 23 meeting with Danilovich he publically applauded the program by shouting, uncharacteristically, “ ¡Que viva el pueblo de los Estados Unidos!”

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