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Is Nicaragua Winning War on Poverty?

MANAGUA – The Sandinista government’s claim to have achieved a “spectacular reduction in extreme poverty” in Nicaragua is being met with as much skepticism as cheer.

Citing results from a recent survey conducted by the International Foundation for Global Economic Challenge (FIDEG), the Sandinista government claims that between 2005 and 2009, the poverty rate in Nicaragua dropped from 48.3 percent to 32.9 percent, while extreme poverty dipped from 17.2 percent to 9.7 percent.


In other words, the government says poverty has been reduced by 15.4 percent, while extreme poverty is down 7.5 percent. And in the rural countryside, extreme poverty has fallen by 12.3 points, from 30.5 percent to 18.2 percent, according to the survey.

The remarkable reduction in poverty has allegedly occurred mostly on the watch of President Daniel Ortega, who returned to office in January 2007.

The FIDEG survey also suggests that the divide between rich and poor is closing as the poorest percentile of Nicaraguans consume more, while the richest percentile consume less. Nicaragua, the Sandinista government boldly claims, is now “the most equitable country in Central America.”

The FIDEG survey was conducted with funding from the Swiss and Dutch governments, as well as the World Bank. A second government survey conducted in 2009 by the official National Institute for Information and Development (INIDE) indicates a slightly less dramatic reduction in poverty, but a reduction all the same.

The important thing for the government is that poverty is on the decline – something the Sandinistas attribute to Ortega’s policies and the benefits of “ALBA” (Venezuelan aid given under the auspicious of the Bolivarian Alliance for the Americas).

“This is the result of the product of the poverty-reduction policies of President Daniel Ortega, which have functioned even during the Great World Recession of capitalism,” read a government release issued this week.

The Sandinistas claim the reduction of poverty is due to a government that prioritizes “the people.”

“The governments of savage capitalism prioritize profit above people, while the government of Comandante Ortega – the government of reconciliation and national unity – prioritizes the people above all, and prioritizes the poor,” said Paul Oquist, Ortega’s private adviser.

Oquist pointed to the government’s social programs, such as Hambre Cero (Zero Hunger), loans for women, homes and roofing materials for the poor, and the national literacy campaign, as examples of programs that are improving the lives of the poor.

“If we’ve achieved these good results with social programs in difficult economic times, imagine what we’ll achieve under  other conditions in three or four years, now that the economy is starting to recover  – the results will be even better,” Oquist told state TV, the only media he’ll talk to.

 Other Sandinista officials have also lined up dutifully to congratulate their leader.

Sandinista lawmaker Wálmaro Gutiérrez, president of the legislative Economic and Budget Commission, said the reduction of poverty is due to the government’s prioritizing budgetary spending on health, 

education, rural credit and production.

“If you look at the indicators of previous years you will see that the majority of resources were not going towards these areas, and as a result poverty was stagnant. But now poverty is not stagnant, it is clearly reducing,” Gutiérrez said.

           Fuzzy Math?

Not everyone is convinced the government is winning the war on poverty.

Economist Sergio Santamaría, director of the Cinase research firm, says there is “something weird” about the survey’s findings.

Santamaría notes that overall the economy last year contracted by -1.5 percent, thousands of jobs were lost and per capita income did not improve, and possibly dipped.

In fact, since Ortega took over, the economy has only grown by an average of 1.5 percent over the past three years, while the government’s budget has shrunk.

Santamaría says it’s difficult to see how poverty is being reduced alongside a falling economy.

“It doesn’t add up,” he said.

Opposition economists agree that the numbers don’t seem to make sense.

“In my over 40 years of experience as a development economist in Africa, Asia and Latin America,  it is inconceivable that this kind of anemic economic growth could translate into important changes in poverty statistics,” said opposition lawmaker Francisco Aguirre, vice president of the legislative Economic and Budget Commission.

He added, “Nicaragua is still Latin America’s second poorest country. To put a real dent into poverty in the country, it would need to average at least three percent in real per capita income growth over a sustained period.”

Aguirre, however, said it has been impossible for him to do a more profound analysis of the FIDEG survey, since it hasn’t been released in its entirety or provided to independent economists or opposition lawmakers who have requested a copy.

FIDEG, a Nicaraguan non-governmental organization, is run by economist and businessman Alejandro Martínez Cuenca, the former Sandinista Minister of Foreign Trade and a previous Sandinista presidential hopeful (NT, March 24, 2006).

The Nica Times this week wrote to and called the FIDEG office in Managua to ask Martínez if the Ortega administration was correctly interpreting his survey results. But he didn’t respond.

Based on other poverty studies, Aguirre says some of the government’s recent claims are hard to swallow, including the one about Nicaragua’s economy becoming more egalitarian. He said the 2008 World Development Indicators showed that the poorest 20 percent of Nicaragua’s population shared only 5.6 percent of the income, while the richest ten percent account for 34 percent.

“An interesting phenomenon that has occurred since 2007 is that a growing share of the income held by the top 10 percent of the population is in the hands of Daniel Ortega and his closest associates,” Aguirre told The Nica Times. “According to most informed observers, the president is now one of Central America’s richest persons and may be the richest by 2011, the last year of his term.”

        ALBA Trickle Down?

The government acknowledges that the reduction of poverty may seem counter intuitive to some.

“The reduction of extreme poverty during the government of Comandante Daniel Ortega cannot be attributed to a great economic expansion. Instead, these results have come during a Great Depression of capitalism,” reads the government release from the office of Sandinista communication tsar Rosario Murillo. “This leaves perplexed those who believe that the only way to reduce poverty is through the trickle-down effect of benefiting the rich.”

Instead, the government claims, the poverty reduction is due to the “programs and social spending” of Ortega’s government, “backed by the resources of ALBA.”

“The government of Citizen Power stresses that the reduction of poverty has not come from the following the trickle-down model, which means promoting economic development exclusively for the rich while impoverished sectors wait for the breadcrumbs,” Oquist said.

Yet considering Venezuelan President Hugo Chávez has given Ortega $1.1 billion in “ALBA resources” – money that is controlled directly and privately by the presidential couple, without any public oversight – in a sense, the aid that gets to the poor is trickle down – ALBA trickle-down.

 The Mood in the Countryside

Cirilo Otero, who works closely with campesinos in various parts of the country as head of the nongovernmental Center for Research on Environmental Policy, said the mood and conditions in the countryside do not reflect the claims of dramatic socio-economic improvement boasted by the government.

Otero argues that the government, despite its rhetoric, has not prioritized agricultural production. As proof, he points to statistics on the use of fertile farm land: When Ortega came to power in 2007, there were 610,000 manzanas of farm land out of production. Now there are 650,000 manzanas of fallow farmland, Otero said.

“Agro exports and big production are up, but overall production is not growing,” Otero said.

Otero also criticizes “Hambre Cero,” the government’s pillar social program in the countryside to provide small farmers with pregnant pigs, a milk cow and chickens – the basic tools needed for them to start producing.

The idea of the program is once the small farmers get on their feet, they pay into the system by providing similar assistance to other poor farmers, giving the program a component of exponential growth.

Otero says Hambre Cero is an “excellent idea,” and that the government clearly wants it to work. The problem, he added, is that the government doesn’t have the vision or capacity to execute it properly.

Despite the president’s promises to benefit 100,000 campesinos with Hambre Cero packages by 2011, so far the government hasn’t gotten halfway to its goal.

Otero claims only 35,000 families have benefited so far, and that the project has essentially been “detained” for the past six months, as the government tries to readjust the program so that it will comply with the conditions of the Inter-American Development Bank (IDB), which agreed to give $20 million towards the project earlier this year.

The IDB told the government it has to make the Hambre Cero more inclusive (not just benefiting Sandinistas) and has to include more technical assistance to small farmers, Otero said.

For the program to really work and have a sustainable impact on poverty reduction, Otero said, it needs to provide more technical assistance, be incorporated as part of a broader vision of rural development, introduce new technology to modernize agricultural production, and provide new market options for producers to export their products.

Instead, Otero said, the government is creating an unsustainable model of handouts propped up by political trade with Venezuela, which could fall apart as soon as there’s any change of government in either country.

“What they are doing in the countryside is similar to the model of the free-trade zone maquilas; they are providing jobs, but not providing people with any new tools or knowledge. They are not investing in the productive workforce,” Otero said. “And like the free-trade zones, it could all go away at any moment.”

 Migration Patterns Changing?

While Otero claims there isn’t as much reason for optimism as the government claims, others see hints of change in the countryside.

Martha Cranshaw, head of the national Immigrant Network, said that overall emigration numbers haven’t changed in the countryside, but they are beginning to see a new trend in the way people emigrate.

Whereas many seasonal migrant workers used to go to Costa Rica for eight to 10 months a year, a small percentage of Nicaraguan migrants are going to Costa Rica for shorter periods and spending part of the year cultivating small plots of land in Nicaragua, too.

Cranshaw said that this group of people is reduced to “older campesinos who have land in Nicaragua and access to government programs.” Most of them are “traditional Sandinistas,” she said, but not all.

Cranshaw said her organization is also noting that campesinos have been helped considerably by government efforts to provide free health and education services – two areas that previously consumed much of their family income. As a result, she said, people have slightly more money to spend on other consumer products, even though their incomes have not increased.

Cranshaw says advances in free health and education services probably explains the 12 percent increase in consumption about which the government is boasting.

But in broader terms, she said, “there has been no reduction in emigration or a return of migrants who have left Nicaragua”—two indicators that would really suggest poverty reduction and an improved quality of life in the countryside. An estimated 1.5 million Nicaraguans – or nearly one in five – have emigrated abroad.

“On a macro level, the situation has not changed,” Cranshaw told The Nica Times. “Those who left 10 years ago, are still living abroad.”


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