NicaNotes: US sanctions hit Nicaragua’s social investment programs

By John Perry

[This article was first published in The Morning Star on Nov. 7, 2023.]

(John Perry is based in Masaya, Nicaragua, and writes for the Council on Hemispheric Affairs, London Review of Books, FAIR and other outlets.)

Finance Minister Ivan Acosta (right) tells John Perry that Nicaragua has an excellent reputation globally for completing projects and accounting for the money it receives.

Which country spends nearly two-thirds of its budget on tackling poverty? When I met Nicaragua’s finance minister, Ivan Acosta, he had just presented his 2024 budget to its National Assembly, and he made clear that a large part of it is aimed at doing just that.

In cash terms, Nicaragua’s government will spend about 24% more in 2024 than in the current year, which includes a huge increase (43%) in public sector investment. Acosta explained how the country would continue its recent advances in health, education, transport, energy, water supply, housing and local government services. Less than 3% of spending is for defense, and in any case Nicaragua’s army has mainly civil duties such as dealing with frequent natural disasters and preventing deforestation.

Nicaragua’s per capita income is one of the lowest in Latin America, so poverty alleviation is a high priority. It might be expected that the World Bank and other international institutions would be helping the country to achieve this goal. And yes, they were, but now they aren’t. This isn’t because of corruption or poor accounting.

Acosta tells me that Nicaragua has an excellent reputation globally for completing projects and accounting for the money it receives. When the revolutionary Sandinista government regained power in 2007, only $70-80 million was arriving from institutions like the World Bank: a decade later, it had reached $300-400 million, because the banks knew the money would be wisely spent.

But then Nicaragua was hit by an attempted coup in 2018, and the economy ground to a halt for three months (the Morning Star has four articles on the coup, starting here and NicaNotes has several eBooks on the attempt including here and here.)  It had been several years since the country had needed economic support from the International Monetary Fund, but suddenly it needed it to avert the risk of money flowing out of the country. Acosta told me that IMF officials, happy with the government‘s track record, were ready to approve emergency loans.

However, coinciding with the coup attempt, legislation was passing through the US Congress imposing sanctions on Nicaragua. These would require US officials to block any funding by international bodies where they have the power to do so, such as within the IMF. Acosta was therefore quietly asked by the fund’s officers not to request any loans as they would be turned down once the request reached IMF directors.

The sanctions imposed by the US on Nicaragua in 2018 and again in 2021 were the first since the economic blockade that destroyed the country’s economy in the 1980s. This led to the Sandinistas being voted out of office in 1990. The US has still not paid the $17 billion claimed in reparations by Nicaragua when it took the US to the International Court of Justice and, in 1986, won its case. Washington, undeterred by this past ruling, had sponsored the coup attempt and intended it to devastate Nicaragua yet again. Hoping to ease the Sandinistas out of office for a second time, Washington had no intention of allowing the IMF to bail the government out. However, by 2018 Nicaragua was better prepared, saw out the violence, restored order and launched a public investment program to bring life back to the economy using its own resources.

Not only was there no help after the coup attempt, but the answer was virtually the same when Covid-19 hit the country in 2020. By the middle of that year, when the pandemic was at its most severe, Nicaragua had received almost no help from the US or its allies. This contrasted with its neighbor, Honduras, to which the US quickly sent $8 million in cash plus large amounts of medical supplies. When help for Nicaragua eventually arrived in December from the International Financial Institutions, following two devastating hurricanes, it came in much smaller quantities than had been requested.

Nicaragua has succeeded in cutting the proportion of its people living in poverty to 24.9%, a lower level than all its neighbors apart from Panama. But more could have been achieved with international help: Ivan Acosta estimates that the country has been denied funding worth between US$2.5 and US$3 billion in total since 2018, all of which would have been earmarked for social programs. As he puts it, a country whose income per head is about $2,500 annually is being penalized by countries (the US and its allies) whose per capita income is as much as $70,000.

Nevertheless, Acosta is optimistic: he points out that Nicaragua is enjoying the fastest economic growth in Central America since the pandemic – 15.9% over three years compared with the regional average of 12.1%. Nicaragua successfully fought Covid-19, largely by itself, and its recovery since then meant that government income was increasing. Smaller amounts of funding are still provided by the Central American Bank for Economic Integration (CABEI). Acosta notes that since the US has no control over how CABEI disburses it funds, these should continue. In addition, the country’s new relationship with China has already led to investment in projects such as affordable housing (China has just granted funding for more than 700 new homes). Nicaragua maintains a close relationship with many other countries such as Russia, Japan and South Korea, many of which also provide development funding.

Nicaragua has by far the most public hospitals in Central America

A recently published chart shows that Nicaragua has the most public hospitals in Central America – 77 in total, while much wealthier Costa Rica and Panama have just 29 and 18 respectively. A third of these hospitals are new ones, built in the last 16 years. But Ivan Acosta wants to build more. He points out that a 450-bed hospital costs $130 million to build. How many more could Nicaragua have, he asks, if Washington hadn’t stopped the World Bank and other international institutions from financing them?

By Nan McCurdy

National Assembly Ratifies Trade Agreement with China
The signing of the trade agreement between Nicaragua and the People’s Republic of China was unanimously ratified on Nov. 16 by the plenary of the National Assembly. The trade agreement guarantees the immediate access for 91% of Nicaragua’s exportable products with tariff preference to the Asian giant’s market. It is the first international trade agreement that includes a special chapter for small and medium-sized enterprises which will have access to training and fairs in order to enter this market of more than one billion citizens. Among the products that may be exported as of January 2024 are: textiles, automotive harnesses, beef and beef offal, fish, shrimp, lobster, rum, sausages, chocolates, leather, and hammocks. (La Primerisima, 16 November 2023)

Nicaragua Officially Leaves OAS 
On November 19, 2021, the Sandinista Government announced that it was initiating the two-year process to definitively leave the Organization of American States (OAS), often referred to as “the Ministry of Colonies of the United States.” On Nov. 19, 2023, that deadline was met and Nicaragua no longer has any ties or obligations to the OAS which the government said was “organized by the US power to cover up and justify its aggressive actions.” On Nov. 20, Foreign Minister Denis Moncada summarized the Sandinista Government’s reasons why Nicaragua decided to continue its national liberation process by leaving the OAS. To read more details: (La Primerisima, 20 November 2023)

Alto Wangki to Have a Higher Education Center
Representatives of the Alto Wangki and Bocay Indigenous Territorial Government and the National Agrarian University (UNA) signed an agreement creating the first Indigenous and intercultural school of higher education in the special regime zone established in 2008 as part of the Autonomy Process. The University is expected to be inaugurated in February 2024 and will be located in the community of San Andrés de Bocay in the Miskitu Indian Tasbaika Kum Territory and will be serving young people from the Miskitu and Mayangna peoples of the Upper Wangki and Bocay who have demanded from their territorial authorities the right to higher education with equal opportunities and conditions. During the signing of the agreement, the rector of the UNA, Alberto Sediles Jaén, explained that the coming of the university to this area is a sign of the good will of the Sandinista Government to build new and better opportunities for Indigenous youth. (La Primerisima, 16 November, 2023)

Ensuring Greater Access to Quality Education
The Ministry of Education reported that US$1.5 million was invested to rebuild, expand, and equip the schools in San Rafael del Sur municipality, Managua department, benefiting 1,459 students. The financing is part of the Project for Improvement and Rehabilitation of Educational Centers ensuring access to free and quality education for all. (Nicaragua News, 17 November 2023)

Advances in Electricity Coverage
National electricity coverage in Nicaragua was 99.37% at the close of October. Between January 2nd and October 31st this year, 186 electrification projects were carried out, benefiting 40,782 inhabitants. Electricity coverage has expanded from 54% in 2007 to 99.37% at the end of October. (Nicaragua News, 16 November 2023)

CABEI Renews Credit Line for US$200 million
The Central American Bank for Economic Integration (CABEI) renewed a credit line agreement for up to US$200 million to support the liquidity management of the Nicaragua Central Bank, which is responsible for monetary and exchange rate policy in the country. According to a note from the Central Bank, the renewal of the credit line strengthens the country’s financial safety net, safeguarding financial stability and contributing to the credibility of the exchange rate regime, a pillar of Nicaragua’s macroeconomic stability.  This is the fourteenth renewal of the credit line with CABEI, which is revolving, with a one-year term beginning on August 21, 2023. The Central Bank subscribed to this instrument for the first time on August 21, 2009. CABEI’s financial support will contribute to the stability and promotion of Nicaragua’s economic development. (La Primerisima, 17 November 2023)

Government proposes Valdrack Jaentschke for SICA Secretary General
President Daniel Ortega proposed his Minister Advisor for Policies and International Affairs, Valdrack Jaentschke, as the new Secretary General of the Central American Integration System (SICA), after the resignation of Nicaraguan Werner Isaac Vargas Torres, who held the position. The other two candidates proposed by the Nicaraguan government are Violeta Irías Nelson, from the Office for the Defense of Human Rights, and Sandinista National Assembly Deputy Iris Marina Montenegro. In his letter, the Nicaraguan Foreign Minister presented the list of three candidates for the election and appointment of the new Secretary General of SICA, “who will continue with the 2022-2026 period corresponding to the Republic of Nicaragua.”  Jaentschke, who heads the list, is also minister counselor with consular functions of the Nicaraguan embassy in Costa Rica. (La Primerisima, 18 November, 2023)

Nicaragua to Be Headquarters of the OIRSA Regional Training Center
During the 31st Extraordinary Meeting of the Technical Commission of the International Regional Organization for Plant and Animal Health (OIRSA) held last week in the Dominican Republic, Nicaragua was selected to be the headquarters of the new OIRSA Regional Training Center. Ricardo Somarriba, executive director of the Nicaraguan Institute of Agricultural Protection and Health Safety (IPSA), stated that “The selection of Nicaragua as headquarters of the Regional Training Center is a recognition of the great achievements of the country in the prevention and control of pests in the agricultural sector. It formalizes the health and safety assistance that Nicaragua already provides to the countries of the region.” (Nicaragua News, 20 November 2023)

Investments in Free Trade Zone Companies Increases
A new free trade zone distribution center of unnamed US capital in Mateare is opening in 2024, where it is projected to generate more than 1,000 jobs. The modern industrial building has a length of 52,000 square meters and 20 to 30 containers will leave daily with products to be shipped out of the Port of Corinto. “We had the opportunity to have placed the distribution center in any other part of Central America, since we have operations in many countries; here we saw the benefits of investment and centralized logistics,” said Leonel Sanchez, director of logistics for Central America of this international company. For this center, US$23 million was invested in infrastructure and another US$3 million to acquire modern equipment, since jackets, shirts and pants are shipped from here to other countries. “Nicaragua has been a strategic partner for our company since 2014, in 2020 we started our own operations,” said Barrantes, and currently have three plants in operation and expect to open another one by 2024 that will generate 1,000 jobs. (La Primerisima, 20 November 2023)

Nicaraguan Wins Miss Universe
Sheynnis Palacios made history for Nicaragua by winning Miss Universe 2023. The 72nd edition of Miss Universe took place in San Salvador. Almost 90 delegates from all over the world competed for the crown. For the first time in the history of the contest, the winner was Miss Nicaragua. On Nov. 18, during a brief press conference Palacios announced that her crown “is dedicated to the girls all over the world, to my inner child, to my family and to the more than six million inhabitants of my country,” and thanked “life and God for the opportunity.” Palacios completed a degree in communications at the Central American University (UCA) in Managua in 2022. See photos: (La Primerisima, 19 November 2023)