Trump’s Budget Would Cut Aid; Nicaraguan Leaders Aren’t Concerned

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Economic sector leaders recently spoke out unanimously that Trump’s proposed budget cuts in foreign aid will not affect Nicaragua. The threat of the NICA Act, though, does continue to look malignantly over the horizon, so let’s explore this week where economic relations stand between Washington and Managua.

In the US system, presidents present a proposed budget around this time of year. The budget should be understood as a political document, not a financial document. The US press is quick to declare the president’s budget “dead on arrival” no matter who the president is. Presidential budgets are already smelly and decomposing if the Congress is held by a party different from the president. But even though this year both branches of government are held by the Republican party, Trump’s inexperience and the radical changes proposed in his budget, probably make his budget just as much worm meat as Obama’s last six budgets after he lost congress in the first mid-term election of his presidency.

That doesn’t mean that Trump won’t get anything he wants, but there are lots of steps to the spending process and there are economic interest groups defending every dollar in the budget and using campaign donations and other means to insure congressional support for their little space at the pig trough of public spending. Trump can’t just wave his hand and sweep the entrenched interests from the game board.

It is true that some areas of spending have more powerful economic and political interests defending them than others. Foreign aid may well be one of the least defended areas in the budget and therefore most vulnerable to cuts on the order of 50% which is what Trump is proposing overall. (Much deeper cuts for Nicaragua.) The question is whether that’s a bad thing.

Foreign aid has always been a tool to achieve US foreign policy objectives, but beginning with Reagan and increasing under each of his successors, Republican and Democrat alike, the money has been spent less and less on brick and mortar projects that were arguably of some benefit to the recipient country, and more and more on the mis-named “democracy promotion” funding of opposition groups and projects to destabilize the country and promote anti-democratic forces. So you won’t see me joining any campaign to “save foreign aid.” The published analysis by Nicaraguan leaders on the effect of US aid cuts reflects that US aid has actually become irrelevant to the Nicaraguan economy. That’s true not just because its focus has changed but because its level is already so low as to make no difference. Luxembourg, the smallest country in Europe sends more bilateral aid to Nicaragua annually than does the United States!

Presidential economic advisor Bayardo Arce said that in the short term Nicaragua’s economy could withstand threats of reduced US aid, US protectionist moves, and even the NICA Act, if it passes. Arce pointed out that he’s not aware of any US aid actually going to the government of Nicaragua except maybe a little to the Army to fight the Drug War. Any other US aid is directed to civil society groups, the great majority of which oppose the Sandinista government.

Jose Adan Aguerri, president of the big business advocacy group, COSEP, said there is no reason for alarm because already the only countries [in Latin America] that still have substantial, though diminished, US aid, are those with direct migration problems such as Mexico, Honduras, El Salvador, Guatemala and Haiti. “The rest of the countries such as Costa Rica, Panama, Uruguay, Paraguay, Nicaragua, have already seen aid cut to a minimum,” he said.

Other business leaders echoed his remarks. Alvaro Rodriguez, president of American Chamber of Commerce of Nicaragua (AmCham) said, “For the moment I don’t consider it a cause for alarm.” Mario Arana, director of the Association of Producers and Exporters of Nicaragua (APEN) and former president of the Central Bank (BCN), said that President Trump’s proposal was due to internal affairs in the US. “In relation to Central America, they are more concerned with issues of security and migration. However, I think this [the proposed cuts] is preliminary and we still have to wait,” he said.

The only concern was raised by Michael Healy, president of the Union of Agricultural Producers of Nicaragua (Upanic), who said that this decrease will affect the training of small Nicaraguan producers. “This is definitely a blow to the small producers who have been trained with these funds,” Healy said. If adopted by Congress, the Trump budget would cut aid to Nicaragua from the current US$10 million to a mere $200,000 which would have quite an impact on opposition political and civil society groups which lack support within their own country.

We should be clear that the NICA Act, which, if passed by both Houses of Congress and signed by the president, would require the US governors for the IMF, World Bank, and the Inter-American Development Bank to vote against multilateral loans to Nicaragua, is a much bigger threat than the cut in US aid, but perhaps, as Bayardo Arce indicated, not as big a threat as initially thought.

The Nicaragua Investment Conditionality Act (H.R. 1819) took another small step forward when it was approved unanimously by the Western Hemispheric Affairs sub-committee of the House Foreign Affairs committee. That sets it up potentially for a hearing by the full committee. If passed there it would go to the Speaker of the House to put on the House calendar for a vote. When it is scheduled would depend on other legislative priorities such as the no-healthcare bill, tax reform, Trump’s Russia ties, etc.

If it should be voted on and approved by the House, it then goes through a similar process in the Senate. El Nuevo Diario says that the full Foreign Relations Committee of the House will take up the NICA Act in early June. That is possible, and that is what happened last Fall prior to the elections. What happened then is that it passed the full House by unanimous consent which means it wasn’t thought be the leadership of either party to be controversial. Members of Congress didn’t actually vote on it or even necessarily have any knowledge of it. It is important to be in touch with your Congresscritter to make sure they tell Nancy Pelosi, the Minority Leader, that the NICA Act is a bad bill and one that should not be passed on a unanimous consent docket. This is particularly important if you live in the Districts represented by Maxine Waters or Joaquin Castro who are leading Democrats on relevant committees and whose word alone to Pelosi would be enough to block the bill from unanimous consent.

Former Liberal Party Foreign Minister Francisco Aguirre Sacasa thinks that the House will pass the NICA Act in July, but didn’t know its prospects in the Senate. Congress normally goes on a long recess in August when temperatures and humidity in Washington, DC are at their most miserable. So, if the NICA Act is considered by the Senate, it will not be until Fall at the earliest.

US Ambassador Laura Dogu said that, in the hypothetical case that the NICA Act passes, the Trump administration will continue to work with the government and people of Nicaragua. “Our focus is prosperity, security, and democracy, working where we have interests in common…,” she said.

And finally, it is not at all certain that the US, under Trump, will be able to maintain the effective veto power it has exercised before in the multilateral lending institutions. We reported a few weeks ago that the Inter-American Development Bank has changed its voting procedures so that the US no longer has the votes to block a loan by itself. In the IMF and World Bank, it never has, but other countries have deferred to the US giving it an effective veto. Given Trump’s alienation of European leaders in particular, I think there is a possibility that the US could no longer dictate decisions by the World Bank and IMF.

None of this is to imply that Nicaragua is not under a real threat and that it is our job to oppose US intervention just as we have for the last 38 years.



  •  Trump’s withdrawal from the Paris climate accord has brought attention to the fact that only Nicaragua and Syria had not signed the Accord. Initial corporate media coverage tried to paint Trump as joining the “bad” company of Ortega and Assad, but surprisingly, coverage soon turned to truthful reporting that Syria was unable to attend the negotiations because of its civil war and Nicaragua, of all the nations of the world, refused to sign because the agreement was too weak to achieve its goals and the developed world was not held responsible for its historical contribution to climate change, as stated by Paul Oquist, Nicaragua’s chief climate change negotiator. Nicaragua is one of the nations most vulnerable to climate change. Oquist pointed out that the 100 poorest countries only contribute 3% of carbon dioxide emissions. Nicaragua also already exceeds Paris targets with 50% of its electricity produced from renewable resources. (Informe Pastran, June 2)
  • President Daniel Ortega continues to enjoy wide popular support in his 10th year in office.  A Siglo Nuevo poll carried out between May 26-28, found that 80.4% of the Nicaraguan people expressed their support for the President. Seventy-nine percent said they approve of the way in which the government is being managed and 72.7% have a positive opinion of the Tripartite Alliance Model between government, employers and labor. The survey was based on interviews with 10,431 individuals nationwide. (Nicaragua News, June 2)
  • Vice President Rosario Murillo announced the construction of a new US$20.6 million hospital in Bilwi, capital of the Northern Caribbean Autonomous Region (RACN). “This is an important donation from the Netherlands that will provide greater coverage and better healthcare services to the Nicaraguan people,” Murillo said. (Nicaragua News, June 1)
  • Mario Amador, president of the National Sugar Producers Committee, announced that production of energy using sugarcane waste totaled 620.4 million kilowatt-hours during the 2016-2017 harvest season, a 15.5% increase above the amount recorded in the previous year. He added that greater electricity generation is being projected due to an increase in sugar production which is expected to reach 17 million hundredweights during the 2017-2018 harvest. (Nicaragua News, June 1)
  • On May 31, a plane landed in Managua with 26 men deported from the United States. They brought to 280 the total of Nicaraguan migrants deported since Jan. 1, a small fraction of the number deported to Nicaragua’s northern neighbors. The men had been detained in different states. The Nicaraguan government provided them with medical attention and help to return to their places of origin outside the capital, services that are not commonly provided to returnees in the other Central American countries. (El Nuevo Diario, June 1)