Discussing Latin America (II): Which Way Is Nicaragua Headed?

Last week, the Latin Americanist put up two conflicting articles on Nicaragua. On the one hand, Foreign Policy suggested that Nicaragua was one of five countries that could be "the next Iceland" (i.e., go bankrupt), saying remittances from the to Nicaragua, which play a major role in the Nicaraguan economy, will probably drop, perhaps drastically. This drop would accompany a drop in coffee exports, one of Nicaragua's major sources of income in the international market, as prices drop off in the face of a global depression (this is nothing new - Brazil was similarly hit in the 1930s, and Costa Rica and others were ravaged in the 1970s and early 1980s. Incidentally, in the case of Costa Rica, the collapse in the coffee economy actually played a major role in the development of eco-tourism as an alternate source of national income, a hugely successful policy that is still keeping that country stable even today). Finally, Foreign Policy argues that Ortega's increasingly authoritarian rule is isolating foreign partners, leading to reduced international aid for and investment in Nicaragua under Ortega.

On the other hand, World Focus foresees Nicaragua on the verge of great economic success. In the video, it reports that anti-Americanism has declined, leading to a growth in tourism. It also suggests that Ortega has taken a pro-business stance that has helped the economy to grow, and that while there is political opposition, the economy is ready to boom because of the increased business opportunities for foreign investment and a rise in tourism.

Clearly, these are two diametrically opposed stances. I asked Yann about this, and he will have more to say later, but I wanted to comment on a few things (though I will defer to his expertise on Nicaragua, which is much greater than mine). I suspect it falls somewhere between the two. I really don't see any evidence that Nicaragua's government is about to go bankrupt, for a couple of reasons. First, from what I can see, there's just no evidence that it's on a major economic precipice. Secondly, it goes without saying that Iceland's particular conditions and contexts are different from Nicaragua's. I can't see any current or historical reasons or evidence to believe that, if Nicaragua were to really flounder economically, organizations like the IMF or the World Bank wouldn't be ready to swoop in with more loans that Ortega very well may take. After all, the U.S. has had economic interests in Nicaragua for well over one hundred and fifty years. Yes, the U.S. has withdrawn aid due to Ortega's actions, but we've never had a problem looking the other way in the past when it was to our financial or political interests.

That said, I don't think Nicaragua's really ready to boom, either. Ortega can make all of the pro-business pitches he wants, but the fact that the U.S. and the European Union are witholding aid are important. Businesses may be investing in Nicaragua, and that could set off some of the aid withdrawal, but not all. What is more, the World Press article seems to put a lot of faith on the importance of tourism and ex-pats, which would be fine if we weren't in the midst of a global recession with no sign of exiting anytime soon. But we are, and one of the first things that goes when recessions hit globally is tourism. Certainly, some people who would have like to go to Asia or Africa or some expensive vacation may opt for Nicaragua instead, but I don't think that would be a very significant number of people. And the evidence for an inexpensive lifestyle seems deceptive, as the report only cites an American ex-pat who comments, "I can afford it. I can live the good life on a postal pension." That's fine, but that says more about borderline colonialist and exploitative mentalities than it does about the general cost of living for Nicaraguans themselves, many of whom remain in poverty despite government programs designed to finally help Nicaragua's poor.

In short, it will be interesting to see where Nicaragua goes, but it's as interesting to see how two respected journalistic sources could come to opposite conclusions on this issue. Again, I think it's somewhere in the middle - Nicaragua is neither about to experience a full-blown collapse, nor is it about to enter a new golden age. Political repression under Ortega is a real problem. And while he may be making strides to help the poor, his human rights record is far from good, and claims that he wants "equality for all" are hard to swallow when one considershis stance towards women's rights). If push came to shove, I'd probably have to say Nicaragua is facing an uphill climb, simply because there are few countries in the global economy right now that aren't facing an uphill climb, but I could be wrong. I look forward to Yann's comments on this.