Artugo Cruz: Is a political-democratic solution inevitable in Nicaragua?

Journalist Alberto Arene interviews Dr. Arturo Cruz (AC), historian and Professor at INCAE (business school in Managua) as well as former ambassador of Nicaragua in Washington from 2007-2009.

FOCOS TV (El Salvador), the programme Zoom

2 December 2018

See the program here in Spanish (34 min).

Transcript and translation of the program:

Is a democratic political solution in Nicaragua inevitable? This is the topic that concerns us tonight. Seven months after the social uprising in Nicaragua, more than 300 have been killed, hundreds have been wounded and more than 500 are political prisoners. Neither the exit of Ortega nor the negotiation that should lead to early elections has been achieved, while the economic and social situation deteriorates rapidly. Although President Ortega has lost legitimacy from governing with repression against the majority social opposition, realism prevails at the national and international level: There is no solution without negotiation. The economic and social deterioration, and the law that Washington will approve (Magnitsky NICA Act) that will restrict loans to Nicaragua from the multilateral financial institutions are factors that will push towards a democratic political solution to the crisis, including early elections. To update ourselves on the Nicaraguan crisis and its probable outcome, we are, tonight, speaking with Dr. Arturo Cruz: Renowned historian and Nicaraguan political analyst, professor at the INCAE (Central American Institute of Business Administration) and former ambassador of Nicaragua in Washington in the first Ortega government. Arturo, in this first part, I would like you to make a synthesis of what you have called the ‘responsible populism’ that led to the social uprising.

AC: Bastically, when I referred to the topic of ‘responsible populism’ I saw it from a strictly fiscal point of view. I truly believe that governance comes from having resources available and being able to execute, and at the same time meet the expectations of society. Fundamentally, one of the great problems of governing a country like Nicaragua is that we have many who have immediate needs and that immediacy often leads you to respond to it. We can call this a populism that does not think about the future. If you wish to cater for the future, you have to manage the immediacy without losing sight of the future. I am being very frank about the subject. At first, it (the Ortega government) was performing well due to 2 things: A peculiar arrangement with Venezuela on the issue of oil money and at the same time being on good terms with the Monetary Fund. It was necessary to respond to the immediacy. This was done through the Venezuelan resources. At the same time the government needed to think about the future. This was done through agreements with the Monetary Fund and the multilateral organizations. Through this (two-pronged strategy) President Ortega had a lot of resources available. There was a time when external cooperation combined with the formal Venezuelan money amounted to about 1,500 million dollars. So what did that allow you to do? The Venezuelan budget represented a parallel budget for administering these issues of people asking for immediate things, and at the same time it allowed you to subsidize public transport, subsidize energy, and making a series of programs outside of the formal budget.

We are talking about 500 or 700 million dollars per year.

AC: For several consecutive years, the Venezuelan cooperation lead to inward flows of more than 500 million USD to Nicaragua. This was an advantage and at the same time a disadvantage in the sense that they were discretionary funds. Therefore, they also lent themselves to abuse. However, it allowed you to handle those immediate claims. At the same time, you had the formal budget of the Republic, negotiated under the criteria of the Monetary Fund and administered with great responsibility. That is precisely what I meant by ‘responsible populism’ from a fiscal point of view: Responding to the immediacy of demands from your clients to put it that way and maintaining an orderly macro economy that allowed private investors, both national and foreign, to feel that the country had a future, and that the macroeconomic figures were kept in order.

That made an average growth of 4 – 4.5 percent possible.

AC: Basically, from the crisis of 2008/2009, the average growth was close to 5% (annually). And most importantly, GDP per inhabitant saw a growth of 3.6. The involution of Nicaragua was very big during the revolution against the Somozas, and the reality of the 1980s was dramatic in the sense of the nationalization of the economy and, then, a return to the privatization of the economy, which means that still, today, in regard to the GDP per inhabitant in real terms we have not reached the best year of Nicaragua. That year was 1977, imagine that! So, without a doubt, there is sustained growth until December 2017 but it is a growth that still lacked a lot from the point of view of reaching that GDP per inhabitant that Somoza achieved in 1977.

But even so, in a recent article last week named ‘a brief essay on the crisis of the Ortega regime’, you affirm that in that period the GDP per capita doubled.

AC: The GDP doubled. We must take into account that the management of Mr. Enrique Bolaños in my opinion was a remarkable management, which focused on the future. Paradoxically, since he focused on the future his approval ratings were very bad. Societies often claim immediate results, but catering to the immediate situation endangers the future when resources are limited. Just to give you an idea, at one point don Enrique’s budget to mediate between the state and society was 1,200 USD. That is a ridiculous budget for a country as poor and with economic perspectives as modest as ours. So, there is no doubt that President Ortega took advantage of the good macro economy that Don Enrique had left behind. On top of that, Ortega had the inflow of resources that allowed those growth rates that made the Internal Product double and the GDP per capita double as well. When that happens, something else happens that is very important for me. It’s a paradox. While it is true that the GDP per capita remains modest, expectations are growing. Therefore, clientelism begins to rise, and it begins to yield to the citizenry. And a citizen is not the same as the client who asks for zinc plates on the roof, to put it that way. A citizen will complain about other things, among which are things that affect the political dignity of the person and relate to the feeling of being somewhat stifled by a political model. I believe the political model is very peculiar in the sense that it almost resembles a monarchy of the 16th century, absolute in its power.

These resources also helped oil the machinery, and provide important subsidies to the population without putting the macro economy at risk. On the other hand they also led to constitutional reforms (very questioned), and gave absolute control of the powers, not only over the executive but also over the legislative and judicial powers, and so on. They started buying means of communication and to have an increasing control of the society, moving away from what we would normally call a representative and fair democracy. We can say that the government was playing with democracy with the dices loaded.

AC: Well, I totally agree with what you say. Obviously, it compensated for the lack of legality and legitimacy with a very, in quotation marks, ‘effective government’. It basically generated growth, it had a very orderly macro economy that attracted investment, a very safe country, and at the same time it was a country that had the capacity to meet the immediate ‘customer’ needs of a very poor society. On top of that, it did everything else in terms of ensuring sustained growth and having a modern (public) sector that was developing. But you are absolutely right. Politically speaking, as I have said on other occasions, the government did not show any courtesies to legality or legitimacy. And I am going to tell you something: paradoxically, the Somoza government was more sensitive to democratic behaviour than the government of Daniel.

There are other important issues that you have already introduced, which have to do with the issue of security, drug control and a negotiation with Washington. You were a relevant actor as an ambassador there in the first years of the first (Ortega) government in Washington. That is, it seems that the arrangement was, please correct me if I am wrong: “We will take care of the security issue, we will take care of the drug trafficking issue, as long as you do not intervene much in the political part in our country”.

AC: There is something about that, unquestionably, but let me make an argument on the subject. I believe that the United States – and the visitation of President Bush with Tom Shannon handling the Latin American issue – quickly understood precisely the argument of accepting the relationship with Venezuela economically speaking because the United States was no longer able to offer the resources it once did back in the day with the famous budgetary support that gave you a balance of payments and tax issues. In that sense the US saw Venezuelan cooperation as, ironically speaking, a factor of stability, precisely because Venezuela contributed to the governance that contributed to the complex and difficult mediation between state and society. On the other hand, yes, without a doubt the geopolitical issue, to use that expression, or concerns with issues like drugs or migration were for them a priority and in that respect Daniel was very effective. However, in my talks with the President then, I always insisted that the United States will never renounce the liberal agenda, the democratic agenda. It is the essence of the US. There may be times when one issue is emphasized more than the other. But we cannot ignore what we can call that ‘impulse to democracy’ as an essential part of US foreign policy. It’s undeniable. And in that sense, my argument, however, was that, still, in 2007 my country did not have enough density of the citizenry to be able to truly seek that long-awaited demand of democracy. That is why growth was so important. And that’s more or less how the Bush administration looked at it, they thought “how interesting” and bought the argument.

But it seems that Obama also did it in his first government

AC: Do note that it was actually Hillary Clinton as the secretary of state who never gave up on the issue of democracy. We must recognize that the 2011 elections, the presidential elections, were a disaster in the form. One can claim that he made himself a fraudster, Daniel Ortega, and that is no good. Truly everything at that moment was at its peak, at its best, the stars were aligned in Ortega’s favor: Growth, exports, remittances, tourism, the economic flows from external cooperation, foreign direct investment. On top of that he showed that he was no longer a communist. He was a traditional caudillo. He was not a institutional Marxist. Society prefers a traditional leader to an institutional Marxist. And there is a certain accommodation. It’s not that he’s going to take the remittances.

But they eliminated the MRS and then the liberals themselves

AC: You’re right but we’re still pausing on other issues. This is his best moment, especially because there was a lot of fear of going back to the eighties, and suddenly this man comes and manages the macro economy very well, he does not intervene in your remittances, the economy is dollarized, there is freedom in the capital accounts. It is not Venezuela, definitely. It is at its best. It is at its best and all the surveys came out great. However, the trauma of the 90s, that shadow I think, complicates everything and it is definitely a fiasco the result, the electoral process (in 2011). So, it is Hillary Clinton who is very sensitive to these issues, right. She begins to say something that was dramatic in 2012, – that the United States will carefully scrutinize everything that has to do with the cooperation of the multilaterals (financial institutions) towards Nicaragua. That is, the theme of representative democracy and its electoral liturgy – the theme of the integrity, of the liturgy, it is Hillary that puts it on the table.

Now Obama arrived in 2008. You are saying that it’s four years later.

AC: Obama really came a little later.  Remember, he is formally elected in 2008. He assumes the presidency in 2009. What I am going for, however, is that in that first period of Ortega’s government the US is obviously working with him. He is the one who has the legitimacy from the base (: legitimidad de origin) – complicated but he has it – but in 2011, the legitimacy from the base, he loses it. And Hillary intervenes with a very aggressive policy. Now what happens when Kerry arrives? Kerry arrives and suddenly that militant policy on the subject of representative democracy disappears and takes a back seat. And you are right, but it is with Kerry as the Secretary of State.

Very good. To finish this first part, Arturo, what happened then: A middle class that grows (with aspirations), a more conscious citizenry, and it aspires to other things than just a roof made of zinc plates, right? On top of this, there are 200,000 students at the university.

AC: Several things happen, Nicaragua goes from being a country where, still, in 2013 only a little more than 2o% (: veintipico) of Nicaraguans had ever sent an email or used the internet. It was ranked the lowest out of the 18 countries of the Latinobarómetro. Suddenly, only between January 2017 and January 2018, half a million Nicaraguans joined the social networks, partly because the Government made WiFi freely available in public spaces. On top of that, we have students in impressive magnitudes, 200,000 university students. Besides that, we have other things such as: In the transition from Daniel to Rosario or in the succession of Daniel to Rosario as the future protagonist of the Sandinista Front, Rosario overrides what we can call the historical or relevant Sandinistas. They lose their positions but it is also done in a very cruel way. She begins to create deep resentments among the old militancy at all levels and in such a way that when we have the social uprising in April, – that still needs to be studied in detail – , you have students who were Sandinistas only months before, you have contras, ex-contras, you have former Sandinista party members (militantes), you have the aspiring middle class, you have this new citizenry that is already suffocated by a government where basically any small decision is taken by the sovereigns. As a joke, I used to say that we were going to reach a point where if you wanted to get a divorce the sovereigns would have to give you the permission.

This is what Edmundo Jarquín has called the ‘accumulation of grievances’. Is a democratic political solution in Nicaragua inevitable? That is the subject that concerns us as we talk with Dr. Arturo Cruz, renowned historian professor & analyst of the INCAE Central American Institute of Business Administration and former ambassador of Nicaragua in the United States in the first government of comandante Ortega. We talked about how a change of conditions led to this social uprising. Within this, the fall in the resources from Venezuela plays an important role.

AC: Without a doubt. To give you an idea of it, for several years, the Venezuelan cooperation exceeded 500 million dollars annually. And in 2017, the Venezuelan cooperation amounts to 37 million. Now, why is this so important? Because now the multilateral institutions like IDB (the Inter-American Development Bank), and the World Bank among others are fundamental. In 2017, the total external cooperation was worth less than one billion and of that total cooperation more than 70 percent came from the multilaterals. In the previous years, we had 1,500 million dollars in external cooperation, and of course the cooperation of the multilaterals was important but not as relevant and as strategic as it is today. That is the reason for the concern about the multilaterals and the different bills that are being passed in the US Congress, and I am convinced they will be passed before the end of the 115th Congress.

We are now in a situation that has changed because blood has been spilled, there are wounded, there are political prisoners and that has an impact on not only Nicaraguan society but also on the international community. Now you have an external front of Latin American and European countries, and certainly a total bipartisan consensus in Washington. It seems that the only thing that Democrats and Republicans agree on is Nicaragua. That is the only thing the Legislature and the Executive have managed to agree on.

AC: What has been achieved is impressive. What you say is so true because I believe that the Government never imagined such an uprising, for which reason it was not prepared with its coercive apparatus to do it in an “efficient” way. Its reaction was not only cruel but it was also clumsy. It was these two things at the same time and, obviously, in the process it lost all the credibility of the police force that had been so celebrated in previous years as regards the issue of citizen security. Basically, it was coercion, coercion and more coercion. Obviously, with the coercion, you lose all legitimacy and above that you have a situation not only of the murdered, of the incarcerated. Above that you have a country that begins to deteriorate markedly economically. So, Ortega was left with nothing. Now, all he has is coercion and, in the immediate plane, a correlation of force that still allows him enough space to somehow find a negotiated political solution, meaning peace as well as justice, if he was willing to do it. This is utterly complicated and involves early elections. I want to elaborate on that subject thirty seconds. President Ortega insists, just like Somoza Debayle, that his presidential term ends in November 2021. My argument is formally yes. The problem is that the 2016 election result was doubtful. Therefore, his legitimacy from the base is doubtful. Hence, his claim to legality is also doubtful. And why do I compare it to Somoza Debayle? Because during the crisis of the late 70s, Somoza Debayle insisted that his mandate legally ended in 1981. His claim to legitimacy from the base was doubtful. Therefore, forget about that claim. Now it is interesting. I think that in the end Somoza realized his big mistake. Beware that if there had been early elections, the situation in Nicaragua might have been different but he did not agree. In the history of our recent elections, our Achilles heel has always been the succession. That is why I am surprised that Ortega is handling it in that way. I do not want to say clumsy because I still have keep this vision alive that at some point he will give us a ray of hope for the country, that he will agree to not only trustworthy elections that are fundamental for Nicaraguan society but also advanced elections so longed for.

If we look at the projections for GDP growth at the beginning of this year compared to what we expect now, we are talking about a fall of 8 to 9 percent. (AC: There is a lot of speculation about that.) There is a huge fall in GDP, a fall in job creation. There is unemployment, more unemployment, underemployment. There is a huge run on the banks. If on top of that this law is passed in Washington, Nicaragua will no longer have access to loans from multilateral financial organizations. On the other side, I see an evolution, so to speak, from the triumphalic expectation that Ortega was going to be taken down in the beginning of this uprising, towards a greater sense of realism, both nationally and internationally, that there is no solution to this if there is no negotiation.

AC: I remember that in April I made a podcast where I spoke about the ‘soft landing’. I talked about the correlation to the force used and that in the medium and long term, this definitely does not favor the Ortega regime. Therefore, the regime has lost its breath (: agotado). However, Ortega has enough strength to make the exit very painful for Nicaragua. Hence, the hope that we can make an agreement with him. The problem is also that, as you mentioned, the opposition feels that at any given moment it is a matter of giving the boxer a last blow, and then he will be knocked out. And that any negotiation would only give oxygen to the dictator. Now, however, the opposite has happened. The boxer recovered for a second round and believes he is in control. We are at a moment where the calculations do not match the situation! But you are right. It is an objective reality. Nicaragua is a country whose growth – and that is something that I believe President Ortega always felt – is based on our proximity to the United States, CAFTA, remittances, tourism, foreign investment wherever you see it.

The exception is remittances that come from Costa Rica.

AC: No, they come more from the United States. The United States has exceeded 24 percent of world GDP. I think Ortega would have loved to be in proximity to Russia, but Nicaragua is in the United States neighborhood instead. Sorry, that is the reality. These sanctions that are coming will complicate the story. The American law, however, requires that loans which have to do with basic needs cannot be blocked and much of the future portfolio of Nicaragua is a function of that but psychologically the law is terrible. In addition, there is the specific Nicaraguan Magnitsky element of the law. The original Russian Magnitsky law is from 2012. After that came the Global Magnitsky law that President Obama signed in 2016. Now we have the Magnitsky NICA Act, which includes a Nicaraguan Magnitsky list. We have the Russian Magnitsky & the Global Magnitsky list. These kinds of laws do frighten the Sandinista officers because they relate to individual sanctions. You have the NICA Act (Nicaraguan Investment Conditionality Act), the Global Magnitsky and the Nicaraguan Magnitsky list combined into a single bill. The one that they fear the most, I think, is the Nicaraguan Magnitsky provisions, more than the NICA Act as such with its blocking of loans from the multilaterals.

These sanctions will be conditioned on progress in dialogues and in democratic reforms that lead to early elections. There is, in principle, a way out.

AC: It’s a tremendous pressure instrument. Now, the law will be passed but the Executive will have the power to offer what is called a dispensation, an annual dispensation. If Trump sees that there is a movement in favor of what you are saying (democracy and human rights), he can give a dispensation that would leave the multilateral financial institutions unaffected by the Treasury and at the same time he can be less aggressive on the subject of the Magnitsky sanctions. But there has to be a movement forward. If not, we might experience my nightmare: Be in a destructive tie between a society that is passively resisting a coercive apparatus that governs as a police state and we are going to have the worst of both worlds: A destroyed economy and this police apparatus governing in practice.

The issue is if the commander Ortega, President of Nicaragua, will understand in time that it is time for negotiation. That is the time for the reforms that could eventually lead to this being settled with early elections, possibly in 2020.

AC:  That could even allow him to survive as part of the political ecology of the new Nicaragua. Besides this, imagine what it will be like to govern Nicaragua in the future? What is to be done is a reform of the Social Security (INSS), tell the public employees that they will not receive the bonuses they have received for years, remove the energy subsidies, the subsidies given to public transport. Whoever governs will basically have to govern by saying no. He or she will have to line up those macroeconomic figures for the future and I am sure that person will be facing obstacles in terms of political approval ratings. Also, he or she will have to implement institutional reforms because Daniel Ortega destroyed the institutions. In that context, we can go from ‘effective autocracy’ to ‘weak pluralism’. What I want to say is that it is inevitable that we will have to go through a hard time but with the hope of a better future this time. Difficult years will come with or without Ortega.

I agree. The negotiation is not just about getting advanced elections. It is about a democratic, institutional re-foundation that offers guarantees and not only the respect for human rights but also free and fair elections.

AC: I would like to tell you two things: our new president has to be a lucky Doña Violeta, – a transitional president and he or she has to say publicly and that should be the electoral slogan of the future: “I will, indeed, be leaving”. In other words, it should be a ruler who knows how to leave because that will be the true great revolution of our society.

Possibly, this will be regulated by a reform of the laws that prevent reelection.

AC: But not only preventing re-election. It should become a new habit in Nicaraguan politics, a habit felt in the heart, internalized in Nicaraguan society. This is the issue of the political culture. As is very well known it is very complicated because the caudillo (strong man) in our history of Spanish America is the substitute for the King. Because our institutions do not perform very well in terms of public management, we keep returning to personalization instead.

Today, let’s talk about the eventuality of a negotiation. There are diverse national and international pressures and economic, financial, complex issues, – fine. Will the Church assume a negotiating role? Will it be the OAS? Will it be a combination? How do you see the role of Almagro on the one hand and the Church on the other?

AC: I always sympathized with Almagro even in moments of less popularity and I believe that the church is fundamental. Look, there is no political settlement in Nicaragua without the Church and its legitimacy guaranteeing any agreements. There is no point without them (the bishops). The institution that all Nicaraguans respect, whether by tradition or religious conviction, is the Catholic Church. It is the bishops who have total legitimacy. In this context, including the issue of justice, they are fundamental. It is not just the political architecture and the settlement. The Church has to reconcile us. This Government will not reconcile us. Forget about reconciliation as a decree. The only one that can reconcile is the Catholic Church.

There are also other very complex issues to deal with, not only electoral reform. A credible new institution is needed, composed of new independent people with integrity, that do not tip the scales anywhere and who will guarantee international observation. But there are also sensitive issues that have to do with justice regarding what has been considered by the Inter-American Commission on Human Rights as a flagrant violation of human rights.

AC: Undoubtedly. We have the issue of (justice for) the prisoners, the pain of mothers. It is a very difficult issue but we have to face it. That is also going to complicate the political transition.

Last week you gave a talk on representative democracy to your alumnae of INCAE. There you spoke precisely about the difficulties of managing democracy in these times and the mediating role between the state and society. The issue is how it was believed for some time that it was possible to have this ‘responsible populism’, authoritarian and with economic growth. Some were excited that it was possible to leave aside democracy and put all the emphasis on security and economic growth. In the case of Nicaragua, this turned out to be false. In the end, the institutional political crisis led to the uprising, although there are economic reasons behind.

AC: Yes. When looking at reality, what you are claiming is obviously unquestionable and unobjectionable but the point is that we must recognize that in the private sector, we saw the fissure in our own investigations. We did not believe that this fissure was going to become cracks so quickly and that’s why we started talking about a ‘soft landing’ of the institutional reform and we did it with a lot of emphasis. In 2016, I gave a speech to Amcham in the Nicaraguan Chamber of Commerce where I warned that in the event of a devaluation in ‘effectiveness’, it would have to pay more attention to the issues of legality and legitimacy and really take seriously what I called ‘the electoral liturgy’. The 2016 elections were probably Ortega’s last chance to gain legitimacy from the base and he did not look for it, believing that his effectiveness was eternal. Now, evidently, if it was not for the growth, for which the private sector played a key role, there would have been no social explosion. ‘Clients’ are satisfied. Citizens aspire. The paradox of Ortega is that at a much faster time, now, because of the internet, he can thank Somoza for an incomplete modernization and that he did not know how to adjust politically.

Both in Nicaragua but also in the rest of CA-4 countries, one of the big problems is precisely that this speed of disruptive changes is not accompanied by a timely understanding of elites and power and that leads us precisely to this crisis. Arturo, I want to thank you.  We have to cut but next time we will continue talking about this and other issues.