Ortega regime stands firm as Nicaragua deteriorates

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The president, Daniel Ortega, has, temporarily at least, gained the upper hand in Nicaragua’s three‑month‑old civil conflict. However, his ultimate victory is far from assured and as such he will continue to seek a negotiated solution to the political crisis. Dislodged from the streets and highways where it waged its protests, the opposition Alianza Cívica, a coalition of students, peasant farmers, civil society groups and business people, is unwilling to negotiate from a point of weakness, believing that it can regroup and resume the fight. A factor influencing both sides is recent international outrage against the methods of pro‑government forces, which led to actions by the Organisation of American States (OAS) and the US designed to force the Nicaraguan president to cede power in early elections. Although Mr Ortega is determined to resist this foreign pressure, his opponents are counting on it to help them prevail. As long as these dynamics persist, the prospects for any meaningful negotiation of the conflict are slim.

Most of the international media has portrayed the conflict in Nicaragua as an unarmed civic uprising against a brutal authoritarian government. In order to counter this narrative, in a speech on the July 19th anniversary of the 1979 Sandinista revolution, Mr Ortega presented his supporters with a version of events in which they were fighting an internationally funded armed conspiracy intent on ousting his government. The slogan for the occasion was “the comandante is staying put”. But Mr Ortega did not declare victory, instead telling his followers to not let their guard down in the coming period.

Dismantling the barricades has proven costlier than expected

During the month preceding July 19th, pro-government forces (which reportedly included both paramilitaries as well as members of the national police) knocked down roadblocks and tore down barricades erected around the country by thousands of citizen protestors, some of whom were lightly armed. The resulting clashes pushed the death toll in the conflict to 286, according to the Nicaraguan Center for Human Rights. News reports suggest that hundreds more have been detained and disappeared, and as many as 2,000 have been injured. The campaign was quick and effective; in addition to depriving the opposition of its main source of leverage, the removal of roadblocks permitted thousands of Central American trailer trucks stranded on Nicaraguan highways to resume their journeys and inter‑regional commerce to flow again.

However, relentless attacks of this nature has caused fearsome damage to Mr Ortega’s reputation. News reports of the assault of bishops and priests, desecration of Catholic churches and denial of medical assistance to the wounded generated a wave of international indignation strong enough to wash up on US shores. On July 18th the furore surrounding the situation prompted the Permanent Council of the OAS, in a 21-3 vote, to approve a stern resolution condemning state repression in Nicaragua and demanding that Mr Ortega negotiate an “electoral calendar” (a time frame to hold new elections) with his opponents within the framework of an ongoing national dialogue. The US joined six major Latin American democracies in sponsoring the vote.

Simultaneously, a bipartisan group of US lawmakers led by Robert Menendez, a senator, introduced a bill titled “The Nicaragua Human Rights and Anti‑Corruption Act of 2018” in the US Congress. A variant of the Magnitsky Act, specifically tailored to Nicaragua, this legislation would authorise the US president to impose sundry economic sanctions on Nicaraguans deemed to have violated the human rights of protesting citizens, as well as on others alleged to have committed acts of corruption. The draft law calls on the US Department of State to certify annually Nicaragua’s progress in controlling these behaviours, and provides a waiver mechanism to stave off sanctions if compliance is forthcoming.

The two measures signal departures from past practice and have potentially serious (although not inexorable) consequences for Mr Ortega. Though no follow‑up is in the offing, the OAS vote opens the door to higher‑level consideration of Nicaragua’s dilemma by the hemisphere’s foreign ministers, which could lead to an invocation of the 2001 Inter‑American Democratic Charter and in the last instance to Nicaragua’s expulsion from the OAS. Immediately, the resolution will make it difficult for the Inter‑American Development Bank, a component of the inter‑American system like the OAS, to approve fresh loans to the country. The Menendez initiative, which is likely to pass both houses of the US Congress by November, could have speedy repercussions by targeting financial sanctions at a large number of Mr Ortega’s collaborators.

A pair of bilateral aid suspensions followed in the wake of the OAS vote. On July 20th the Dutch government announced that it was suspending a US$18m disbursement assigned to build a regional hospital on Nicaragua’s North Atlantic coast, while Luxembourg put off the signing of a new four‑year aid programme.

The opposition’s travails are substantial

As these initiatives indicate, the US and hemispheric attitudes are now aligned—both are demanding that Mr Ortega agree to early elections and negotiate a political accord with his opponents to make those elections possible. The opposition welcomes this foreign backing, as a new phase of the conflict is set to begin. By all indications, the Alianza Cívica remains resolutely opposed to allowing Mr Ortega to remain in power until the end of his current term in 2021, and believes that a combination of popular protest, continued deterioration of the economy and ever‑stronger US sanctions will eventually force him to go.

Putting that combination into practice will, however, not be easy. Repression has crimped recent attempts by the Alianza Cívica to show strength; demonstrations in Managua, the capital, have attracted fewer than 10,000 people, compared with 40,000 in late May. Groups outside the alliance have, meanwhile, questioned its cumbersome decision making and lack of representation (the leaders of the Alianza Cívica were handpicked by the Catholic bishops to be delegates to the national dialogue). Efforts are now under way to fold the alliance into a broader coalition encompassing other civic organisations, social movements and opposition political groups such as the Frente Amplio por la Democracia, Ciudadanos por la Libertad, and the Movimiento Renovador Sandinista. Organisationally, this endeavour is likely to produce results in the short term. But whether it will lead to better choice of tactics and enhanced capacity to mobilise people in the prevailing atmosphere of fear and repression remains to be seen.

Moreover, Mr Ortega’s opponents cannot count on international pressure to maintain its July 18th peak; the initial momentum of the struggle has eased (at least for now), new fatalities will be fewer and the international spotlight will dim. Despite verbal proclamations from Washington, the idea that the administration of the US president, Donald Trump, will apply enough pressure on Mr Ortega to force him out of power remains to be put to the test.

The business community becomes a target

For his part, Mr Ortega probably believes that continued repression will contain popular protest while the opposition coalition will gradually deflate and fall apart as internal tension boils over. At the same time, economic activity and investment will slowly recover. For this scenario to come to pass, it is important for the business community or business people individually to leave the alliance and resume some sort of working relationship with his government.

To spur that movement, Mr Ortega has sought to punish the business community represented in the Consejo Superior de la Empresa Privada en Nicaragua (the main industrialists’ association) for its collaboration with the opposition. For months the government has tacitly supported land invasions and takeovers of urban properties to highlight their owners’ vulnerability, according to a number of business leaders. More recently, the ruling Frente Sandinista de Liberación Nacional party passed an ill-defined new anti-terrorism law in the National Assembly, which threatens anyone financing citizen protests with a 10‑15 year jail sentence. So far, tightening the screws has not led the major business chambers representing agriculture, industry, commerce and tourism to bow to pressure. Banks have also rejected demands that they disclose the names of depositors who have removed large sums of money from the country. However, other business segments could succumb to pressure and blandishments to return to the government’s side.

A risky outlook

Although Mr Ortega presently has the upper hand in the conflict, the resilience of business people in the face of his threats is one indication that he will have difficulty in restoring economic and political stability in the short term. Nevertheless, The Economist Intelligence Unit believes that Mr Ortega will continue to defy demands for early elections and refuse to participate in any dialogue run by the Catholic bishops, whom he has now accused of trying to overthrow him. In this environment, we believe that the most likely scenario is one in which Mr Ortega bides his time, awaiting an opportunity to propose another forum for talks, with a different mix of opponents, and then offer modest electoral and political reforms as a solution to the conflict.

Our baseline forecast continues to be that Mr Ortega will succeed in his endeavour, outlasting his domestic and foreign opponents. Although the US is signalling ever more loudly that it is in support of regime change in Managua, we remain skeptical that the Trump administration will invest the political capital necessary to tilt the scales against Mr Ortega, as it would risk generating a power vacuum, leading to further instability in Central America.

The risks to this forecast remain significant and have grown in the past few weeks. The Nicaragua Investment Conditionality Act (the Nica Act), a piece of legislation that would condition US support for multilateral lending to Nicaragua on the Nicaraguan government’s adherence to democratic norms, still stands a chance of being passed by the US Congress. Moreover, even if the Nica Act does not become law, a deepening of the crisis could lead to greater withdrawal of assistance from multilateral and bilateral donors than we already account for. All of this would strain the finances of the Nicaraguan government, as well as the foreign reserves position of the economy, paving the way for serious, long‑lasting macroeconomic imbalances.

But these eventualities, if they occur, are unlikely to be enough to propel Mr Ortega’s exit from power in early elections as desired by the opposition. We believe that Mr Ortega is determined to hold on to power at any cost, even that of replicating a Venezuela-style quagmire in his own country. In such a scenario, Mr Ortega’s hold on power will be determined by the role played by the country’s security forces. Mr Ortega continues to exert significant influence over both the police and the military—with the president’s allies holding key positions in both institutions. However, a decision by the army to maintain a neutral stance (the military has not participated in the removal of blockades and a spokesperson has stated that the army is in favour of dialogue to resolve the crisis) heightens the risk that Mr Ortega will not enjoy the support of the armed forces that he has come to rely on, should the ongoing crisis degenerate further.