Nicaragua's Ortega Reignites an Unfinished Revolution

(Bloomberg View) -- Whether brandishing a Kalashnikov or a stacked court, Nicaragua’s President Daniel Ortega has proven especially resilient. The onetime guerrilla insurgent turned autocrat has endured turmoil, outsmarted opponents, and co-opted rivals to lock down four presidential mandates spread out across 38 years, marshal economic growth and outlast authoritarian peers.

So when protests exploded in the streets of Managua and other cities earlier this month, leaving at least 38 dead and provoking calls for Ortega’s ouster, that idyll was shattered. The breadth and speed of unrest are new in Nicaragua and may prove to be an inflection point, if not a terminus, for one of Latin American autocracy’s most successful brands.

The immediate trigger was a ham-fisted social security reform, announced earlier this month by decree, and then revoked just as abruptly on April 22 after a week of riots.

On the surface, the proposal seemed reasonable enough. Like most of its neighbors, Nicaragua spends too much on pensions for a society that is graying fast even as its taxable working age population shrinks. Nicaragua’s fertility rate fell by more than half, from five children per woman in 1990 to 2.3 in 2015, while life expectancy rose 13 years to age 75 in the same period, according to a report by the International Monetary Fund.

That’s hardly the hemisphere’s worst case. But what’s worrisome — and galling — for one of Central America’s poorest nations is that the Ortega government has made the vexing demographics more dangerous through doubtful administration and murky deals.

After a partial makeover in 2006, Nicaragua ran a surplus in social security for the next six years. Thrift ended, however, in 2013, when Ortega’s government began investing in questionable real estate deals and subsidized mortgages. Hence the IMF’s warning last year that social security was on track to “run out of liquid reserves by 2019” and that “the authorities should act quickly to avoid a costly bailout of the system.”

After punting reforms for years, Ortega surprised his compatriots with a hasty decree on April 16, ordering an increase in social security taxes and a cut in benefits, and sparked a revolt. “When people found they would be paying more and getting less for it, they were outraged,” Manuel Orozco, an economist at the Inter-American Dialogue told me.

For Nicaraguans, that was just the latest in a string of Ortega’s offenses. Resentment surged last year when the U.S. Treasury charged Nicaraguan supreme electoral council president Roberto Rivas with amassing considerable personal wealth while on the government payroll. Ortega’s riposte? He not only protected Rivas but kept him on the job as the electoral council sponsored a sweeping, executive-friendly reform of electoral laws, over protests by citizen groups and opposition lawmakers.

The mood darkened last month when the government announced it had asked the legislature to “review the use of social networks,” which was widely seen as code for censorship, drawing an immediate retort from Nicaraguan non-government organizations and the Catholic Church.

Then came the botched response to a wildfire — including an official decision to turn away a team of Costa Rican firefighters who’d volunteered to help — which destroyed 7,000 hectares of an important bio-reserve and covered several forest communities in a pall of smoke and ash. Nicaragua belatedly accepted help from a Mexican fire brigade.

“Ortega had always been seen as a kind of master player, but absolute rulers have a blind spot,” said Orozco. “What he didn’t realize is that the anger against his government had been growing.”

Now Nicaraguans may have found opportunity in Ortega’s debacle, including some unlikely apostates. One of the casualties of the public backlash over pensions could be the longtime government pact with the country’s private sector: In return for executives’ support support for his policies — and their complicit silence on its authoritarian excesses — Ortega had allowed companies to prosper.

That alliance has worked reasonably well for both sides, not least because of the blessings businesses have reaped on Ortega’s watch, including annual corporate tax breaks worth 6 percent of gross domestic product. Not coincidentally, says the IMF, those perks have added to Nicaragua’s worsening fiscal woes.

Yet Ortega’s fiat has not always been good for business. In a 2015 survey, 47 percent of company executives said they felt their property rights were not guaranteed by law and 50 percent said mechanisms for settling disputes were inefficient.

Finally, the moguls appear to be stirring. The leading business chamber, known by its acronym COSEP, representing companies that kick in around half of Nicaraguan GDP, has pointedly criticized the heavy-handed official response to protests and called for dialogue — not a favorite in the Sandinista playbook.

Talk alone is unlikely to curb the Nicaraguan government’s authoritarian instincts. But clearly the unofficial pact of indulgences as well as the private sector’s complicit silence must end.

Thanks to years of centralizing power, Ortega has all but defenestrated the country’s political opposition. Students and civil society groups have stepped up in the wake of the disastrous pension reform plan. Will the private sector do its part? “The business community is one of the most legitimate social forces in the country,” said Orozco. “That makes them political players, whether they like it or not.”

The precedent exists. Almost 40 year ago, business leaders joined forces with the political opposition and labor unions, funding three political strikes that helped drive then-Nicaraguan dictator Gen. Anastasio Somoza from power. That was the precursor of COSEP’s subsequent complicated alliance with the Sandinistas. Now, surely, it’s time for that tryst to end.

Mac Margolis writes about Latin America for Bloomberg View. He was a reporter for Newsweek and is the author of “The Last New World: The Conquest of the Amazon Frontier.”

To contact the author of this story: Mac Margolis at mmargolis14@bloomberg.net.

To contact the editor responsible for this story: James Gibney at jgibney5@bloomberg.net.

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