The Neoliberal Politics of Nicaragua & Their Structural Adjustment Programs (SAPs)

The Neoliberal Politics of Nicaragua

Structural Adjustment Policies (SAPs) originated in the 1980s when the IMF and World Bank began to solicit their services to Latin America, promoting the production of ‘tradable goods’ through the message of ‘recovery with growth’ (Brydon, 346, 347). On this path, claimed the IMF and World Bank, Third World states would potentially develop into middle-income countries by 2020 (Brydon, 347). The unsuspecting propositions of these institutions were alluringly ideal, but it is that idealness that has ultimately undermined and harmed Nicaragua’s development. Saying this, it is necessary to further take into account the Nicaraguan government’s role (past and present) in dealing with the IMF and World Bank regarding SAPs. In the following paragraphs, I will address varying view points on what I believe to be SAPs’ two principle themes (privatization and liberalization) and their effects on Nicaraguan society (specifically relating to gender and various economic classes). These examples will essentially show that because of SAPs’ neoliberal tendencies and presumptuous beliefs of a “perfect market,” Nicaragua has therefore continued to suffer from detrimental instability.
After President Violeta Chamorro took office in 1990, Nicaragua had accumulated the highest per capita debt in the world, due in large part to the Somoza regime (“Deadly Embrace”, 11/12/08). With mounting pressure to alleviate the financial burden, it was during this time when Nicaragua built a substantial relationship with the IMF and World Bank. The IMF rapidly imposed their version of structural adjustment which lowered Nicaragua’s fiscal deficits to an absolute minimum, when the country’s fiscal income was already incredibly small.
In that context of scant fiscal income and huge foreign debt payments, keeping the fiscal deficit at a minimum could only be done with absolutely rock-bottom per-capita spending on the state’s fundamental responsibilities: education, health care, drinking water and sanitation, housing and physical infrastructure” (Vogl, 1).
President Chamorro encouraged this by initiating privatization into Nicaraguan society. The argument for privatization was “to enable the country to participate in an effective global economy” (“Deadly Embrace”, 11/12/08). Fans of privatization claimed that it would increase employment by bringing in more foreign investors who would in turn construct large factories and offer a greater number of jobs. The private sector, it was said, would “fill in the gap” of the market economy. In reality, the unemployment rate in Nicaragua had already reached 60% nationally, and on the Atlantic Coast it skyrocketed at 90% (“Deadly Embrace”, 11/12/08). Not only did unemployment continue to increase, but labor unions were also cut and Free Trade Zones (with loose labor restrictions) were growing. The act of liberalization, specifically financial liberalization in this case, played a large role in affecting these circumstances.
Enacting liberalization in coalition with privatization meant the removal of government interference. Trade liberalization opened the markets, emphasized an export economy, lowered the value of farmers’ goods in the market, and ultimately stripped farmers of their subsidies (Espinoza, 11/13/08). Import duty barriers that protect national product (for example, tariffs) as well as quotas were continuously reduced. As Isolda Espinoza claimed, financial market liberalization increased the potential for market distraction (for example, international chain companies entered Nicaragua for money but not for the substantial development of the country) and created a mismatch of incentives (the thought that jobs would increase with employment options from international companies but in reality maquilas with little labor codes and foreign banks came and took over small, local businesses). In 2001 and 2002, the IMF proposed financial liberalizations in the name of the Washington Consensus and neoliberalization; this resultantly cost Nicaragua $500 million in debt when four of the country’s banks went bankrupt (Avendaño, 11/12/08).
All this was done in the purely ideological belief that government interventions only distort markets, and that if left to act freely, markets produce a restructuring that favors greater “efficiency.” The IMF demanded the fastest possible privatization of public enterprises and the total opening, deregulation and liberalization of the economy rather than ensuring the country’s rehabilitation and the creation of basic infrastructure conditions and human capital with an eye to future development. (Vogl, 2)
Because of the IMF’s blatant mistreatment and virtual dismissal of the different sectors of Nicaraguan society, specifically those of the lower economic class, the IMF has developed a selective, narrow dialogue and has reproduced social inequalities because of its relationships based on power and money.
The IMF’s exclusion of Nicaraguans is exemplified when critiquing the manner in which policies have been imposed “without even negotiating the preservation of certain margins of social inclusion” [specifically those that the Sandinista Revolution fought in the name of] (Vogl, 4). Regarding transparency and the utter lack of it, “top level transactions” starting in the 1990s then set the stage for how policies are decided currently. Vogl writes about the FSLN’s internal commitments with the IMF… what officials label a “poverty reduction program” actually is a process that moves resources to the BCN in order to recover its international reserve levels and then cover the domestic debt service… which ultimately limits social spending even more severely. Therefore the majority of Nicaragua’s population has little to no say in how their national budget is spent and thus people are left even more helpless when they, in turn, must suffer from governmental cut-backs on their social and health needs. “We have to question ‘how priorities are established, and who gives way when agents’ decisions do not add up to a coherent whole’, thus taking on board issues of power and entitlements…” (Brydon, 350) From a context such as this, the role of gender in neoliberalism (neoliberal politics) comes into play.
Viewing neoliberalism and its connections with the world economy, it is seen that men and women are affected in diverse ways by changes in production, trade and financial flows (O’Brien & Williams, 283). This division of labor thus supports the theory that it is the impoverished and working-class women, then, who suffer most from the world’s ongoing economy crises. Although many men also endure impoverishment, the systemic feminization of poverty is undeniable and therefore the costs of SAPs are unequally carried by women.
As governments attempt to balance budgets and engage in structural adjustment programs to make their economies more internationally competitive, women are often forced to pay the price by taking up tasks hitherto performed by the state or giving up their existing sources of income in order to concentrate on caring for their families’ immediate needs. In other words, structural adjustment programs are dependent on unpaid women’s labor. (O’Brien & Williams, 285)
Unfortunately women’s work has much been overshadowed by the false autonomy of the masculine sector of the population. It does not help when a government such as the FSLN, for example, in 1990 voted in favor of all the IMF’s SAPs (Vogl, 7). The result of these votes ultimately decreased spending to balance Nicaragua’s budget, therefore losing many public services – such services that would support the already over-stretched woman. This emphasizes that Nicaraguan neoliberal policies have thus far failed to take women into full and equal account in the light of their unique circumstances.
Civic society still has the potential to educate the public about the dynamics of neoliberal policies in order to affect good governance clauses, bring light to ecological issues, and broaden the theory to development by placing greater importance on social conditions. This could result in greater transparency (which current policies have been gravely lacking) and more open dialogue/debate. So far, though, Nicaragua’s SAPs – simulated by the IMF’s neoliberal policies – have failed and thus deepened instability because of their lack of competition laws, their lack of sequencing and pacing, their lack of gender and social equalities, and their lack of wealth distribution. Néstor Avendaño was right when he spoke of society’s lack of faith and trust in Nicaragua’s leaders… “No one believes in the Supreme Electoral Council. Leaders of the institutions are all made of either the FSLN or the PLC; these leaders are not being bi-partisan. This is all affecting Nicaragua economically” (Avendaño, 11/12/08). Effective, bi-partisan government regulation is necessary in order to ensure fair practices and just working conditions and wages. With government regulation, foreign companies have less power to enter into a country like Nicaragua and develop a monopoly within the market, therefore knocking out all other competition just to later raise their prices. Safety nets are also needed, especially when the economic market suffers from crises. SAPs must adapt to and meet each specific cultural context depending on the country in which they are occurring. SAPs cannot follow just one neoliberal model because each country develops at its own pace, based on its own societal circumstances. It is when power balances and internal aspects such as corruption and political tensions are eased that SAPs can be utilized to promote Nicaragua’s development rather than commit the adverse. As Carlos Pacheco declared, “The solution does not depend on one government or one country. No individual solutions exist. These are global” (Pacheco, 11/09/08).