Nestor Avendaño, a prominent Nicaraguan economist recently visited Washington DC as a guest of the Quixote Center.  He came to present his recently completed paper which documents the history of debt relief in Nicaragua under the Highly Indebted Poor Country (HIPC) initiative and tracks the usage of that debt relief. 

What the study makes clear is that funds which were liberated under this initiative were only minimally used on poverty reduction programs, contrary to the expressed wishes of the G-8 countries.  The funds were used instead largely to pay a huge domestic debt which had been largely incurred during the 1990s. 

It has been documented that much of this debt was incurred as a result of fraud by government functionaries and national banks.  The Coordinadora Civil has submitted a draft law to the National Assembly which would evaluate the legitimacy of the debt and re-issue legalized bonds that have a longer repayment schedule and a lower interest rate.  The Central Government and the IMF both continue to resist this idea which is the only real possibility for increased spending to reduce poverty. 

In our visit with the new head of the Nicaraguan Mission, he demonstrated an extremely orthodox attitude, maintaining staunch resistance to this proposal.   Actually we experienced much more openness to this proposal during our visits in the offices of two executive directors, from Great Britain and Switzerland. 

We don't know what actually transpired in the review of Nicaragua at the IMF board this week, but they were put back ‘on track' for receiving new loans after more than a year of being ‘off track'. In the Nicaraguan President's state of the nation address earlier this week, he explained how the interest on the domestic debt had been re-negotiated last year, in allusion to the notion that everything that will be done has already been done.  Unfortunately this continues to be an unacceptable and response to many in the country.

At a meeting with members of the Jubilee USA network, Nestor helped the strategy session which was contemplating how to seek similar debt relief from the Interamerican Development Bank (IADB).  The rate which lending from the IADB and other regional banks continued, Nicaragua is back on the path of a new un-payable debt burden.  We will continue to work together to forge creative solutions to these complex problems.