Representatives of the Nicaraguan government begin meetings with business leaders and other members of the opposition Civic Alliance starting today. Church leaders are present to witness the discussions, but unlike the dialogue attempted last year – where church leaders were “moderators” – they have no formal role this time.
Last year's rounds of dialogue were very public affairs, with plenaries held before cameras and smaller working sessions held in private. The new talks are being held completely in private; indeed the location of the talks has not been released. A small group, working together outside the temptation of live camera feeds, may be more likely to reach an agreement. On the other hand, there is also a danger that an agreement reached by this smaller gathering won’t be accepted by the myriad groups cut out of the talks.
Context for Discussions
Since the fighting ended in July, a sustainable peace has been hard to achieve. In July, the government passed an anti-terrorism law which has since been used as the basis for the arrest of hundreds of people involved in demonstrations last year. While there was certainly violence from opposition groups - a point largely ignored outside of Nicaragua - the scale of arrests seems out of proportion to those crimes. In some cases, the sentences handed out have been questionable*, far in excess of the constitutionally mandated maximum 30-year sentence, giving the whole process the feel of show trials meant to bolster Ortega’s authority rather than as an effort to achieve justice. That said, there were crimes committed and families clamoring for justice. Not all of the arrests can be dismissed as political posturing. Even so, the process to date has not inspired confidence and is being used outside of Nicaragua to legitimate further sanctions.
Meanwhile the economy has come undone. Nicaragua entered 2018 with economic growth projected at 4-5%. By the end of the year, the economy had actually shrunk; 150,000 jobs were lost (even more in the informal economy), and banks had sharply reduced new lending, creating the potential for a protracted recession. The immediate cause for this is the political crisis. Blockades erected during demonstrations stopped almost all commerce for the months of May to July. Tourism, which had become a major source of foreign exchange and represented 6% of GDP in 2017, collapsed. Over 800,000 reservations into Nicaragua were cancelled in 2018, leading to a 54% decline in revenue and widespread job loss. Foreign direct investment (FDI) took a huge hit as a result of the crisis. FDI fell to $10.7 million in the second quarter of 2018, its lowest level in years. By comparison, FDI in the second quarter of the previous year was $113 million. Capital flight passed the $1 billion mark in August, creating a liquidity crisis for banks. The Central Bank intervened with sales to banks from foreign reserves for a time, but the Central Bank was facing its own liquidity crisis given the falloff in international transactions. By the end of 2018, foreign exchange holdings had fallen to their lowest level in a decade.
On top of the broader economic problems, the threat of sanctions is freezing out investment and raising the costs of borrowing to the government. Nicaragua had already been hit by the secondary effects of new U.S. sanctions against Venezuela announced in August of 2017. Venezuela’s oil company PdVSA holds a 51% stake in Albanisa, a private holding company that uses a portion of proceeds from subsidized oil sales to invest in variety of energy projects. Under threat of sanctions, Albanisa was forced to transfer all of its funds from private banks in Nicaragua to the Banco Corporativo (Bancorp), which is also an Albanisa company. The U.S. congress passed the NICA Act in December, an immediate result of which was that U.S. banks began withdrawing services from Nicaragua for fear of being caught up in sanctions. The long-terms impact of the NICA Act could be devastating. If the U.S. were to veto any new agreement with the International Monetary Fund (as called for in the NICA Act), the ability of the government to borrow funds would be severely hampered.
What’s on the table
As the sides meet today, they will be hammering out an agenda and delineating the process for discussions. The government is clearly looking for a path out of the economic crisis, or at least an agreement that would forestall implementation of further sanctions from the U.S. and avoid sanctions threatened by the European Union. It is doubtful that a formal agreement on new tax policies and social security reform would even be on the table at this point. But positioning for those coming debates will certainly be an undercurrent in the discussions.
The Civic Alliance is coming with demands (as reported in El Nuevo Diario): Release of political prisoners and the restoration of freedoms, rights and guarantees, established by the Political Constitution, as well as electoral reforms that guarantee fair, free and transparent elections; and Justice for the people of Nicaragua. Not on this list is the specific demand for early elections. This may still be a part of the discussion, of course, but there is some light here. The government has committed, on paper at least, to introducing electoral reforms and has met some opposition demands on local election policy already. Last night the government prepared to release 120-150 prisoners to conditions of house arrest. This is far from the freedom being demanded, but might garner the government some small amount of goodwill on this point. As of this afternoon, the government has already begun to follow through and a partial list of those under house arrest has been made public.
Whatever is decided at the dialogue faces at least two further challenges, a domestic one and an international one.
If the Civic Alliance members are seen as compromising too much to get an agreement, it might well be rejected on the streets. This is particularly true on the questions of prisoners and elections. The hardcore opposition wants Ortega gone, and will demand all prisoners released. The Civic Alliance negotiators are not likely to get either, but they may get a process to review arrests, with some additional people released to house arrest in the intervening period, and they may secure electoral reform that will provide more space for opposition candidates and, possibly, no fourth term for Ortega. Will that be enough?
Then there is the so-called international community. Throughout the crisis, the U.S. government has been pressing for early elections. National Security Advisor John Bolton recently said that Ortega is on his way out, one way or another. Will this posturing from the sidelines make an agreement impossible to reach? Will the United States accept an agreement even if it does not meet all of their demands?
All of which is to say, I am hopeful that this process is underway again, and even hopeful that an agreement will be reached; but this hope is tempered somewhat knowing that any agreement will face further challenges to be seen as legitimate and to be implemented. Compromise has not been in the air much since last April, but maybe the economic situation, which impacts everyone (if not equally) will force the question. We can only watch from here - and hope Bolton stays out of the way, allowing Nicaraguan negotiators to come to an agreement without putting his thumb on the scale.