The Economy vs. Democracy in Ortega’s Nicaragua

˙ Voces

President Daniel Ortega has received his seventh consecutive nomination as the Sandinista National Liberation Front’s (FSLN) candidate for the upcoming presidential elections in November. Ortega, who has been the FSLN’s sole presidential candidate throughout the party’s history, has been in the top two candidates every election for 32 years. He currently stands as Nicaragua’s only candidate just five months before the election. A high approval rating and fractured opposition are expected to pave the way for Ortega to win an unprecedented fourth term in office and third consecutive term as Nicaragua’s president.

Since his return to the presidency in 2007, Ortega and his followers have enjoyed widespread popular support, driven in part by the country’s impressive economic expansion. While the economy continues to grow, Ortega aims to extend his over two decades in power by yet another term, arguing that Nicaragua needs long-term stability. Ortega’s political longevity, however, has frustrated civil society and raised polarized opinions about the state of democratic governance in Nicaragua.


Sources: International Foundation for Electoral Systems, Elections in the Americas: A Data Handbook, Vol. 1
Sources: International Foundation for Electoral Systems, Elections in the Americas: A Data Handbook, Vol. 1


Ortega’s laudable economic record

The economic impact of the FSLN’s return to power has been surprising, considering the leftist revolutionary party’s history. Ortega’s scorn for “neoliberal imperialism” and “global capitalism’s tyrannical dictatorship” recalls the Sandinista revolutionary government, which presided over a severe crisis in the 1980s as a result of its aggressive non-market policies. Ortega’s management of Nicaragua’s economy since 2007, however, reveals a drift from the revolution’s guiding principles towards a much more pragmatic approach.

Under Ortega, GDP has increased by 74 percent from $6.78 billion in 2006 to $11.8 billion in 2014, with GDP per capita increasing by more than 50% between 2006 and 2013 (1,228.30 to 1,851.11 USD). Additionally, poverty rates fell from 48.3% in 2005 to 29.6% in 2014. Strong levels of growth in the agricultural, construction, and manufacturing sectors have taken place over the recent years. To top things off, annual levels of inflation, measured by CPI, have decreased from 20% in 2008 to 4% in 2015 according to the World Bank.

This positive macroeconomic outlook has been partly a result of pro-business measures that have led foreign investment to increase by a compound annual growth rate of 22% between 2005 and 2014. The country’s crawling exchange rate peg to the US dollar, which allows for currency stability and a slow devaluation that helps the export sector, has coupled with stable stocks of international reserves to facilitate growth. Lastly, Ortega’s government has shown considerable budgetary discipline, with the fiscal balance floating between 0.1% and -1.4% in the 2011-2015 period.

At the same time, Venezuelan oil and aid have also been vital to Nicaragua’s economic success. Assistance from Venezuela peaked in 2010, when Nicaragua received more than $500 million in oil discounts, amounting to about 7.6 percent of GDP. In 2014, $435 million of the country’s $2.5 billion in budgeted income came from Venezuela. Although aid from Venezuela has slowly been reduced, it continues to be the government’s largest revenue source for social spending. This aid has been crucial for Ortega, subsidizing key services and economic support for loyal voting blocs.

To be sure, Nicaragua faces considerable economic challenges, including substantial income inequality and persistent poverty. But the broader economic outlook continues to be favorable: the country’s GDP is expected to grow between 4.2% and 5.3% in 2016.


Has Nicaragua’s economic progress come at the expense of its democracy?

This economic progress, however, seems to have a political price. While Ortega’s supporters insist his broadly-popular government continues to be, by definition, fundamentally democratic, those same sweeping electoral majorities have allowed him to consolidate power. Ultimately he has dismantled many of the country’s democratic institutions, following a similar path to presidents in Venezuela, Ecuador, and Bolivia. With the executive, the courts, and the legislature all under single-party control, Ortega has been able to expand the powers of the presidency and eliminate most of his constraints on his path to indefinite reelection.

In 2009, the Supreme Court (CSJ), composed of six Sandinista appointees, lifted the country’s constitutional ban on consecutive reelection, allowing Ortega to run for a third term despite a lack of support in the National Assembly. When elections were held in 2011, the FSLN won enough seats in the National Assembly to amend the Constitution, abolishing the two-term limit for the president and the ban on consecutive reelection in 2014. In addition, Congress altered the electoral process, eliminating the minimum requirement of 35% of the vote to be elected in a first-round.

Nicaragua’s opposition parties have decried these moves as abuses of presidential power and a threat to democracy, but Ortega’s opponents still remain largely unsuccessful in their attempts to challenge him. The newly formed opposition coalition, known as the National Coalition for Democracy (CND), is highly fractionalized, composed of nine movements and political parties under the leadership of the Independent Liberal Party (PLI). The two main factions of the coalition, the PLI and the Sandinista Renovation Movement (MRS), founded by dissidents of the FSLN, also compete against the Constitutional Liberal Party (PLC), which has created its own alliance with the 150-year old Conservative Party (PC) and other smaller parties.


Looking ahead to the November elections

The CND is likely to emerge as Ortega’s main challenger, but it already faces relatively low chances of success. In early June, the Constitutional Chamber of the Supreme Court stripped opposition leader Eduardo Montealegre of his title as president of the PLI, transferring power over to Pedro Reyes Vallejos. Montealegre immediately accused President Ortega of a “coup” against the opposition and has called on his supporters to take to the streets. As the backbone of the opposition coalition, the PLI’s sudden leadership change threatens the alliance’s unity, especially after Montealegre accused Vallejos of being a “puppet” of the FSLN.

There are also serious concerns about the electoral process and the potential for electoral fraud. Like other key institutions, Ortega has undermined the independence of the Supreme Electoral Council (CSE), which is dominated by Sandinista supporters. In addition, Ortega has announced that independent international observers will not be allowed to oversee the elections in November, an explicit violation of Nicaragua’s electoral law.

In the face of Ortega’s democratic record leading up to the 2016 presidential elections, it is likely that Nicaraguans will continue to reward economic growth, even at the expense of the country’s democratic institutions. With a population of 6 million people where nearly 1.8 million continue to live under poverty, Nicaragua remains the poorest country in Central America and the second poorest in the Western Hemisphere. Polls conducted by FUNDES show that for the last 10 to 15 years, the economy has been the most important issue for 75 percent of Nicaraguan families. Ortega will likely continue to enjoy widespread popular support not only because of his continued economic success, but also because of the opposition’s inability to connect with Nicaragua’s poorest. By focusing on claims against Ortega, the opposition fails to raise the issues Nicaraguans really care about.    

Moreover, sound policymaking has helped the Ortega government avoid much of the criticism, both at home and abroad, that is often leveled against left-leaning leaders in Venezuela and Ecuador. Ortega has maintained a delicate balancing act between his socialist allies and embracing capitalism. While his counterparts in Venezuela and Ecuador are perceived as a threat to democratic capitalism, Ortega’s willingness to work within a market-based economic system has mollified concerns in the United States and elsewhere. As Pedro Reyes, the newly appointed president of the PLI, recently expressed, in Nicaragua “there is an authoritarian government, but not a dictator. We have freedom of the press, a business economy, and the Superior Council of Private Enterprise (Cosep) maintains very good relations with the government.”

In fact, the absence of criticism is so striking that it is unclear why Ortega, who enjoys strong support and a favorable economic climate, would marginalize the opposition and prohibit electoral observation in the first place. He would almost certainly win in any case. And economic progress is most beneficial when it goes hand in hand with, rather than counter-posed to, the consolidation of democratic institutions. After all, in order for all members of society to permanently reap the gains of economic progress, their voices must be adequately and fairly represented.

If other cases of democratic decay in Latin American serve as an example, Nicaraguans should be wary. Like Venezuela and Ecuador, economic troubles may not be far behind. The country’s future will rely on institutions built to weather a downturn, as well as an economic system that performs regardless of who is in control.