The International Monetary Fund (IMF) has threatened to cancel the loan agreement it recently signed with Nicaragua because the country's legislature, the National Assembly, changed the nation's budget to give more money to local governments for public improvements and to raise slightly the extremely low salaries of teachers, police officers, nurses and others. [A Nicaraguan elementary teacher earns about $60 per month]. Besides requiring that Nicaragua adopt the budget the IMF wants, the Fund also mandates the privatization of hydroelectric power even though the legislature has passed a moratorium on further water-related privatization. And it also requires Nicaragua to expand its "school autonomy" program that cuts funding to local schools, monies that must then be made up by parents' fees.
Background Information
A six-person technical mission of the International
Monetary Fund (IMF) acted like typical mafia-style
protection racket enforcers in Nicaragua on January
15. Following up on the agreement signed with Nicaragua
on December 4 for a US$131 million loan, their
anti-democratic message was, "Revert to the president's
original budget for 2003, or face the consequences."
In their final press conference, members of the
mission made it clear that the changes made during
the budget debate in the National Assembly would
have to be reversed if the recent agreement was
not to be cancelled and Nicaragua was not to
lose all multilateral and possibly all bilateral
aid. In its turn, loss of this support would
mean that the country would be unable to meet
the requirements to remain within the "Highly
Indebted Poor Countries’ Initiative" (HIPC).
HIPC is another con game engineered by the IMF and
World Bank to allow them to control national economies
on the ever receding promise of cancellation of part
of their external debt.
"In departing from the original budget – as it was proposed by President Enrique Bolaños for ratification by the National Assembly – Nicaragua has placed itself outside the agreement made with the IMF," a spokesperson said. "As a result it can no longer be considered to be within the IMF program. Unless this situation changes by March, when another mission will be here, then Nicaragua will receive no support from the international community."
Reaction to the IMF strong-arm tactics was swift. The measure that the IMF most objects to is the National Assembly’s reprioritization of funds from payment on the internal debt to bankers in order to allow small raises for police, teachers and health workers. Some observers note that President Bolaños prepared his budget not only to please the IMF but also to please his banker supporters.
Alejandro Bendaña, Director of the prestigious Center for International Studies, accused the IMF of a "policy of blackmail worse than that which existed during the Spanish colonization." "We have never elected the IMF to be our government," he expostulated. "The Nicaraguan government has two options – to hand over the Nicaraguan people to the bureaucrats, or to pack the IMF mission back onto its plane and send it home to Washington. The IMF is widely discredited; there are many peoples’ initiatives and ethical tribunals that have condemned it and its policies. Its prescriptions constantly violate human rights, imposing policies which inflict more impoverishment and hunger, less health care and education."
This position was strongly echoed by a united Sandinista Front. Also accusing the IMF of blackmail, FSLN General Secretary Daniel Ortega emphasized that the mission’s position "showed a complete disrespect for Nicaragua’s national sovereignty." Reading from a statement prepared by the Sandinista National Council, Ortega claimed that the amendments passed by the National Assembly actually meant that the budget remained within the overall IMF guidelines in any case, with the added benefit that the proposed raises offered to the sixty-five thousand public sector workers would put more money into the economy and so generate more state income through taxes and other spin-off effects.
The Nicaraguan Center for Human Rights (CENIDH) also joined the chorus of criticism. In a strong statement, CENIDH maintained that, "Since 1990, a succession of Nicaraguan governments has made agreements with the IMF on the backs of the Nicaraguan people. None of these has led to any improvement; rather the overall quality of life for the majority has been constantly deteriorating. The Nicaraguan people are the victims of a new dictatorship, that of the IMF, which imposes fundamentalist economic models through authoritarian and anti-democratic means. These models serve only to deepen our dependence and under-development. We call on President Bolaños to act with firmness and dignity; he must not allow the IMF to continue to act in this arrogant manner." CENIDH further issued a call for the creation of alternative proposals to set over against the "blackmail and pressures of the multilateral organizations."
The Civic Coordinator (a coalition of non-governmental organizations) issued a statement supporting the transfer of funds by the National Assembly from interest payments (on the national debt) to the banks to local municipalities for public works. Coordinator leaders Vida Luz Meneses and Ricardo Zambrana noted that the banks have been receiving interest payments at a rate of 20%, while at the same time they have been defaulting on their tax payments to the tune of US$200 million over the last two years. "The banks should honor all of their obligations to the tax office!" emphasized Zambrana and Meneses. Tax revenue from the banks could make up the 1% deficit in the budget caused by the diversion of funds to increase the miserable salaries of public employees like teachers, nurses, and police officers. Meneses and Zambrana stated that "The IMF mission exceeded its functions; it does not have the authority to demand of Nicaragua that its National Assembly approve the budget exactly as it was introduced by the executive branch, nor should the president permit this."
The Bolaños government defended the agreement with the IMF. The president claimed that the "global package" would breathe new life into poverty alleviation programs and "bring hope to Nicaraguans everywhere." The US$131.5 million would be allocated with $129 million "to support the government's economic program," which means that it will go for balance of payments support, and $2.5 million to bring Nicaragua into compliance with HIPC (Highly Indebted Poor Country) debt relief requirements. It was unclear how any of these funds would help the poor.
IMF conditions for its loan also would require Nicaragua to sell its state-owned hydroelectric dams and hydroelectric company. This privatization process has been fraught with corruption and irregularities. Early in 2002, Enron bid to buy the hydroelectric dams. But when Enron failed to comply with conditions of the sale, the contract was transferred to Coastal Power of Texas. However, the bid was so low, estimated at only 20 percent of the plant's value, that the comptroller general of Nicaragua began a review of the process. This incident prompted the National Assembly to unanimously pass a law that suspended all private concessions involving water uses until a national regulatory framework for water could be established. Although President Bolaños vetoed the bill, it stands until or unless the Assembly votes again to "sustain" the veto, which it has not done.
The latest effort by the corporate globalizers to commodify everything has been to grab national and local water systems, raising rates and thereby leaving large numbers of the poor without essential water service. The privatization of the management of the water systems of Leon, Chinandega, Matagalpa, and Jinotega was moving forward, in spite of organized citizen resistance, until the National Assembly, reacting to general alarm among the public, passed the moratorium. In meetings with IMF officials in November, representatives of the Nicaragua Network and other groups were told that, if this moratorium stands, the IMF would have to consider what to do, because Nicaragua would be "in breach" of its agreement.
The IMF agreement was also predicated on the sale of 51% of the shares of the successful national phone company, ENITEL. This was most one of the most controversial aspects of the IMF package. Much of Nicaraguan civil society, together with many opposition figures in public life, has become increasingly critical of "the rush to privatize." While impoverished Nicaraguans have been fighting primarily to prevent the privatization such basics as power and water, the loss of the phone company from public service is widely seen as a key stage in the remorseless process. The agreement with the IMF overall has been particularly criticized for largely ignoring the civil sector, and nowhere more so than in the privatization context.
"The IMF is taking an Olympic leap over the laws of our country, including our Supreme Court, the Comptroller General's Office, the National Assembly and our constitution," said Ruth Herrera, a representative of the National Network in Defense of the Consumer, a Nicaraguan organization. "One has to ask if any of our democratic institutions will be respected." Herrera is working with the Humboldt Center, the Center for International Studies, and the Nicaraguan Center for Human Rights (CENIDH), in Nicaragua, as well as Public Citizen, the Quixote Center, the Nicaragua Network and the Latin America Working Group in the United States to oppose IMF-mandated measures.
In addition to violating Nicaraguan law, the new IMF loan conditions contain requirements that violate U.S. law by imposing user fees for Nicaraguan children to attend schools. The new agreement will require the government of Nicaragua to continue to implement "school autonomy" legislation that reduces national government funding for schools. Under the "school autonomy" system the government pays only teachers' salaries [at a level of misery], some special training, and some school repairs. Parents must come up with the money for additional salary, desks, books and materials, electric bills and cleaning materials. (The children clean the schools.) For many parents, these fees mean that their children cannot go to school. The fees are supposed to be voluntary, and poor children exempted. But, in Nicaragua, only poor families send their children to public elementary schools (the middle class and the rich send their children to private elementary schools) so pressure is put on the parents to pay the fees since the schools cannot run without them. The IMF official at the meeting mentioned above, when asked by the Nicaragua Network about the "school autonomy" measure, which was on a list of conditions that we were allowed to see but of which we could not have copies, became nervous and said, "Ask the World Bank." He also told us that the list was available on the web. It is not.
In November 2000, the U.S. Congress passed legislation requiring the United States to oppose any World Bank, IMF, or other multilateral development bank loan which includes user fees for basic health or education services, and to report to Congress within 10 days should any loan or other agreement be approved that includes such user fees. The actual language mandates opposition to "any loan of these institutions that would require user fees or service charges on poor people for primary education or primary healthcare, including prevention and treatment efforts for HIV/AIDS, malaria, tuberculosis, and infant, child, and maternal well-being, in connection with the institutions' lending programs." The report language is even more explicit: "user fees should not be imposed or required through Bank or Fund sponsored "community financing," "cost sharing," or "cost recovery" mechanisms prepared in conjunctions with loans, structural adjustment schemes or debt relief actions." The euphemism for primary school user fees used in the case of Nicaragua is "school autonomy" which would come under the Congress's prohibition on "community financing."