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Nicaragua's Economic Slide

With unemployment, inflation woes, Chamorro struggle for consensus with Sandinistas

FOR more than 10 years, Juana Estrada has worked in Managua's main outdoor market selling coffee, soap, and other sundries to support her family of five. Sales have always been enough to put food on the table and afford other basic necessities, she says. Until now.

``Almost no one is buying now. All I can earn is to `half eat,''' she says, standing near her table in the crowded market. ``Tortillas and a little cheese, rice and beans. That's all we eat.''

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As the government of President Violeta Barrios de Chamorro tries to stop the country's decade-long economic slide, Nicaraguans are feeling the pinch as never before.

There are hundreds of other vendors like Mrs. Estrada, not just in Managua, but in other Nicaraguan cities as well. Often whole families are out on the streets in this burgeoning informal economy, buying and selling goods in order to scrape by.

Despite meager profits in such ``bisne'' (business), street vendors often earn more than they might in salaried jobs. Inflation in Nicaragua has eroded consumer purchasing power by 90 percent since 1981. Economists say the now-ended contra war, government mismanagement under the former Sandinista regime, and a previous United States economic blockade all contributed to today's difficulties.

``You have a new government trying to implement changes in an economy with 1,800 percent inflation so far this year, little foreign aid arriving, and accumulated needs after years of privation,'' says Arthur Gallese, executive director of the Managua-based Institute for Socio-Economic Research. ``Everyone is demanding a larger share of the pie.''

Economic turbulence

More than 70 percent of Nicaraguans now live in ``extreme poverty,'' according to a United Nations-supported study by Mrs. Chamorro's government. Unemployment is estimated at more than 40 percent, with thousands of former soldiers crowding the job market because of reductions in the size of armed forces. Compounding the trouble is a drought in several food-producing regions, leading to outright hunger in some areas.

The premise of the Chamorro government's economic program is to decentralize government control over the economy, privatize businesses and farms, and encourage foreign investment to stimulate production of food and export crops such as cotton, coffee, meat, and sugar. To tackle inflation, the Nicaraguan Central Bank is slowly introducing a new currency, the gold cordoba, while devaluing the old cordoba.

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The government has also removed subsidies for public transportation and basic foods, and has raised prices for gasoline, electricity, water, and telephone services.

This approach has brought price rises and tensions with salaried workers that exploded into general strikes in May and July. The Gulf crisis has also pushed up fuel costs and inflation.

Chamorro was traveling to Mexico Tuesday in hopes of renegotiating Nicaragua's $960 million debt there, so that oil shipments can be renewed, government officials said. In July, Nicaragua rescheduled its $150 million debt to Venezuela. Caracas then renewed oil supplies suspended since 1983, supplementing oil supplied to Nicaragua by the Soviet Union.

Reluctant investors

Meanwhile, thousands of refugees who fled to neighboring countries during the war are returning. And ex-combatant contras are placing demands on the government, some claiming the Chamorro administration has broken its promise to help them set up new farming communities.

Looking abroad for help, the government is having difficulty encouraging new foreign aid and investment, in part because of underlying political tensions that worry potential investors.

``Plenty of people were ready to set up new businesses after the change in government [in April]. But when shooting started during the July strike, they were all scared away,'' says Francisco Briones, a Managua businessman.

Later this month, $118 million in US economic aid is due to arrive. It will be the second installment of the $300 million aid package approved by Congress. US officials say much of it will go to help pay for petroleum imports as well as a jobs-creation program and other projects.

But most of the aid will go to pay $220 million in debt arrears that Nicaragua owes international lenders, including the World Bank. The idea is to open doors to new financing.

``Donors are only going to send money once they're convinced the government has a handle on the situation,'' says a Managua diplomat. ``Unfortunately, the fundamental problem here is still political. The government is trying to implement its program, but with a strong opposition [the Sandinistas] able to thwart it at every pass.''

Economists say nothing is likely to change - especially the inflation rate - without reducing the large budget deficit. Top Chamorro adviser Antonio Lacayo heard this message during a recent visit to Washington, where he met with the Bush administration, World Bank, and International Monetary Fund officials. He returned to announce cuts in education and the bureaucracy.

Talking about talking

Faced with a ``Catch-22,'' the Chamorro government must cut the budget to lower inflation and encourage new aid and investment, but is blocked from doing so by a mostly pro-Sandinista work force.

Firing state workers will be difficult, given the job-security law hastily approved by the Sandinistas before leaving office. It was a plan to fire state employees that lead to violent strikes that brought the country to a standstill until negotiations ended the street battles in July.

Given this reality, government and Sandinista leaders agree on a need for concertaci'on, or dialogue aimed at reaching concensus. Leaders across the political spectrum recently met for a public debate led by Mr. Lacayo and former President Daniel Ortega Saavedra. All agreed the time had come to find common ground. Chamorro has called for talks beginning tomorrow, though it is not clear if Sandinista leaders will accept her call.

``We need sincere and constructive dialogue, so that together all sectors of the country can seek a solution,'' Lacayo said. Mr. Ortega said he supports dialogue, but dislikes ``monetarist'' policies that hit Nicaragua's poor.

A resilient people

``Sure we can try concertaci'on, but the Sandinista Front will never accept policies favoring the minority and which only promote hunger for the majority,'' Ortega said. Venzuela and Argentina were both rocked by food riots last year, and Ortega and other Sandinista leaders warn a similar ``social explosion'' could occur here.

Despite such statements, Nicaraguans seem remarkably resilient.

``Things have been very bad and only appear to get worse, but you do get used to it,'' Estrada says. ``At least now the war is over. There's no danger our children will be sent to the mountains. We can be thankful for that.''

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