Ambassadors Archive 1

Nicaragua: Struggling Toward a Hopeful Future

An Interview with Ambassador Salvador E. Stadthagen

By Hugh S. Galford

While there were reports of demonstrations in Managua, over the raising of bus fares, Nicaraguan President Enrique Bolaños arrived in Washington on May 12 to attend a meeting of the Central American countries involved in CAFTA. In a speech at a reception hosted by the Embassy of Nicaragua, which included former U N ambassador Jeanne Kirkpatrick, Senator Richard Lugar, and Congressman David Dreier, President Bolanos stressed the importance of CAFTA (the Central American Free Trade Agreement). He said it was crucial not only to his own country, but also to the hemisphere as a whole. CAFTA, he said, “is about democracy. In the 1990s, we all expected a linear continuation of democratic growth: a straight line up. But this has not been the case. CAFTA will link the US and Central America economically, but more importantly, democratically.”

Such linkage is of utmost importance, he said. “On May Day, Daniel Ortega was in Cuba shaking Fidel Castro’s hand and calling the US a threat to humanity.” A carefully negotiated trade agreement would strengthen the hand of Central America’s democratic leaders. For his part, Bolaños declared, “I, and my administration will not stop fighting for democracy, for the separation of powers and for the independence of the courts,” the three main areas of contention in Nicaragua.

For most Americans, Nicaragua is stuck in the 1980s. Mention the country, and rebellion, war, arms proliferation and a stringent anti-American outlook are the first thoughts many have. Yet the fact remains that Nicaragua is the second poorest country in the region after Haiti. Its population of 5.1 million have suffered immense deprivation as a result of war, manipulation and political turmoil.

Salvador Stadthagen, Nicaragua’s ambassador to the US since December 2003, struggles to bring developments in Nicaragua up-to date. While still facing political difficulties, the country has been largely peaceful for well over a decade. He mentioned a film shown at the American University in Washington, entitled “The World Stopped Watching”. The film underlines a near-universal truth of modern news, he says. “If there is no conflict, there is no attention.”

Ambassador Stadthagen notes that the 1980s were an exceptional period in US-Nicaraguan relations. Historically, he says, “there have been warm relations with the US.” The ambassador cites the statistic that one-in-eight Central Americans live in the US, 700,000 to 1,000,000 of whom are Nicaraguans. This strong human link benefits the US economy. These workers remit nearly $7 billion to their families in Central America each year. Sixty-two percent of this money is spent on consumption, much of it spent on American-made goods, creating jobs here. For every dollar of goods sold to the US, Central America purchases $1.30 of goods made in America.

The new reality of Nicaragua (and the region as a whole) has not gone totally unnoticed. Both Condé Nast and GQ magazines have run recent articles on the country. In 2003, Nicaragua had the second largest amount of investment in Central America (behind Costa Rica); in 2004, the country ranked third (behind Costa Rica and El Salvador). The current debates over CAFTA hold even greater hope.

Nicaragua remains a largely agricultural economy. Coffee, cattle, fruits and vegetables comprise the largest sectors of agriculture, but tropical plants and flowers and exotic fruits are growing markets for export. The country is trying to diversify its economy, the ambassador says, mainly through the various Free Trade Zones established throughout the country.

The fastest growing Free Trade Zones are in garment production; US, Taiwanese, Korean and Canadian companies are the major purchasers. The Free Trade Zones are operated by the government, with stringent enforcement of legal requirements and thorough monitoring. The minimum work age in the Free Trade Zones is 18. Child labor does exist, the ambassador admits, but “is more a problem in the fields and agriculture.”

Ambassador Stadthagen puts great hope in the Free Trade Zones. Pay in the Zones, he says, “is much higher than in local industry. This pulls up the local economy, since there is a large pool of labor…suffering from high unemployment.” The country is still poor and underdeveloped; per capita income is approximately US$750. The Free Trade Zones contribute to the local economy not just through higher compensation, but through mandatory training programs. Each Free Trade Zone sets aside two percent of payroll to fund job training at a number of institutes, in all areas. Employers can even request specific types of training. While education in Nicaragua is free, and the national university system accounts for six percent of the national budget, Ambassador Stadthagen says the quality of local university students is relatively low and there are many graduates. They come away with lower qualifications than bachelor’s program graduates, but are a ready, easily trained workforce for mid-level jobs.

In addition to the Free Trade Zones, Nicaragua is focusing on tourism as an impetus for economic growth. In 2004, tourism grew by 12.5 percent. While more visitors are welcome, the ambassador stresses that the country is not looking for a flood. There is a strong interest in ecotourism—welcoming visitors while protecting Nicaragua’s ecosystem. Nicaragua, Ambassador Stadthagen says, has the largest nature reserves north of the Amazon.

Nicaragua’s tourist industry is run in tandem with those of other Central American countries. Tourists, the ambassador says, “like multiple destinations when they travel.” The region has a rich and varied history, and each country has its individual strong points. “Nicaragua, for instance, can present its colonial past, Amerindian culture and folk festivals.” Grenada, founded in 1524, is the oldest city in the Americas, and is being billed as “the new Antigua.”

One of Ambassador Stadthagen’s main goals is to argue for the passage of CAFTA, which he sees as a major support for Nicaragua’s continued growth. The ambassador is “positive it will pass.” He describes organized labor’s opposition to the agreement as “excuses.” Organized labor, he says, “has concurred that there would be no significant job losses in the US with CAFTA. Studies have shown that both sides will grow in terms of trade. They say they care about Nicaraguan laborers, but Nicaragua has no doubts that our workers will be better off with CAFTA.” He underlines that there are six democratic countries in Central America, and that Nicaragua is open, has a free press and permits labor unions.

The country is also undertaking two complementary reform programs, the National Development Plan and the Poverty Reduction Plan. The former is a 25-year, long-term plan to develop a social market economy. It runs in parallel with and incorporates the Poverty Reduction Plan, consisting of specific ideas on how to develop territoriality. Previously, the government attempted to take resources to the various small towns that were without. Now, the government works to improve regional infrastructure and have a center of services, with townspeople coming to the center. Thus, rather than bringing multiple services to individual towns and villages, numerous villages are linked to a central town that provides the needed services. This, the ambassador says, is a smarter use of limited resources by the government, as some areas can’t be developed in particular ways, due to a lack of water, land, etc.

The Poverty Reduction Plan, undertaken with the World Bank, is the main economic focus of the government. It is a wide-ranging plan, and must be instituted with care. “To decrease poverty,” Ambassador Stadthagen says, “we must produce wealth by increasing exports and so on. We must make the country more productive.” Land reform is not an issue in Nicaragua, the ambassador says. “Land tenure was never as concentrated in Nicaragua as it was elsewhere. There were always a large number of small or medium farms.”

Politically, Nicaragua has made huge strides since the strife of the 1980s. President Bolaños, a former cotton grower and processor jailed for a short time by the Sandinistas, is seen “as a simple, transparent, solid, moral person. The US, Organization of American States and EU have each praised his placing Nicaragua on the path to transparency.” Bolaños, now 78, will be too old to run again, and is working hard to push through institutional and democratic reforms before the 2006 elections.

The Sandinistas—now a parliamentary party—and the Liberals, however, are challenging his anti-corruption platform. The Sandinistas as a party won 39 percent of the vote in the last election (compared to 56 percent for the government) and hold 38 of the National Assembly’s 92 seats. Daniel Ortega has been defeated in the last three elections, personally garnering only about 12 percent of the vote.

The Sandinistas, Ambassador Stadthagen says, “are dogmatic Marxist-Leninists and bank on the country not developing.” Despite this ideological background, Ambassador Stadthagen points out that the Sandinistas stole nearly $2 billion from the country. He notes that when they were defeated in elections, the Sandinistas hastily passed a law giving themselves the right to appropriate large tracts of property. The Sandinistas, hard-core socialists, “are now landed,” the Ambassador wryly notes.

The corruption of the Sandinista leaders, and their alliance with former president Arnoldo Aleman—currently serving a 20-year prison sentence on corruption charges—have eroded their support with the “good Sandinistas,” in the ambassador’s words. By distancing himself from the rest of the party, Managua’s mayor, a Sandinista, has actually gone up in the polls.

President Bolaños survived an impeachment campaign in the National Assembly in the fall of 2004. When this failed, the Sandinistas and Liberals moved to counter Bolaños’ proposed Law of Judicial Career, whereby the country’s Supreme Court would be elected. The National Assembly attempted to strip Bolaños of most of his executive powers and create instead a “super legislature” with broad-ranging powers. This move was found to be unconstitutional by the Central American Court of Justice on April 5, 2005, on grounds that such a change would upset the balance of powers.

In addition to lobbying for passage of CAFTA, Ambassador Stadthagen hopes to promote investment in Nicaragua and the protection and promotion of the Nicaraguan community in the US. He notes that Nicaragua’s real per capita income is back to the 1942 level, due to the Sandinistas’ policies. He also notes that the GDP of Nicaraguans in the US is five times that of Nicaragua itself. “The Nicaraguans in the US are so important to the future of our country,” he says. “Our middle class left for the US.” One major change that would allow expatriates to play a greater role would be to allow them to vote in Nicaraguan elections, a right they have by law. Despite the legal underpinnings, the Electoral Council blocked consulates from providing expats their national ID cards, a prerequisite for voting.

President Bolaños continues to face difficulties, as the riots over increased bus fares in early May of this year showed. Against this background, two foes have come together with plans to try to win back the presidency in next year’s election. Former president Daniel Ortega and former president, Arnaldo Aleman who is now serving time in jail for embezzling $100 million while in office. Nonetheless, Ambassador Stadthagen is confident that Bolaños and his reforms will succeed. “I am with the President,” he says. “If the Supreme Court and the Election Board are in decent hands at the end of his term, we will have made real progress.”

The Bush administration is struggling to get House and Senate votes on the Dominican Republic-Central America Free Trade Agreement before the July 4th recess. Potential blocs by the House New Democrat Coalition, lead by Rep Adam Smith (D-Wash), oppose the free trade pact on the grounds that they cannot support its “weak labor and environmental provisions.” They argue that the Republican congressional backing has undermined the worker protection precedents for domestic and foreign workers that were added to treaties during the Clinton administration.

Ambassador Stadthagen’s response to that argument is that CAFTA is the free trade agreement to date with the strongest labor provisions:

“More than the US-FTA with Jordan. The same as Morocco, but with a capacity building component that will address the real issue; compliance with excellent laws that are in tune with the International Labor Organization high standards.” He asks: “Why did most of the Congress vote for Jordan and Morocco and now turn their backs on close neighbors in Central America? While CAFTA now has a state of the art environmental Secretariat which, for the first time, will give a forum to Civil Society to express any complaints they may have.”

The vote on CAFTA may be a pivotal moment in the history of both Nicaragua and the region.