The Neoliberal Noose Hanging Nicaragua

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Managua, March 10, 2003 I sat and watched Claudia, a small pregnant woman of about twenty with two children at home. After asking how and why she had refused a large bribe from her former employer, Yu Jin, I realized the answer was obvious. Without hesitation, Claudia answered, “If we take the money, they will never recognize our dignity or our rights.”
Claudia is a member of the Nicaraguan labor movement who has spent the past four months struggling to regain her maquila job sewing clothes for American consumers. She and other workers were fired for attempting to organize a union. It was only once a campaign was begun to demand that the fired workers be rehired that Yu Jin, an apparel factory in the Saratoga Free Trade Zone, offered Claudia severance pay – an amount it would take her about nine months to earn. Claudia informed me, however, that there was no question in her mind about taking the money. She simply didn’t even take into consideration what an amount like that would mean to her.
Union busting is not an uncommon practice in Nicaragua, where maquilas (large, hot factories where line workers are under continual pressure to increase their output) employ about 60,000 people in a population of 5 million. Nor are workers who feel their human dignity violated rare.
Claudia told us that she and the other workers in her factory, almost all women, are often patted down when leaving the building, even though there would be no reason for them to steal pieces of cut fabric or other
materials. While most maquila workers are women, most guards are not.
I went to Managua as part of a Witness for Peace delegation with a group from United Students Against Sweatshops (USAS) – I expected to hear stories like Claudia’s. After I spoke with Claudia, a twenty-two year-old member of my host family, Mary, told us about how she used to work 7 AM-9 PM Monday through Friday with only a thirty-minute lunch break and a fifteen-minute dinner break. She explained that her boss had often berated her as a caballa [horse], and that there was no soap or toilet paper supplied in the company bathrooms.
What I didn’t expect from my trip to Nicaragua was for such a clear picture to emerge. Although I learned many things about the grays of life in a “third world” country – not every maquila worker is poor, not every poor person is unhappy, many people do have high school or even college educations – I also learned how startlingly black and white international power dynamics can seem when viewed through the bottom-up lens.
Nicaragua has been struggling under the yoke of colonialism (now called “foreign intervention”) since the Spaniards invaded Central America in Columbus’s wake. In the past two centuries, though, the United States has been primarily responsible for enslaving Nicaragua in the service of Western capital.
In 1855, only thirty-four years after Nicaragua’s independence from Spain, an American named William Walker invaded Nicaragua and declared himself the head of state. It didn’t last long. In the 1920s and 1930s, U.S. Marines occupied Nicaragua. And in the 1980s, as we all know, the U.S. government funded the Contra rebels in a war against the Sandinistas, the socialists who had driven U.S.-supported dictator Anastasio Somoza from power in 1979. The Contra war ended only in 1990, when Violeta Chamorro was elected president under heavy political pressure from the United States.
Currently, Nicaragua’s external debt totals U.S.$6.6 billion. Nicaragua’s annual GDP is only U.S.$2.15 billion. Nicaragua will pay $225 million this year just to service this debt, meaning that it will spend that amount of money simply in order to make the minimum interest payments necessary to borrow more money from institutions like the International Monetary Fund and the World Bank.
Loans come with strings. Most IMF and World Bank loans are given only with coerced agreements from the recipient countries to implement structural adjustment policies or SAPs. The idea behind SAPs is that economists at the IMF are in a position to advise countries like Nicaragua on how to best use their loan money. Nicaragua must do its best to follow the SAPs in order to remain eligible for the next loan. In theory, it makes sense in a global economy to encourage fiscal responsibility in other countries. But who elected the economists at the IMF to be responsible for making Nicaragua’s budget decisions? Shouldn’t budget priorities be set by the citizens of a democratic nation? The budget writing process for 2003 is a good indicator of the relationship between SAPs, democracy, and the welfare of Nicaraguans. The Nicaraguan government will spend about 23% of its budget paying off old loans—the same amount that it will spend on education and health care combined.
After a draft of the 2003 budget had been approved by the IMF advisors, Nicaragua’s National Assembly increased the fiscal deficit spending in the budget by 1% of the 2003 GDP (gross domestic product) and expanded the government tax base.
Since the IMF had capped deficit spending in the budget at 6.3% of the GDP, and expansion of the tax base isn’t in the IMF development model, the IMF was unhappy with the increase and sent a delegation to Nicaragua. This delegation was widely interpreted as threatening the National Assembly with the withholding of future loans if the original, IMF-approved budget was not passed. The National Assembly, a democratically elected representative body, decided to pass the original budget set by the IMF instead of what Nicaraguans’ own officials thought was better for their country. SAPs are more than just spending priorities.They also mandate privatization of most, if not all, state-owned property.
According to neoliberal economists, state-run agencies are inefficient. But private companies, especially foreign ones, haven’t proven any more efficient from the perspective of the Nicaraguan people.
Union Fenosa, the Spanish transnational company that bought Nicaragua’s national electric company has raised electricity rates drastically in order to increase the efficiency of the company. The raise was so drastic that many Nicaraguans (and some government agencies) can no longer afford to buy electricity.
For a family living on $600 Cordobas a month – minimum wage for policemen and teachers – electricity amounts to about 76% of their income. Furthermore, a private company has no incentive to provide electricity and services to those who are unlikely to pay the bill. According to Carlos Pacheco, a Nicaraguan economist, the situation got so out of hand that Union Fenosa cut the power to a branch of the Nicaraguan government that hadn’t paid its bill—the branch that is responsible for monitoring the seismic activity in the region.
Privatization encourages a government to sell the few assets it has. By selling the electric company, Nicaragua lost one of its most reliable sources of revenue, and many people lost their jobs as a result of the government’s attempt to make the company more saleable.
Even after these measures, the company was sold to Union Fenosa at rock bottom prices.
So why does the IMF keep encouraging privatization and other measures if they aren’t helping Nicaraguans? Because the policies aren’t intended to help Nicaraguans.
IMF policies are helping the countries whose investors are able to come into Nicaragua and make a fortune by selling utility services. They’re helping the international financial institutions get back some of their loan money by providing governments with quick cash. Most of all, they’re helping to ensure the world economic status quo.
In 1987, the World Court ruled that the United States owed Nicaragua $17 billion dollars in damages for mining Nicaragua’s harbors. The United States does not recognize the jurisdiction of the World Court, so it has never recognized that debt. U.S.-backed Chamorro agreed to abandon Nicaragua’s claim to the money in exchange for loans and other aid. So why does Nicaragua owe the United States and international financial institutions billions of dollars in aid spent trying to recover from the damage inflicted by a U.S. invasion in the 1920s, a U.S.-funded war in the 1980s, and policies imposed by U.S.-led institutions?
For more information, see Witness for Peace at; Nicaragua Network at; and the Wisconsin Coordinating Council on Nicaragua at If you are interested in things you can do, please contact me at

Meghan is a grown-up who lives in Urbana. Likes: social justice, abortion, democracy. Dislikes: American hegemony, birds.

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