War and Peace in Central America: Reality and Illusion
Agony in the Garden: A Stranger in Central America
On July 19, 1989, celebrating the tenth anniversary of the Nicaraguan revolution which drove the dictator Anastasio Somoza Debayle from the country, President Daniel Ortega Saavedra spoke from a podium a few hundred yards from the square that was renamed the Plaza de la Revolución after it was destroyed by earthquake in 1972. The square remains a wasteland. Somoza was unwilling to rebuild the downtown district, and the Sandinistas have also failed to do so.
After ten years of Sandinista rule, the Nicaraguan economy is in a miserable state. Between 1981 and 1988, according to a confidential study prepared by a group of international experts at the request of President Ortega, consumption has been cut by 70 percent. Real wages of Nicaraguan workers have fallen to less than 10 percent of their level in 1981, and per capita gross domestic product has dropped to roughly $300 per year, even less than that of Haiti, long considered the poorest country in the western hemisphere. Last year, the per capita output fell to half the pre-1979 level, while prices rose by 33,000 percent. The Nicaraguan gross domestic product fell by 8 percent this past year, and, according to the report, will continue to fall by at least as much in 1989. Industrial production in 1989 is expected to decrease by about 20 percent. These predictions, moreover, were made even before the latest round of devaluations and inflation in June when the value of the Nicaraguan currency fell by two thirds against the dollar.1
Certainly the US trade embargo, imposed in May 1985, and the costs of fighting the US-backed contras have put a severe burden on the economy, with defense expenditures consuming about half of the budget, or, according to the report, about 17 percent of the gross domestic product. In addition, Washington pressed for a cutoff of access to loans from the International Monetary Fund, which further deprived Nicaragua of liquid assets and short-term trade credits. According to the confidential report, Peter Passell wrote in The New York Times, “half of this year’s prospective exports are already pledged as collateral against this year’s imports.”
But the Sandinistas have to bear much of the blame for the mismanagement of the economy. After the 1979 revolution, about 40 percent of cultivated land was confiscated and turned over to large-scale cooperatives or state farms, though a small amount has since been redistributed to individual farmers. Nonetheless, over one half of the economy remains in private hands, including most of the cattlemen and the farmers who grow the country’s staple crops of sugar, coffee, and cotton. About 35 percent of the relatively large industrial enterprises—companies engaged, for example, in sugar refining, food processing, and textile manufacturing—are still privately owned, and 25 percent of the gross domestic product is accounted for by small artisans, such as auto mechanics and repairmen, and small businessmen who are mostly in service industries, such as taxi drivers, shopkeepers, or, in many cases, street peddlers.2 But under the…
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