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MULTILATERAL DEBT (in US$ thousands)
Despite the Cologne initiative of G7 leaders in 1999 promising speeded up, deeper debt relief, between June 1999 and May 2000 Nicaragua's debt increased from $6.4 billion to $6.5 billion.
Who owes what to whom?In the 1980s when the Sandinista government was in power, the Reagan administration attempted to overthrow the Sandinistas by financing and training a mercenary army known as the contras and imposing an economic embargo. As a consequence 30,000 people on both sides lost their lives and Nicaragua's economy was left in ruins. In1986, the World Court found the US guilty of acts of aggression against Nicaragua in violation of international treaties signed by both countries. The Court ordered the US to pay reparations estimated at $17 billion, the cost of the aggression sponsored and funded by the US. The US refused to accept that the World Court had the right of jurisdiction over the case and has used this as justification for refusing to recompense Nicaragua. The amount owed would be sufficient to pay the Nicaraguan debt nearly three times over.
Hurricane MitchHurricane Mitch devastated Central America in October 1998 leaving over 20,000 dead and widespread destruction. 'Mitch laid bare the traumas that Nicaragua was already going through,' says Cruz Bermudez, mayor of San Francisco Libre which lies on the shores of Lake Managua where 18 months later the level of the lake is still 3 metres (9ft) above normal. Poverty and marginalisation exacerbated by debt and structural adjustment were major factors that contributed to the scale of the devastation. After the Hurricane donor countries agreed to defer debt repayments for both Nicaragua and Honduras for two years but not to cancel the debt. This means that debt has continued to accumulate. At the same time the IMF, World Bank and Inter-American Development Bank insisted on maintaining their 'preferred status' and continued collecting repayments. To ensure that multilateral lenders continue to be paid, the World Bank set up a special trust fund to help Nicaragua and Honduras pay their debt service. According to Jubilee 2000, one year after the Hurricane, Nicaragua had spent almost as much on debt service ($170 million) as on reconstruction ($190 million). The IMF has explicitly stated that Nicaragua must 'limit reconstruction outlays' to $190 million per year in 1999 and 2000. This amounts to 8% of GDP even though the damage caused to the Nicaraguan economy by Hurricane Mitch amounted to 60% of GDP. Despite the Hurricane the IMF insisted that Nicaragua must 'accelerate structural reform' by tightening credit, reducing the public sector by 1,200 workers (mainly from the health sector) and increasing the cost of public utilities by 1.5% per month. The latter has provoked a public outcry because of the severe impact it is having on the poorest sectors of the population.
Structural Adjustment - Enriching the rich, impoverishing the poor'The impact on women of structural adjustment programmes is devastating. When times get bad it is the women who go out and take almost any job to provide for their family... women take on three shifts per day – the domestic role, paid work and when they come home they take over the responsibilities of the government: health and education.' Sharon Hostetler, Witness for Peace. 'We hear the decisions that are made for us,' says Suyen Barahona, Humboldt Centre (Nicaraguan NGO) commenting on the need for democratisation of the IMF and World Bank, where the US has 20% representation and Central America 0.01%. Because of its foreign debt, Nicaragua has been forced to implement a series of structural adjustment programmes (formerly known as Enhanced Structural Adjustment Facility, recently renamed Poverty Reduction and Growth Facility). Since 1995 Nicaragua has been through two structural adjustment programmes and in January 1999 signed a third with the IMF and World Bank. This has resulted in the following ('A Window for Development' GPC, 1999): In 1998 nearly 70% of Nicaragua lived below the poverty line according to United Nations figures as compared to 50% in 1993. An accelerated privatisation process has left over half the population excluded from health and education services. Per capita spending on health and education has dropped substantially since the mid 1980s and illiteracy has consequently increased from 18% in 1990 to 34% in 1998. During the contra war, the government was spending $40 per capita on health compared with $11 per capita in 1997. Real income per capita has fallen since 1990 by 46%. The average monthly salary of Nicaraguans in work is $68 per month while the minimum cost of food and services for the average family of 6 people is $139. 'Today's neglected children will become tomorrow's marginalised adults,' says sociologist Carlos Lopez, Nicaraguan special procurator for the rights of children. When the school year started in February 2000 the Ministry of Education announced that more than 1 million children (almost half school age children) had failed to enrol. Despite the fact that the Nicaraguan constitution guarantees every child free education thousands of Nicaraguan parents are unable to afford their children's school expenses. In addition to paying for uniforms and materials, parents are required to pay 'voluntary' contributions towards the cost of teachers' salaries, and exam fees. Ministry of Education figures indicate that double the current number of teachers and a further 14,000 classrooms are needed to cater for all Nicaragua's children. However, even if the political will existed to ensure this provision, recruitment of teachers will be problematic. NSC study tour member Christopher Hall commented: 'Ten years ago, as part of the cuts in public spending (part of structural adjustment), teachers' pay was frozen. They have had no increases not even for inflation so they are now paid £20 per month yet the cost of a basic necessities for a family is £100 per month. The effects on recruitment can be imagined.' Numerous innovative local initiatives struggle to fill the holes in state provision but as an NSC study tour member commented: 'We visited projects for children who survive by scavenging on the local rubbish dump, for training older children in carpentry, typing and sewing, drama and art ...but inevitably such services cannot take the place of a comprehensive state system of education and many people fall through the net.' The HIPC initiative - half hearted, piecemeal and inadequate ('Kicking the Habit' Jubilee 2000 UK Coalition) 'the Fund and the World Bank have been hijacked by their major shareholders for overtly political ends... they have become an explicit tool of western and particularly US foreign policy.' The Economist Zambia's Jubilee 2000 coalition believes that 'the conditions for meeting the needs of the poor should be set by local people and institutions within the debtor country not by outside creditors imposing their preferred prescriptions.' They argue that the only acceptable condition on debtor countries is the setting up of a poverty eradication fund. After that conditionality should be 'from below'. The agreements of the G7 in Cologne in June 1999 and the decisions of the annual meetings of the IMF and World Bank in September incorporated a new element into the woefully inadequate HIPC initiative. The World Bank admitted that based on evidence of past failures, economic growth is a necessary but not sufficient condition for debt reduction and that poverty and inequality of income can be serious impediments to economic growth. The September 1999 meeting of finance ministers incorporated poverty reduction, governability, transparency and civil society participation into the HIPC initiative. However, the policies of the World Bank and IMF and therefore their commitment to poverty reduction are fraught with profound contradictions. For example, the IMF stated at a meeting of leaders of African countries in February 2000 that it will demand of all countries 'a more rapid privatisation process' and 'a faster pace of trade liberalisation.' Squaring this with reducing poverty will present a major challenge.
The Listening Bank?The NSC study tour met Mr Lachler, the World Bank representative in Nicaragua Although accepting that the Nicaraguan debt is unsustainable he seemed out of touch with Nicaraguan reality. He claimed that there had been only a marginal drop in school enrolment, that fees were 'voluntary' and added that 'it's OK to make some charges for education because people always value things more when they have to pay for them' - hardly a realistic option when over half the population has an income of less than 70p a day. Although he talked about the need for participation of civil society in drawing up a Poverty Reduction Strategy Paper when pressed further about the role of civil society he commented 'Who elected them?' - a question he should clearly be addressing to his own employers. Study tour member Anne Adams highlighted the profound difficulties of changing the mindset of the IMF and World Bank: 'We were able to meet with the World Bank representative who appeared to listen to our case quite sympathetically but I felt he was locked up in the global system of trade and in measuring a country's prosperity by its GDP. '
What difference could debt reductions make?In 1998 the Nicaragua Lobbying Forum on debt (GPC) together with Oxfam, estimated that if debt payments from 2000 to 2004 were reduced by 70% the following could be achieved: free universal primary education; the building of 1,100 pre-school classrooms; rehabilitation of 350 schools and 400 health centres; the primary school completion rate increased from 34% to 60%; improvements in access to basic health services for 900,000 people; improvements in the water supply to 450,000 people in rural areas and training programmes for rural producers ion credit and marketing needs. The GPC stressed the importance of the government, donors and civil society working together to monitor the use of resources freed through debt relief.
Nicaragua, the HIPC initiative and political opportunismAs a HIPC country, Nicaragua should have benefited from the faster, deeper debt relief announced by the G7 countries in Cologne. In 17 September 1999 Nicaraguan President, Arnoldo Aleman announced that 'Nicaragua is now firmly set on the path towards a future free from the crushing burden of debt as a result of its entry into the HIPC initiative.' However, the IMF and World Bank had, in fact, rejected the Nicaraguan government's proposals because of their inadequacy in addressing governability and lack of clarity on how funds released through debt cancellation would be used for poverty reduction. The Nicaraguan government, happy to accept structural adjustment because it corresponds with its own interests, expressed strong resentment at these measures, condemning them as interference in the internal affairs of a sovereign state.
Civil Society Co-ordination for Emergency Relief and Reconstruction (CCER)In May 1999 the Civil Society Co-ordination for Emergency Relief and Reconstruction (CCER), which was formed in the wake of Hurricane Mitch, published a paper entitled 'Turning the Mitch tragedy into an opportunity for the sustainable development of Nicaragua.' Put together after a very broad consultation, the paper argued for a profound transformation in the existing economic model, which had greatly exacerbated the scale of the Hurricane Mitch tragedy. This paper was presented to a meeting of donor countries, the IMF and World Bank in Stockholm in May 1999. The CCER views the IMF and World Bank Poverty Reduction and Growth Facility as an important lever for civil society to develop its own strategies for poverty reduction. However, the corrupt, authoritarian government of President Arnoldo Aleman, has seized every opportunity to undermine and denigrate civil society organisations. The CCER and donor countries are extremely concerned about influence peddling, illegal enrichment, diversion of funds, political harassment and persecution on the part of the government. In a briefing paper for the Consultative Group meeting of donor countries in May 2000 Oxfam called for the following: the Nicaraguan government to make poverty reduction its first priority (it is currently listed as sixth); the international community to speed up aid disbursements (eighteen months after Hurricane Mitch, the European Union has still not started one single project despite having allocated 250 million Euros for reconstruction work); the Paris Club donor countries to honour a post Hurricane Mitch two year debt moratorium not due to expire until February 2001; the IMF to ensure that its Poverty Reduction and Growth Facility prioritises strategies for reducing poverty; greater collaboration between civil society, the Nicaraguan government and donor countries.
Nicaraguan perspectives on debt cancellationThe Catholic Church in NicaraguaThe lack of support from the Catholic Church in Nicaragua has created a difficult climate for Jubilee 2000 unlike other Latin American countries such as Peru where the Coalition is strong. 'The head of the Catholic church in Nicaragua, Cardinal Obando y Bravo has promoted Jubilee 2000 as the offer of pardon, reconciliation and love but not the forgiveness of debt. Ignoring the Pope's encyclical of 1994 in which Pope John Paul called for 2000 to be a year of not only repentance but forgiveness of foreign debts, Cardinal Obando y Bravo's Jubilee message is a call to personal repentance, even reverting to the pre-reformation practice of release from punishment for sin as an incentive to repent. This has meant that to many Nicaraguans (80% of who are Catholic) jubilee is simply a religious activity. Christopher Hall, NSC study tour member.
Nicaragua Lobbying Forum on Debt (GPC)The GPC is made up of 10 NGOs working in primary health care, rural and community development, social and economic research, autonomy and development of the Caribbean Coast. It was set up in 1996 to present a civil society perspective on issues related to food security but subsequently broadened its work to include the impact of debt and structural adjustment. The GPC does research, publishes information and lobbies nationally and internationally on issues related to structural adjustment and debt, working together with Oxfam and other NGOs in North America and Europe. The GPC takes a pragmatic approach to debt cancellation and the HIPC initiative, arguing for lobbying and negotiating using achievable objectives. Nicaragua Jubilee 2000The Nicaragua Jubilee 2000 coalition was formed in April 1999 and is made up of 25 religious and secular groups. They take a more radical view than the GPC arguing for a much broader conception of debt that should include the resources of the South that have been plundered by the North. They argue that even if debts were cancelled now, they would recur in exactly the same fashion unless there is a fundamental change in the global economic order. The Coalition has organised workshops and seminars on debt, collected signatures to the debt cancellation petition, run public education campaigns and participated in Latin America Jubilee 2000 initiatives.
Reflections on debt cancellation and Jubilee 2000'It's been a positive experience creating a coalition bringing so many diverse groups together from all parts of the country.' Nicaragua Jubilee 2000 'Jubilee 2000 world-wide has made some significant achievements but what you see in Britain as a triumph (for example the G7 announcements at Cologne) is not necessarily a triumph for Nicaragua. We will not celebrate until we have seen the differences in our lives.' 'Cancelling debt alone will not lead to a permanent reduction in poverty. Structural changes are needed for that in particular changing the way world trade operates and changing the terms of trade. For example exports of coffee from Nicaragua have doubled in volume in the last three years but the export earnings for coffee have remained the same.' Suyen Barahona, Humboldt Centre (Nicaraguan environmental NGO) 'The British Jubilee 2000 has given a very good example of standing up in front of government and the interests of the wealthy to change relations with the South.' Cirilo Otero, GPC 'I returned from Nicaragua with a renewed sense of the value of ordinary people in both rich and poor countries standing together for social and economic justice.Study tour member. If compassion and Biblical injunction is not sufficient motivation to cancel the debt, self interest should be an incentive - the world as a whole would benefit if Nicaragua and other indebted countries could stand on their own feet.' Study tour member, Anne Adams. ...'Paternalism and Washington central planning have failed, and must be replaced by a real shift in power - to the South and to democracy.'
Web Site connections
e-mail: nsc@nicaraguasc.org.uk
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