Following a series of provocative public statements made by Nicaragua’s left-wing president, Daniel Ortega, condemning the United States as an imperialist state, in addition to deepening Nicaragua’s political and economic relationships with both Venezuela and Iran, international business investors and Western governments are beginning to question the president’s overall maturation since he first held power in the 1970s and 1980s. Since assuming office in January 2007, Ortega has ushered in a new era of cooperation with neighboring Venezuela and is seeking closer ties to the Iranian government.
However, President Ortega has likewise maintained closer relations with the US, while avoiding industrial nationalizations that characterized his government during the 1980s. Maintaining his country’s political and economic ties to the US have hurt Ortega among his Sandinista political-base that views any economic or political cooperation with the US as contrary to their leftist agenda.
This delicate balancing act demonstrates Ortega’s desire to maintain his Cold-War revolutionary bravado while promoting his apparent newfound economic pragmatism.
Political and Economic Investment
In June 2007, the Iranian government announced its intention to invest nearly US $500 million into Nicaragua, announcing the construction of a new hydroelectric project, a new port and the construction of 10,000 houses for impoverished Nicaraguans. Likewise, the Venezuelan government is constructing a US $2.5 billion oil refinery and has signed several oil and development assistance agreements with the Nicaraguan government.
While Ortega’s leftists political speeches and business ventures with Venezuela and Iran are troublesome to international investors, they have failed to dramatically alter the US-Nicaragua relationship that has steadily healed since Ortega’s Sandanista government fought US-backed Contra rebels in the 1980s. In July 2007, Nicaragua’s vice president welcomed a US Navy ship to the port city of Corinto, where it would provide free medical care to Nicaraguan citizens. The US goodwill gesture came just one week after President Ortega called President Bush a “tyrant” while welcoming Venezuelan President Hugo Chavez during public celebrations marking the 28th anniversary of the Sandanista revolution.
Ortega Learns From Previous Errors
Ortega’s reluctance to re-nationalize key Nicaraguan industries illustrates various lessons learned during his first presidential tenure, realizing publicly owned companies fail to provide the revenue and efficiency privately owned enterprises create. Likewise, maintaining economic relations with both the US and neighboring Central American countries through The Dominican Republic-Central America Free Trade Agreement (DR-CAFTA) has provided a boost to Nicaraguan commodities, fueling a 29.2 percent export growth in 2006. In addition DR-CAFTA and US-demand for cleaner and more reliable alternative fuel sources has assisted Nicaragua’s nascent ethanol fuel industry.
Importance of Foreign Investment
Nicaragua is reliant on foreign investment to maintain its aggressive pursuit of opportunities in call centers, tourism, and non-traditional exports, including fair trade products and fresh tropical fruits. Nicaragua’s tourism sector has continued to expand in the country’s interior and colonial cities, as Western nationals are increasingly drawn to the country’s safe environment. However, frightening rhetoric by Ortega and the growth of Iranian and Venezuelan influence in Nicaragua has provoked a slight slowdown in foreign investment as international companies, particularly those based in the US, develop a wait-and-see approach to Ortega’s economic and political priorities.
The US has skillfully interacted with Ortega, maintaining its original declared intention to engage the Sandanista president, while improving its economic and political relationship with Nicaragua.
Nicaragua’s Economic and Political Outlook
President Ortega will continue to seek a middle ground approach to his economic and political priorities, seeking to attract investment from any government willing to assist his country’s development requirements. The poor state of the Nicaraguan economy and the destitution faced by the populace, with nearly half of the residents living on less than US $1 a day, requires Ortega to embrace willing investors from any political or social camp. Moreover, the previous unreliability of both the Venezuelan and Iranian governments will ensure the Ortega administration continues to follow a middle ground, never fully embracing nor rejecting any country.
