Nicaragua finds huge patron in Venezuela's Chavez

The four-story Seminole Hotel in central Managua is among the business ventures in a web of companies controlled by President Daniel Ortega.
The four-story Seminole Hotel in central Managua is among the business ventures in a web of companies controlled by President Daniel Ortega. Tim Johnson/MCT

MANAGUA, Nicaragua — Over the past four years, entities controlled by Nicaraguan President Daniel Ortega have received at least $1 billion in no-strings-attached donations through an oil deal brokered by President Hugo Chavez of Venezuela.

The windfall has helped Ortega mount a vigorous campaign to fight rural poverty and generate electricity — and to build political support for himself.

By the account of one respected economist, who was assisted by the World Bank in gauging rural poverty, the money has had a dramatic effect. It's put more food in the bellies of tens of thousands of Nicaraguans and better roofing over their heads.

It's also created a web of Ortega-controlled companies with no public oversight, making the president a force in Nicaragua's economy and blurring the lines between what belongs to him, to his party and to the citizenry.

Ortega's new economic clout unnerves those who compete with his business interests and angers civic activists, who say the oil proceeds should be transparent. The money, meanwhile, allows Ortega to buy off or silence his foes.

Ortega's senior financial adviser, Bayardo Arce, a former Sandinista comandante, said that Venezuelan assistance topped $1 billion, and he acknowledged that the off-the-books nature of the aid has facilitated a fight against poverty.

When Ortega came to office, Arce said, creditor banks and nations in Europe and North America had imposed a variety of conditions on new credit to the country.

"There were 54 conditions to obtain the loans — 54 conditions!" he said.

So when Chavez, a pan-Latin nationalist and critic of the U.S., offered a way to use oil imports to raise discretionary funds, the Ortega government jumped.

"Venezuelan aid has been fundamental for the country," Arce said, listing large assistance programs that have received money, such as Zero Hunger, Zero Usury, Roads for the People and Housing for the People.

The Zero Hunger program gives selected rural households pregnant cows, pregnant pigs, six chickens each, seed, materials to build stables and bio-systems to turn cow manure into cooking gas. Arce said the aid packages, worth about $2,000 each, had benefited 48,950 families so far.

As in many of the programs, the aid goes to the women at the heads of rural households, so that "the men don't sell the assets to raise money for booze," he said.

All told, the assistance programs have reached nearly 150,000 households. The Zero Usury program offers micro-loans to single mothers, and has benefited 79,500 women so far, Arce said.

Alejandro Martinez Cuenca, an economist with a Ph.D. from Vanderbilt University, said that research from his Managua institute, conducted with technical assistance from the World Bank, indicated marked improvements in rural conditions in barely four years.

"The principle factor is that the government has had access to unlimited resources from Venezuela, and these have gone toward the rural sector," he said. "This money has had an impact."

Martinez Cuenca said his study found that the number of Nicaraguans in extreme poverty fell from 17.2 percent of the population in 2005 to 9.7 percent in 2009.

The study also found that rural young people are staying in school slightly longer, lowering rates of illiteracy, and that rural housing conditions are improving.

"If you fly over the rural areas now, you'll see how it's changed. You'd see that many of the huts are no longer huts but small houses with roofs of zinc," said Martinez Cuenca, who served as foreign trade minister under the Sandinista government that ruled Nicaragua from 1979 to 1990.

Critics of the Venezuelan aid deny that it's reduced rural poverty, alleging that Ortega has siphoned off the money to strengthen his party and himself.

"To say that Daniel Ortega has reduced poverty is not true. The only poverty that Ortega has reduced is his own," said Vilma Nunez, a former Sandinista who heads the Nicaraguan Center for Human Rights.

The torrent of Venezuelan aid began in 2007, when the state-owned oil companies of Nicaragua and Venezuela created a private company, Albanisa, to handle the million of barrels of crude that Caracas was sending to Managua each year. Under the deal, Albanisa paid Venezuela half the market cost of the crude and kept the rest for use by Ortega.

Martinez Cuenca said the deal reaped $150 million in 2007, $400 million in 2008 and $450 million in 2009, all for Ortega to channel without obstruction from the National Assembly, where his party is in the minority.

The scheme is similar to other arrangements Chavez has set up under his regionwide Bolivarian Alliance for the Americas — ALBA, in its Spanish initials — which comprises Antigua and Barbuda, Bolivia, Cuba, Dominica, Ecuador, and Saint Vincent and the Grenadines in addition to Venezuela and Nicaragua.

Under the scheme, Albanisa funnels money to at least a dozen other firms — usually with Alba as part of their names — with interests in wind power, transportation, security, gas distribution, heavy machinery, food sales and port management. In November 2008, one of the companies bought the Nicaraguan assets of the Seminole Tribe of Florida, including a four-story hotel and a ranch that breeds high-quality cattle.

Early this year, Albanisa bought Telenica Canal 8, a private television station, temporarily forcing off the air the debate program of one of Ortega's fiercest critics, Carlos Fernando Chamorro, who spent months finding another private channel that was willing to risk the government's wrath to host his show.

The Alba business network under Ortega differs from the business dynasty the Somoza family built during more than four decades in power until its fall in 1979.

Historians say the Somozas treated Nicaragua like their personal ranch, putting profits first. In contrast, Ortega's businesses seem designed less to bring riches than to provide money for social assistance programs and offer him a large economic base to continue his political career.

Ortega's opponents said they didn't trust government assertions that he wasn't running up Nicaragua's public debt to Venezuela, and they lambasted the lack of legislative or fiscal control of the money and the Alba companies.

"They are subject to no supervision by the comptroller general," said Dora Maria Tellez, a minister of health under the Sandinistas in the 1980s.

Some businessmen gripe about competing with the Alba companies even as soaring sales of beef, beans, sugar and dairy products to Venezuela elate ranchers and farmers. Venezuela is now Nicaragua's second biggest export market.

Supporters and critics of the Venezuelan aid to Nicaragua agree on one thing: How long the aid lasts will depend on Chavez's ability to weather lower oil prices and remain in power well into his second decade in office.

"If the situation of Venezuela grows serious, then Daniel's situation will also grow serious," Martinez Cuenca said.


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