U.S. denies aid, Nicaragua threatens to expel US AID

Last week, the U.S. State Department made a decision that will effectively deny Nicaragua $12 million in aid this year.  Now, Nicaragua and other Latin American countries are considering expelling US AID. What is going on here?

U.S. Ambassador in Nicaragua, Phyllis Powers

Each year, in order to receive bilateral aid from the U.S. and for the U.S. to give the green light for World Bank, IMF and Interamerican Development Bank loans – which make up a large portion of the Nicaraguan budget – Nicaragua must be granted two waivers by the U.S. State Department.  These waivers, which indicate that a country has complied with certain conditions, are mandated by U.S. law for aid to continue. One waiver, the one that the U.S. denied Nicaragua last week, indicates that the country has sufficient transparency and governability.  The second waiver has to do with land disputes involving U.S. citizens or companies in Nicaragua: the country must prove to U.S. satisfaction that it is making progress resolving property cases involving U.S. citizens or it will be denied the property waiver and another chunk of bilateral aid.

According to the State Department, the U.S. has denied the first waiver this year due to insufficient transparency of public finances.  In particular, Nicaragua receives money from the Bolivarian Alliance of the Peoples of Our Americas (ALBA – member countries include Nicaragua, Venezuela, Cuba, Ecuador and Bolivia) which is not built-in to the government budget because it is administered by bi-national and private agencies.  These funds are, however, included in Nicaragua’s balance of payment statement, which has satisfied IMF and World Bank oversight.  Though there is discord even within Nicaragua about the accounting of ALBA funds, but this has been the case since 2007, and the waiver has always been granted.  What has changed this year? 

Ros-Lehtinen

For one, there is growing pressure being exerted in the U.S. by extreme anti-Cuban factions – including the Chairman of the House Foreign Affairs Committee, Congresswoman Ileana Ros-Lehtinen (R-FL), and Obama’s recently appointed Latin American policy adviser Ricardo Zúñiga.  Ros-Lehtinen, Zúñiga and others like them are threatened by ALBA’s strong alliance with Cuba – since ALBA is financed mainly by Venezuela, it’s no surprise that they would target ALBA funds in Nicaragua, which continues to have strong ties with Cuba.

Additionally, the U.S. was displeased with last year’s Presidential elections when the opposition was unable to beat Ortega, and with the country heading into municipal elections this year, it’s possible that the State Department is hoping to give the opposition a push in November by denying the waiver.

But the waiver issue is not really about how transparent or how democratic Nicaragua – or any other country – is or is not.  Because international aid is not about helping poor countries improve their situations.  As Nicaraguan economist Carlos Pacheco likes to remind our delegations: It’s about politics.  Conditional aid – from the U.S. or any other country – is the carrot that precedes the stick of military might.  

Here’s an example: In the past four years, a handful of European countries have withdrawn aid, citing Nicaragua’s eroding “democracy” and “institutionality” as the reason.  Some speculate that Europe’s own deteriorating economy is really to blame, but more probably it has to do with who will control the African continent.  Historically, Europe has controlled Africa, first through colonialism, and now through the neo-colonial carrot of conditional aid.  Lately, however, China is pouring money into Africa, and Europe fears that the Chinese will gain control of the giant continent in its own backyard.  In order to better concentrate on keeping a hold on Africa, they are withdrawing from Latin America, Nicaragua included.

From my perspective, if the U.S. wants to influence politics in another country – as all countries do – fine, but don’t call it aid.  Sending aid that is earmarked for healthcare (Nicaragua will lose healthcare funding with the waiver denial) only when a country meets certain political conditions is wrong.    Not only is it wrong, but it also ineffective.  Will the waiver denial push Nicaragua to make better decisions about budget transparency and improve U.S. – Nicaragua relations?  Quite the opposite. 

Nicaraguan President Daniel Ortega

Nicaraguans of all stripes – even fervent critics of Daniel Ortega and his administration – are absolutely up in arms over what they see as U.S. interference in Nicaragua’s internal affairs.  For hundreds of years, Nicaragua has been at the mercy of the whims of politicians in the U.S., and they are tired of it.  This weekend, President Ortega responded to the waiver denial by saying, “From this moment on, they can forget about Nicaragua making institutional political decisions while being subjected to blackmail and pressure. We’ll make decisions when the people decide.”  His typically anti-imperialist response has drawn criticism from moderate sectors in the country, but it also struck a chord in the region: all ALBA countries are currently considering expelling US AID.  “What lessons of morality and social treatment are the Yankees coming here to teach us?” He asked, “At the end of the day, they see the Nicaraguan people as enemies, because for them if the Nicaraguan people are a dignified people that defend their sovereignty, their self-determination, their independence, then they are enemies.”  -- Becca