How the “big capital” in Nicaragua went from being an ally to a rival of Ortega (and what could happen after the elections)

For a decade, big business supported the political and economic reforms promoted by the leftist government of Daniel Ortega, who now accuses them of “Treason”.

That break came in part because the business union disagreed with the social security reforms that triggered the April 2018 protests and withdrew its support for the government amid a wave of repression that left more than 300 dead, according to the Inter-American Commission on Human Rights (IACHR), hundreds of incarcerated and more than 100,000 people who left the country.

With the main opposition candidates detained or disabled, Nicaragua celebrates this Sunday a presidential election marred by the political crisis and in which President Ortega will seek his third re-election and a fifth presidential term.

At least 39 opposition leaders, including seven presidential candidates, have been deprived of liberty since May.

Among those arrested are some of the highest representatives of the Nicaraguan business community: José Adán Aguerri, Luis Rivas Anduray, Michael Healy and Álvaro Vargas.

Aguerri, Healy and Vargas were the top leaders of the Superior Council of Private Enterprise (COSEP), the most important business organization in the country, while Rivas was in charge of the Banpro bank, belonging to the Promérica group, a powerful conglomerate of financial companies.

José Adán Aguerri and Michael Healy were leaders of the Superior Council of Private Enterprise (COSEP). Now they are detained.

Some of the detained businessmen are charged with conspiring against national sovereignty, requesting military interventions, using external financing to carry out acts of terrorism or “treason”.

Healy and Vargas have been added to the alleged crimes of money laundering to the detriment of the State, allegations that have been rejected by the defendants, their lawyers and their families.

An unexpected opposition bloc

The judicial battle against businessmen is the latest chapter in an intricate relationship between the government and the country’s large economic groups, which after the social outbreak of April 2018 went from being Ortega’s traditional allies to becoming, together with the protesters, a critical pillar in the failed negotiating tables.

A new and unexpected opposition bloc that, each for very different reasons, called for political reforms and an end to police violence.

“The social mobilizations marked a turning point in the relationship between the private sector and the government ”, tells BBC Mundo Tiziano Breda, analyst for Central America of the organization International Crisis Group.

The United Nations, the Organization of American States (OAS) and the Inter-American Commission on Human Rights (IACHR) have criticized the avalanche of arrests of opponents whom the Ortega government accuses of “Coup plotters”.

In parallel to the arrests, the justice ordered in June to lift the banking secrecy, immobilize accounts and to prohibit a group of businessmen investigated for alleged “illegal acts” from leaving Nicaragua.

Among them are Luis Rivas of the Banpro bank; Juan Carlos Sansón, executive director of the Bank of Central America (BAC); and Edwin Mendieta, secretary of the Avanz bank of the Pellas group and of Seguros América.

The decision also affected the accounts of members of the Baltodano family and Jaime Montealegre Lacayo, all part of a business elite that for more than a decade maintained an alliance with the political power that some analysts describe as a kind of de facto co-government.

“Economic issues are agreed with the private sector”

The leftist Ortega denies the existence of a “consensus model” with big capital in which the business community allowed him to govern without any counterweight in exchange for letting them expand their businesses and influence the laws and sector policies related to their interests.

He recently said that “that kind of understanding between the rich and the poor has never happened” in Nicaragua.

However, when he was president of COSEP, José Adán Aguerri openly recognized the benefits of the relationship with the government.

“Today economic issues they are consensual with the private sector and in some way this has enormous importance in the legal framework in which companies operate, ”he said in 2017.

There is “a fairly positive business climate, which is translating into investments from the private sector, national and foreign,” he added.

Now Aguerri is under arrest.

Who are the greatest exponents of big capital?

The pillars of great Nicaraguan capital have been built around a few very powerful families with a marked influence in the banking and agribusiness sector. Some of its representatives are:

The fortunes of Pellas and Ortiz have exceeded $ 1 billion, according to Bloomberg calculations.

How the links between political and economic power evolved

When Ortega returned to power in 2007, he formed a close alliance with the government of Hugo Chavez, who had the petrodollar tap turned on.

Nicaragua enjoyed good economic and business health, a favorable environment for its expansion that “allowed influence approval or the reform of laws that favored their commercial interests, ”economist Enrique Sáenz tells BBC Mundo.

An example was the change to the tax law that regulated exemptions.

“Even yachts, helicopters and sparkling wines were exempt from paying taxes when they entered the country,” says Sáenz.

In addition to tax changes, there were reforms in sectors such as the energy and banking that they assured favorable conditions to the great capitals and that they opened the doors to the national and foreign investments.

The profit of the banks went from 15.4% in 2007 to 27.8% in 2016, surpassing the bank profits of the rest of the Central American countries, according to data from the Central Banks and Superintendencies of the Region.

But when the Venezuelan cooperation policy weakened and the country had to face a challenging economic scenario, the continuous growth that had characterized Nicaragua began to die out.

But the great fortunes did remain – including the alleged enrichment of the Ortega-Murillo family, according to local press reports – to the detriment of vulnerable sectors of society that little enjoyed the benefits of economic growth.

“In Nicaragua there is an economic model crony capitalist, based on an agrarian and extractivist economy ”, points out the economist Oscar René Vargas in dialogue with BBC Mundo.

About half of the Nicaraguan population live in poverty, inequality has grown in recent years and the country’s Gross Domestic Product has fallen as of 2018.

An economy based mainly on the export of agricultural products, tourism and remittances that has been hard hit by political instability and the covid-19 pandemic.

Despite the harsh conditions faced by the poorest, it is not very common for people to go hungry thanks to an economy agrarian subsistence that allows them to obtain a basic food sustenance, unlike what happens in other countries such as Venezuela or Cuba.

An economy in danger

Shortly after the social outbreak of 2018, concerned about the instability of the country and the popular clamor for Ortega to leave power, the big businessmen published a letter on May 30 calling for urgent reforms that would allow advance the elections.

And in December of the same year they published a letter to resume the dialogue.

“There is a dramatic reduction in economic activity, an unprecedented contraction of the financial system, with a marked reduction in deposits and credit, and a significant increase in exchange rate risk, ”the letter states.

Among the signatories were Miguel Zavala, Carlos Pellas, César Augusto Lacayo, Miguel Gómez, José Antonio Baltodano, Juan Bautista Sacasa, Ramiro Ortiz, Jaime Rosales, Alberto Chamorro and Jaime Montealegre.

That was the year that Carlos Pellas himself said in an interview that “The model that the country brought was exhausted.”

The great uncertainty

With the passage of time, the owners of big capital have withdrawn from the public stage, leaving their union representatives – now opposition leaders – to continue the battle.

Those same leaders who are now detained for treason.

The signs indicate that the consensus model that operated in Nicaragua for so many years is, at least momentarily, fractured.

The question that many are asking is what will happen to the relationship between the business community and the government when Ortega ensures his continuity in power.

Will they re-establish a strategic alliance? Will this episode in which they clashed on opposite sides remain in the past? Or will it be the beginning of a new stage in which big capital will reduce the support of the 75-year-old ex-guerrilla?

Despite the mobilizations, the elections were never brought forward, nor were the detainees released, nor was freedom of expression recovered. As they were not carried out the democratic reforms that the large economic groups had proposed.

After the elections, it is likely that a new scenario will open where the position assumed by big capital could be decisive in the future of the country.