Editorial: Retro’s the rage Sandinista Ortega assumes Nicaragua’s presidency

With Daniel Ortega Saavedra’s inauguration later today as Nicaragua’s new president, it’s still not entirely clear whether the ex-Marxist guerilla’s return to power is an endorsement or a repudiation of modern liberal economics.

The 61-year-old, longtime leader of the Frente Sandinista de Liberacion Nacional — whom U.S. President George H.W. Bush famously described as “looking like an unwanted animal at a garden party” when they appeared together at a meeting of world leaders in 1989 — has neatly risen and dusted himself off after spending 15 years on the ash heap of history.

Before last November’s electoral success, Ortega had failed to win Nicaragua’s three previous presidential elections, losing handily to moderate, free-market types more at home in business suits than combat fatigues.

Ortega first rose to international prominence as the leading member of the communist Junta of National Reconstruction, which came to power in Nicaragua in 1979 by violently overthrowing the tyrannous Somoza dictatorship.

Ortega was first elected president in 1985 and then turfed out of office by war-weary voters at the first opportunity, in 1990.

While there were some undeniable advances in literacy and public health, Ortega’s years in power were overall a disaster for Nicaraguans: the Sandinistas’ wide confiscation of private property unleashed a vicious civil war that left 50,000 dead and 600,000 homeless, and the party’s full embrace of political and military assistance from the Soviet Union and Castro’s Cuba set the country on a collision course with its neighbours and the United States.

Nicaragua is still limping along after that wasted decade, and now ranks as the hemisphere’s second-poorest country, after Haiti.

Since the somewhat surprising election results of November 2006, foreign companies with mines and exploration projects in Nicaragua have been reassured at length by representatives from the incoming Sandinista party that it will be “business as usual” going forward.

These reassurances peaked in December with the slightly surreal spectacle of Sandinista envoy Ernesto Martinez Tiffer showing up in the heart of Canadian capitalism, the Toronto Stock Exchange, to assuage the Canadian business community with a talk entitled, “Nicaragua: Open for Investment.” (And no, the ’80s warbler and guerilla poseur Bruce Cockburn was nowhere to be seen.)

“We know exactly what was the mistake we did in the past, and that means we have an experience that we cannot repeat,” declared Martinez. “That’s the main reason why, I think, this could be one of the best governments that Nicaragua could have.”

He emphasized that the Nicaraguan government “will honour all existing contracts” and will “extend to all investors all the security of their investments.”

Added Martinez: “The Nicaraguan people have the right to education, to health care, to have a job, and to commit to the basic needs of a human being. We also believe that the only way to accomplish this is by generating the necessary business climate and legal security that will allow investors to grow and prosper, which in turn will help us create jobs and reduce poverty.”

Nicaragua’s at the hub of Central America, hosting the region’s largest population (5.5 million, 65% of which are under 25) and landmass (129,500 sq. km). The country’s gross domestic product stood at US$5 billion in 2005, and was predicted to grow 4.1% in 2006, compared with 5.1% and 4% in 2004 and 2005, respectively, making it one of the fastest-growing economies in Latin America.

Inflation is at 9.6% and falling, while public debt is at US$4.2 billion after the country received substantial foreign debt forgiveness.

Nicaragua has also received the U.S. government’s Millennium Challenge Account grant worth US$175 million, awarded to countries that “rule justly, invest in the people, and encourage economic freedom.”

While mining has a long history in Nicaragua and is welcomed by the government, it still isn’t a big part of the Nicaraguan economy, which is dominated by agriculture, fishery and textile exports. Gold is now Nicaragua’s sixth-largest export, and of the top-12 export companies, two are gold companies.

There are only a handful of mostly Canadian players active in Nicaragua’s mining sector: RNC Management, Glencairn Gold, Hemco Nicaragua, Fortress Minerals, Meridian Gold, Radius Gold, Yamana Gold, Goldstone Mining and Chesapeake Gold. In total, these companies hold five mining concessions and 79 exploration concessions — most of which are gold-related.

“We still think there’s lots of opportunity for mining in Nicaragua,” said RNC Management chairman Randy Martin, whose company sponsored Martinez’s visit to Toronto.

Kerry Knoll, chairman of Glencairn Gold, stated that his company is still “very comfortable doing business in Nicaragua and will continue to look for additional opportunities in that country.”

He added that during an analyst site visit in November, Glencairn was assured by a senior member of the Sandinista transition team that the party “supports both foreign investment and mining, and does not plan to institute policies that would adversely affect mining operations.”

(Note that Glencairn’s flagship mine in Nicaragua, El Limon, was owned by Noranda before it was nationalized by the Sandinistas, who seized every mine in the country their first time around.)

While Martinez’s message generally sounded very positive for miners, some mining analysts present couldn’t hide their lingering skepticism of the Sandinistas, particularly in dealings with the country’s sometimes fractious unions.

As well, Martinez ended his talk on a disturbing note, indicating that the Sandinistas were once again prepared to throw themselves into the arms of enemies of the United States, if the price is right: “If there is a country that helps us to fight against the poverty we find now, we welcome it and we cannot refuse that. . . any country.”

Perhaps we can better understand what may lie ahead for Nicaragua under the Sandinistas by looking at some of the “unwanted animals” who are due to take in the Ortega inauguration: in addition to the respectable heads of states of Nicaragua’s Central American neighbours, the guest list include the A-list of anti-American bad boys: Bolivia’s Evo Morales, Venezuela’s Hugo Chavez and Castro, if he’s good to travel. Then, on the weekend, Ortega welcomes Iran’s Mahmoud Ahmadinejad to Nicaraguan soil.

Plus a change…