Caribbean & Central America - June 2012 (ISSN 1741-4458)

IMF visit: A delegation from the International Monetary Fund (IMF) paid a visit to Nicaragua between 2 and 11 May to discuss the 2012 Article IV. In its final mission statement, the IMF was positive on the management of the economy by the Frente Sandinista de Liberación Nacional (FSLN) government of President Daniel Ortega. It noted that, “helped by high export prices, large concessional and foreign direct investment flows, and broadly appropriate macroeconomic policies, the economy has averaged growth rates in excess of 4.5 percent during 2010-11”. As regards future priorities, the IMF underlined that “higher economic growth is essential to reduce poverty rates significantly over the medium-term. In this regard, measures to further strengthen institutions, reduce labour market informality, and enhance the effectiveness of public spending while reducing budget rigidities will be key…In addition, reforming the pension system is necessary for inter-generational fairness and long-term fiscal sustainability, and a more equitable tax system would also generate resources for needed infrastructure investment and social spending.”

The visit nonetheless drew protests on 23 May from thousands of students in the capital and other parts of the country against the IMF’s supposed interest in modifying the 6% of the annual budget that goes to universities as per a constitutional requirement. The protests were the first held in recent years in favour of the universities’ traditional demand that the 6% assignation stipulated under the Constitution be ring-fenced. Yet, organised by unions affiliated with the FSLN, many dismissed the unrest as a show staged by the Ortega government (see sidebar), particularly given that the IMF’s reported proposal to reassign part of the 6% to primary and secondary education did not even feature in its final mission statement; as part of the left-wing regional integration movement Alianza Bolivariana para los Pueblos de Nuestra América (Alba), Ortega has traditionally railed against the IMF as a target of his anti-neoliberal rhetoric. Despite this, relations remain strong; following the IMF’s completion in October 2011 of the seventh and final review of Nicaragua’s economic performance under its three-year Extended Credit Facility (ECF) arrangement, the government announced plans to seek a new deal with the multilateral [RC-12-01].

• Anti-IMF protests

Critics of the Frente Sandinista de Liberación Nacional (FSLN) government of President Daniel Ortega also pointed to the fact that, during the supposed anti-IMF protests, the student organisations were calling for progressive tax reform and social security reforms as evidence that the demonstrations were a “charade” staged by the Ortega government. The two reforms are in line with the demands of the IMF, with whom the FSLN administration is seeking a new deal.