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Not all Rose-Colored

Despite some encouraging statistics and general optimism, there are some negative factors that pose more serious risks to the long-term stability of Nicaragua’s economic and social stability, the analysts claim.

One of the biggest risk-factors is grinding poverty, Avendaño said.

“The average per-capita income in Nicaragua is $900; an amount that is practically insignificant,” Avendaño said.

The economist also blasted the government’s policy of promoting free-trade zones, particularly in the textile sector, as a means of stimulating the economy.

“Foreign investment under the free-trade scheme is not subject to national laws, they don’t pay taxes or contribute to the country’s larger social problems,” the economist charged.

Guzmán says that the “accumulation of unsatisfied demands” also poses a threat to long-term stability.

The socio-economic tension bubbling below the surface erupted recently in the form of street violence by students and other protestors lashing out against bus drivers for raising the inner-city bus fair $0.03 without government authorization. Several buses were stopped in the street and burned last week, while others were attacked by masked youth who threw rocks through the windows, terrorizing passengers.

“The possibility of increased tensions is very high,” Guzmán said.



Still Heavily Indebted

Foreign debt is another negative factor affecting the country’s overall risk-level.

Despite some debt-forgiveness and restructuring in recent years under the Highly Indebted Poor Country Initiative (HIPC) and the International Monetary Fund (IMF), the debt level is still staggering, Avendaño says.

“Government authorities have erroneously claimed success of reducing the foreign debt,” Avendaño charged. “But they have not been able to reduce or restructure $1.36 billion in debt owed to Costa Rica, Libya, Honduras, Iran, Peru, Poland, Venezuela, China and India.”

According to Central Bank statistics, Nicaragua’s total external debt to foreign countries and lending institutions is still $5.2 billion – and amount equivalent to 107% of the Gross Domestic Product expected for this year.