Vendors Frustrate Sandinistas : Black Market Supplies Nicaragua Necessities

As the 5 a.m. train from Granada rolls through the countryside, scores of unlicensed merchants climb aboard with sacks of rice, corn and beans to sell in Managua’s Eastern Market.

By law, most grain is supposed to go directly from the farm to government warehouses for distribution at low prices, and until recently, the police would stop the train to seize the sacks as contraband.

So an early warning system was set up. Whenever a railway guard spotted the police, he would radio a coded message--”The country is in danger”--to the approaching train’s conductor. The merchants would be alerted to unload, and the rail workers would collect a protection fee from the contents of the grain sacks.

The pre-dawn ritual--beneficial to the farmers, the merchants and the state-employed railway men--worked so well that the government recently suspended the train raids. It also dismantled roadblocks set up on highways two years ago to try to keep smuggled merchandise out of Managua.

In retreating from such ineffective and unpopular measures, Sandinista officials admit that illegal vendors play a bigger role than ever in supplying food, clothing, soap and other essentials to Nicaragua’s 3 million people.

Frustrated by their inability to guarantee those necessities to everyone at low prices, the Sandinistas instinctively blame the U.S.-backed contras for crippling the economy. But they are at odds among themselves over what to do about the merchants.

Some See Futile Fight

To some in the government, the vendors are evil speculators who profit from the country’s troubles and must be sent to jail or put out of business with more sophisticated controls. Other Sandinistas say it is futile to fight them.

“We are trying to find the right policy,” Vice President Sergio Ramirez said in a recent interview. “There is anxiety among some officials to solve this problem by trying to get their hands on everything that moves, but it is impossible. The more free mechanisms we have for the production and sale of food, the less trouble we are going to have.”

Although 60% of the economy is nominally in private hands, the Sandinistas set all legal wages and prices and try to control the distribution of consumer goods.

In state-run neighborhood stores, anyone with a ration card is entitled to buy at controlled prices each month a pound of beans, three pounds of rice, four pounds of sugar, 2 1/2 quarts of cooking oil and a bar of soap.

In the grain belt around Granada, the government buys rice for 3,500 cordobas per 100-pound sack and sells it for 4,000 cordobas, about 80 cents.

But government stores are often out of rice, because farmers have sold at least a third of this year’s crop to middlemen who can get 35,000 cordobas ($7) per sack in the Eastern Market.

The result is a vicious cycle of shortage and speculation. Farm labor, already drained by compulsory military service, is further diminished as peasants realize they can live better by leaving their land to buy and sell food.

“We cannot work the land anymore because they took away our sons to fight in the mountains,” said a middle-aged woman who smuggles corn on the train.

Cattle Across Borders

Cattlemen evade the requirement to sell to the state by driving their herds over the borders into neighboring Honduras and Costa Rica, and this has created a meat shortage. Others slaughter them in secret for sale through private channels.

Earlier this year, police raided a home in Managua’s Barrio Revolucion at 4 a.m. as a man with an army knapsack was butchering cattle in a walled courtyard. The butcher and 10 head of cattle escaped, but the owner of the house went to jail.

Contraband also comes from factories and from the very bureaucracy designed to control it.

According to government statistics, slightly more than half of Nicaragua’s 1 million workers belong to the “informal sector,” a euphemism for unlicensed entrepreneurs who do not pay taxes. At least 120,000 are said to be retail merchants.

The proportions were similar in the 1970s under President Anastasio Somoza, who personally controlled much of the formal economy but left the rest of it pretty well alone.

Today’s illegal economy is more pervasive than the figures indicate because so many wage earners have a stake in it. They include factory workers who collect part of their pay in the goods they produce or buy low-priced merchandise in company stores and then turn around and sell at a profit on the open market.

Officials Also Involved

According to Sandinista officials quoted in the pro-government press, they also include army supply officers who skim food rations destined for soldiers fighting the contras, state warehouse supervisors who privately sell parts of their inventories and Internal Commerce Ministry inspectors who take bribes to supplement their meager income.

“What we have here is not simply a network of speculators; it is more than that,” said Carlos Carrion, a top Sandinista official in Managua. “So many sectors of the population are mixed up in this.”

The Sandinista newspaper, Barricada, disclosed recently that pickers had stolen 1.2 million bananas since last June from a state-owned plantation once owned by the Standard Fruit Co.

Factories produced 1.25 million bars of soap in February. Even though that fell short of the country’s needs, officials said, the Internal Commerce Ministry managed to distribute just 178,000 bars at the controlled price of 43 cordobas each. The rest slipped away into the black market and sold for 1,100 cordobas a bar.

Asked where she got the soap she was selling in the Eastern Market, Rosa Maria Martinez, 36, said it came from a government warehouse.

“I am not capable of breaking into those warehouses,” she said. “You’d better ask the government who are the thieves who get in there and sell to us.”

Tripled His Salary

At another unlicensed stall in the crowded market sat Roberto Madriz, 28, selling light sockets, locks and keys. He said he quit his job as chief of administrative services at the Health Ministry and now earns triple his former salary, which was $21 per month.

In 1985 and last year, police conducted periodic raids in the Eastern Market, but the ousted vendors kept coming back, expanding their turf, and now outnumber licensed merchants there 3,500 to 2,000.

A government inspector was attacked by a mob and stabbed to death last year in another Managua market.

Merchants interviewed at the Eastern Market said they crossed into the illegal economy to escape poverty but now live in fear of the inspectors.

“To them, we are all contras,” Rosa Martinez said. “But we are really here out of need. I have seven children. How am I going to feed them when the government gives me just three pounds of rice?”

When rumors of a new raid swept the market this year, some of the saleswomen armed themselves with rocks. The Internal Commerce Ministry denied any such plans.

‘Would Take an Army’

“To control that market by force would take an army,” said Alejandro Arauz, who supervises the ministry’s 70 inspectors.

Just as fruitless was an attempt to halt contraband grain by searching buses and trucks at roadblocks outside the capital.

When merchants circumvented the 50-pound personal limit by dividing their grain with other passengers, some inspectors reacted by confiscating all food.

Jose Espinoza, a labor leader, tells the story of a man who won 12 pounds of beans, 12 pounds of rice and a quart of cooking oil for being the most efficient worker at his factory outside Managua. The prize was seized at a roadblock as he was driving home to the city.

An inspector told how the roadblocks backfired.

“The problem,” he said, “is that while my partner stopped traffic and I made the inspections, people would get off the bus and loot the goods we had confiscated during the day.”

Gave Up Wages in Kind

Under pressure from Sandinista militants seeking to shut off contraband sources, many unions agreed last year to give up company store privileges and the practice of receiving wages in the form of goods.

The restriction proved costly. Unable to collect four yards of cloth every payday, a fifth of the work force quit the Fanatex textile mill. Turnover and absenteeism at other factories rose.

Hard-liners in the government say the cost is justified.

“We cannot accept the argument that the situation is difficult,” said Luis Carrion, one of the Sandinista Front’s nine commanders. “It is exactly for this reason we need more firmness and more order. The speculators must be defeated, ideologically and materially.”

Ramon Cabrales, the minister of internal commerce, told reporters that unlicensed merchants “have to be captured.” But he said police enforcement will not work without active support from licensed merchants and grass-roots party organizations. The ministry plans to train 5,000 “volunteer” inspectors.

Economic Steps Announced

Such militant rhetoric is not echoed at the top. Economic steps announced by President Daniel Ortega in early April were aimed more at protecting government workers against hyper-inflation than controlling the black market.

One of the measures, outlined to an assembly of labor leaders who demanded it, was the return of the low-price company stores abolished last year as a source of contraband. Ortega, in turn, asked the workers for continued sacrifice but did not mention the issue of illegal merchants.

Vice President Ramirez said that food shortages are “the first social problem” faced by the government and the one that “causes the most discontent.”

“But taking a dozen eggs or a pound of sugar away from a person is not going to solve it,” he said. “Until the war is over and we can produce enough to go around, there is no solution. Meanwhile, we are forced to improvise.”