Ortega Tour Seen as Modest Success : Nicaraguan Short of Financial Goal, Shows Political Gain

President Daniel Ortega’s most ambitious quest for Western aid, a three-week tour of 10 European capitals, has produced sufficient cash to finance spring planting by farmers but not enough to avoid another year of economic setback, Nicaraguan officials say.

Despite intense campaigning by the Bush Administration against the aid, Ortega came home last week with pledges of $48.6 million in hard currency from Norway, Sweden, Finland, Denmark and Spain, plus expectations for more assistance later this year. The Sandinista leader was seeking $250 million.

European diplomats called Ortega’s trip a modest political success. They said it highlighted the contrast between skepticism in Washington over his pledge to hold free elections next February and the conviction in some other parts of the West that economic incentives can help achieve that goal.

Meager Commitments

But in economic terms, the commitments were relatively meager--a sign that the end of the U.S.-backed Contra war, suspended by truces for 14 months, is not going to unleash the torrent of reconstruction aid that Sandinista leaders once envisioned. Instead, the money is likely to come in small doses that fuel the war-battered economy for just a few months.

“Of course $50 million is not sufficient, but, well, it is a starting point,” Ortega said last week. “We are hopeful that in the coming months there will be more resources.”

Nicaragua, a country of 3 million people, is in a severe recession caused by anti-inflation measures that have cost 29,000 government jobs since Feb. 1. Inflation, running more than 100% per month at the end of last year, was held to 12% in April. But officials say $250 million in extra cash is needed to keep hyperinflation from reviving or the economy from shrinking for a sixth straight year.

Nicaragua received about $100 million in development aid from Western governments last year. With economic aid from its chief benefactor, the Soviet Bloc, limited to such commodities as oil, Nicaragua is turning to the West for emergency cash in the form of balance-of-payments supports. But the United States, in addition to its own four-year-old trade embargo against Nicaragua, has blocked any assistance by the World Bank and International Monetary Fund, normally the source of such funds for poor nations.

The new aid pledges to Nicaragua came at an unusual 17-nation conference in Stockholm, arranged by the Swedish government at the end of Ortega’s tour. Sweden, one of Nicaragua’s main donors, has commercial interest in this country’s timber, fishing and mineral resources.

The Swedes paid a team of private economists, led by Lance Taylor of the Massachusetts Institute of Technology, to help Nicaragua draft the austerity program and to monitor its progress for would-be donors, as the IMF does in other needy countries.

Before the Stockholm meeting, U.S. ambassadors and other officials urged invited governments to withhold aid to Nicaragua, mainly on the ground that its new election law is stacked in the Sandinistas’ favor. A State Department official called the campaign a “full-court press” against Managua.

“The telexes and faxes in foreign ministries all over Western Europe were jammed with anti-Sandinista messages,” said a European official. “The point was that aid now would give Managua the wrong signal.”

U.S. officials said that President Bush took part in the effort himself, lobbying the visiting prime ministers of Canada and Norway and telephoning other leaders.

Ortega countered by defending the election law as similar to those in other Latin American countries and accusing the United States of “wanting Nicaraguans to die of hunger.”

The result was mixed. Nicaragua’s traditional donors came through: Sweden and Spain pledged $10 million apiece, Denmark $5 million, Norway $4.6 million and Finland at least $3 million, all to be disbursed by June 30. Sweden offered another $16 million in balance of payments supports after July 1.

Wrote Off Some Debt

Planning Minister Alejandro Martinez Cuenca, who led the Nicaraguan delegation in Stockholm, said that 10 other Western European nations and Canada made “clear commitments” to increase aid this year or put long-term aid programs to more immediate use. In addition, Spain wrote off $60 million of Nicaragua’s bilateral debt.

“I think the Europeans understand that you cannot have democracy without economic development,” said Martinez Cuenca.

European diplomats generally agreed with this view. But they noted that West Germany, which suspended a large bilateral aid program in 1985, refused to pledge any renewal, at least until after the Nicaraguan election, and that Britain and Japan did not attend the Stockholm conference.

Some who agreed to help Nicaragua, notably Spanish Prime Minister Felipe Gonzalez, made it clear that they expect Ortega to free more anti-Sandinista prisoners and install an impartial electoral council before pledging additional money, diplomats said.

But in a speech to Sandinista supporters after his return, the president denied there was any “twisting of Daniel Ortega’s arm in Europe.” He lashed out at private business leaders for refusing to join the Nicaraguan delegation in Stockholm and declared there will be “no more reforms” of the election law. “That’s the end of it.”

While cautioning that Ortega’s hard line may be only rhetorical, diplomats and other observers believe it reflects disappointment with the results of his aid mission.

‘Timid Response’

“The response was so timid that it is time (for the Sandinistas) to re-evaluate their expectations,” said Mario Arana, a private Nicaraguan economist sympathetic to the government. “Obviously, a postwar solution is not around the corner.”

Martinez Cuenca said that $40 million of the new aid is needed to pay for a package of credit subsidies and debt relief offered to farmers April 21 to induce spring planting.

Everyone agrees that without new aid by the fall, when Sweden is planning a follow-up donors’ conference, the Sandinistas would face a choice between printing worthless cordobas--thereby reviving hyperinflation--and letting the national product drop by at least 8%. Both are election-year risks for the decade-old government.

“The whole austerity program was a risk, but taking risks is how we made a revolution,” Martinez Cuenca said. “We are trying to carry out painful surgery but we need more anesthesia--more of the international support that usually accompanies this kind of effort.”

Times staff writer Doyle McManus contributed to this story from Washington.