Next Step : Requiem for a Revolution? : Nicaragua’s Sandinistas, who once toppled a dictator, now must adjust to electoral defeat. They vow to regain power--the question is how.

A day after conceding defeat in Nicaragua’s first democratic elections, President Daniel Ortega faced 5,000 defiant Sandinistas in Managua’s Revolution Plaza. Stunned and angry, many in the crowd refused to believe that their party, which a decade ago had toppled the Somoza dictatorship after an 18-year guerrilla struggle, was leaving the government. “Don’t give up power!” they demanded, raising fists in the gathering dusk. “We’ve got the guns!”

The scene was a haunting reminder of the Sandinista National Liberation Front’s guerrilla legacy, so threatening that supporters of President-elect Violeta Barrios de Chamorro, who takes office Wednesday, have yet to hold a public celebration of her victory two months ago. In the tumultuous days that followed, throngs of belligerent young Sandinistas, many of them armed, seemed to own the streets. In one provincial capital they burned the headquarters of Chamorro’s pro-American coalition. In another, a Sandinista helicopter blasted a coalition leader’s home with a grenade.

Sandinista officers, alarmed by desertions from their army after the Feb. 25 election, handed out rifles to thousands of loyal civilians. Party leaders now admit that scores of Sandinista combat veterans formed an illicit underground network to resist the Chamorro government. “Companero, when are we going back to the mountains?” a security guard at the Foreign Ministry asked an official there. “I’m ready.”

These fitful bursts of Sandinista hostility pose a major challenge not only to Chamorro as she tries to govern a war-divided, economically crippled Nicaragua, but also to Ortega as he tries to transform his revolutionary vanguard movement into a legal opposition. In the hot, dusty plaza that day, he used a mix of tough and conciliatory rhetoric, trying at once to whip up the party’s defeated spirit and to quiet its simmering rage.

“We are willing to contribute to peace and stability as long as the people are respected and not threatened, because the people have enough power to crush anyone who comes intent on revenge,” he declared. “The great winner of these elections is the Sandinista Front because we brought democracy here. . . . The day will come when we will return (through elections) to govern this country. In the meantime,” he added, “we will govern from below.”

Can Ortega transform a party that never formally abandoned its commitment to armed struggle as a means of achieving social change? Will Chamorro’s free-market advisers be able to dismantle the Sandinistas’ state-owned enterprises without a violent backlash? Will anything of the Sandinista revolution survive in a democracy? Can the party remain united enough to defend its programs, or will it fall apart in defeat?

In recent interviews, 16 Sandinista leaders--from comandantes to neighborhood cadres--said that their party had mellowed, irreversibly, during its decade in government. They expressed the unanimous view that a return to clandestine resistance after their electoral defeat would have brought a Panama-style U.S. invasion and finished their movement. The constitutional route, they said, is now the way to defend their revolution and regain power in the next elections, in 1996.

“I don’t know if there is another example in the world of a revolutionary party that comes to power by force of arms and passes peacefully to the opposition,” Vice President Sergio Ramirez said with a mixture of pride and resignation now echoed at all levels of the party. “For this country, that’s an immense step forward.”

But the Sandinista promise of peaceful politics is still fragile; it depends on good behavior by about 8,000 U.S.-backed Contras and, say some party activists, by the Bush Administration. Many are skeptical that the rebels, who signed a definitive cease-fire last Thursday after eight years of fighting the Sandinista-led army, will fulfill their pact to disarm and disband by June 10.

“If the Contras don’t disarm, then we have to disarm them,” said Ramon Cabrales, the outgoing vice minister of economy, who has kept a rifle since his days as a guerrilla commander. “To refuse to hand over the government would be to commit mass suicide. But it’s healthy, mentally, to keep open the armed option, as long as there are Contras, as long as the U.S. government is going to have more influence, more presence, in our society.”

Even with peace, the Sandinista opposition that Chamorro could face during her six-year term is daunting.

Still stronger than any of the 14 parties in her broad but fractious coalition, which won 55% of the vote, the Sandinistas, who got 40%, are well positioned to “govern from below.” They will control the Supreme Court until 1993. They hold a large enough minority in the new National Assembly to block changes in a Sandinista-drafted Constitution that enshrines such revolutionary tenets as state control of all banking and foreign trade. They own two newspapers and several radio stations. They have better-organized support among farmers, urban wage earners, women’s groups, war veterans and students than does the Chamorro coalition.

The lame-duck legislature dominated by Sandinistas has scrambled in recent weeks to bolster their party for life as the opposition. Party members were given permanent titles to the homes they confiscated and immunity from prosecution for any crimes. Universities, Sandinista strongholds, won autonomy from the state. Opposition groups were finally allowed to own television stations, and labor unions won the right to engage in collective bargaining.

Sandinista leaders insist that their political clout is enough to defend their revolution--a socialist-inspired order that provided land to 120,000 peasant families, free universal health care and education, scholarships abroad for 8,000 students each year and worker participation in the management of state-owned companies.

With the economy battered by war and U.S. economic sanctions, the Sandinistas saw those benefits erode. Now they are warning Chamorro, a conservative newspaper publisher, that her mandate is simply to disarm the Contras and unlock American aid; to revive the revolution with cash, not reverse it with free-market ideology.

“The Sandinista Front is ready to cooperate with the new government on matters having to do with the people and their conquests,” said Comandante Jaime Wheelock of the party’s nine-man National Directorate. “The people did not vote against the Sandinista project. They voted for peace and economic security.”

At the Sandinistas’ elite cadres school outside Managua, law has replaced economics as the dominant curriculum as the party moves from managing a mixed economy to defending the workers’ stake in a business-oriented regime. The sharpest clashes will come if the purest of free-market advocates around Chamorro win her approval to sell the state’s 518 companies, which include the grain monopoly, confiscated sugar mills, textile plants, coffee and banana plantations, and seafood processors.

The Sandinista Workers Central and the Farm Workers Assn., which represent nearly all 60,000 workers in those enterprises, stand firmly against privatization. They fear the loss of such revolutionary gains as equal pay for women, day care centers, workers’ housing and lunchrooms, as well as their voice in running the companies. Arguing that money-losing state farms and factories must be given time to profit in peacetime, the unions have threatened to seize control of any company that is sold and lock out the new management.

“A lot of former owners have returned to demand their companies back,” said Bernicia Sanders, a Sandinista leader of the textile workers’ union. “They have to come down to earth and realize that the rules are not the same as before (the revolution). The workers are not robots any more.”

Chamorro’s advisers must also tread carefully as they whittle away the 70,000-member Sandinista army and the 60,000-strong government bureaucracy. And as they struggle to tame Nicaragua’s 1,700% annual inflation within a campaign-promised deadline of 100 days, they will face an explosion of pent-up wage demands that cannot be restrained.

In an apparent warning to Chamorro of their clout, Sandinista unions that rarely went on strike against their own leaders have in the past week halted mail delivery, disrupted international telephone service, shut down the banking system and threatened to disrupt electricity, water and health services. “The Sandinistas have all the tools to paralyze the country,” said Emilio Alvarez Montalban, a Chamorro aide. To keep social peace, admits Alfredo Cesar, another of her key advisers, “there will be a permanent process of negotiation.”

So far, the Sandinista leadership has shown more willingness to deal than to destabilize. It agreed in transition talks to accept civilian control of a smaller, non-political military and to disarm their paramilitary followers as long as Chamorro leaves the hierarchy of the mostly-Sandinista officer corps intact. Gen. Humberto Ortega, the president’s brother, worked closely with Chamorro’s transition team to achieve last week’s armistice with the Contras. One Sandinista leader spoke of the need for a “secret coalition” and “underground understandings” with the new government “to get the country producing.”

But a split between Sandinista moderates and radicals surfaced during a bitter debate in the closing weeks of the old Assembly. A hard-line minority pushed unsuccessfully for a huge minimum wage hike against moderates intent on cooperating with Chamorro’s forces. “We’ve had a win-or-die mentality. Now we’re looking for something in the middle,” explained Foreign Ministry official Alejandro Bendana.

Amid their tentative shifts toward a conventional opposition role, the Sandinistas are debating an invitation to join the Socialist International, an organization of mainstream socialist and social democratic parties around the world. The issue is controversial because staunch Marxist-Leninists in the Sandinista Front want to stay closely allied with Communists in such countries as Cuba and North Korea, while moderates fear being isolated by the demise of Soviet Bloc parties elsewhere.

Even the harshest critics, those who claim that its socialist ideals are bankrupt, recognize the Sandinista Front as an indigenous political force that will not disintegrate like the Moscow-imposed Communist parties in East Germany and Hungary. But the Sandinistas’ clout will depend on their ability to stay united, learn from defeat and democratize their Stalinist party structures, many members say. None of this will be easy.

The radical faction is close to Interior Minister Tomas Borge, the party’s lone surviving founder. He has been heard complaining that the Ortegas blew the election by ignoring his advice to end the unpopular military draft. Another comandante, Henry Ruiz, who still uses the nom de guerre Modesto, has reportedly blamed corruption in state enterprises.

Sidestepping such recriminations, the party leadership delayed a formal finger-pointing analysis of the election loss to give its displaced members time to clean out their files and find new jobs. Vanesa Castro, a party official, estimates that 300 to 400 Sandinistas will lose government posts. The party can offer them little, she says, because its own 2,000-member payroll must be slashed by 20% to 30% to compensate for lost government revenue.

Some outsiders believe that the party will be crippled by the loss of patronage and damaged by the unromantic spectacle of comandantes lingering on in mansions confiscated from the old order. “A tremendous number of opportunists, probably a majority of Sandinistas, will abandon the party when they can no longer benefit from being in power,” said Moises Hassan, a prominent former Sandinista. “The party will break into pieces.”

But no such doubts assail the Sandinista leadership, which remembers the trials of clandestine struggle as far tougher. By easing membership requirements, the party is moving to strengthen its clout as Nicaragua’s largest party. As a “party of cadres,” the Sandinista Front numbered about 40,000 militantes, or full-fledged members, at the time of the election. Now party officials have launched a campaign to recruit all of the nearly 580,000 Nicaraguans who voted for Ortega.

A more important shift is quietly under way in Managua, where some 200 open assemblies of Sandinista militants have replaced the elitist “base committee” cells appointed from above. Soon the assemblies will elect coordinators, who in turn will choose new party leaders for the capital. Carlos Carrion, the Managua party chief, said the election process “must go all the way to the top,” a controversial idea not yet approved by the party’s self-designated National Directorate.

If the new grass-roots democracy takes hold, it could correct one fault that many Sandinistas say distanced them from voters and cost the election--a tendency to impose party leaders from one city or neighborhood on another. “We’re going to have six long years to build a vanguard that truly rises from the community,” said Edgar Paladino, a Sandinista combat veteran and neighborhood leader in Managua.

Whatever the changes in the party leadership, Daniel Ortega is expected to remain on top. He has declined to take the seat he won in the new National Assembly, chosing instead to work on holding the party together and strengthening its alliances abroad. Despite his failed candidacy, the 44-year-old comandante appears to have grown in stature among his peers on the National Directorate and his countrymen as well.

“There was Daniel, two days after the election, up on the stand, speaking to the cadres, trying to turn defeat into victory,” said a veteran South American ambassador. “He wasn’t talking like a revolutionary but like a politician, an important politician who has a good chance to come back and knows it.”

Steps Toward Peace

The Contras and the outgoing Sandanistas government have agreed that the rebels will gather within rural demilitarized zones--scattered around the country and totaling about 1,150 square miles--by Wednesday. Violeta Barrios de Chamorro’s inauguration day. They will also start disarming immediately after she is sworn in. The accords are to be supervised by Venezuelan troops, part of a U.N. peacekeeping force.

Pitfalls for Chamorro

Contras-- The U.S.-backed rebels have agreed to a definitive cease-fire and pledged to disarm by June 10. They still want Chamorro to purge the army of senior Sandanista commanders, but she has yet to agree. She could face a violent Sandanista backlash if she retires too many commanders but risks a breakdown of the peace agreement if she leaves the army intact.

Inflation--Prices rose nearly 1,700% last year. To stabilize the economy and pull it out of a six-year-old recession, Chamorro needs to disarm the Contras, secure U.S. congressional approval of a proposed $300-million U.S. aid package, get quick aid to farmers to help them plant grain next month, gain business confidence and win a truce with Sandanista-led unions.

Property Disputes--

Free-market advocates in Chamorro’s coalition want to sell of most of the 518 state-owned companies, some of them confiscated by the Sandanistas and many of them losing money. They could meet resistance from Sandanista unions representing 60,000 workers who fear the loss of social benefits. Violence could result if former owners of confiscated homes or land try to retrieve their property.

Ortega’s Economic Legacy

When she takes over leadership of Nicaragua from President Daniel Ortega on Wednesday, Violeta Barrios de Chamorro inherits an economy battered by war, U.S. economic sanctions and what her allies call 10 years of mismanagement by Ortega’s Sandanista Front. Here are some of the measures of Nicaragua’s economic health after a decade of Sandanista rule:

Inflation Rate: Drained by war, Nicaragua say inflation begin taking off at end of 1987. Through 1988 prices soared, fed by high spending, declining government income and collapse of public confidence. Austerity measures cut inflation somewhat last year.

Source: Reuters/Economist Intelligence Unit

Trade Balance: Nicaragua’s export-import figures over eight years reflect the country’s cooling of ties with Washington and its increasing reliance on Moscow.

Note: 1983-88 Soviet-Nicaraguan trade figures are estimates. 1983-88 U.S.-Nicaraguan figures are based on U.S. government reports.

SOURCE: International Monetary Fund