Sandinistas Left Behind Meager Cash Reserves : Nicaragua: The economy is in chaos, President Chamorro and aide say. No quick relief is in sight.
The Sandinistas left $3 million in Nicaragua’s Central Bank last week, the same meager sum they had inherited in 1979 from the defeated Somoza dictatorship, Nicaragua’s new government reported Monday.
President Violeta Barrios de Chamorro and her Central Bank chief, Francisco Mayorga, said they have taken over an economy in chaos and warned of an inflationary explosion in the coming weeks. Their first public comments since assuming office last Wednesday appeared to be aimed at dampening expectations that their free-market policies will bring quick relief to Nicaragua’s war-battered economy.
Defending a 50% devaluation of the local currency last Friday, Chamorro said in a nationwide radio address that “severe measures” are needed to stabilize the cordoba and to promote confidence among farmers and investors. She also announced new talks this week with Nicaraguan rebel leaders to urge them to disarm.
“The situation of a country does not change overnight,” Mayorga said at an earlier press conference. “At the moment that the presidential sash was transferred from Daniel Ortega to Violeta Chamorro, we still had the same bankrupt country, the same country that feeds its people only two meals a day.”
He estimated the foreign debt at $10 billion. The debt total and the amount of liquid cash reserves had been subjects of uncertainty in the final days of the Ortega government, which was defeated in February’s election. The $3 million reported in the Central Bank after an initial audit is enough for 1 1/2 days of imports.
Mayorga appeared to back away from his election campaign promise to whip inflation in 100 days, saying that only “the first fruits” of his policies will be evident by then. It will take “more than a year or two or three” to revive the economy fully, he said.
Prices rose 36% in the first 25 days of April and could go up 100% in May, Mayorga said, as a result of what he called “irresponsible” measures by the Sandinistas in their lame-duck days in office: hefty wage increases to public employees, a near-doubling of the money supply, an overvaluation of the cordoba and the giveaway of official cars and other public property that must now be replaced.
Since the cordoba fell from 70,000 to 140,000 to the dollar at exchange houses last week, gasoline and food prices have nearly doubled, and the black market price for the dollar has gone from 140,000 cordobas to 170,000. In a new round of labor demands, stadium workers seeking a 200% wage hike are on strike, delaying the local baseball championship series.
Sandinista union leaders and newspapers have quickly blamed the increases on Mayorga’s abrupt devaluation and the expectations created by his campaign promises.
Answering his critics, Mayorga said: “The inflation that’s coming in the next five or six weeks is an ambush that was carefully planned by the Sandinista government. They were laying the groundwork for an inflationary explosion that we will try to combat but cannot stop.”
The debate was echoed Monday on the streets of Managua.
“Mayorga has not given us an economic plan, so these measures are arbitrary, and who knows where where they will stop,” said Marvin Diaz, a civil engineer.
Mireya Rios, a 42-year-old housewife and mother of four, disagreed. “After five days you cannot blame the situation on Mrs. Chamorro,” she said. “The same thing would be happening if Ortega was still president and it would probably be worse.”
Mayorga said wages will be adjusted to offset inflation in the hope that a bountiful midyear grain harvest will dampen the spiral. But to encourage farmers to plant that crop now, he said the U.S.-backed rebels must comply with their agreement to disarm by June 10 and the United States must deliver $300 million in promised aid by the end of May.