The Economics of The Sandinista Revolution in 2022
Nicaragua ended 2021 with extraordinary results in the economy, highly positive results in production and is leading economic growth in the region after three difficult years during which it faced a coup attempt, two devastating hurricanes, Covid-19 and permanent attempts by the United States and big capital to destroy the country’s economy.
In Managua, we interviewed Minister of Finance, Ivan Acosta, on Nicaragua’s model, regional economic integration and new prospects as Nicaragua and China seek cooperation after reestablishing relations in December. Kawsachun News’ Camila Escalante sat down with Minister Acosta on January 14, at the offices of the Ministerio de Hacienda y Crédito Público. What follows is a translation of the portion of our interview conducted in Spanish. We also asked some additional questions in English, which can be watched here.
Nicaragua experienced a year of economic recover in 2021. How has managed to control inflation when other countries have failed to do so?
The issue of inflation is very complex. In 2021 most countries have had strong growth and Nicaragua is one of them, but there has been some inflation and that inflation is imported because we’ve seen global price rises on goods that we import such as oil. If the price of energy goes up then that’s felt across the whole economy. However, we have also benefited from the rises in the international prices of other goods such as coffee and beef, these are goods that we export and the value of those exports is up 21% during 2021.
Our high level of food production has stopped inflation from really shooting up. When you visit Nicaragua and you see what is served as meals, you can see that 90% of what’s served up is produced within Nicaragua. Our President Daniel Ortega wants us to achieve food sovereignty and food security by making sure we produce all the food on people’s tables, such as chicken, beef, cheese, rice, beans, oil. We can control inflation on these goods because they’re produced here, but we can’t do much about the rising cost of energy and products that use hydrocarbons such as fertilizer.
To support our exports, we devalued the national currency by 2% this year, when this is accounted for then our rate of inflation last year was just below that of the US, which hit 7%, which is very high for them, it’s the highest since 1982. I don’t think inflation can be avoided because we import oil, so we’re sensitive to rises in its price. We can cushion the effect by boosting national production, particularly agricultural production, through public investment, by providing technical assistance, and guaranteeing access to markets for campesinos.
What are the prospects and opportunities for the national economy in the context of the new progressive governments in the region and the renewal of relations with China?
When we compare development and growth in Latin America, to that in Asia, we can see that regional integration is incredibly important. Our countries that share a border and a region, that share a history and culture, should unite to have a greater voice on issues of trade and exchange rates. This hasn’t happened in Latin America for our whole 200 year history, for different reasons, and the result is massive inequality, for us in Mesoamerica is meant that we are the poorest region in the Americas. If we are to tackle this poverty and inequality, then all countries must come together to exchange knowledge and experiences.
Look at how Cuba has produced its own vaccine and become the most vaccinated country in the Americas. Meanwhile, other Latin American countries with a free market economy have been unable to. If there can be exchange of that type of scientific and commercial knowledge in the region, then we could all benefit. We should remember that the alliance with Venezuela, especially over Petrocaribe that saved countries in the Caribbean and Central America during the 2008 financial crisis, it softened the international effects of the Lehman Brothers collapse. During that critical moment, Venezuela sent oil to Caribbean countries that rely on tourism and were going to be wiped out as rising energy prices made their hotels noncompetitive. Venezuelan oil averted that crisis. Nicaragua also benefited from this because we were sending them our excess agricultural produce in exchange for oil and as a result, poverty fell by 50% during that decade. The governments of the left in the region have to focus on these issues of integration to tackle poverty and inequality.
Can you tell us the new Memorandums of Understanding with China?
China is clearly the world leader in international trade and will lead the process of globalization going forward. In the last 30 years, they have lifted 800 million people out of poverty. Their Belt and Road Initiative has brought about a strategy of cooperation with more than 60 partners that constitute 75% of the world’s energy supplies. They have focused on helping countries build infrastructure and ports to boost trade in Africa, Asia, and Latin America, as well as transport links to China. For us, this is a huge opportunity and there’s no reason for us to be outside this process. For countries like us that export food, we always need new markets, and the Chinese market is the largest. This is a huge opportunity for us to bring in new investments, too, and thereby increase the productive capacity in the production of our export goods. We also need to build cooperation on science and technology with China, to help develop our industries and energy capacities. We need to connect our ports in the Caribbean and Pacific, so we require investments in new corridors and a canal that can compete with that of Panama. We think that our relationship with China opens a new space for our economic development and boost trade and integration.
We reestablished relations from the 10th of December, and that basically is a political agreement to accept One China policy. The principle of this agreement is to have political relations, trade relations and cooperation. This agreement we established and recently signed four memorandum. The first memorandum is to have a global operation between the People’s Republic of China and Nicaragua. The second memorandum is to have what you call the early harvest that gives a step ahead. In the meantime, we negotiate a free trade agreement. The third memorandum is that Nicaragua be included in the Belt and Road Initiative. The last memorandum is to be part of the initiative of economic dialog with China. That is the four memorandum that I think is very good for our country.
The English portion of our interview can be watched below: