Why Daniel Ortega Will Go On Ruling Nicaragua

When Daniel Ortega was Nicaragua's President in the 1980s, he and his quasi-communist Sandinista regime turned the Central American nation into an economic basket case. Hyperinflation, massive business and property expropriations, abusive state controls — exacerbated by the contra rebel war and a grinding U.S. economic embargo — left the country lying face down in the street by the time Ortega was voted out of power in 1990. Little wonder, then, that when he won the presidency again in 2006, many figured Nicaragua faced another round of ruin.

The red scare seems to be over. Nicaragua is suddenly the fastest-growing economy among the five traditional countries of Central America. It's leading the region with double-digit investment and export growth and setting national records for tourism revenue. Last year's inflation rate, 7%, was Central America's highest — but a miniscule fraction of the 33,000% Ortega presided over in 1988. COSEP, Nicaragua's main business chamber, says government-private sector relations are better than ever. And so is Ortega's approval rating, about 45%.

But is Nicaragua's advancing economy coming at the expensive of its democracy? And should Nicaraguans have to choose one over the other? Ortega looks set to announce that he'll run in next fall's presidential race — a re-election bid that critics and legal scholars call a clear violation of the Constitution. If Ortega is on the ballot — he's already printing "Daniel 2011" hats and shirts after the Sandinista-packed Supreme Court recently lifted the constitutional ban on consecutive presidential terms — polls say he's likely to win. And that would irk his long-time nemesis, the U.S., as much as it would demoralize his feckless political opposition. "In all previous elections, the discourse of the political parties on the right was, 'Careful, here come the Sandinistas, the Nicaraguan economy will be ruined,'" says Javier Chamorro, executive director of ProNicaragua, the state investment promotion agency. "But who is going to believe them now?"

It's getting harder for many Nicaraguan leftists to believe that their erstwhile Marxist comandante is still with them. Most of the ideologues who helped shape his revolutionary government a generation ago have bolted the Sandinista Party, accusing Ortega of cozying up to right-wing "neoliberal" economic policies for political gain. "The Sandinistas' economic model is based on an open economy that operates according to the rules of a free market," says Mario Arana, Finance Minister and Central Bank President under Ortega's more conservative predecessor, Enrique Bolanos.

At the same time, however, Ortega has created a "redistributive" parallel economy with a $1.4 billion slush fund handed him by left-wing, oil-rich Venezuelan President Hugo Chavez. "The resources from Venezuelan cooperation, which are administered [by Ortega] mostly as a private fund, are channeled in good part to small producers and the most vulnerable sectors of society," says economist Francisco Mayorga, who had the daunting task of kick-starting Nicaragua's post-Sandinista economy in the 1990s. "This is the 'socialist' component of [Ortega's] model."

Between free enterprise and free money from Hugo, Ortega has the luxury of having it both ways. So does that make him part of Latin America's new centrist wave, exemplified by former Brazilian President Luiz Inacio Lula da Silva, and its identifiable hybrid of capitalism and socialism? Not really, say Nicaragua watchers. "I wouldn't call [Ortega] a capitalist," says Mayorga, "but I would have a hard time knowing what to call him." Even Ortega's chief propagandist, First Lady Rosario Murillo, has a hard time describing her husband's philosophy. She recently cobbled together the slogan "Christian, Socialist and In Solidarity" (the mantra really doesn't specify with what). But it's hardly catching fire.

Critics contend that's because what looks like Lula-style pragmatism is Ortega-style cynicism. All Ortega really advocates, they say, is staying in power, and concentrating it, as long as possible. If so, it hearkens back to the 1980s, when he seemed intent on ruling as indefinitely and autocratically as his communist mentor, then Cuban President Fidel Castro. Lula promoted the fruits of capitalism as an engine of social development. But Ortega, says opposition leader Edmundo Jarquin, a former policy analyst at the Inter-American Development Bank, only seems interested in them as a trough of political patronage, "rather than focusing on job creation [that] allows people to live with dignity. And that's shameful."

More worrisome is Ortega's democratic record. Since returning to power in 2007, Ortega has been accused at home and abroad of dismantling constitutional checks and balances and of engineering election fraud. In his less than veiled push for a one-party system, he's made access to many government programs and state jobs restricted to card-carrying Sandinistas. The Supreme Court and electoral authority have largely degenerated into "Orteguista" institutions whose primary mission is to legitimize Ortega's counter-constitutional re-election effort. Most leaders, even Chavez, bow to a referendum process to change their constitutions. Ortega simply had his high court in late 2009 overturn Nicaragua's charter, and the federal election board looks ready to go along.

But for the moment, so do most Nicaraguans. While Central America's economy (excluding Panama's) grew a tepid 2.4% last year, Nicaragua had 4% growth. Foreign reserves are stable and bank deposits are up. Nicaragua certainly has a long way to go — according to the International Monetary Fund, its economy is still 65 years behind — but for the country's 6 million people, almost half of whom live in poverty, any economic progress is welcome. Even, it seems, at the expense of democratic process.