from envio, january 2002:
[trickle down] The most defined feature of the new government’s economic design is that the motor force of economic growth during its five-year term will be large-scale foreign investment, followed by national private business investment. This growth strategy is based on the very traditional idea that the benefits of the big investments will trickle down to the others.
(...) These two investments reflect the new government’s priority areas: tourism and the assembly plants known as maquiladoras, which process imported materials for re-export and are exempt from import and export taxes. The latter will be given particular priority because this type of operation seems to be of greatest interest to the investors currently sniffing around.
(...) [employment] With all polls showing unemployment as the social problem most affecting the population over the past decade, Bolaños’ campaign promise to create new jobs sparked particularly high expectations. Like its predecessor, the current government is counting on the maquila industrial parks—commonly referred to as free zones—as the quickest way to mass-create the longed-for jobs. Indeed, when Alemán took office, around eight thousand people were employed in the maquiladoras; today, according to the Central Bank, that figure has climbed to nearly forty thousand. Nonetheless, his seemingly exclusive reliance on big investors is questionable considering that small urban and rural businesses still provide the bulk of Nicaragua’s jobs and the government has no clear plan for this sector.
(...) Bolaños is offering investors two advantages. The first is competitive prices—"starting with the cost of our labor force," to use his words. The second is security, at least compared to most of the other Central American countries vying for tourists and maquila investors. In his opening speech at the investment forum, Bolaños told the audience that "Nicaragua is a safe country, its people very warm and welcoming. We have one of the lowest crime rates in Latin America, and the public safety we can offer today is the envy of our neighbors north and south. There are no kidnappings or violent crimes against tourists or investors here, and the tourists who come don’t have to listen to special instructions about security beyond the dictates of common sense."
(...) [the future of agriculture?] The most noteworthy aspect of this government’s economic strategy is that agriculture, for nearly two hundred years the kingpin of the national economy and the source of the new President’s own wealth, has been left in the dust. It seems to be viewed as a problem rather than a solution, a sector that drags on the economy rather than driving it forward.
(...) [credit] In Nicaragua, private commercial banks do not work with the rural productive sectors. The bulk of their credit portfolios is dedicated to financing consumption. An individual can easily get a loan to buy one of the plethora of luxury 4-wheel-drive vehicles clogging Managua streets today, but faces often insurmountable obstacles when applying for a loan to plant papayas for export. Around five years ago, the World Bank set up a program to extend private banking services to the countryside, providing a US$30,000 subsidy to the banks for each branch they opened in rural areas. The banks jumped at the offer, but did precisely the opposite of what the World Bank intended: they used these branches to attract the savings of the rural population and thus increase their capacity to finance consumer loans in the cities, providing no credits for any rural productive activities.
(...) [strategy for poverty] If very few resources have been invested in the productive sector in the past decade, the Poverty Reduction Strategy, now an official World Bank-approved document that the new government is committed to implement, does not appear particularly concerned with production either, mentioning it only in very general terms. The strategy’s main objective is to create a social safety net that will use subsidies to alleviate (not reduce) the poverty of the most vulnerable population. The strategy does not propose incorporating the poor into the national economic project. Based on a very traditional mentality, it assumes that the poor will automatically be pulled in as the large, modern sector of the economy grows.
(...) [on GDP] In 1990, the annual per capita GDP was equivalent to US$454. Today it is US$484. In other words, eleven years after the war, during which Nicaragua has been receiving an annual average of US$500 million in foreign cooperation, the income of each Nicaraguan has only grown US$30! If that is not shocking enough, it must be remembered that this figure only expresses a mathematic or artificial reality, homogenizing the head count of not only both babies and the retired, but also the very rich and the very poor. It in no way reflects real income distribution, which is profoundly inequitable in Nicaragua and becoming more skewed with every passing day.
(...) [poverty] International analysts calculate that a country’s economy must grow at least 7% a year to effectively reduce that country’s poverty. During the reactivation period of the past seven years, Nicaragua’s economy grew an average of 4.5% annually.