U.S. Threatens to Cut All Aid to Nicaragua

By: Christine Goffredo
     WFP Nicaragua Team Member

Small chile farmers like Don Orlando (left), Don Roger (center) and Don Roger's son (right) are those that have benefited from USAID funded programs in Nicaragua like Chiles de Nicaragua, S.A.

Many people in the U.S. know about Nicaragua from the Sandinista revolution in the 1980’s, or they may have heard about the Iran-Contra affair.  But there is a 150 year history of tension between the United States and Nicaragua, and this history has continued to the present day.


Currently at issue in U.S.-Nicaraguan relations is the renewal of two separate “waivers”, without which Nicaragua would not receive any foreign aid from the United States in the upcoming fiscal year.  Last week Washington announced that Nicaragua would not receive one of the waivers, and the prospects of receiving the second so-called “property waiver” are not looking positive either. The new U.S. Ambassador to Nicaragua Phyllis Powers’ comments at a May 11 American Chamber of Commerce luncheon signaled as much:


 “I must be honest with you, the persistent failure in fiscal transparency, the incapacity of the government of Nicaragua to make concrete decisions in resolving the property invasions of U.S. citizens, and especially the grave irregularities in the electoral process of last year; and the absence of means that indicate that the conditions are improving for this year, make the decision for the disbursement of funds very difficult.” 


The first waiver deals with transparency in budgeting, and its denial will cost the Nicaraguan people $3 million in aid for the next fiscal year.  The approval of the property waiver still remains uncertain and could mean a cut of over $13 million in education, health, and small business development funding.  


The property waiver comes from Section 527 of a U.S. law called the Foreign Relations Authorization Act that gives the Executive Branch authority to cancel all aid to a country if cases concerning land confiscated or appropriated from U.S. citizens by that country’s government are not resolved in a satisfactory manner.   In addition, the U.S. government would have to veto any decisions by international financial institution, such as the IMF where the U.S. holds veto power, to disburse funds.  


While such a law may seem logical on its face—a way to protect U.S. citizens’ property—such laws have almost exclusively been used to punish government’s that disagree with U.S. policymakers.  


And this legislation is particularly problematic for Nicaragua. In the first place, due to the Hickenlooper Amendment that dates back to 1962 but was resurrected by Senator Jesse Helms and Representative Henry Gonzalez when they authored Section 527, the definition of U.S. citizen can be applied retroactively.  This means that Nicaraguans whose land was confiscated before they became U.S. citizens are applicable under this law.  One of the main motivations for this amendment is the Nicaraguan Agrarian Land Reform, passed after the Revolution in1979 that put an end to a 40-year long dictatorship by the U.S.-supported Somoza family.  The Reform confiscated land primarily from  Somoza family members,  soldiers in Somoza’s army that had committed war crimes, and those that had taken out hefty mortgages for their properties and then left the country for the United States, taking all of their wealth with them, and leaving the burden of the unpaid-for properties with the Nicaraguan government.   Following the U.S.-funded Contra War in Nicaragua, the democratically elected president of 1990, Violeta Chamorro, formalized the land turnovers, an act lauded by many as a great aid in the war reconstruction effort of the country.  The Agrarian Reform benefited over 60% of Nicaragua’s rural population by providing them with land after over a decade of war and destruction.  


In 1994, however, the U.S. passed Section 527 and even advertised it in stateside newspapers, urging new U.S. citizens from Nicaragua to file claims.  According to César Zamora, the vice president of the American Association of the Chambers of Commerce of Latin American and the Caribbean (Aaccla), these property claims have cost Nicaragua over $1.4 billion in 15 years, and that the resources that the country has utilized to return and compensate these confiscated properties makes up around 45% of the internal debt of the country.  This is on top of a $4.12 billion external debt that represents 52.6% of the country’s GDP, thanks to U.S. supported neoliberal policies that pushed borrowing from the IMF and World Bank.  


Today the Attorney General of Nicaragua, Hernán Estrada, has reported that in this year alone, 50 cases have been resolved, leaving 193 claims, representing 366 properties, still unresolved.  This shows a real effort to escalate the pace of case resolution, as there were 48 in 2009, 61 in 2010, and 62 in 2011.  Of the 193 claimants still remaining, only 6 are U.S.-born citizens, the rest are Nicaraguan who became citizens during the 80’s and 90’s, according to the Attorney General’s Office.  Estrada has also noted that some of the difficulty in resolving the remaining cases has to do with poorly filed claims, or lack of documentation for claims.  


Nevertheless, the decision that the Executive Branch will make is still uncertain.  In the case of the negation of the first waiver, the major reason cited was lack of transparency in the Nicaraguan budget. The other issue mentioned was inconsistencies in the 2011 Nicaraguan Presidential election.  This, despite that fact that the first waiver is based on the Department of State’s Foreign Operations and Related Programs Appropriations Act, which evaluates only fiscal spending (specifically, making the national budget public).  In regards to the elections, there have been several documented instances of issues with that election, while the Nicaraguan government and its supporters maintain that the election was free and fair.  


Clearly these waivers are powerful diplomatic tools that raise very serious questions not only about national sovereignty, in terms of producing a national budget or electing a leader, but also about what the goal of foreign aid really is. Should U.S. assistance be used to ensure that a country obeys the will of the United States? Or to aid the millions of Nicaraguans that could benefit from financial assistance in health, education, and environmental programs?  


Sociologist Cirilo Otero told Witness for Peace in a recent interview, “I think that the two waivers are necessary for Nicaragua, in relation to the country’s interests with multilateral institutions and the commitments of the country to multilateral lending institutions.”  But he left an important reminder concerning these international lending institutions, their programs, and the majority of Nicaraguans:


“With or without the waiver, poverty will continue to be a difficult and denigrating situation for a large percentage of Nicaraguans, for many Nicaraguan families - I am speaking about roughly 3.5 million people, principally young people.  Up until now, the projects that have been executed with these loans have not succeeded in benefiting the poor of Nicaragua.”


Nevertheless, loss of United States development aid would seriously damage and possibly eliminate programs currently operating in Nicaragua that assist Nicaraguans around the country.


The decision will be made by July 30, so there is still time to act. Call John Ballard at the State Department’s Nicaragua Desk (202-647-1510) and tell him that you support extending both of these waivers to Nicaragua this year.