A situation that started with students protesting the government evolved into a failed coup d’etat and, consequently, the decimation of a once-thriving tourism industry. Protesters, feeling powerless in the face of violence, turned to the dark side for help, accepting aid from narco-terrorists sponsored by oligarchs.
The Sandinista Government, also known as the Sandinista National Liberation Front (FSLN), is a revolutionary ideology and organization that was created on July 19, 1961, to overthrow the Somoza dictatorship. From an outside perspective, it looks like the government has come full circle in becoming what it was created to destroy.
U.S. Sanctions have influenced the Sandinista Government to change their strategy in restoring law and order to what was once known as the “safest country in Latin America.” Disregarding warnings from the embassy, I boarded a plane leaving the U.S. to Nicaragua to see it for myself.
No sh*t, there I was…
Did someone say, “communism?”
A History of Distrust
Historically, Nicaragua and the United States have not have an outstanding relationship due several political scandals, including the Iran-Contra affair. Long story short: We sold weapons to Iran through Israel in order to negotiate the release of U.S. hostages. The funds from the weapons sale were going to benefit the Contras, a guerrilla terrorist organization that opposed the Sandinistas. Needless to say, they weren’t so thrilled about it.
Today, the people of Nicaragua don’t treat U.S. citizens negatively because of our nations’ histories, but they do harbor a general distrust of American diplomats and government officials — this is especially true among the top brass.
It is important to note these specific examples of the past because there are similar accusations heading our way once again.
Not your best pitch, Don.
The Reason for the Sanctions
In Nicaragua, a country that has served as a physical barrier in our ongoing War On Drugs in Central America, was developing all the telltale signs of an impending coup.
Local police responded with extreme force against what they believed was a new arm of the criminal underground created to overthrow the government. Their aggressive pushback was interpreted by outside news outlets as a wanton wave of human rights violations. The ‘shoot first, ask questions later’ approach backfired — as it tends to.
The United States responded by implementing sanctions on the government and corporations, withdrew vehicles donated to the Police, and the U.S. embassy closed its doors and ceased routine operations until further notice.
I assure you, we’re open.
The Effect of Sanctions in August, 2018
Jacinto Saurez, the International Secretary of the FSLN, told the Havana Times of a conspiracy theory of a U.S.-sponsored coup. Oldtimers were quick to believe this because of our nations’ turbulent recent history.
Meanwhile, the United States is Nicaragua’s top investor with nearly a billion dollars invested in 2017, producing a return of 6%. Meanwhile, the rest of Central and South America was generating declining returns for U.S. investors. A law ratified in 2000 allowed foreign investors to retain 100% of their capital and the current Government has offered generous tax incentives in the areas of exports, agriculture, and forestry sectors.
As capitalists, we would never take a metaphorical cow producing milk behind a barn and shoot it, so the idea of a U.S. coup doesn’t hold water against facts.
The harsh reality is, sadly, that Nicaragua killed that cow themselves. The entire economy is reliant on the United States but old revolutionaries in power, blinded by pride, resent that the U.S. is essential to the country’s stability. The old, stubborn leadership resents any foreign influence — even if it is beneficial.
Taxes? No habla ingles.
U.S. sanctions aimed towards the Sandinista government have hit the tourism industry hard and they’ve hit the private sector even harder, yet the upper class has felt nothing. Investors have almost completely pulled out of the country and major corporations tied to the government have fired half their staff.
Mom-and-pop shops are running at max capacity to fill the void left behind by the departure of major department stores, restaurants, and franchises. Larger businesses have to raise their prices to keep up with taxes that the smaller businesses dodge. In short, we’re seeing a great dying of big business but an exploding entrepreneur market.
Small businesses are unaffected by the sanctions because they do not report their income. Hell, most small businesses down here don’t even have the proper licenses to operate legally.
The moment the new national strategy was implemented.
According to the Institute of Nicaraguan Tourism (Intur), U.S. tourism makes up a 24% market share in the country. A new national strategy has been implemented to try and regain American confidence and ensure visitors’ safety. They have increased police presence day and night, all barricades have been removed, and criminals have either been arrested or have fled the country. Regardless, I would highly recommend against traveling here without a guide or prior experience until the political situation improves.
Despite safety precautions, there are more ‘demonstrations’ planned for the near future that pose a security risk. It is unknown if the anti-government forces are going to return en masse.
A deflationary trend has developed for the Nicaraguan Cordoba (NIO) from 32.24 to 31.70 (at the time of writing). This may not seem like much at first glance, but it’s actually a pretty severe drop. The exchange rate is currently id=”listicle-2598140554″ USD to C.70 and, though the jump in U.S. buying power is good news for us, it has had devastating consequences for the local population.
Adam Hayes of Investopedia does a great job of explaining it:
“Deflation typically occurs in and after periods of economic crisis. When an economy experiences a severe recession or depression, economic output slows as demand for consumption and investment drop.
This leads to an overall decline in asset prices as producers are forced to liquidate inventories that people no longer want to buy. Consumers and investors alike begin holding onto liquid money reserves to cushion against further financial loss. As more money is saved, less money is spent, further decreasing aggregate demand.”
Normally, Nicaraguans are paid in U.S. dollars on a monthly or bi-monthly basis. The employees prefer to be paid this way because the dollar is less volatile. Corporations are lobbying for a new law that changes the payout to workers to Cordobas instead of dollars because of deflation. So, now that the local currency has deflated, the prices on everything have gone up. Unfortunately, corporations want to pay people “technically” the same amount — but by that logic, when the economy recovers, they’re “technically” paying people less.
These colors don’t run.
Americans living in Nicaragua
So, what’s the situation like for Americans in the country?
Many foreigners have left, but one thing is for certain among Americans who have remained: They will not be intimidated. Surprisingly, the Americans give no f*cks. They have stockpiled supplies, ammo, and alcohol. Those who have property out in the countryside have opted to weather the storm away from the cities. Those living within the cities have installed electric fences, cameras, and are even flying personal drones when things get hairy.
Nicaragua may be dangerous at the moment, but I can tell you that it’s no Afghanistan. Fortunes are made in times of chaos and it’s a buyers market. Right now, residential and commercial properties are practically being given away.
Americans aren’t turning tail. When I attended a bullfighting competition in the city of Juigalpa, a city saturated with Sandinista loyalists, I took a picture of this warrior: