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Daniel Ortega's new friends

Published by Forbes on 1988-08-22

HE WOULD SEEM to have his problems: His economy is a mess, his Soviet and Cuban friends can't afford to give him much nonmilitary help, some of his Central American neighbors are critical of his persistent human rights violations, and the contras are still camped on his doorstep. Yet the chief of the Sandinista junta in Nicaragua, dapper Daniel Ortega Saavedra, 43, was cool and confident when he spoke at some length with FORBES late last month in Managua.

Why was Ortega so confident? In good part because he looks forward to a Democratic victory this November and he is a great admirer of Massachusetts Governor Michael Dukakis, whose acceptance speech at the Democratic national convention Ortega calls "inspiring."

Don't the recent cutbacks in Eastern bloc nonmilitary aid worry Ortega? Yes, but he has some new friends who are a lot richer than the Soviets, and who can defy the U.S. embargo. Who other than the U.S.' Canadian and Western European allies? The Soviet bloc supplied 47% of Nicaragua's imports of $ 830 million in 1987, but this year the Eastern bloc's proportion will drop to 40%. (Soviet military aid, of course, is a bit more than that, but you can't feed people with guns, and tanks aren't much use in plowing fields or moving goods.) The slack in economic trade and aid will be more than taken up by noncommunist countries.

Ortega: "In spite of the great pressure exerted by the U.S., there have been governments willing to face up to the American policy of blockade and embargo. When the U.S. dictated the embargo and blockade, Canada immediately showed a willingness to supplement with whatever it could in its trade relations with Nicaragua. It has also been willing to take in Nicaraguan imports of coffee, sugar and fruits -- which were normally exported by us to the U.S.

"We have also been able to place our bananas in Belgian markets and elsewhere in Western Europe. In spite of U.S. pressure and the resistance by right-wing sectors in various countries, we have managed to maintain a diversified market and generate diverse sources of international aid."

Ortega and his aides enthusiastically describe some of this assistance. Spain, Italy and West Germany are investing large sums in tourism (see box, p. 40). Spain and Mexico are helping to develop the forestry industry -- Nicaragua has $ 2 billion in furniture-quality wood available, particularly on the Atlantic Coast.

The Japanese, always alert to new commercial possibilities, have become a noticeable presence. Toyota jeeps and trucks are everywhere in Nicaragua. Mitsui is making new investments in the fishing industry. Japanese tractors are steadily displacing the clunky Soviet tractors that were imported in volume after the Sandinista dictators shot their way to power against dictator-strongman Anastasio Somoza in July 1979. Japanese tractors are also replacing the sturdy but aging John Deere tractors that Nicaraguan farmers universally desire but can no longer get.

The aid does not end with trade. Nicaragua is receiving unprecedented development assistance -- grants, concessional aid and such -- from Western Europe. According to Planning Minister Alejandro Martinez, last year $ 80 million in grants came from Sweden, Spain, Finland, Norway, Canada, Argentina, Yugoslavia and India. Yes, India. Italy and Nicaragua recently signed a $ 150 million agreement for long-term credits and development projects.

Sweden is high on the list of Ortega's friends. Martinez says it gave $ 60 million in development aid last year. Italy was close with $ 50 million. The Soviet Union tied Italy in economic (as opposed to military) aid, with $ 50 million. From Spain came $ 22 million; from Canada, $ 10 million.

Why are the Western Europeans undercutting the U.S. effort to restore democracy to Nicaragua? Part of the explanation is commercial, the chance to exploit a new market when the war ends. Humanitarian concerns for the war-torn country also play a part -- as do cynical politics. Says a senior Western diplomat stationed in Managua: "Part of the reason is political sympathy -- especially from such left-of-center governments as Sweden. For some of these donors, it's an opportunity to steal the thunder from the U.S. in its own backyard."

A pleasant thought: We defend Western Europe and Western Europe nourishes a Marxist-Leninist government in our backyard.

Throughout much of the world, socialist policies have been discredited. Market forces and liberalism are on the rise. But many European governments must still pay lip service to their minority, but vocal, left-wingers. How to satisfy the left without ruining one's own economy? A few millions for the Sandinistas offer a cheap solution.

But India? Ortega is on excellent terms with Prime Minister Rajiv Gandhi, who supports the Sandinistas at the U.N. and in the Nonaligned Movement and has extended a commitment for credit and raw material. In the fall of 1986 Gandhi pledged $ 10 million in easy-terms credit to Nicaragua under which the Ortega government would buy Indian textiles, machinery and consumer goods.

Of course, Ortega wants more foreign investment. When seeking it -- as in the interview with FORBES -- he sounds more like Adam Smith than Karl Marx. "We want to assure foreign investors Nicaragua is safe for them," he vows. "We aren't talking about more state production in our economy. Rather, we're talking about stimulating the private sector, letting it develop, letting it get strengthened."

Unfortunately, Ortega's deeds don't square with his words. The San Antonio sugar plantation is Nicaragua's biggest commercial unit; until recently owned by the liberal Carlos Pellas family, it produced 40% of the 143,000 tons of sugar Nicaragua produces annually. In July Ortega's government nationalized the San Antonio operation.

Pressed on the point, Ortega shrugs. "The plant had deteriorated to such a degree that we were obliged to take it into our hands. The owners had decapitalized the plant, had turned their profits into dollars and invested the money in the U.S." But U.S. State Department officials describe San Antonio as "the largest and most efficient sugar refinery in Nicaragua."

What about the Sandinistas' clampdown on the political opposition and on the daily newspaper La Prensa? Ortega said that dissent would be tolerated, as long as it wasn't "disruptive." Disruptive of what? The one-party state, of course.

Ortega denies persistent reports that the Sandinistas host large numbers of Soviet and Cuban military personnel. "All we have is fewer than 100 foreign military instructors," claims Ortega. "And they are going home." (The State Department estimates that there are 3,000 military advisers from the Eastern bloc.)

Ortega says he was displeased by Michael Dukakis' criticism of Ortega's great friend, Panama's dictator/drug merchant Manuel Noriega. But otherwise he admires Dukakis greatly. Ortega: "We can trust Dukakis' administrative ability, and the administrative ability of a future Democratic Administration to change U.S. policy. I think that with Dukakis we could have better conditions to work for a new dialog."

"Carter," continues Ortega, "did not enter into a dirty war against Nicaragua. He always wanted to resolve problems through diplomatic means. It was when Ronald Reagan came to office that the dirty war began. . . . However, I think that Mr. Dukakis will doubtless encounter some serious obstacles -- he will be subjected to McCarthyist pressures from the die-hard conservatives."

Maybe so, but even a sympathetic Dukakis can hardly ignore Ortega's dragging his feet on democratizing his dictatorship. To meet the terms of the so-called Arias peace plan, Ortega must hold free elections and must tolerate a free press. Ortega shows no sign of doing either. In fact, he cannot genuinely afford to democratize. In a recent poll conducted by Centro de Investigaciones Itztani, associated with the Jesuit Central American University, the Sandinistas won a 28% approval rate among Nicaraguans; a large majority of those polled said they had no political preference.

With little support for the Sandinistas at home, Ortega is especially thankful for the aid and trade from his new friends abroad. "This has been an extraordinary effort on the part of these countries," he says sincerely, "and we appreciate their willingness and receptiveness." The majority of the Nicaraguan people, groaning under a repressive government and suffering from all kinds of shortages, may have a somewhat different view.

Pranay Gupte,
Senior Writer and Global-Affairs Columnist

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