"BISNES" IN NICARAGUA A New Headache for the Sandinistas
Lapper, Richard
On the wall of the shabby administrative building at the entrance to Managua's Mercado Oriental, or "Eastern Market," government officials have pinned a small cardboard sign addressed to...
...As a result, many Nicaraguans, particularly in the countryside, have resorted to growing their own food...
...The government aims to reduce the physical size of the market by over half and cut the number of traders from the current 25,000 down to 4,500...
...Managua, Nicaragua's capital and the center of "bisnes," abounds with stories of skilled workers who earn ten times the average manual wage by doing odd jobs for householders in middle-class Managua suburbs like Pancasin and Altamira...
...Labor Market in Chaos Nicaraguan wage levels are barely adequate to meet basic needs at official prices...
...Currency for this kind of purchase can be bought for be- tween 700-800 cdrdobas to the dollar on a legal parallel market whose rates are pegged closely to the "free" or black market rate...
...At another level, with the contra war already pushing people out of the countryside, the prospect of employment in the black economy has made Managua a magnet for peasants from the war zones and others dissatisfied with their lot in rural areas...
...Such a step could destroy what remains of the Sandinistas' alliance with the middle class and further dent the revolution's image with friendly governments in Europe and Latin America...
...In the last three years, thousands of Nicaraguans have left their jobs in favor of the Mercado Oriental and other trading centers, where even modest profits can far outstrip wages in the government and private sectors...
...In effect, Nicaraguans are presented with two markets, in which the prices of all goods and services, including labor, reflect the different exchange rates...
...As part of a campaign to rein in the Mercado Oriental, some 50 inspectors from the Ministry of Internal Trade (MICOIN) have been dispatched to the market to establish a new system under which traders are to be licensed and prices rigorously controlled...
...According to Enrique Murillo, deputy director of the MICOIN program, only those traders who can demonstrate a long record of doing business in the Mercado Oriental will be licensed to operate there...
...If the Sandinistas' new package of economic measures fails, the political cost could be high...
...The drift from the countryside has also worsened traditional rural labor shortages, obliging the government to mobilize students, schoolchildren, state employees and even Sandinista supporters abroad to pick the vital coffee crop, on which more than a third of Nicaragua's export revenues depend...
...On the other hand, not only will continuing chaos on the labor market undermine economic performance, it will harm the government's social programs, which so far have been relatively successful...
...In theory, most basic goods-rice, beans, maize, soap, milk and sugar, as well as domestically produced clothes-should be available at rock bottom prices in the government's own stores as well as in private shops...
...However, the impact of the war and production difficulties have been compounded by inefficiency and corruption in the state distribution system...
...There are already disturbing signs, however, that once they are ejected from the Mercado Oriental, traders are simply setting up their "bisnes" elsewhere...
...At an average official rate of 70 to the dollar, the government buys imports, such as oil, that are essential both for the war effort and for continued agricultural production...
...The last two years have also seen four rounds of wage increases, the latest involving a sliding scale of raises ranging from 58% to 102%, effective January 1, 1986...
...These steps may have slowed the pace at which the black market is growing, but its growth continues...
...On the wall of the shabby administrative building at the entrance to Managua's Mercado Oriental, or "Eastern Market," government officials have pinned a small cardboard sign addressed to the thousands of market traders...
...To make matters worse, Nicaraguans have been slow to change their traditional patterns of consumption...
...On the black market, almost anything can be bought, but the prices are astronomical...
...Others will be forbidden to trade and offered altemative work...
...Those ousted so far include a pilot who made more money selling cheese than flying, as well as over 100 teachers, lawyers and engineers...
...We have to drive the mercantilist spirit out of these people," says Murillo...
...Now the government has followed its wage hikes and devaluations with other measures aimed more directly at black marketeers...
...On the black market, a bar of Lux soap costs the equivalent of a week's wages for a manual worker, and it is not unusual for a secretary to pay half her monthly salary for a bottle of Flex shampoo and conditioner...
...Bisnes" is now growing so fast that it is undermining the Sandinistas' ability to manage, let alone plan, the country's economy...
...The Sandinista newspaper Barricada and the pro-government El Nuevo Diario have been quick to denounce the recent appearance of new centers of black market activity in Managua, many of them clustered around the city's bus stations...
...families with relatives abroad are especially anxious to receive regular remittances of dollars, however small the amount...
...The lure of work in the black economy has aggravated the shortage of professionals such as teachers, doctors and nurses, who are vital to government social programs, and of skilled labor and middle-level managers, upon whom sustained production and economic growth depend...
...they are loath to believe, for example, that the quality of locally produced shampoos and other toilet products is as good as that of imported brands...
...Recent shifts in the government's economic policies demonstrate that it recognizes the extent of the problem...
...The Sandinista government originally conceived of this strategy as a means of keeping down the price of basic goods, while at the same time acceding to some middle-class consumer demands...
...Others tell of women from the slums who can sell homemade coconut sweets from ramshackle stalls and earn as much as 60,000 c6rdobas a month-twice the maximum legal wage earned by top government officials-including the nine comandantes of the Sandinista Front...
...The result is frequent shortages...
...On the official market, a limited range "Bisnes" pays better than factory work of goods-when available-is cheap...
...Middle-Class Safety Valve Basic to the black economy is the dual rate at which Nicaragua's c6rdoba exchanges against Latin America's major international currency, the U.S...
...The gap between the two exchange rates is now so wide that it is seriously distorting the economy...
...Modest though the sign is, it symbolizes the determination of the Sandinista government to control a market that has become the center of Nicaragua's informal or "black" economy-a network of legal and semi-legal trading activities that Nicaraguans call "bisnes...
...The only alternative may be to take much more drastic action against the private sector, and in particular the trading community...
...Driving out Mercantilism The black economy, then, originally seen as a safety valve, has become a gaping hole that threatens to overwhelm the whole economic fabric...
...Young Nicaraguans buy London Bridge designer jeans, Nike training shoes and Rudolfo silk shirts from Panama-all on the installment plan, with each single item costing the equivalent of two months' wages for a manual worker...
...His most recent working visit to the region was in JanI uary 1986...
...The hand that we have extended you in friendship could suddenly become a fist...
...However, in the last eighteen months, the contra war and the United States' economic boycott have seriously hit production, aggravated shortages of foreign exchange and pushed up the price of the free market dollar...
...APRIL/MAY 1986 7vels once a month to Guatemala, where he buys shampoos and cosmetics that are unavailable in Nicaragua, and brings them back to sell in the Mercado Oriental...
...now, he traRichard Lapper covers Central American affairs for the Economist Intelligence Unit and for the London-based Caribbean Insight...
...Managua's population has doubled since 1979 to its present size of 900,000, putting enormous pressure on the city's already strained social and economic infrastructure...
...A 60% devaluation of the cordoba announced January 31 was the second in a year...
...If that economic crunch comes, the government is likely to respond in favor of its core supporters, in the spirit of one of the most basic and enduring of all Sandino quotes adopted as a slogan by the Sandinistas: "Only the workers and peasants will go through to the end...
...A recent government survey, conducted before the latest round of wage increases and devaluation, found that the legal minimum wagethen 4,500 c6rdobas a month, or about $112.50 at the prevailing official exchange rate, would buy only a quarter of the basket of basic goods necessary to feed a family of six...
...Any further erosion of these programs, and of the formal economy as a whole, might in turn jeopardize Sandinista support among the poor...
...Don't think," it reads, "that just because we have been flexible and moderate in the past that we can't be tough...
...Gerardo, who earns up to seven times his former salary, sums up the "bisnes" ethic when he says, "You've got to get yourself a 'conecte' to survive here...
...While providing the poor with cheap food, clothing and transport was a major goal of government policy, the dual exchange rate and the black economy functioned as a safety valve, quietening discontent with austerity among the middle class and helping to stem the exodus of professionals to the United States...
...There are many people like Gerardo Trejos, a 35-year-old who left his job as a senior administrator in a government department six months ago to devote himself full-time to a small import business...
...Gerardo started up with $1,000 borrowed from a brother who lives in the United States...
...While both these trends help sustain the black economy, it is the tendency of Nicaraguans to quit the formal sector altogether that worries the governREPORT ON THE AMERICAS 8ment the most...
...dollar...
...The government has relatively few dollars remaining, but it makes these available much more expensively for what it considers "inessential" imports-electrical goods such as food mixers, fashionable clothes and foreign travel...
Vol. 20 • April 1986 • No. 2
