Nicaragua's crisis caused by Albanisa
The president of Nicaragua, Daniel Ortega, anounced a controversial decision to cut down on welfare, back in April this year. Protests against the decision were violently suppressed by the government. Despite the chaos it caused, the government cuts had to be made and this is why.
Recently street protests occurred in Nicaragua due to unpopular decisions made by president Daniel Ortega. His new policy cuts severely in the social security system of the country. Why has Daniel Ortega made this decision and why was it inevitable?
By Romy Bruijnzeel, August 17, 2018
After Ortega announced the government was going to decreed social security reforms, protests began on April 18th earlier this year. Initially, the protestors consisted only of elderly people that disagreed with the social reforms. This was nothing unusual, since the elderly have been protesting on this matter since 2013. The circumstances changed, however, when the peaceful protestors were violently disrupted by paramilitary government mobs that are linked to the Sandinista Youth. The estimated number of deaths is nearly three hundred. The Sandinista Youth is the youth organization of the Sandinista National Liberation Front (FSLN), the governing party of Ortega.
To better understand the decision of Ortega to cut on social reforms, we must look more closely to a company called Albanisa. After getting elected as president in 2006, Ortega signed an oil cooperation agreement with former president of Venezuela, Hugo Chavez. The multi-billion dollar cooperation with oil-rich Venezuela seemed a solution for rebuilding Nicaragua that had suffered from years of dictatorship and civil war.
The Venezuelan state oil company PdVSA agreed to supply oil to its Nicaraguan equivalent PetroNic under favorable conditions: 50 percent of the oil purchase had to be paid op front and the other half is a long-term loan with a very low rate of 2 percent interest. Ortega put one of his closest confidants Rodrigo Obregón in charge of the joint state company that was owned by PetroNic for 49 percent.
Albanisa helped Ortega to rebuild the country. Just a few days before the protests began, the World Banks stated in a report that Nicaragua has one of the most rapidly growing economies with growth rates higher than the average country in Central and Latin America .
Since Albanisa is partially owned by a state oil company, there should be checks and balances. So far, there is no transparency on the expenses of the company. Many other companies like a cell phone company or a hotel have been linked to Albanisa. All of these linked companies have not justified themselves towards the public. Confidant Obregón accused Ortega of nepotism after leaving Albanisa in 2014.
The crisis in Venezuela did not do any good for Albanisa. The flow of oil from Venezuela has dropped with 80 percent since 2014. Nicaragua had to look for an alternative way to meet their fuel needs, which raised the expenses. Hence these expenses, the costs for the social security system grew, which lead to the unpopular decision of Ortega to reduce pensions and other social security welfare.
What was planned to become the solution to rebuild the country has led to the opposite effect. Ten years later, Nicaragua is left with a debt of more than three billion dollar. Besides this enormous debt, Albanisa has acted as a tool for Ortega to put friends and family into powerful positions. Critics claim that Albanisa helped Ortega to build his own political dynasty. The international community never paid close attention to the multi-billion oil company, but it would not harm if someone would keep an eye on it.
The right to know about Albanisa – April 14, 2016 - confidencial.com
Daniel Inc: How Nicaragua’s Ortega financed a political dynasty - May 5, 2018 - Univision.com
White House considers Nicaragua sanctions for Venezuela links – November 14, 2017 - mcclatchydc.com