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Central American University - UCA  
  Number 5 | Octubre 1981



Additional Comments By Xavier Gorostiaga

The above talk by Xabier Gorostiaga was given before the recently announced State of Emergency. In light of this State of Emergency, Fr. Gorostiaga agreed to make some additional comments which would cover some aspects of this emergency situation. The following is taken from those remarks.

Xabier Gorostiaga

There are many causes for the economic emergency in which we find ourselves. One of them is an external cause – the foreign exchange. We have imports on the order of $ 900 million this year and exports of $ 540 million. Also, the private sector stopped investing in 1975–76. Before that, the private sector invested 85% of the total investment. Now the public sector has to invest 85%, which is impossible since it only controls 20 – 25% of the material production. This sort of contradiction is hurting the government. There has been a decrease in the price of export goods, such as coffee and sugar, and an increase in the price of imports. The Central American market is in such a crisis that it is impossible to carry on normal trade relations. This country is unable to save at the moment. There is no surplus. There was $ 120–140 million in decapitalization in 1980–81, and much of it is done in ways which are very hard to control. These and other factors have resulted in a State of Emergency that is four–fold: economic, social, military and ecclesiastical.


If we have a boycott from the International Monetary fund, the World Bank, the Inter-American Development Band and/or the Central American Bank (where we obtain 60% of our external funds) we will have a severe financial problem. We also fear a boycott of our beef, sugar, bananas, etc. Venezuela is moving away from Nicaragua. This will be very important in the area of oil. That is why we are forced to move closer to Libya, to show the world that we will go to any country to preserve the revolution. We are trying to keep a diversified market without becoming members of the Socialist bloc, but the pressures may force us to move more in that direction.

We are trying to develop a planned, mixed economy. Before, we always operated under the “trickle down” economic premise; now we want a “trickle up” economy with the first cause to be the bottom 50% of the people.

There is a strong problem in production. For each $1 of production, we need up to 60 cents in raw material from outside the country. In the businesses that are nationalized, we have been losing money. Therefore we are going to consolidate, which will result in increased unemployment. The most critical emergency will be felt in Managua, where the unemployment rate will increase to about 25%, while in the country there will be a labor shortage. This points out the need to decentralize, to de-urbanize.

We are trying to save our exports by shifting some of our internal consumption practices. We are shifting from white to brown sugar; and from beef to pork, chicken and fish. These are difficult changes to make and they meet a lot of popular resistance. It requires considerable reeducation of the people.


Another critical area is the standard of living. Some 250 doctors and 400 engineers have left the country because of low salaries and political fears. This affects production and social services. We reduced inflation form 30% in 1979 to 27% but now it will climb again to 35% by the end of this year. Luxury goods have increased in price tremendously. Even popular durable goods like transistor radios and irons have increased over 300%. We are a country that has acquired the tastes of a developed country and again, there is a problem in changing the mentality of the people.

Housing is a problem that cannot be solved by traditional methods. One possible solution would be to lead the people to take over the vacant lands in a rational way, and have them build their own houses, with the government providing technical assistance, some of the materials, and services (water, lights, etc). In this way the resources of the country could be stretched to provide many more housing units.


The military emergency is a serious one. There are 100 ex-Guardia in training camps in Florida and Texas; 6000 more in Honduras; 3000 Miskitos who have crossed into Honduras. There are 50 Argentine advisors in Honduras and El Salvador and an equal number of Chileans. There has been a serious effort to recruit large numbers of Chicanos into the U.S. military. There is the added factor of the joint Honduran- U.S. military maneuvers on the Atlantic Coast of Honduras. Most people are expecting an intervention here, although we believe that a direct military intervention with U.S. troops is unlikely. The logical tactic is one of continued harassment from across the Honduras border and on the Atlantic Coast, especially during the harvest time. We are hoping to use the army to help in the harvests since we know we will have a shortage of labor; however, continued confrontations from the ex-Guardia could make this impossible.


In the ecclesiastical emergency, the Bishop of Managua, Mons. Obando y Bravo is a key figure. He has popularity with the people and can mobilize large numbers. The political opposition in the country has made Mons. Obando y Bravo a leading figure of the opposition since they themselves cannot mobilize the people. The pressure against the progressive sector of the church is in full swing.


Several laws were enacted because of this State of Emergency and some will be difficult to understand outside of Nicaragua. One example of this is the laws concerning the communications media. Under these laws, there has just been another closing for two days of La Prensa, I believe that it is the third or fourth. La Prensa has a very good history, using the name of Pedro Joaquín Chamorro and the role that La Prensa played during the Somoza time. All this historical background has created a very good name and popular image for La Prensa. There was a split in La Prensa about a year and a half ago. Those people from the old tradition of La Prensa moved to El Nuevo Diario and only the right wing remained in La Prensa, keeping the name. La Prensa is now a key point in the whole opposition. According to the Heritage Foundation and according to the document of Santa Clara, two of the think tanks behind Reagan, there are three key factors of the opposition: the hierarchy in the Church, La Prensa and the so-called Free Trade Unions. What La Prensa is trying to do is to create confusion. It is doing that very well and it is the best newspaper in the country, technically speaking. What it is doing is taking some facts and creating dramas out of the facts. In the last case, the manager of an enterprise that has been decapitalizing was presented in La Prensa as being persecuted by the Vice-Minister of Industry. This Vice-Minister was the former National Director of Revenue in the Ministry of Finance and, as such, was aware of the manager’s decapitalization practices. In this case, and the others, La Prensa twisted the facts to present confusion.

What are the means and the instruments in the hands of the government to stop that? It has no instruments. The only instrument is to close La Prensa for one or two days. Of course, La Prensa is using that as a sign of persecution and thus gets more international support and even more popularity among the opposition. If the government fines La Prensa for falsifying information, they will utilize that for a campaign to raise funds. It is an extremely difficult problem. The only other solution for the government would be to close La Prensa, and it does not want to do that. La Prensa is trying to force the government to take this step. La Prensa has the support of Obando, the support of some of the most influential international press organizations, and it is using this political power to destabilize and to confuse. My position is that the temporary closures do not solve the problem. The government will have to find another way of handling that issue. But if they close it completely the political costs will be great. It will create more problems than it will solve. It’s extremely difficult and La Prensa knows that, that they have bargaining power against the government.

Another issue is the strikes. I was and I am fully against this emergency measure. I think the government could have found a much more clever, more subtle, and more popular policy than to stop all strikes and all the land occupations. What was the reason that they consented to this decree? At that time, CAUS, the Communist Trade Union, was occupying Fabritex, the most important textile factory in the country. With the leftists, there was a problem. With the rightists, there was the problem of the Managua bus drivers who were refusing to use tickets to control the payment of the passengers. Without tickets, the drivers can do whatever they want with the money. The government had to take a very strong stand because of these two problems. There was also a kind of deterioration in the productivity of the majority of the working class and the government was prepared to clamp down on the private sector, on decapitalization, on any anti-economic measure, buy it also had to require discipline in the labor force. Otherwise it would be unable to implement the laws affecting the private sector. The law has not been well accepted by workers, but it is a way to demonstrate the difficult economic situation. The law is extremely difficult to explain internationally to popular movements and to democratic forces because it appears as a kind of totalitarian measure. And it is not. At the moment it was necessary to demand discipline in the working class and also to balance the strong position against the private sector.


Regarding the renegotiation of the last part of the national debt, it has, on the whole, been very positive. It was the most difficult part of the debt, the debt with private banks and a debt of the former private banks in Nicaragua. It was the most costly, the most risky. The conditions are not extremely good but they are acceptable. With this final part, we have negotiated the entire 1.6 billion and in international terms, we are in a good position; one which will enable us to carry on negotiations for more money and for new relations with transnational banks or international organizations. It improves the risk conditions of the country. The banks have this test on each country. Nicaragua appears as accomplishing all the formalities. Citibank was the toughest of all in these negotiations. The other banks, even the Japanese and the European banks, have been much more open to accept the Nicaraguan conditions. In this sense, it is also a political triumph.

In the economic emergency there are positive and hopeful signs. We are much more aware of the failures and of the possible solutions. A crisis helps to visualize exactly what is happening. Without a crisis, a revolution will not advance; it is necessary to break down the old way of doing things in order to begin to move forward.

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Additional Comments By Xavier Gorostiaga

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