Mar 20, 2016 | 13:00 GMT

6 mins read

In Nicaragua, Economics Will Be the Left's Downfall

Latin America Analyst, Stratfor
Reggie Thompson
Latin America Analyst, Stratfor
(INTI OCON/AFP/Getty Images)

Political change comes slowly to Nicaragua. Nearly 27 years ago, the country's civil war ended with a truce. That war, which pitted the Contra movement, supported by the United States, against the Soviet-backed government of Nicaragua, concluded with a settlement in April 1990 to hold presidential elections every five years. Decades later, that commitment to regular political transition has not appreciably altered the underlying drivers or changed the key actors in Nicaraguan politics.

The Sandinista National Liberation Front — which ruled from the 1979 revolution to 1991 — is again the dominant party. Ruled by President Daniel Ortega, Nicaragua is one of the last self-described leftist states in Latin America not facing an existential threat from shifting voter sentiment or economic turmoil. But Nicaragua's populist politics could be challenged in the next several years, given that Ortega is aging and assistance from Venezuela — the government's largest source of social spending — is slowly tapering. Oil shipments, which are a crucial part of that assistance, have already been reduced, and in the coming years, economic challenges will help the opposition make gains.

To understand how the Sandinistas came to hold such power in Nicaragua, it helps to know some modern Nicaraguan history. Democratic rule, in which power is frequently transferred from one party to another, is a relatively new concept in Nicaragua. Although national elections were held in the 19th century, Nicaragua's post-independence politics were largely characterized by violent overthrows of presidents and a decadeslong struggle between the country's major factions, including the Liberals and Conservatives. Because Nicaragua is located in the United States' near abroad, political violence occasionally drove Washington to intervene to preserve political stability in the country and to safeguard U.S. economic interests. Following conflict between the Liberals and Conservatives in 1926, Washington deployed several hundred Marines to Nicaragua, who occupied the country for nearly a decade until their departure in 1933.

Sandinista fighters prepare for a national guard attack in June 1979. The group started out as a guerrilla insurgency but eventually transformed into a political party, which rules the country today. (ARCHIVES UPI/AFP/Getty Images)

It is this intervention, and the reaction to it, that led to the rise of the Sandinistas. Augusto Sandino, for whom the Sandinistas named their party, was the main resistance leader against U.S. forces. After several years of guerrilla warfare against the U.S. Marines, Sandino was killed in an ambush by government forces, and Anastasio Somoza, a commander in the U.S.-backed Nicaraguan armed forces, became president. Somoza and his son ran the country unopposed until the 1970s, when the global rise of leftist movements spread to Nicaragua. Inspired and supported by leftist forces in the Soviet Union, China and Cuba, a small leftist militant organization calling itself the Sandinista National Liberation Front (FSLN) was formed in the 1960s and steadily began an insurgency, which by 1978 had spread across the country. The Somoza government finally toppled in July 1979, when the younger Somoza fled to the United States and later to Paraguay. The new FSLN government soon became hostile to the United States, inspiring a U.S.-funded insurgency known as the Contra war that lasted nearly 10 years. During that time, from 1984 to 1991, Daniel Ortega led the party and the country until a peace accord with the United States led to elections and a peaceful transition to a new government.

Despite the end of the conflict, the main parties that emerged from the 1979 revolution and the subsequent civil war continue to define Nicaraguan politics and will continue to do so through at least the next election cycle. When Nicaraguans head to the polls in November, they will likely be choosing between Ortega, an opposition front composed of dissident Sandinistas, former Liberal and Conservative party members, and even former Contras. A victory in November would grant Ortega a third consecutive term in power. Since the FSLN regained the presidency in 2006, it has clearly dominated politics without a strong rival, but its dominance may soon be threatened — not at the ballot box or by the relatively small anti-government insurgency but by financial concerns.

Nicaraguan President Daniel Ortega's Sandinista party emerged from the country's revolution, but future economic trouble threatens it. (MIGUEL ALVAREZ/AFP/Getty Images)

The FSLN owes some of its electoral success to the copious flows of Venezuelan assistance subsidizing public spending. The aid is crucial for Nicaragua, as it supports potential voters and subsidizes key services such as public transport. In 2014, $435 million of the country's $2.5 billion in budgeted income came from Venezuela. But that will soon change. Nicaragua is already receiving fewer loans from Venezuela, partly because Caracas is demanding more payment up front for oil shipments because of lower oil prices, and political and economic uncertainty in Venezuela raises concerns about how long it can provide any loans at all. As a small economy generating only $12 billion yearly in gross domestic product, Nicaragua simply lacks the domestic funds necessary to keep those subsidies in place without resorting to higher taxes. A heavier tax burden and the loss of subsidies would at the very least lead to more disgruntled voters, and higher taxes could cause the private sector, much of which backs Ortega and his party, to switch allegiances.

It is clear that Ortega is capable of winning one more term in power. But what comes after that term will depend on the pace at which Venezuelan assistance deteriorates and on whether the ruling elite supporting Ortega and his wife, Rosario Murillo, decide to remain political allies. This is crucial: The party's fragmentation, because of internal disagreements over economic policy and presidential succession or because of an electoral loss, would open up the country's fractious political scene to greater competition. This would reduce the FSLN's domestic power and potentially bring a more U.S.-friendly government to power in upcoming electoral cycles.

Now, more than 100 years after the first major U.S. intervention, 70 years after Sandino's death, and 35 years after the Sandinistas first came to power, Nicaragua is again facing the possibility of major political change. But this time it is the faltering economies across Latin America and the Caribbean, especially that of Venezuela, driving change, rather than a U.S. intervention or a domestic insurgency.

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