The Best Revolution Money Can Buy

By Joel Hirst

"This time they're being more careful," said  an old friend of mine as we sat in the White House Pizzeria on a lazy, sunny Sunday afternoon in northern Nicaragua. "The times have changed, they can't be so radical." The large billboard hanging just outside, emblazoned with a portrait of a smiling President Daniel Ortega, seemed to emphasize this. "Socialism, Solidarity, Christianity" is the theme of Ortega's second Sandinista revolution. Gone are the days of feared military checkpoints brandishing the harsh red and black flag of the atheistic FSLN - the color of the new revolution is a pretty pink.

Nevertheless, since Ortega took office in 2007, dark clouds have appeared ominously on the horizon. He orchestrated a fraudulent municipal election in 2008. He has closed more than twenty radio stations and taken over several television stations. A new trinity of "national security laws" passed in December of 2010 threaten to extend partisan control over what had become a professional, credible and trustworthy army and police. Most importantly, he has manipulated the judiciary to allow him to seek re-election this year despite constitutional term limits. The FSLN party is increasingly active at the base, playing the usual electoral games to stilt this year's results in their favor. "We will do whatever it takes to not hand over power," said Tomas Borge, a Sandinista activist who directed the feared security forces in the 1980s.

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Yet despite these very obvious concerns, I was struck more by a different aspect of Ortega's revolution. I expected this revolution to smell of blood. Ortega's new socialist revolution instead smells of something else - money. "This is the hotel that Ortega bought," said my taxi driver as we drove by the Seminole in the center of Managua. "Along with this came several cattle ranches ... He paid $12 million for them. He also bought TV Channel 8, for eight million ..." and the list went on.

It seems that, far from the fiery revolutionary of the 1980s, a reincarnated Ortega is instead following the path of another Nicaraguan dictator - Anastasio Somoza. Daniel Ortega the "Caudillo" has become, arguably, the wealthiest man in the country.

The funding for Ortega's capitalist ventures has come from an unlikely source - President Hugo Chavez of Venezuela. Immediately upon assuming office in 2007, Ortega announced his intention to join the Bolivarian Alliance of the Americas (ALBA) - a Venezuela-sponsored ideological group of eight countries. As part of ALBA, Venezuelan oil conglomerate PDVSA sells gas to PETRONIC, Nicaragua's state owned petroleum company. The gas is sold at market rate in the PETRONIC gas stations, however Nicaragua only reimburses Venezuela for 50 percent of value of the gas.

The remaining 50 percent is funneled into a private business named ALBANISA (ALBA of Nicaragua, S.A.), which is controlled by Daniel Ortega. ALBANISA has come to include many companies, including electricity, transport, tourism and others. While visiting Somoto, in the north, I stumbled across an office for ALBALINISA, the ALBANISA agriculture company. This office sells Venezuelan fertilizer for 25 percent less than market value. Payment is made to the Venezuelan government in black beans and cattle - much of which comes from Ortega's own increasing landholdings. The ALBALINISA office itself was guarded by ALBA Security, a newly formed guard company employing former Nicaraguan soldiers.

Due to the lack of fiscal transparency, it is difficult to ascertain the extent of President Ortega's private wealth. However, according to official statistics Venezuela accounts for 40 percent of Foreign Direct Investment and will provide Ortega directly with an estimated $400,000,000 in 2011 (on top of a similar amount in 2010). Funding from Venezuela has totaled over one billion dollars in the last several years.

"The benefit of this funding," a university professor told me, "is that it does not go through the National Assembly where the parliamentarians can block it (...) from this money we get our monthly teacher bonuses, $25 a month which could disappear if President Ortega loses power." This stipend is part of the off-budget support that Ortega gives to almost 150,000 civil servants across the country.

"I received my cow and chickens," I was later told by the president of a local Citizen's Power Committee, a parallel governance structure of dubious legality run by Rosario Murillo, President Ortega's wife. "And they're bringing electricity right to my house. Other governments didn't do this, they let the local mayor manage things and we never saw any benefits. Through these committees we can hold the government accountable."

Across the board, the sentiment is that public services and outreach to the poorest has improved under the Ortega regime. It is unclear how much of ALBANISA's profits remain in Ortega's private bank accounts to fund his ongoing reach into Nicaragua's economy and how much are pumped into social programs - however the latter is enough to make an impact in the minds of the poor.

Nevertheless, Nicaraguans remain wary of their leaders. While Ortega retains a hard-line minority, less than 30 percent of the electorate voted for him in 2006. Perhaps with this in mind, his "pink" revolution has succeeded in providing very real benefits to a large number of Nicaraguans - and in true "Caudillo" fashion, he has tied this aid directly to himself. Meanwhile, the opposition continues to be tone-deaf and bereft of any real ideas. Given these realities, it might be tempting for the United States to take a back seat on the issue of Nicaragua's leadership - after all, there doesn't seem to be any real crisis here, right?

I would warn against this. The United States must continue to support a free and democratic Nicaragua, while continuing to insist upon open elections. Instead of timidity, let us act with resolution and courage of conviction before Ortega's pretty, pink revolution inevitably turns to a darker shade of red.

Joel D. Hirst is an International Affairs Fellow at the Council on Foreign Relations. You can reach him at jhirst@cfr.org, www.twitter.com/joelhirst and at www.joelhirst.com.

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