Wednesday, December 8, 2010

Wkileaks food: keeping a close watch on Nicaragua

Ortega's Faltering Economy 
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2. (SBU) In 2007, the Ortega Administration coasted on the 
achievements of the Bolanos government, but that ride is 
about to end. The government essentially adopted Bolanos' 
2007 and 2008 budgets, and used them as the basis for 
negotiating a new Poverty Reduction and Growth Facility 
Agreement with the IMF. Foreign investment remained stable 
in 2007 thanks to commitments made during the Bolanos years. 
Exports are up this year by 21% over 2007 levels. In most 
other respects, however, the Ortega government is not faring 
well. Growth expectations have fallen while inflation 
expectations have risen. In 2007, inflation reached 17% and 
annualized inflation is running at 22% for 2008, the second 
highest rate in Latin America. The lack of a strong policy 
response to rising oil and food prices worries independent 
economists, some of whom suspect that hidden foreign 
assistance from Hugo Chavez has created excess liquidity. 
Minimum wages rose 30% in the last year, but still do not 
cover the soaring cost of food and transportation. To quell 
demand and keep prices down, the government removed import 
tariffs on basic food items through December 2008, made 
documenting export shipments more difficult, and instructed 
the state-owned grain storage company to intervene in local 
markets. So far in 2008, the Agricultural Ministry has 
failed to deliver needed seeds to farmers in time for 
planting, although it has become aware of the urgency need to 
do so. More radical measures related to food supply may be 
coming, as President Ortega has just concluded a regional "food sovereignty" summit in Managua on May 7.

MANAGUA 00000573 002 OF 008 


(Thanks Ann)

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