Contesting Everything,
Winning Nothing

Presidential candidate Violeta Chamorro surprised her Nicaraguan and U.S. allies, most observers and certainly the incumbent Sandinistas by winning the February 1990 election. Her victory set off a series of conflicts over basic issues of governance, economic policy and ideological transitions that have yet to be finally resolved.

Everything has been contested and, given the historical moment, everything was going to be contested. The conservative Chamorro succeeded a quasi-socialist government that had crafted enormous structural changes in the economy. On election day, the country was at war, with the U.S. financed National Resistance troops, or contras, vowing that an electoral victory of FSLN (Sandinista National Liberation Front) candidate Daniel Ortega could not be free and fair. Many members of Chamorro’s unwieldy, fractious 14-party UNO (Union Nacional Opositora) coalition had recently been contra officials, and the Chamorro campaign was heavily financed by the U.S. The Sandinistas had overthrown, in 1979, the two generation Somoza family dictatorship that had made a burlesque of democratic procedures and institution building. Governing under a liberal constitution adopted in 1987, the wartime Sandinista government had a very strong executive, but weak legislature and court systems. It was opposed by small, ever dividing and weak political parties, some of which had abstained from the 1984 elections.

As Chamorro took office the economy was prostrate. Ten years earlier, surveying the economic damage of the war which defeated the Somoza dictatorship, UN analysts predicted that under the best of circumstances Nicaragua’s economy would not get back to pre-war conditions (which were hardly robust) for a decade. Nicaragua got the worst instead: ten years of war, tempest (historic rains, years of drought and near drought, hurricane, tidal wave), and hunger. Only pestilence was missing from this Old Testament script, and then the cholera and dengue fever epidemics came along.

Despite the much praised 1990 electoral process and Ortega’s gracious concession, political conditions, like economic conditions were worse than in 1980. The ten year war, extreme polarization, a halting peace process, rural areas where residents had fought on both sides of the war, and a palpable desire for revenge, contrasted sharply with 1980 when there was no war, lingering political unity in the aftermath of the struggle against Somoza, and considerable hope for the post Somoza era.

Our title, then, does not reflect a view that a bickering political class is chiefly responsible for the current difficult straits. Nor do we believe that had only there been sweet harmony these past five years, Nicaragua would have emerged from its morass with a healthy economy and polity. Rather, Chamorro, her allies and her opponents faced difficult, contentious conditions. Major conflict was inevitable.

But our analysis is not fatalistic, simply that history has been unkind. In the last five years, political actors and organized groups have made choices, and those choices have made a difference. The level of conflict, the number of bargains which have not been kept, the palpable corruption, the prolonged confrontations over ideology which seem at heart over quotas of power, and the extensive role played by some hardly neutral foreign players have left Nicaraguans (according to polls) highly critical of the political process and economic conditions and those who shape them. While the 1990 election was hotly contested, it was enthusiastic. Voters turned out in large, committed numbers. Now there is cynicism, despair and indifference. Some would argue that the economy is on a better footing now than in 1990, but there has been virtually no economic growth, and for a significant majority of Nicaraguans economic conditions are either no better, or worse. With different choices, results could have been more positive for the majority. And with more consensus and economic policies which fully take into account the material and human damage suffered by Nicaragua results could be more positive in the future.

What has been contested? The most fundamental questions a polity encounters. Who shall control the means to make war? Should the new government recognize the laws and Constitution of its enemies? What is the proper scope of governmental action in the economy? In a severely war damaged and traditionally impoverished economy what shall be the best development policy? How shall those most damaged by the war be helped; how shall reconciliation be achieved? How shall power be shared between the branches of government? How shall many thousands of ownership disputes be resolved? What role in decisions should foreign financial institutions play?

Nicaragua’s contests have been so intense and difficult because all of the questions have been contested during this historically short time and because debate parameters have been very wide and differences fundamental.

The breadth of the questions can be compared to countries in the former Soviet Bloc at the end of the cold war, but Nicaragua’s context is still different and more complex. Unlike the former Soviet Union, Nicaragua was painfully emerging from a decade or more of war. The Sandinistas had been in power just over a decade, not 75 years; those it had defeated were still around, still angry, and were poised to gain political and economic pay backs. The political and economic model that was defeated, Sandinismo, had its vagaries and was itself under change, but organized Sandinista groups were prepared to defend their gains and Sandinismo. Finally, Nicaragua is a weak nation with few chips to play against international powers.

Following the 1990 elections, all Nicaraguan factions were in a weak, or weakened position, which led to a more desperate defense of positions. The Chamorro political victory rested on newly won votes, not an organized base, much less a solid party structure. It was surrounded by international creditors and an anti-Sandinista U.S. on the one side, and the Sandinistas on the other. The FSLN controlled the military and the police, had a solid, though minority bloc of 39 in the 92 member Assembly, and a large, veteran organized base. But the Sandinistas, shocked by their defeat, came to realize that their base was not as organized, efficient or loyal as they had thought. They had lost their international partners, had only minimal financial means, and faced an opposition a portion of which was vengeful. Each UNO group was weak with no organized base, and distrustful of the others. Trade unions, farm workers on state farms, and organized small and medium farmers faced a government bent on privatization and tight credit. The business class was divided. The legislature had been weak and was about to be badly divided. The courts had been passive. With major questions at issue, and weakened desperate players, there was no solid institutional means for resolving conflict. There was, on the other hand, an abundance of assault rifles.

In this report we review the major contests which have embroiled the nation. While in some there is evidence of substantial progress leading toward consensus, in others, particularly economic contests, conflict and lack of reconciliation remain. To the extent that economic conflict has been less severe recently, it is due to the exhaustion or disarticulation of contestants on one side, rather than the true resolution of the issue.

In some of the issue areas reviewed, there was a turning point, when conflict was about to go over the edge, but then a framework for consensus emerged. That is not true in others however, particularly in the case of those uprooted by war whose aspirations for a better future have been thwarted. And where a framework for consensus has been erected, it is everywhere fragile, and there is no clear direction beyond the elections scheduled for October 20, 1996 next year. The candidate who has consistently led in the polls, anti-Sandinista Arnoldo Alemán, has not been a part of the various negotiating processes which have led to a measure of consensus.

The Chamorro administration’s chief decision maker Antonio Lacayo, son-in-law of the President, is a neoliberal. This philosophy was widely shared in the electoral coalition, and, more important, by international donors and lenders.

Application of the neoliberal policies with international support that in comparative terms has been ample has aroused contentious responses ranging from political threats, to demonstrations, to armed violence, to cries of favoritism, and, more recently, even to grumblings from business sectors. The demonstrators have protested massive layoffs, a reduced standard of living, and reduced or more expensive state services.

Neoliberal economic policies have thus far failed to establish an expanding economy of sufficient strength to raise all boats. In perhaps the government’s most signal accomplishment, hyperinflation was halted in 1991 and inflation has been modest since then. But the economy has hardly grown; there has been little new investment; poverty is extensive and deep with indications that it is worse than in 1990, unemployment rates are very high and underemployment rates still higher. Optimists see signs of modest growth and hope that the economy is about to turn the corner.

Supporters of neoliberal policies blame the severe mess the economy was in on Sandinista government mismanagement, and argue that subsequent large or violent confrontations created a climate of insecurity that is anathema to investors. Others blame the war and its perpetrators and claim the neoliberal model has been vicious. Critics claim economic policies led to the very violence and chaos which its advocates claim hinder its success.

International funding institutions, multilateral and bilateral, continue to promote neoliberal solutions, though some have tried to moderate the model. Protests have abated in number, violence and intensity in recent years, but overall there is less, rather than more, consensus over what program can work in the Nicaraguan context.

Few publicly predicted a Sandinista loss in 1990, and no one predicted that within a year or so the new President would have a tactical, if not strategic, working alliance with at least a core of top level Sandinistas, including the Sandinista bench in the Assembly. Though they lost the election, the Sandinistas have remained the dominant issue cutting across all lines of political debate.

Among those at the right end of the UNO coalition, the key political indicator for judging the reliability of other political actors has not been their economic philosophy or approach to issues of private property, but the extent, militancy and consistency of their opposition to the Sandinistas. Presidential candidate Chamorro and Antonio Lacayo were suspect from the beginning because she had been in an early Sandinista government and he had business negotiations with the Sandinista government. The key issue among the new governing coalition became the extent to which the government was going to roll back Sandinista political power and economic changes.

For those on the right, the answers were consistently bad. President Chamorro kept Humberto Ortega as the head of the military, and did not sweep away the Sandinista agrarian reform. With the loss of UNO support, Chamorro and a few (former) UNO deputies gained a majority in the Assembly by dealing with the Sandinista bench and its 39 votes. The UNO coalition claimed to have won the election for President Chamorro and been betrayed; Antonio Lacayo claimed his mother-in-law had swept the unknown UNO parties into office.

U.S. policy contributed to polarization in Nicaragua because for at least two years the U.S. administration, and for all five years Republicans in the Congress, adopted an anti-Sandinista attitude rather similar to that of the UNO right.

Institutional incoherence and fragile governance by ad hoc policy making has been the result. The President, whose electoral coalition had won 51 Assembly seats, could rarely muster a strong majority and relied increasingly upon legislation by executive decree. The National Assembly at times could not muster a quorum, and for over a year was boycotted by an UNO minority which did not recognize the legality of Assembly proceedings. Judicial branch rulings often had no legitimacy with the UNO right because of judicial connections with the Sandinistas or Lacayo. Then, in the last two years, a crisis between the branches of government over proposed Constitutional amendments further confused the picture. For six months this year, different branches of government followed different Constitutions and disagreed over the size and composition of the Supreme Court. As described below, however, this Constitutional crisis finally led to increased consensus.

These institutional battles have been played out among political elites. But Nicaragua was marked during the Sandinista years by formation of large grass roots groups almost all of them organized and led by Sandinistas. Though the degree of autonomy and political role of these groups during the Sandinista years has been the subject of debate, there is no doubt that they changed the political landscape. The Chamorro administration, and even Sandinista political elites, could hardly ignore these organizations amid the wrenching economic changes and institutional struggles. The last five years have been filled with crises for these groups brought on by the electoral loss and hostile relations with the state, layoffs and tight credit, privatization and, at least in rural areas, the search for reconciliation with former enemies.

When Violeta Chamorro won, the rebel contra army, thought that it had won too, and questions of which army would be the army of the new government quickly came to the fore. Critics of the Sandinistas had complained for years that the military was a Sandinista Party army, not of the nation’s army, and pointed to the persistent Sandinista refusal to change the name of the military from Popular Sandinista Army (Ejército Popular Sandinista, EPS) to one reflecting the nation and not the party.

To the Sandinistas, though they had lost the election, militarily they had won the war, and they were not about to hand over military power to a government which would replace them with contras. To them, UNO’s participation in the election signified its acceptance of the legality and constitutionality of the Sandinista government and its institutions. The incoming Chamorro government’s willingness to retain the military and General Humberto Ortega as its chief, and to demobilize the RN, ruptured UNO, without putting the military question to rest. Disgruntled UNO members, Senator Helms and the U.S. government, and former contra combatants continued to press for the removal of leading Sandinista Humberto Ortega as head of the military, to end any aspects of military autonomy and/or to simply eliminate the military altogether. Similar pressures were brought to bear to end Sandinista control of the national police.

The military question has been, after five years, largely resolved with the drafting and passage of a law on the military, with changes in the police leadership and with the 1995 resignation of Humberto Ortega under the terms of the new military law.

An extensive Sandinista agrarian reform took properties of the Somoza family and close collaborators, and, later, properties that were being decapitalized or underutilized. Compensation was, in the view of the confiscados, wholly inadequate. Those properties were transferred to the state sector, or transformed into private, peasant-held cooperatives. Substantial numbers of urban businesses and residential properties also changed hands.

Chamorro backers wanted their properties back. The new government promised property to demobilizing RN troops and then to some EPS officers being demobilized. Beneficiaries of the agrarian reform and workers on state farms did not want to lose their farms. The government has not been able to resolve these conflicting claims or meet its promises. A significant minority of former owners have gotten their property back through privatization and some workers have been able to get a share of businesses being privatized. Other former owners have received bonds as compensation. Agrarian reform beneficiaries, and others, have unclear property titles. Insecurity increased with a wave of land invasions. Finally, the workings of the neoliberal model amidst these crises has resulted in distress sales by agrarian reform beneficiaries to the extent that analysts speak of a reconcentration of land. Though violent land invasions have abated, and there are both titling and compensation processes in the works, great uncertainty and unhappiness remains over legal ownership, slow and corrupt bureaucratic procedures, inadequate compensation, extensive landlessness and lack of credit, and rural violence and crime.

Though the war inflicted severe damage on the economy, its economic and social effects were most severe on those who were wounded, other combatants, refugees who fled over the border, those who were forcibly displaced, and those in rural areas who were caught in the middle between two warring armies. The great majority of Nicaraguans lost friends and loved ones in the combat. Of these groups, special programs have been designed primarily for demobilized combatants, with some additional immediate help to returning refugees. The large displaced population has been largely ignored.

The government, by its own admission, has not accorded these programs sufficient attention and resources. Initially it failed to fulfill promises to those groups targeted for compensatory "reinsertion" programs. The new government was ill prepared to design and promote programs for international funding. There have been policy debates with some international agencies wanting to target not a particular group of ex combatants, but rather entire war-torn communities. The government’s priorities have been elsewhere, and the agencies charged with programs for the war affected have gone through a five year period marked first by major corruption and then by wholesale changes of structure and plans.

This inattention and lack of resources was a primary cause of the violence which erupted soon after demobilization. But given macroeconomic policies and conditions, reinsertion programs for ex-combatants and the war affected, even with better funded programs, would have had difficulty making an impact in an economy with a 50% under and unemployment rate.

One can find in the pages of this report evidence of progress toward reconciliation among former war enemies at the grassroots. The reconciliation is often leavened by a sense on each side of having been betrayed, misled or manipulated by former leaders. As the former leaders of the ex-combatants, in no small part, remain within the upper levels of Nicaragua’s political class, this lack of confidence is another warning sign. But the examples of reconciliation are warming and should perhaps serve as a model to elites in the political class.

We report also progress toward consensus within the political class in various issue areas. But in reviewing the events of the past five years with multiple crises and innumerable bargaining sessions, one can also get the sense that, a deal is never a lasting deal, merely a vehicle to stave off crisis. Making deals only to break them or, sometimes in the case of COSEP, the leading business association, not negotiating at all, can hardly build political confidence or healthy economic conditions.

And, in turn, it has been hard to make lasting deals because resources have been in short supply. Very significant levels of international aid have flowed to Nicaragua, relative to other countries, but, given the historic needs of the country and the war damages, these have not been yet been adequate. The great bulk of these funds have been earmarked for stabilizing the currency by reducing international payment imbalances. These funds have been contingent on Nicaragua accepting the hard bargaining conditions of the World Bank and IMF. We do not here debate the worth of these general recipes. We argue in the Conclusion, that applying the model without fully taking into account Nicaragua’s war time and post war economic social and economic upheavals, providing relatively few funds for the uprooted and demobilized combatants, and tightening credit with no provisions for helping small and medium producers have resulted in, quite apart from the social pain that comes along with the neoliberal bargain’s "strong medicine", unstable conditions of virtually every stripe that have impeded investment.

ECONOMIC RESTRUCTURING

Despite its campaign emphasis on peace and reconciliation, and its initial efforts to reach an accord with the Sandinistas over the transition of government and control of the military, the Chamorro administration opened with highly aggressive moves to return confiscated property and to stabilize the currency. The latter effort was dubbed Plan Mayorga, after Finance Minister Francisco Mayorga who had boasted during the campaign that the inflation problem could be cleared up in 100 days. One hundred days later, the protests against implementation of the plan were so broad and violent that the country seemed on the brink of another war, this time in the streets of Managua.

The Plan included replacement of the cordoba currency with a new Gold Cordoba, pegged to the dollar and to be backed to the hilt by the government, a devaluation of over 100% in May without compensatory salary increases, broad scale government layoffs, increased fees for public utilities charged in the new currency even though the old, devalued currency continued to be used to pay salaries, and executive decrees freeing the government from civil service and union contract obligations. Understandably, Sandinista unions, quite apart from the economic hardship visited upon their members, saw in Plan Mayorga an effort to break them. They launched protests which rapidly spread.

By the end of the year, inflation had risen to 13,000% (though this was in part due to last few months of the Sandinista government), Mayorga was no longer Minister, and the government had negotiated with the unions and the opposition in a Concertación agreement calling for consultation, alleviating some of the layoff plans, renewing its campaign pledge not to take lands away from poor beneficiaries of agrarian reform and, in general attempting to dampen the crisis. Many sectors of UNO objected that Lacayo had caved in to the Sandinistas, and that the Sandinista police and military had been insufficiently aggressive in controlling the protests. Calls for Lacayo’s removal began.

In March 1991, Lacayo announced a second major devaluation to shore up the collapsing Gold Cordoba. Though quantitatively greater, it was accompanied by negotiations with unions, early, though not fully compensatory, salary adjustments, and some social compensation programs — all designed to dampen protest. Though the recessionary effects were and continue to be severe, many point toward this as the leading achievement of the Chamorro administration. Inflation has been moderate; it descended from over 13,000% in 1990 to 866% in 1991, to 3.5%, 19.5%, and 12.4% in each of the subsequent three years. However, large international inflows have made this possible, and they will not be permanent.

The Sandinista’s expansion of the government and its role in the economy has been reversed. Some 30,000 public sector non military jobs were lost through 1994 amounting to a reduction by about one/third in the public sector since 1988. Trade policy has been liberalized with tariff protection reduced, substantially damaging small producers and reducing incentives to invest in the already economically distressed and disadvantaged economy. Lacayo has directed a large scale sell off of state owned businesses. The government appears to have gained little, or no, net income or assets from these sales despite the fact that these businesses (however run down or damaged by the war) used to amount to 30% of GDP. (See "The Property Tangle," below.)

The reasons for this lack of progress on many fronts have been hotly debated. Defenders of the government point to the disaster they inherited and the 12% drop in GNP as recently as 1988. Many analysts point to the severe political instability, armed actions, and insecurity of ownership. Critics of the government argue that the instability is a result of the harsh neoliberal policies suffered by an already destitute, war weary population. Virtually all sectors point toward the need for social compensation programs, but programs which have appeared are very small in dollar terms or job creation potential in comparison to the universe of needs.

NICARAGUA’S POLITICAL TRANSITION:
From Crisis to Institutional Reform

On september 7, 1995 Antonio Lacayo resigned his job as Minister of the Presidency. The Chamorro administration’s chief decision-maker announced he would devote full time to forging the "Proyecto Nacional", the government’s new political party. Asked if he would run for president, Lacayo replied "if the National Project primary next March decides that Antonio Lacayo is the candidate, I will be the candidate." Lacayo’s preparations to campaign clash frontally with a provision of a recent constitutional reform barring presidential bids by close relatives of an incumbent president.

This and other recent events demonstrate that, despite consensual developments leading to substantial constitutional reform earlier this year, Nicaragua’s executive and legislative branches, and larger political forces, remain locked in combat over the rules of the political game.

For example, on September 6, the National Assembly passed a law prohibiting law suits that would claim that newly reformed sections of the Constitution were themselves in violation of the Constitution. But two weeks earlier, 23 high officials of the Chamorro government argued to the Supreme Court against a new constitutional clause requiring them to resign a year early if they wish to run for legislative office.

At some remove, however, parts of the political class have demonstrated a capacity for innovation leading to positive formulas for resolving political and institutional impasses. But progress is by no means sufficient to allay fears and cynicism reflected in the aforementioned voluminous polls. They show majorities who profess that Nicaragua is a more democratic country than in 1990, but that democracy is not delivering the stability or prosperity that its citizens were promised.

The 14 party UNO coalition supporting Violeta Chamorro lacked a stable center and was torn from the beginning by a struggle between Antonio Lacayo and vice-presidential candidate Virgilio Godoy. Lines of cleavage deepened when news of her coming appointments made clear that technocrats with economic and international experience, rather than UNO political stalwarts, would receive top posts.

Though lacking organized support, Mrs. Chamorro and her team entered office with a supremely ambitious agenda. They were determined to bring peace to a war-torn country and effectuate a deep restructuring of the economic system, a partial return of confiscated properties to former owners, and an overhaul of education, all without departing from a formal democratic framework. As her administration opened, the gap between the government’s goals and its base of political resources loomed very large. Her government nevertheless moved rapidly to secure its first objective, the demobilization of the 22,000 members of the Nicaraguan Resistance or contras in June, 1990.

As shown by this report’s sections on the economy, property, and those most damaged by the war, contra demobilization has not spared the country serious trouble. Class based property conflicts, and struggles over distributing the costs and benefits of the wrenching stabilization and adjustment measures pitting unions against a government determined to slash public spending, slough off costly functions and privatize have dominated the political scene.

Processing conflicts of the magnitude of those facing postwar Nicaragua would test the mettle of any democratic system of government. Nicaragua’s has nearly been overwhelmed. Three factors are at play here: the system’s basic underdevelopment, the questioning of its legitimacy by much of the political spectrum, and the dual power situation emanating from the election.

The 1987 Sandinista constitution was basically liberal, enshrining the ideas of individual rights and a separation of powers in a formally democratic system. Before 1990, however, the country had not developed relevant experience with the interplay of liberal-democratic institutions. Instead, reigning practice was expressed in executive dominance, legislative inferiority, a lack of judicial independence, and the absence of controls over the management of the public wealth.

Institutional weaknesses have been exacerbated by the de facto situation of dual power emanating from the election. The 1990 election was fought under the Sandinista constitution. Sandinista forces thus emerged retaining control over the army and police and with important quotas of power in the courts and the media, along with enough seats in the National Assembly (39 of 92) to block important reforms. The incoming Chamorro administration quickly found itself forced to negotiate significant aspects of its program with the Sandinista opposition if it wanted to see its overall project stick.

Nicaragua’s political transition has evolved in two broad phases. In the first phase, the Chamorro government, the Sandinistas, the political parties of UNO, the socio-economic actors, the military, the IFIs and the U.S. fought over the above mentioned transition issues without the benefit of a stable institutional framework. The result was some progress in resolving short term economic and social conflicts. But dissensus over the rules of the game deepened. By the end of this period, in September, 1993, two competing proposals for institutional change had emerged, one promoting reform of the Sandinistas’ 1987 constitution, the other demanding a constituent assembly to draft an entirely new national charter.

The second phase (September 1993 – September 1995) has witnessed the victory of the reform option and a struggle over the content of constitutional reform as a way out of Nicaragua’s political crisis.

By October, the parties resorted to an informal bargaining mechanism ("Concertación") to hammer out what was supposed to have been a consensual framework for subsequent policy. But when that framework proved incompatible with the strictures of the IMF, the government ignored the deal and used its executive powers to negotiate economic policy measures with international financial institutions. Sandinista groups promptly accused the government of reneging, and labor violence recommenced. The government then prevailed over the unions, after making some concessions with its March, 1991 stabilization package.

This crisis displays a pattern. First, existing formal institutions were inadequate to resolve conflict. Ad hoc mechanisms invented on the spur of the moment also failed, although they contained conflict within certain bounds. Both government institutions and ad hoc concertaciones ended up delegitimated in the eyes of at least one of the parties. Second, the government resorted to its "executive prerogatives", enshrined in the strongly presidentialist Sandinista constitution, to make decisions that some party again deemed unacceptable. In response, the aggrieved party resorted to coercion, either in the form of direct violence or by marshalling foreign, extra-system pressures to make its will prevail. But the failed deal generated more conflict.

This pattern has been recurrent. For example, in the struggle over property, dealt with in detail below, the Chamorro government prevailed over former property holders by engineering a crucial ruling from a pliant Supreme Court, and by cobbling together a coalition in the National Assembly composed of Sandinistas and "centrist" deputies whose loyalties, rightist opponents charged, had been bought. The UNO right came away from the fracas disillusioned with the legislature and court system. In retaliation, the former owners lobbied U.S. Senator Jesse Helms to cut aid funds to Nicaragua in a successful effort to exert pressure on the Chamorro government to deal with their claims. Feeling betrayed by agreements struck with the executive, the contras negotiated staring down the barrel of a gun, and also resorted to pressures from political powers in the U.S. These dynamics illustrate an institutional system dysfunctional under the stress of major conflict, and a vulnerability to interference from foreign parties, the latter a traditional and much played political card.

Key tactics allowed the government to prevail over its opponents at crucial junctures. It strengthened its resource base by hewing closely to 1990s neoliberal economic orthodoxy, maintaining the backing of foreign donors and financial institutions. Though it could not quell strikes by force, the government found that through control over the public purse it could outlast the Sandinista unions, whose members’ will power was exhausted in repeated negotiations with authorities who appeared to give in to their demands and then refused to pay up.

Second, it wove alliances and struck compromises with key opponents in order to preserve room for political maneuver. Its most crucial alliance has been with the Sandinista army, whose historic chief, General Humberto Ortega, was allowed to stay on in his job so that the government could exert some degree of control over the behavior of other Sandinistas (and later over the rearmados). The administration also came to terms with the FSLN and Sandinista interest groups over issues such as property and privatization, university autonomy, and power sharing in the Supreme Court, after playing them off against former owners.

Third, the government has used foreign pressures to extract compromises from other power centers. When U.S. Secretary of State James Baker demanded in January, 1992 that "security and stability" in Nicaragua had to increase—and backed his demand by suspending assistance—the Chamorro administration used the pressure as a lever to fire police chief Vivas. A year later, it deflected similar U.S. pressures for greater control of the military toward Humberto Ortega, forcing a negotiation which eventually induced the general’s resignation.

In the successes achieved by the government in this early stage, the political acumen of chief minister Antonio Lacayo, who from the outset displayed unsuspected skill at political maneuver, stood out. In a juggling act initially regarded by many observers as masterly, Lacayo managed supremely well at playing off and deepening divisions among his adversaries.

In so doing he made liberal use of the extensive prerogatives granted to Nicaragua’s presidency under the 1987 Sandinista constitution. The Chamorro government drew up its early economic and privatization policies in secret, without any legislative input. In the opinion of many adversaries, Lacayo has injected elements of corruption to weaken the Assembly and the Supreme Court.

Other institutions fared little better. Unable to resolve basic political disputes, the National Assembly became the scene of frantic maneuvers for control. When a Center Group-Sandinista alliance gained a majority in January, 1993, most UNO deputies began a year-long walkout, alleging they had been illegally deprived of control. The Supreme Court languished on many constitutional challenges put before it, while rulings on others reinforced a perception of submission to the executive’s will. In the face of allegations of its own official corruption, the government turned out the watchdog, the Comptroller General, in January, 1993.

Though the government generally won out, its opponents refused to accept defeat. A result was continued resort to violence. Postwar Nicaragua’s wave of instability crested in the third quarter of 1993 with three major incidents. In July, rearmed Sandinista officers demanding attention to their economic grievances seized the northern city of Estelí, setting off a bloodbath as the Sandinista Army retaliated, retaking the town. A month later, back-to-back kidnappings began when rearmed contras captured a high level government delegation with figures ranging across the political spectrum. In retaliation former Sandinista army officers seized leading rightists. In September, a violent strike by transport workers in Managua backed by FSLN leader Daniel Ortega left two dead, including a popular police commandant, and the FSLN itself on the road to schism.

Added to this, the alienated UNO right called for a constituyente — a new constitutional assembly to rewrite the nation’s Magna Carta. It quickly became evident that they intended a rupture of the system and the ouster of the Chamorro government.

This thrust from the right, combined with the violence and three years of ad hoc deal making and deal breaking did not cause the system to break down. Instead, it sparked efforts to find solutions to basic problems. At the heart of these efforts was a proposal for partial constitutional change that emerged as an alternative to the more radical idea of a constituyente.

A sector of the FSLN based in the National Assembly and loyal to former vice-president Sergio Ramirez took the lead in proposing partial constitutional reform. The shift in strategy by the Sandinistas at this juncture was crucial, and is a noteworthy change in light of the reputation the FSLN had by then acquired of being involved in an illicit "co-government" with Lacayo, as well as its tendency to regard the 1987 constitution as sacrosanct.

Their motive was to reshape the balance of executive-legislative power so as to exert influence over policy, and perhaps to diminish presidential power after the 1996 election. The FSLN had benefited in deals with Lacayo over property, but returns diminished as titling was slow and credits were not available. Their response was to propose a shift in powers to the Assembly, in order to be able to exert at least minimal leverage over an economic policy decided in secret between the government and the IFIs.

A small group of Sandinista leaders who later became the nucleus of the Sandinista Renewal Movement (MRS) wanted constitutional reform as a way to avoid crises, and to fortify Nicaragua’s shaky institutions. This, and the appeal of cutting down Lacayo’s power, attracted some UNO legislators to the reform coalition. In addition, in the aftermath of the violent transport strike, centrist Sandinista leaders were increasingly at odds with the FSLN elements pushing for militant street actions, and Daniel Ortega, burned by criticisms from trade union rank and file that the Sandinistas had been too close to the Chamorro government’s economic policies, was increasingly drawn toward the more militant wing of the party.

The reformist Sandinistas were soon joined by UNO moderates not tied to Lacayo led by Christian Democrat Luis Humberto Guzmán and Conservative Miriam Arguello, who deserted the rightist coalition demanding a constituyente. The reform coalition scored a relatively quick victory in the Assembly which undermined the UNO boycott and permitted election of a new leadership dominated by the reformers. This effectively killed the call for a Constituent Assembly. After extended bargaining in 1994, by the time the reforms came up for an initial vote, a coalition embracing 70 out of 92 Assembly deputies had been forged to pass them.

The content of the reform package was bound up with the political interests of party factions and leaders in ways that diminished consensus. While fully justified given Nicaragua’s tradition of corrupt and nepotistic rule, prohibitions on political candidacies by close relatives of the president were clearly directed at squelching a presidential bid by Lacayo, and opening up space for centrist candidates, such as Ramirez. An Assembly seeking more Constitutional powers for itself, however justifiable the changes, is not going to be seen by all as statesmanlike. Lack of consensus led to crisis.

The reforms were ratified by the Assembly, first in October, 1994 and again in February, 1995, by the required constitutional margin of 60% of total deputies. But President Chamorro refused to promulgate them, alleging procedural irregularities. Assembly President Guzmán then had the reforms published. For months, the President recognized the 1987 constitution as still valid while the Assembly recognized the reformed version.

The Nicaraguan Supreme Court was quickly drawn into the battle. On April 6, the Assembly elected six new justices to fill three vacancies and in accord with a constitutional amendment expanding the number of magistrates from nine to twelve. However, the existing justices refused to accept their new colleagues. In May, the rump court issued a ruling striking down the Assembly’s promulgation of the reforms. The legislature refused to recognize this ruling, on the grounds that the court was not legally constituted to act.

The decisive element in resolving the crisis was a shift in position adopted, privately and in public, by segments of the international community that had supported the Chamorro government for five years through thick and thin. These include important bilateral donors (in particular the U.S. and the Nordic countries), and at least one key multilateral institution in which U.S. influence is paramount, who strongly signalled the need for institutional agreement and reform, and in general the need for stricter controls over the use of foreign assistance. Facing the need to go to Paris June 19 to secure fresh funding commitments from donors for the remainder of its term, the Chamorro government decided it could not afford to leave Managua without an agreement in hand.

The current juxtaposition of fragile institutional consensus and mass political apathy suggests that Nicaragua’s democratic transition will be not only a long-drawn-out affair, but one with many pitfalls. For democratic construction to continue the newly elected government must not tear down what has just been achieved. Once elected, the new government will have to overcome public indifference.

CONTROL OF THE MILITARY

For many years critics of the Sandinistas complained that the military was not that of the nation, but of the Sandinista political party. They pointed to the military’s name — the Popular Sandinista Army (Ejército Popular Sandinista) and the Sandinista’s refusal to rename it the Nicaraguan Army. Fervent backers of the contra army, the National Resistance (RN) hoped that it would replace the "Sandinista party’s army," or that the new government would clean out the Sandinista officer corps. When the newly elected President announced that she would be her own Minister of Defense, but that Humberto Ortega would remain head of the military, rightist members or UNO complained loudly and two of her cabinet nominees refused to serve.

As government promises to the former combatants of the RN failed to materialize (details in sections that follow), protests by former contras for land and benefits began to include calls for the firing of General Ortega and, soon thereafter, for the firing of Minister of the Presidency Antonio Lacayo as well. That similar calls for Ortega’s ouster, as well as that of René Vivas, were coming from high level sectors of UNO, and from Senator Helms and other Republicans in Congress, led to Sandinista beliefs of an orchestrated campaign backed by a military arm to stamp out the Sandinistas — the continuation of the war goals of the Reagan administration. To the Sandinistas this "revanchist" movement gave little recognition to the Constitutional basis of the elections or the transition accords which, in their view, called upon the government to respect the military as a professional, government institution.

The UNO Assembly bench was hardly cohesive; the Sandinista bench, until 1995, was. The U.S. faced the choice of abandoning the candidate it had supported in the election, while the rest of UNO had no national figures and the RN was in the process of demobilizing.

The RN demobilization agreement called for large scale reduction of the military. The EPS released from service more than half its 96,600 troops by July, 1990, weeks after Chamorro’s inauguration. In November, the first of three rounds of dismissals of EPS officers began and by the end of the third round over 10,000 had been dismissed in acts which left lasting political scars between many of those dismissed and their superiors, despite severance packages of widely varying sizes for most of them. (These had an average of less than $3500 and 6 hectares of land.) With an eye to professionalizing the army, among the first officers to go were those with the most combat experience, but who had fewer skills necessary in a much smaller peacetime army.

Unlike the army of El Salvador during its peace process, Ortega and the EPS were kept busy dealing with multiple armed actions that continued due to the lack of compliance of the government toward the demobilized, combined with the severe economic distress in the country and the reduced capacity of the army and police to deal with armed insurgents.

In January, 1992 General Ortega confounded his critics and infuriated many of his supporters when he bestowed upon the U.S. military attache, Col. Dennis Quinn, Nicaragua’s highest military order, named after his martyred brother Camilo. A firestorm of criticism erupted from Sandinista supporters outside Nicaragua, from veterans, including some who handed their medals back in protest, and even from members of the FSLN National Directorate. The army was marching toward a status of independence from the FSLN.

Later, in July 1993, the EPS attacked an armed incursion by former EPS combatants into the northern city of Estelí, quickly defeating it and leaving behind a still debated number of dead among the insurgents (estimates range from 12 to 54). By 1993, the government had confronted many dozens of armed actions by former contras and EPS, most calling for economic benefits and, in most cases, though not all, the confrontation was ended by negotiations. One analysis of why the army took a hard line in the Estelí encounter was that General Ortega, at a time when a new military law would be coming up for review, wanted to demonstrate to the U.S. and UNO critics that the military was independent and supported the government. Once again, criticism rained down from Sandinistas, including members of the National Directorate.

General Ortega’s efforts to assuage his harshest critics on the right did not help much. Calls for Ortega’s resignation continued, and some rightist critics argued for the abolition of the army. More moderate critics noted the lack of legislation to control the military which would set the terms of office of its commanders, regularize promotions, or set forth the lines of authority between the President and the head of the military. Ortega reached an understanding with the Chamorro administration that a miliary code should be drafted and submitted to the legislature to regularize procedures and professionalize the miliary.

In the midst of this process, President Chamorro shocked General Ortega (as well as his brother Daniel) when she announced in an Army Day speech in September of 1993 that she would remove General Ortega sometime in 1994, among other changes. This pronouncement seemed to violate the understanding that his departure would be determined by the terms of the as yet unfinished military code and also violated a 1991 decree by President Chamorro which put the power to dismiss the Commander in the hands of the Military Council. The crisis was, in all likelihood, engendered by the persistent efforts of Senator Helms to reverse Sandinismo. In this instance he wanted to condition aid to Nicaragua on demonstration that the military was under the control of the Chamorro administration.

The Code was finally passed after months of debate in September 1994. It gave the President the authority to elect or reject the head of the military from candidates proposed by the Military Council. The term of office was for five years. The President could dismiss only for specified reasons, among them being violation of the non partisan status of the military. It set the terms for Ortega’s retirement with pension benefits, also established by the Code. The new head of the military, Joaquín Cuadra, came into office in February 1995. Therefore the President to be elected in October or November of 1996 will not have the opportunity to pick a head of the military until almost four years into a five year term, further separating the military from civilian politics, and perhaps also insulating it from civilian control. The name of the army was changed through the Constitutional reform process to the Nicaraguan National Army.

A significant block of UNO deputies voted against the law, and its permanence may depend on the outcome of next year’s elections. The law would very likely result in at least the next three military heads (that is to the year 2010) being commanders who cut their teeth on Sandinista politics and who have risen through the ranks of the EPS. The military still controls businesses and has a pension system which it will fund and operate as an independent entity. Though the Code sets up procedures for civilians to play a role in auditing these activities, as of this past August, little had been done to effectively implement this level of civilian control. Business interests, through COSEP, complained that it is improper for the military to be running businesses in competition with the private sector.

However, despite UNO votes against the Code, the Presidential contender for the right, Arnold Alemán, an arch critic of the Sandinistas, has been noticeably silent on the Code. According to informed sources, as part of his road paving campaign while Mayor of Managua, Alemán made sure that roads around Commander Joaquin Cuadra’s home were well paved. It may be that the military issue will not come to the fore in next year’s campaign.

THE PROPERTY TANGLE

No issue has been of greater significance for national reconciliation in post-Sandinista Nicaragua than property — and no issue has been thornier. The Sandinista revolution gave birth to a massive, if disorderly, transformation of property and productive relationships that benefited tens of thousands of Nicaraguan families while penalizing a few thousand others. When the Sandinistas lost in 1990, the expropriated propertied elites were determined to get their holdings back. Beneficiaries of the Sandinista agrarian reform, whether regarding themselves as Sandinistas or not, have, in most cases, been equally or more determined to hold onto their land. Complicating the picture, the new government promised land to former combatants on both sides, a promise it did not keep to the satisfaction of many.

The political battle has played itself out within a shifting correlation of domestic and international political forces. It has been accompanied by economic policies and conditions which have undermined the beneficiaries of the agrarian reform, forcing many to sell their land, often at quite low prices. The gamut of actors involved runs the full range of Nicaragua’s social and political groups: Sandinista workers (ATC, CST), farmers (UNAG) and communal (MCN) organizations, demobilized EPS and RN soldiers, propertied elites in Nicaragua and Miami (including COSEP, a association of expropriated former owners, a separate Bondholders Association), and all political parties. The U.S. government and Congress, international organizations (World Bank, IDB, UNDP) and, marginally, other governments (Germany, Spain) have also participated.

The battle over property has deeply affected Nicaragua’s stability. No one set of positions has prevailed; compromise, often borne of violent conflict, has been essential to resolve interim crises. The tenor of a comprehensive solution would affect the prospects for development, social equity and, in turn, hopes for a lasting peace and the consolidation of democratic institutions. We examine below the extent to which the Sandinista agrarian reform has been undone, whether significant progress has been made toward stabilizing land titles, the corruption issue, and compensation problems.

Within weeks of the overthrow of Somoza in July 1979, the government confiscated the holdings of the Somoza family and alleged accomplices. The next few years saw the Sandinistas go on to confiscate or expropriate land, businesses and houses under decrees justifying the taking of property by reason of absence from the country, lack of use and decapitalization, counterrevolutionary activity, or, in a few cases, simple public utility.

Violeta Chamorro’s election campaign did not promise to return all agrarian reform properties to their former owners. Her platform pledged to respect the holdings of poor beneficiaries and to restore the holdings of confiscados only when it was possible to do so without injuring the former. Other confiscados were promised an unspecified indemnization. The Chamorro camp could not hope to win an electoral majority on a platform of open counterreform.

But the confiscados supported the Chamorro campaign in hopes of securing total or partial restitution. It is not clear if they provided much financial support, especially in view of copious U.S. campaign aid. On the other hand, numerous confiscados were members of the new government; campaign promises to the poor often don’t mean much; and the conservative Chamorro camp could be expected to privatize state properties on a large scale, all of which looked promising to the confiscados.

When the Sandinistas awoke on February 26, 1990 and took stock of their defeat, they quickly realized that the lack of clear legal title loomed as a massive danger to their property reforms. To deal with this problem, the lame-duck National Assembly passed a series of last-minute laws.

Law 85 granted full property rights to individuals and organizations occupying state-owned housing units. Law 86 did the same for state-allocated building lots. Law 88 in theory transformed the Sandinistas’ truncated agrarian reform titles into property titles, and authorized subsequent division of cooperatives into individual, family owned parcels (something the Sandinista government had previously opposed). But there was no time individually to title and register the properties covered by these laws.

Vigorous actions by the Chamorro government to return properties to former owners, land invasions by former owners, and the sometimes violent reactions of affected Sandinista groups comprised the first stage of the property battle. This overlapped with equally violent urban conflict over economic stabilization policies, and the over benefits to war veterans. After several rounds of conflict, the Chamorro government and the Sandinistas established a political modus vivendi that later gave shape to the outlines of policy.

The government’s opening foray, in May 1990, gave hope to the confiscados. President Chamorro issued Decree 11-90 establishing a Confiscations Review Commission (CNR) to pass judgment on Sandinistas’ property takeovers and order restitution of holdings found unjustly seized. Without specifying clear criteria for what constituted an "unjust" confiscation, the Commission soon began to hand out legal notices (popularly called papelitos) that housing and farmland should be returned to its "rightful" owners. The government, in its opening weeks, seemed bent on eroding if not nullifying its campaign promise to protect the holdings of poor agrarian reform beneficiaries.

Attempts by former owners to enforce the papelitos quickly led to confrontation and incidents of violence. In most cases the status quo prevailed, however, in other cases peasants, fearing the game was up after the elections, gave up.

The next month, conflict over privatization erupted. The government announced it was leasing state-owned cotton lands to their former owners, who could also recover them outright through the CNR process. In reprisal, Sandinista farm workers, organized in the Farm Workers Association (ATC), seized the farmland. When the government attempted to return 16 state factories and urban businesses in September, workers took over many.

These conflicts made it apparent that the Chamorro government was courting serious danger. Lacking firm backing from the Sandinista police and military to enforce CNR decrees, with land invasions beginning and labor protests in full swing, the government had no choice but to call Sandinista worker and farm groups along with COSEP and pro-government unions to a dialogue designed to avert chaos. While neither of these goals was immediately achieved, "Concertation Phase I" reiterated the campaign pledges to respect poor people’s rights under Sandinista laws and to compensate former owners. The majority of participants (without COSEP) also agreed that a percentage of privatized state enterprises should go to their work forces. The Chamorro administration had decided to dampen conflict by ceding a slice of the pie to a variety of organized social groups and to retreat from an untenable position that would open the door to massive returns to previous property holders. Would the agreement hold?

Sandinistas continued to fear that Somocistas would come back and take away their houses and farms. Land invasions continued. Former property holders, and Nicaragua’s business elite in general, complained that Chamorro had given in to Sandinista violence ("blackmail"). They were further angered when in May 1991 the Supreme Court struck down the operative provisions of Decree 11-90 (saying the CNR had usurped judicial power in deciding ownership conflicts). So old owners shifted the property struggle to the National Assembly.

In April 1991, Assembly president Alfredo César began to hammer together a coalition of UNO deputies to propose a sweeping legislative "solution". In theory, "César’s law" was true to the UNO platform—it would uncover Sandinista abuses, allow former owners to get some holdings back and be compensated for others, while legitimate beneficiaries of the 1980s reforms would ostensibly be protected.

Lacayo allied with the Sandinistas and agreed to reconvene the concertación parley to execute an end run around the legislature. Participants (without COSEP) agreed that workers would be given a 25% share in privatized companies and that abuses of the transition laws (the piñata) would be reviewed on a case-by-case basis by the government. They stipulated that beneficiaries of Law 85 occupying homes larger than 100 square meters would have to pay a 100% tax on the assessed value in order to sell or bequeath them, but they would not simply lose them. On August 19, 1991 President Chamorro signed executive degrees turning the concertación agreements into law.

Chamorro and the FSLN agreed to divide state agricultural corporations among demobilized soldiers from both sides, as well as among the agricultural workers, and a minority of former owners. In addition, the Office of Territorial Ordering (OOT) started operating in October, 1991 to review the legality of acquisitions under Law 85.

But by the end of 1991 conflict continued unabated. No formula for compensating former owners was yet in place. Land invasions continued at a high level, and Managua’s poor neighborhoods continued to be plagued by old-time real estate barons (lotificadores) threatening evictions.

Far from inducing the César forces to give in, loss in the Assembly led them to seek the aid of powerful foreign allies. In May 1992, U.S. Senator Jesse Helms requested the Bush administration to suspend $104 million in assistance to Nicaragua until the Chamorro administration took a number of steps, the principal of which had to do with compensating "U.S. citizens" whose properties had been seized by the Sandinistas. That most were Nicaraguan exiles naturalized as U.S. citizens only after their holdings had been taken was for Helms legally irrelevant.

The new decisions filled in the outlines of an overall political solution to Nicaragua’s property conflict. With the balance of political forces still favoring the Chamorro-Sandinista camp, these steps heralded the likelihood that most poor beneficiaries of the Sandinista reforms would be ratified in their possessions, had they not already been forced to sell them by the severe economic conditions. The bulk of former owners would receive compensation rather than get their holdings back. And legal steps would eventually be taken to recover properties illicitly appropriated by outgoing Sandinista officials.

The September decisions were a turning point. Conflict over property peaked in November 1992 with the murder of confiscados’ leader Arges Sequeira by a commando made up of the former members of the Sandinista state security force. It diminished thereafter as the confiscados association lost steam and, in early 1993, when Alfredo César lost his post as Assembly president. Land invasions became less frequent. Property bonds for compensation began to be issued and accepted in February, 1993.

However, major questions remained. Political players on all sides were by now well aware of Lacayo’s penchant for defusing crises by making promises that could not or would not be fully kept, and tempting his opponents to pursue their individual claims. How many abuses would the OOT ferret out? How would the economically-strapped Chamorro administration compensate former owners? How long would it take for the government to grant titles to humble home owners and agricultural cooperatives?

There was sufficient play in the institutions charged with adjudicating property conflicts for interested actors to exert influence, whether licit or illicit, to achieve their objectives, tipping the balance of the property outcome in one direction or another. Conflict over property did not cease but rather shifted to new arenas.

At the root of the property issue in Nicaragua, then, are the contradictory promises contracted by the UNO government with a range of highly mobilized political and social forces. The impossibility of complying with all forced it to vacillate. For many groups, at the outset of the new government, getting or holding onto property was high on the agenda: confiscated former owners, agrarian reform beneficiaries, ex contra and former government soldiers. The government made promises to them all at the outset, and then added workers on state properties to the list. As violent actions by one group or another escalated, it made more land promises to induce groups to stop shooting.

In attempting to meet its land and compensation promises, the Nicaraguan government has received little foreign assistance. Four years into the crisis, a $25 million World Bank loan was to finance the modernization of the land registry, and part of the titling program. Of the $2.7 billion in foreign funds through 1993, none have been made available for compensating former owners or purchasing properties for distribution, despite the widespread analysis that property related violence and unclear title braked investment. Nonetheless, a great deal of property has changed hands, with sales backed by unclear or no title.

Nicaragua has undergone two radical transformations in rural land tenure in the past 15 years. Some 5.9 million of Nicaragua’s 13.1 million hectares are adequate for agriculture. Of these, the Institute of Agrarian Reform (INRA) estimated 1.97 million hectares (34%) changed hands in the agrarian reform in the 1980s. By 1988, 508,000 hectares had been assigned to individuals and 792,000 to cooperatives, representing together some 60,000 families, while 673,000 hectares were held by the state-owned enterprises. Despite some property restorations since the 1990 election, large landholders control only 22% of the land area rather than the 52% they held in 1978.

Government land policy became reduced to ad hoc crisis management. The invasion trend has been clearly downward as negotiations proceeded, reconciliation between former enemies advanced, land grants were provided, occupiers tired, access to arms was reduced and as the government gained confidence in its ability to operate firmly against usurpers.

Land invasions by ex-RN were successful. Almost a third of the area titled since 1990 had been occupied by invasion, and in the war zones of Matagalpa and Jinotega the figure is 84%.

Ironies abound. During the war RN troops, mainly poor peasants with little or no land, did the fighting against the Sandinistas whose defeat was fervently desired by the former large property owners. In many cases, lands the RN invaded after the war, were lands claimed by confiscados or other anti-Sandinista large land owners. The UNO coalition’s opposition to the Sandinista land reform ranged from mild to apoplectic. But the government was now, in effect, permitting an "agrarian reform" by armed invasion — a "policy" considerably more arbitrary than anything the Sandinistas had effected. Finally, the compensation deals offered by the government to those whose lands had been invaded were little better, and sometimes worse, than what had been offered by the Sandinistas.

Some owners of farms occupied in 1990–91 have received cash compensation of up to $70/hectare (well below market prices in calmer areas of the country; see figures below), but latecomers in the negotiations have been offered only bond compensation. In 1994, 11 cooperatives received indemnization for 1,723 invaded hectares at $238/hectare in bonds, with a present market value of only $48/hectare, about 40% of average compensation under the Sandinistas.

Other land invaders did not do so well. Invaders in the Pacific region by non ex-combatants have been repeatedly and sometimes violently evicted by the police. This response is due as much to the perceived illegitimacy of claims from landless peasants who present no credible military threat as to the political importance of the land owners there.

Eighty percent of these lands are located in Regions V, VI and Rio San Juan, mostly along the agrarian frontier where land tends to be marginal: less fertile, farther from markets, bad roads. Considerable investment will be needed to make it economically productive. By contrast, the more fertile and communicable Pacific regions of the country (Regions II, III and IV) have provided less than 10% of all land under Chamorro’s "agrarian reform". Under the Sandinista Agrarian Reform 44% of the land came from Regions II, III and IV.

The CNR has received claims from 5288 individuals to almost 16,000 rural and urban properties, vehicles, machinery and equipment, factories, and shares of companies. Seventy percent of the claimants were Nicaraguan nationals, while 25% were U.S. citizens. Of these claims, 7,186 (from 1527 individuals) involve 1.4 million hectares on which an estimated 60,000 agrarian reform families live. The return of land would displace, on average, 39 beneficiaries per property. To avoid the political consequences of such displacement, bond compensation has been offered.

The principal state resource being used to shore up confidence in the bonds is the potential sale of a minimum 40% share of the telecommunications company TELCOR. In April 1994, a commitment to effect this sale was written into the Extended Structural Adjustment Facility (ESAF) with the IMF and the World Bank. However, bonds have sold at 20–30% of face value. This sagging quotation has impeded government efforts to get former owners to come to terms over indemnization.

Former owners complain about the slow pace of the CNR. By mid-1995, the CNR had passed resolutions for just a quarter of the area claimed, and bonds had compensated less than 20%. At this rate, the process might last until 2005, if it survives two changes of government. Also, they allege that officials must be bribed.

The titling process has been slow and complicated. Some 2000 cooperatives have unclear legal status, and lands held by some 20,000 rural families are registered in the names of their former owners. Before title can be legally transferred, the latter must sign off on the compensation terms offered by the state.

Five years of legal and political turmoil have taken their toll. Lack of clear title has made it difficult to borrow money. Market forces and an absence of credit to small farmers have deepened poverty among agrarian reform beneficiaries and former combatants, and led to forced sales. Some have lost lands due to invasions or land grabs.

Land claims of some former owners, ex-combatants and workers from state-owned farms have been accommodated through privatization — a mix of restoration to former owners and sales to veterans, workers, former owners and other customers. The Chamorro administration established The National Public Sector Corporations (CORNAP) to manage privatization of 351 urban and rural enterprises.

The ATC estimated the real value of their 130 farms to be $100 million, but CORNAP indicates that these properties might bring in about $20 million, which could be reduced to $10 million under a quick payment plan, and if bonds were used, could be purchased for as little as $2.5 million.

Only 243 of the 279 farms designated for former owners have actually been returned, because occupants have refused to leave and demand agrarian reform titles. Most of these were returned initially but retaken when owners violated worker contracts. Others were invaded by ex-RN who demand titles or relocation to other land. The government continues to pressure the ATC to return a number of farms it received, particularly those belonging to U.S. citizens, in exchange for canceling the debt on the remainder.

The ex-RN initially were to receive 56 farms through privatization. However, in up to 20 cases, requirements to pay were eliminated, so the farms will be titled to them through the agrarian reform free of cost. The same has happened for a few ex-EPS officer groups.

Privatization has given disparate groups slices of the pie, but of quite difference sizes. By privileging certain members of claiment groups the government’s privatization process succeeded in disorganizing larger social movements, thus reducing their capacity to impose demands. This repeats a theme of meeting crises by delay and divide seen elsewhere in the report. The current level of protest is considerably less than the politically destabilizing pressures of a few years ago.

By then, cries had gone up that anti-Sandinista political bias, favoritism, and bribery were influencing OOT rulings. After negotiations with the Nicaraguan Communal Movement (MCN), documentation requirements for humble petitioners were relaxed and the proportion of solvencias went up.

But previous owners have sued in court, and leaders of the Nicaraguan Communal movement have charged that judges have ignored the possession of OOT solvencias by reform beneficiaries. Court orders have led to evictions. In response, the National Assembly passed a law in 1992 prohibiting evictions for six months, and renewed this effective brake on evictions several times.

With all of the property crises confronting the Chamorro government, it has become increasingly evident that it is letting the market and credit policy settle the issue. Both the Sandinista agrarian reform lands and recent transfers to ex-combatants are threatened with reversal due to lack of credit, and for some some ex-combatants lack of farming skills. A stock of buyers feeds an active market offered at distress sale prices.

In sum, former owners received a significant, though minority, portion of their former property through privatization, negotiations, invasions, and in a few cases, court action. Among them, U.S. citizens have done relatively well. They have been awarded $300 million in indemnization bonds, and some of those bonds have been used at face value to buy back confiscated state assets.

Third, the allocation of some state property to unionized workers has lead to experiments with fully worker-managed companies and others in which workers are part owners with some say in management.

It is now five years since the change of government. The process of granting solvencias was agonizingly slow, and CNR processing of former owners claims slower. The titling process has barely begun. Aside from identifying cases of potential abuse, the government has done little to overturn the Sandinista piñata, much less examine allegations of corruption within its own ranks. At current rates the negotiations over compensation will not be completed until after the turn of the century.

Humble home and lot owners are in still in danger from court suits and a large number of agrarian cooperatives face investigation by the state. Unless government and private banks make more credit available, cooperativists, smallholders and worker corporations will lose their land to market forces.

A new property law and the sale of Telcor is being debated in the Assembly as we go to press in November. A framework of agreement has been reached in property, which includes provisions that would benefit some former Somocistas, and protections for owners of small homes, but the property debate was put on hold to take up the related Telcor issue.

WAR VETERANS AND THE UPROOTED

Nicaragua’s war was the first to end of three Central American civil wars framed in cold war terms, and the only one immediately preceded by a radical electoral change in government. Recognition that the root of the region’s wars was not the East-West conflict but the marginality of a large part of its populations underlay what became known as the "CIREFCA process."

To understand why those processes remain incomplete after five years, we will trace Nicaragua’s complex experience, starting with the agreements to end its war.

In early 1990, neither the newly elected government nor the Nicaraguan Resistance (RN) had peace negotiation experience. The RN was further hampered by not being a political organization with an ideological framework and a set of strategic goals. It was a loose agglomeration, organized by the U.S., of former National Guardsmen and young and angry peasants. The RN had also just undergone a serious upheaval, in which Somoza’s former National Guard Colonel Enrique Bermúdez was replaced as top leader by younger men who better represented the rural base. The RN’s negotiating team, however, was as heterogeneous as the RN itself, and less experienced than Bermúdez.

The government-elect, with the participation of Cardinal Obando y Bravo, took over the halting peace talks with the RN that had been initiated by the Sandinista government in 1988. Just 35 days after its inauguration, the government signed a final agreement with an irregular force whose base euphorically believed it had won the war and brought President Chamorro to power.

As a first step of compliance, President Chamorro abolished the draft thus releasing tens of thousands of two-year conscripts into a shrinking job market. Within another two months, the bulk of the RN demobilization also ended. They and their repatriated families, who had received U.S. support, had little or no means of livelihood. Refugees also began streaming back.

All told, over 600,000 people, some 15% of the population, had been directly affected by the war and needed extensive help. Other victims included some 40,000 people with war