The problem of how to respond to the economic crisis without undermining the social conquests of the revolution is now being debated in Nicaragua. Here we publish two interviews with leading Sandinistas on this subject. The first is with Luis Carrión, the Minister of Economy, Industry and
Trade and a member of the National Leadership of the
Sandinista National Liberation front (FSLN).
The second is with Edgardo García, General Secretary of the
Association of Rural Workers (ATC), a Sandinista deputy in the National Assembly and a member of the Sandinista
Assembly. The interviews were conducted by Eric Toussaint on July 30 and August 1 respectively.
October 2, 1989 • #170 International Viewpoint literacy and infant mortality.
T HE EMERGENCY economic
measures applied since 1988 have led to a reduction in inflation since January 1989, but at the price of a very strong recession. Would it be correct to say that the measures taken since June 1988 have primarily hit two sectors; firstly, wage-earners who have suffered a real decline in income, and, secondly, small and medium private producers who, like the state sector, have suffered from the restrictions applied to credit?
Yes, in general, although it's necessary to have a different analysis for each sector. I would say that the impact of the economic measures has varied in the different • sectors of economic activity. At the level of wage-earners, one must distinguish between three sectors.
The export sector (in particular, coffee, crayfish, gold, whose prices on the world market have evolved positively in 1988) hasn't been affected negatively by the measures: the workers in these areas have been able to maintain their purchasing power. However, the sector which produces for the internal market has been hit hard by the measures taken for economic stabilization; the workers in this sector in particular have suffered a decline in real wages.
Finally, those who have experienced the sharpest fall in their purchasing power have been state employees (in government ministries, education, health...).
Small producers have also been hard hit, above all in the urban areas, where the fall in effective demand has been accelerated by the raising of interest rates. However, the small agricultural producers have suffered to a lesser extent because their access to credit has been protected (by the maintenance of preferential rates of interest). • Have these preferential rates of interest been applied since the beginning of the emergency meas-
Yes, they have been applied to small producers of basic grains, such as maize or beans. However, coffee producers have had a higher rate applied to them. Recently the government has decided to extend the preferential rates to the small urban producers, but this has not yet been put • Isn't it true that stockbreeders in general, including the wealthy sectors, have been allowed access to credit at the old rate of interest, which is below the level of inflation?
Briefly. The government allowed this in March 1988, just after the application of the emergency measures, so as to allow the stockbreeders to realize the transactions which are normal at the time of their
NICARAGUA annual fair. On this occasion, the motivation of the government was more political than economic. • The measures applied from June 1988 resemble those of the IMF-type, and yet they do not seem to have led to any reopening of lines of credit, either with the IMF or any other international organizations.
There are clearly similarities between the measures we have taken and those which have been applied in other Latin American countries under the recommendations of the IMF. Nonetheless, there are also differences in the manner we have applied them, such as the maintenance of the preferential credit rates I mentioned earlier, the maintenance of interest-free loans from the Central Bank to the state... amongst the differences, it's also impor tant to note the monthly grant to each public employee and also to pensioners, of 5kg each of rice and beans and 2.5kg of sugar.
But it's true that we've been forced to apply these emergency measures without recourse to significant sources of external finance which might have allowed us to reduce the social cost and find a more rapid path to some kind of economic recovery. Following Daniel Ortega's visit to 11 Western European capitals in April 1989 and 530 million in the form of crin19 and $30 million in the form of credits.
International Viewpoint #170 • October 2, 1989
NICARAGUA
The veto which the US has in the major international finance organizations has worked against our efforts to stabilize the economy and soften the social cost. We hope that, having demonstrated our capacity to put our national economy in order, we will see the opening of new sources of international financial support after the elections of February 1990.
• To defeat the evil of inflation, you have had to face another evil, recession, which has imposed heavy sacrifices on the masses and is pushing the industrial enterprises to the brink of the abyss.
It's correct to say that the recession is creating great difficulties for the industrial sector and we aren't of the opinion that enterprises in difficulty must close their doors make way for others which are more profitable...to close enterprises means to create others, this
Having said that, the crisis has proved to be a stimulus for the improvement of the quality of products, and also the reduction of the costs of production.
We have been accustomed in the past few years to putting the accent on the quantity of pro duction, to the detriment of the maintenance and renewal of equipment. Thus, we use the foreign aid sent for the productive sector essentially to buy raw materials and other elements of working capital.
The heroic efforts of workers who made themselves spare parts formerly bought from the
USA could not counteract the aging of their equipment. We were approaching the abyss, so we judged that, to stabilize the economy, we were obliged to intervene, particularly in the state sector of production, in order to utilize the resources of the enterprises in least difficulty to reduce the threat facing those in the greatest difficulty. We cannot allow recession to wipe out enterprises.
• Has the slimming-down in the public services and in the enterprises been accompanied by compensasuch the tory measures as redeployment of workers in other productive sectors, particularly agriculture?
There have been efforts to redeploy workers, particularly in agriculture. For example, there are projects to renew the exploitation of coffee plantations which have been left lie fallow because of the war. But we have to recognize that such projects have only been implemented in a
20 limited fashion.
In general, it's very difficult to convince workers who are used to urban life to start anew in a rural setting. Some workers have made the effort voluntarily but their number hasn't been significant and we have to recognize that conditions of life in the countryside aren't attractive, even for poor workers in the towns, because they are accustomed to services which can't be found in the countryside. • What have been your priorities for Investment over the last few years?
We have concentrated on internal con-
For example, increased spending in education (organizhealth (building of health centres) to a lesser extent, and in communications (new roads, paving of old ones, building ot bridges). so far as investment in the industrial sector is concerned, here also priority has been given to production for the satisfaction of internal consumption; for example, the big dairy projects at Chil-
The manufacturing sector received the most investment is that producing for the internal market. There hasn't been any investment in the new export industries, even if at the level of intentions we say that we wish to develop this sector. The global dynamic of our political economy turns us towards the internal market, mainly because effective demand in this area continues to grow; for example, demand for basic foodstuffs, or clothes. Moreover, our exchange rates favour internal consumption over export production.
• But in the context of an industrial sector geared towards the internal market, there hasn't been much development of light industry, such the production semias mechanized agricultural tools. In other words, while it's true that the great bulk of industrial production is destined for the internal market, it's also true that the production of goods for agriculture remains marginal and represents only 2.8% of total industrial production.
It would seem that a proper concern for satisfying internal demand hasn't been combined with a longer term vision of modernizing this area of industry and satisfying the need for agricultural equipment amongst the small and medium producers (for example, those who can't afford imported tractors, and who would be satisfied with less sophisticated equipment).
It's true that the level of investment in industry has been relatively low in comparison with investment in agroindustry (for example, there has been important investment in the construction of large silos and in the social sector. As a consequence the internal structure of the industrial sector today has largely remained as it was before the revolution.
Initially, we had set the objective of creating a certain complementarity between industry and agriculture.
For example, we wanted to develop and modernize the textile industry to export our cotton, with a larger proportion of valdevelop our mechanical industry to meet the basic needs of agriculture. Certain things have been done in this area, such as the setting up of workshops for producing basic agricultural machinery
IMEP (People's Metallurgic Industry), but we have suffered from a shortage of both investment and sufficiently skilled workers, and thus the impact has been less significant than we had hoped.
The challenge we still face is how best to develop the vertical relationship between industry and agriculture in two complementary transforming agricultural production, and, downstream, delivering or satisfying the basic needs of the agrarian sector through the development of our national industry.
• Turning now to the situation of the
Nicaraguan working class; numerically weak at the beginning of the revolutionary process, it has been weakened still more by the economic crisis, the development of the informal sector, the rapid turnover of workers from one enterprise to another and so on.
First, could one say that it has become "declassed" , to use an expression employed by Lenin to characterize the state of the Soviet working class in 1920-21, at the end of the civil war?
Secondly, what are the consequences of the weakening of the working class for the revolutionary state and for its leadership, the FSLN?
I won't venture a comparison between the situation of the Nicaraguan proletariat and that of the Soviet working class as described by Lenin in 1920-21. Nonetheless, I wouldn't say that the Nicaraguan revolution has experienced a situation as tragic as that of the Russian revolution in its early years. We haven't experienced the profound isolation that the Soviet government encountered. We haven't had to send brigades of workers into the countryside to take grain from the peasants by
The defence of the revolution hasn't cost us as much as was the case with the Soviets. What's more, it seems to me that at that time the Bolsheviks could only account on the support of the workers. The working class was the sole defender of soviet power. We, on the other hand, have been able to count on the firm support of the poor peasants and the urban proletarian and semi-proletarian popula-
Turning to the concrete situation that we face, I think that the weakening of the agricultural proletariat has been much greater than that of the industrial working class, for different reasons. Firstly, across large areas, the agricultural proletariat has suffered terribly from the war both in terms of loss of human life and in terms of the destruction of infrastructure, an example being the zones where coffee is produced; secondly, there has been a drastic reduction in land devoted to the growing of cotton (the area of cultivation has dropped from around 220,000 manzanas to 50,000). [1 manzana = 0.7 hectares]. The industrial proletariat hasn't experienced such a situation. It's true nonetheless that it has been very much affected.
Today I think that the situation has improved a little. Despite the increase in unemployment, due to the measures taken for economic stabilization, the turnover of the workforce has diminished. A part of the skilled workers who had been in the informal sector have returned to industry, offers the same possibilities for making
The weakening of the proletariat has had a negative effect from the point of view of the revolution. It's obvious that the agrarian and industrial proletariat constitute the most revolutionary class. We have never doubted that. It's the only class which has shown itself to be ready, at certain moments, to put aside its immediate interests, in order to defend more lofty objectives. It's the class which, above all others, has both an objective and a subjective interest in the development of the agrarian and industrial working class weakens one of the fundamental pillars of the revolution. I would say that no other class in the Nicaraguan social formation has shown such revolutionary virtue. In contrast, the attitude of the peasantry is very much more linked to what it does or does not get. The same goes for the tradespersons and the small industrial producers. Their political attitudes are more dependent on the economic situation.
This means that in the medium term the revolution must reinforce and develop the proletariat, in agriculture as much as industry. If, on the other hand, the exhaustion of the proletariat were to continue, this could constitute a danger for the strategic interests of the revolution.
The sacrifices suffered by the workers as a consequence of the measures taken to regain control of the economic situation can be justified temporarily - it's a risk that we run - but there can be no question of prolonging them indefinitely. • Why have the FSLN and/or the government not appealed to the workers to exercise workers' control so as to render production more efficient (avoiding waste at the productive and administrative levels) and to promote their collective leading role. Workers' control has been mentioned in some documents such as "Participatory Democracy in Nic-
But if one reads the Sandinista journals and listens to the speeches of the commandants, such references aren't made. Why?
It must be said that, in the countryside and in the town, the Nicaraguan working class maintains an attitude of active and belligerent criticism. But effectively, in the speeches and the appeals, very much less reference is made to the need for workers' vigilance in the enterprises (and I think that this goes back to the time when the stabilization measures were taken). But recently we can see a new rise of trade union combativity, particularly in
It's especially clear in the countryside where the ATC [Association of Rural actions. In industry, it's less advanced. • What Is your opinion on the work-
NICARAGUA ers' management bill, or the statements of Edgardo García, secretary of the ATC, calling for a readjustment of the historic programme of the FSLN?
The trade union federations like the ATC and the CST have demanded a law on workers' management which in any case is mentioned in the constitution. They have themselves drawn up a bill. This was too crude, too elementary. It comprised only twelve articles with some very general references to what they considered to be workers' management. We have proposed that the discussion continue. We don't think that the bill is viable in its current form. It needs elaboration, and it needs to take account of the mixed character of the economy.
In the public sector, there already exist a series of mechanisms and it's enough to perfect these. This is not the case at all in the private sector. One of the secondary weaknesses of the bill is that it doesn't provide for improving the existing mechanisms in the public sector. Besides, the project confuses workers' participation in the enterprises and the participation of workers in a ministerial institution. For us then, it's an open question, and I don't think we can come to a solution before the • Your attitude concurs with your political project of social partnership with the private capitalist sec-
Yes, to a certain extent. This has to do with the attitude of the industrial entrepreneurs and above all of the landowners. behave like businessmen but like prerevolutionary "planters". They have no accountants, no real organized manage-
The reactions of the bourgeoisie remain very primitive, very elementary; and even if there has been a certain progress since the revolution, it's well worth bearing in mind that before this they were virtually "savages". They did not tolerate trade unions in their enterprises. As a first stage, one must make a distinction between participation in the state sector and participation in the private sector. One must advance in the private sector, but without wishing to immediately achieve that which has been gained in the public. • According to a study carried out with the support of Envio, wage differentials have increased very sharply in recent years. How do you explain this? Does it not damage the revolution?
Really, these figures are amazing. I would ask you where they got them from. I think that, above all from July 1988, there was a period of transition during which we lost control of our wages policy because we had given the enterprises free- 21 dom to fix wages. Thus we abandoned the
International Viewpoint #170 • October 2, 1989
NICARAGUA system of work norms [the fixing of all wage categories on the model of the Cuban system].
Nonetheless, in the state industrial sector we still apply a work norm according to which the wages of the highest paid can only be twelve times higher than the wages of the lowest paid. I can tell you that this wage differential is applied in all the economic sectors. The strongest wage differential is between the public sector (that is, the sector dependent on the state budget) and the wages paid in the enterprises. So if one compares the minimum salary of a public functionary with the highest wages in the productive sector, it's possible you would see a very large gap. • Last Saturday I was at a public meeting of the health sector. It was said that a woman ancillary worker only earned 200,000 cordobas which is in no way sufficient to meet the needs of a family.
Indeed, the sector that is being hardest is government employees. I had a meeting with the workers at the engineers' college and I found that the salaries of the teachers are so low that some third and fourth year students who are working part-time are earning three or four times as much as their teachers.
The problem is very complicated, since the only way to raise wages in the public sector is to shed more jobs. In my ministry, that of business and trade, the wage levels are somewhat higher than in other
The reason is that in March 1988 the ministries of industry, internal trade and foreign trade were amalgamated, and the total staff cut from 1,400 to 400, so that the same amount of money could be distributed among far fewer workers. But this is not possible in sectors like national
In this specific case we had changed the whole economic logic by changing the tasks assigned to the internal trade ministry, which had previously been responsible for distributing ration coupons and controlling prices. This function was abolso we could work with less staff. But this is not possible in other sectors since this would affect not only the quality but also the quantity of services delivered to the public.
It is also necessary to take the war into account. If it could be ended, we could massively reduce the number of military personnel who use up vast resources. And lastly, we have decided to reduce the growth in the state budget to control inflation and this also reduces the possibilities for raising wages in the public sector. • Yes, but what I am trying to say is that inequality has grown. I can see that a worker can understand that an engineer or an administrator might 22 earn more than him or her so long as this person, who is in some cases a member of the FLSN, is efficient. The worker will make sacrifices if there is real workers' control and if the wage range is kept within certain limits. These two things seem to me to be connected, and do not to have received enough
I must repeat that the most glaring wage between public employment and other sectors. could be an excessive difference in the productive sector, but we have tried to
Over the past year we have been under very strong pressure from the unions but now this pressure has diminished, and we feel that wages have recovered somewhat. The main problem is that a skilled worker in the public sector may ear less than an unskilled worker in the private sector. Now the public sector has more than 100,000 workers while the sector of industrial workers amounts to 35,000 at • What is your balance sheet after several months of the dialogue, in the course of which some bosses have taken the credits from the state-owned Central Bank and converted them into dollars on the black
The social partnership is a difficult operation in which we are trying to reach an agreement with the leaders of the entrepreneurial sectors, regardless of the fact that the majority of the private producers, that is the middle and small producers, have behaved quite correctly. But, in the case of the groups of big entrepreneurs things have been complicated, since COSEP has taken the attitude of rejecting every sort of agreement, even those that correspond to their interests. They have gone so far as to forbid some of their members to take part in the Stockholm conference, and this kind of thing has made it all the more difficult to apply the re-adjustment measures.
While we had the support of the workers, we have, on the other hand, been confronted with sabotage on the part of the big private entrepreneurs, especially in the agricultural sector.
In the private industrial sector we have not come up against such opposition. Some industrialists have even made investments. It is not very much in terms of quantity, but it is a significant trend. I believe that a certain collaboration on economic issues is possible even with the majority of the private sector but it will be very hard to achieve before the elections, all the more so if the Contras continue to be supported by the USA.
demobilization of the Contras, linked to a slight change in American policy, would create the conditions for the big private entrepreneurs to come to accept that the revolutionary regime is here to stay. *
"The
criteria is
efficiency"
W HAT is your assess-
ment of the social partnership? before, in 1985-86, over workers' productivity. The dialogue this year represents a continuation of the agreements that were reached in the socialist sector of production. The savings made then allowed us to improve public services. On the other hand, private sector productivity is comparable to that in the socialist sector. The idea is not to allow the capitalist private sector to use the surplus value as it wishes, but to direct it towards the effort for national reconstruction. I think that the time is ripe, both from the point of view of the government and that of the workers to strike against private enterprises involved in the flight of capital.
The fact is, for example, that if, in the recent period, the capitalists have not been able to export capital it is because the finance provided to them by the Central Bank which they had been converting into dollars on the black market has had, as a result of measures taken by the government, to be re-converted into the national currency. Real interest rates were also raised, increasing the deposits of the Central Bank. Thus these capitalists had to act as agents of a policy of national survival and abandon their policy of taking capital out of the country.
I am not saying that these people have suddenly turned into solid supporters of the revolution, but what I am prepared to state, is that the government was strong enough to prevent dollars acquired on the black market from being exported. It was necessary to confiscate the land of three leaders of COSEP [the employers' federation] to achieve this. The proof of the success of the government's policy is that the price of the dollar on the black market is now lower than the official price. • In the framework of the social partnership there has been talk of returning land in the state sector to efficient private capitalist producers. Has that been done or not? What is your opinion of this idea?
The agrarian reform was intended as a way of overcoming the backwardness of agriculture, reflected by the latifundia and share-cropping systems. It has largely succeeded in this. Our current policy is to set in motion a social pact based on the
October 2, 1989 • #170 International Viewpoint consolidation of the different forms of property that now exist. After ten years of transition, the basis is efficiency. In this framework there is a competition between the three forms of property (cooperative, private and state). This allows the more efficient sector to expand its land holdings at the expense of the other two sectors.
But this is not a one-way process. The state sector, just as the private and cooperative sectors, can acquire new land. Political calculations to the effect that land should be given to capitalists in order to ensure their good relations with the regime plays no part in this policy. • The recession seems to be affecting the agricultural sector as well as
Yes. First of all there is a structural recession, particularly serious in cotton production, which provides not only fibre but also oil. The area under cultivation has diminished and significant unemployment has appeared. Some of this land has been converted to the production of vegetable oils, but this does not give sufficient yield for the labour expended. Rice production has also declined because of the war. • But is it not the case that the 1988 measures of economic readjustment contributed to the recession?
Yes, they have also affected rice production through the removal of subsidies on, notably, energy needs that are very important for irrigation. • On the other hand, the grain producing sector seems to have made forward, involves small-holders not the agri-
Insofar as large-scale production, for example that of rice, has declined, the smallholders have used the opening for grain production. • What is your view on the idea of giving dollar incentives to the big
This policy was used at the height of the war. Today, incentives are given in cordobas. The use of dollar incentives could be relinquished firstly because, thanks to the rise in interest rates, depositing money in the bank has become more attractive, and secondly, because it is possible to change cordobas into dollars... • It is said that while the ATC fights to defend the state sector, another Sandinista organization, the UNAG, is fighting to extend the private and cooperative sectors. Does this
NICARAGUA enrich or affect the worker-peasant alliance?
It enriches the alliance, because of the criterion that we have adopted, that of productive efficiency. There is, naturally, competition between them to obtain more finance from the state. Of course, at the moment, individual small producers and the cooperative sector are especially deserving of help, since these two sectors have been especially hard hit by the recession which has been aggravated in agriculture this year by a severe drought. It is also justified because these sectors have fewer means of production.
But this does not mean that the government is favouring the private sector against the state sector. We are defenders of the state sector because it has been the best for the workers. • How are the members of the ATC divided up between the private and state sector?
Some 42% of the members of the ATC union branches organized into 103 unions, 59 of which are in the private sector. The APP [nationalized sector] represents 15% of the land under cultivation and 21% of production. The private sector of big landowners represents 38% of the land and 29% of production. The respective figures for the cooperative sector are 28% and 21%, and for smallholders, 19% and 29%. In order of productivity, the smallholders come out at the top of the list, followed by the APP, the cooperative sector and finally the big private landowners. • There was talk of finding workers rendered unemployed by the slimming down of the public sector in 1988-89 work in agriculture. What has actually happened?
This is a complicated question. We tried to find a structural solution to the problem of unemployment by bringing back into cultivation land abandoned at the hottest moments of the war. But people do not move easily. Even if they are offered houses, food, medical services and some start-up money they find it very difficult to leave their usual surroundings. To leave Chinandega, which is hot, for Matagalpa, which is (relatively) "cold", is not easy. We must add that, in the regions to which we are trying to get people to move, there are not really the resources to ensure medical services or to offer means of production. The migration was a symbolic thing. Finally, the work that was being offered to these workers had no relation to their
Thus, quite a few of them took off for capitalist and socialist countries. Now, we try to find agricultural workers who have lost their jobs fallow land in their home region. We are trying to negotiate the creation of a land fund with the government and the capitalists, but have not yet achieved this. *