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Social Security Protests in Nicaragua? Hold on a Second…

This story originally appeared at The Americas Blog at the Center for Economic and Policy Research (CEPR).

For more than a week, Nicaragua was convulsed in protests that were met with heavy-handed repression that has reportedly left at least 30 dead. Tear gas. Rubber bullets. Live ammunition. Barricades and burning buildings. Daniel Ortega, the revolutionary Sandinista leader — and president for the past 11 years — “is suddenly facing a revolution of his own,” The New York Times reported.

“The Nicaragua of a week ago no longer exists,” José Adán Aguerri said to The Times. “The break was really with the [Ortega government’s] social security [reforms],” Aguerri later told The Washington Post. Aguerri is the head of COSEP, “the country’s main business organization, which organized one of the biggest protest marches,” The Post reported.

Based on much of the media coverage so far, it would be fair to think that this “revolutionary” leader has opted to cut pensions — screwing the very base that has kept him in power — and providing the impetus for a broad movement to oust him. But missing from almost all of the international news analysis has been salient information on what those reforms actually are — and perhaps more importantly, what sort of alternative reforms are actually being proposed by many of those, like COSEP, now criticizing the government.

Nicaragua’s social security system, INSS, is facing a budget shortfall — that much is true. The IMF said last year that the institution was broke, and called for urgent reforms. The shortfall is actually running at about $75 million a year, or about 0.5 percentage points of GDP. A potential problem? Yes, but far from the calamitous situation that it has been described as.

To address the situation, the Nicaraguan government, together with COSEP, have been at the negotiation table for years. But earlier this month, COSEP backed away from the table, refusing to discuss the issue unless it was linked to a broader fiscal reform plan. The government responded by publishing its proposed INSS reforms, without an agreement, on April 16. That a unilateral action, in a highly charged atmosphere, would elicit a backlash is hardly surprising. But the specifics of the reforms being negotiated might be.

The IMF has recommended slashing benefits by as much as 20 percent, gradually raising the retirement age from 60 to 63 (or even 65), and indexing benefits at a lower level, among other tweaks. COSEP, the group that organized “one of the biggest protest marches,” has largely supported these cuts. Presumably, ordinary Nicaraguan workers would greet such reforms with much less enthusiasm.

And here’s what the government proposed: raising employer and employee contributions to the INSS system over the next few years by 3.5 percentage points and 0.75 percentage points, respectively, and a 5 percent cut to pensions. Yes, benefits would be cut, but by far lower amounts than what the IMF and COSEP have been proposing.

Though largely seen as an ally of Ortega, COSEP reacted to the government’s unilateral move, and the increase in employer contributions to the INSS, by calling for protests. Some civil society organizations (including some that receive US government fundingcriticized the reforms as bad for workers, but are using the same pro-business talking points to do so. Many of those same organizations have actually supported deeper benefit cuts, like those backed by COSEP and the IMF.

Either way, the actual INSS reforms are now moot. Ortega withdrew them this past Sunday. Jaime Wheelock, a former member of the Sandinista inner circle who has more recently been critical of Ortega — including over the past week — told The New York Times: “One good thing about Daniel is that if he’s not right, he’ll back down.” Classic authoritarianism.

Backed by the Catholic Church, a new dialogue is planned and COSEP and the government appear willing to return to the table to negotiate over INSS reforms — and now, more than likely, a panoply of other issues. Though after the last week, it’s likely that whatever comes out of that negotiation next will end up being worse for Nicaragua’s pensioners than Ortega’s original reforms. At least the IMF and the private sector will be pleased.

Of course, that hasn’t ended the conflict, at least not yet — because this was never just about social security, and it has since transformed into a challenge to the very legitimacy of the Ortega administration. It’s largely university students at the forefront of the current phase of protests, not the hundreds of thousands of Nicaraguans that currently receive pension benefits ― some of whom had, at least initially, participated in protests. The US government, has, over the last few years, put millions of dollars into civil society and youth organizations ― many of which have been involved in the current conflict. But that doesn’t exonerate the government and its repressive response, or discredit the protesters and their frustrations with the Ortega administration.

Rather than reforms to social security, what appears to have given life to the incipient protest movement was the overreaction of state security forces. Local human rights organizations report that at least 38 (and up to 63) people have been killed in the last week, including two police officers and at least one journalist who was shot in the head while filming live on Facebook. There have been reports of arbitrary arrests, with beatings doled out behind prison walls. In addition, independent (and often opposition-aligned) news feeds were cut at the height of the tensions. Though little information is currently available about the circumstances surrounding the deaths, it is clear that, as the UN has urged, an independent and in-depth investigation is necessary.

After releasing many of the jailed protesters, allowing independent news feeds back on the air, and withdrawing the social security reforms, even some of the hard-line student groups appear willing to join the church-backed negotiations now — though many are still advocating for Ortega’s resignation, and have pledged to continue the protests. Over the last few days, those protests have reportedly occurred without major incident.

As so frequently happens when protests escalate, it was the response of the government that spurred a broader popular backlash rather than Ortega’s initial action. He only provoked protesters further by resorting to the same half-baked talking points of his Central American neighbor, Honduran president Juan Orlando Hernández, who has faced his own protest movement since his controversial reelection late last year. Hernández consistently refers to the country’s youth who have taken to the streets en masse as “gang-bangers,” “terrorists,” and “infiltrators.” Ortega has done the same. “That just made us even more indignant,” Enma Gutiérrez, a Nicaraguan youth organizer, said to The Times.

But compared to Honduras, state security forces in Nicaragua have largely had a good reputation. As opposed to Central America’s Northern Triangle countries, Nicaragua’s crime rates are relatively low. And unlike their counterparts in El Salvador, Guatemala, and Honduras — allegations of extrajudicial killings at the hands of military and police units in Nicaragua have been few and far between. Until the last week, at least.

Still, though scant international attention has been given to the continuing human rights crisis in neighboring Honduras, the protests in Nicaragua have received widespread coverage — and condemnation. The US withheld any criticism of the role of Honduran state security forces in extrajudicial killings from its annual human rights report, but has strongly condemned the Nicaraguan government and withdrawn families of diplomatic staff — something they didn’t do when the Honduran government declared martial law and deployed the military and live ammunition to repress protests late last year.

While few would argue that Ortega hasn’t overseen a consolidation of political and economic power, the reality is that Ortega also remains perhaps the most popular leader in Central America, according to recent polling. Earlier this year, 54 percent of Nicaraguans approved of Ortega’s leadership, according to Gallup — though the director of the firm cautioned that he felt many Nicaraguans were hesitant to express their true feelings.

But it wouldn’t be hard to see why Ortega has been able to maintain at least near-majority support, despite anger at his consolidation of power. Nicaragua emerged from its civil war as one of the poorest and most unequal societies in the hemisphere, but that is changing. Throughout his 11 years in the presidency, Ortega has overseen a dramatic economic turnaround. And far from the “Marxist revolutionary” that sent Reaganites into fits in the ‘80s, and spooked the markets in the aughts, Ortega has worked closely with the local private sector and with international lenders like the International Monetary Fund.

Since 2006, Nicaragua’s per-capita GDP has increased by 38 percent — more than in Costa Rica, Guatemala, El Salvador, or Honduras. Inequality too is lower in Nicaragua than any of those other countries, save El Salvador. Poverty has been cut nearly in half, according to World Bank data, from 48 percent to 25 percent. That brings Nicaragua far closer to Costa Rica (20 percent), than Honduras (over 60 percent).

Ortega’s alliance with the private sector — and a legacy of lingering conflicts between factions of Sandinistas — has always been a source of tension and discord among Nicaragua’s left. But many of those groups supporting the protests today would prefer to see a more draconian reform to social security, more in line with what the IMF has recommended. That’s not very revolutionary either.

In the meantime, it’s little surprise that the protests have garnered so much media attention. Unlike the US-allied strongman in Honduras, Ortega has been a public enemy of the United States for forty years, and remains in the crosshairs of Trump’s hawkish foreign policy team and many US lawmakers. For months, there has been movement in the US Congress to pass the NICA Act, a piece of legislation designed to inflict economic hardship on the people of Nicaragua by having the US vote against multilateral development loans. Already, opportunistic voices are using the protests to encourage the bill’s approval.

There are plenty of reasons to criticize the Ortega administration, particularly following deadly repression by state security forces over the past week. And there is no doubt that student protesters, or anyone willing to take to the streets to have their voices heard, should be allowed to do so peacefully. But conflating all of the world’s grievances with Ortega, without further analysis of the issues or motivations, into one movement — a movement destined to overthrow a “dictatorship”— doesn’t do anybody any favors. Except maybe for those who would like to see a more neoliberal economic reform agenda imposed on the Nicaraguan people.


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