Latin Analysis: Is Nicaragua’s Dictatorship Fueling its Economic Growth?
Kajdi Szabolcs
Despite being widely considered one of the poorest countries in the Western Hemisphere, Nicaragua’s economy has recently been described as “robust” by an IMF report. This is due to a notable improvement in GDP growth, increasing from around 3.8 per cent in 2022 to 4.5 per cent at the end of 2023/beginning of 2024. According to the IMF, this positive economic development has been largely influenced by successful macroeconomic policy, as well as increased remittances from abroad. Inflation has declined, as has the public debt to GDP ratio. This has helped reduce poverty, with rates estimated to have dropped from 13.1 per cent in 2022 to 12.5 per cent in 2023. This economic growth could easily give the impression to outsiders that the situation in Nicaragua is stable. However, many believe this upward trend has been fueled by dictatorship, with remittances from those who have fled or been exiled keeping the economy afloat while President Daniel Ortega maintains his iron-grip.
According to the World Bank, Nicaragua has recently shown “strong macroeconomic management with a prudent fiscal approach that supported the accumulation of gross international reserves”. GDP growth is thought to have been mainly triggered by high domestic private demand and increased exports but has also coincided with high levels of foreign direct investment, approximately 7.3 per cent of GDP. However, 9.6 per cent of GDP during this period of growth between 2010-2017 was attributed to remittances, which have reached unprecedented levels in the last few years.
This reached a record high in 2023, with remittances accounting for $4.66 billion or 29.7 per cent of GDP. Remittances were meant to reach around 28 per cent of GDP by the end of 2023, double that recorded in 2021. These payments are largely coming from the United States, with around “[t]hree out of every four dollars that came from family remittances in 2022 originated in the United States, followed by Costa Rica and Spain”. However, this phenomenon is not seemingly a region wide trend- with remittances declining in Cuba, despite them having a similar number of exiles. This increase in remittance payments to Nicaragua has become a key pillar of the nation’s economic growth. But what is fueling this upward trend?
Main sources of Remittance Payments to Nicaragua in November 2023 (Millions US$)
Since 2018, over 900,000 people out of Nicaragua's six million population have left the country, leaving “almost every family” with a missing loved one. According to a study from November 2023, around half of the population want to leave, with 23 per cent considering “themselves “very prepared” to emigrate.” This mass exodus of Nicaraguans from their home has been largely fueled by the increasingly repressive regime under Daniel Ortega and his vice president – and wife- Rosario Murillo.
Despite leading the left-wing Sandinista revolution in the 1970s and bringing down the dictatorial regime, Daniel Ortega has now become an oppressive political figure in his own right. He first became president in 1984, and after subsequent election defeats and a political rebrand, he retook power again in 2006. Since then, he has managed to dismantle democratic power structures to consolidate his position. He removed presidential term limits and made constitutional changes, allowing him to seek re-election in 2009, 2016 and 2021. Over forty years since he was first elected president, and set to rule Nicaragua until at least 2027, Ortega has made a name for himself as one of the longest serving leaders in the Americas, or as some would see it, one of the longest surviving dictators in the region.
Despite a long history of authoritarian rule, this recent mass exodus of Nicaraguans from their home can be traced back to April 18, 2018. On that day, Ortega’s regime announced a five per cent cut to social security pensions, as well as increased taxes, provoking mass discontent within Nicaragua (despite these policies having the backing of the IMF and World Bank). This was largely due to the fact that “a decrease in the monthly retirement pension and tax increases would have likely pushed many families deeper into poverty.” Protests erupted, and the Movimiento del 19 de abril (April 19th Movement) was born. The government’s response was instantaneous, “police officers used excessive force to shut down demonstrations in several places across the country and […] pro-government groups attacked peaceful protesters.” There were also reports of cyber-attacks on news outlets as well as assaults on journalists reporting on the protests. The days and weeks that followed were characterized by violent clashes between security forces and anti-government protestors. This had a high human cost; it is estimated that between April 18 and July 30, around 317 people lost their lives, twenty-one of whom were police officers, as well as twenty-three children and young people.
Despite widespread condemnation from the international community of the violence, this was unfortunately not the end of the Ortega government. His grip over public life only tightened, further consolidating his power. A government crackdown on Ortega’s political opponents and critics in the period leading up to the November 2021 election triggered yet another wave of mass migration. This event was reportedly "far more impactful in driving emigration,” as the election—widely considered rigged—marked the beginning of Ortega’s fourth consecutive (and fifth overall) presidential term. His party gained a supermajority in the National Assembly, leading to the United States and European Union imposing sanctions.
Then, Ortega proposed another constitutional change to “expand presidential powers and limit fundamental rights” which included creating a ‘co-presidency’ with his wife. This essentially gave the couple a monopoly over governmental processes, providing them with legal protection against the human rights abuses perpetrated under their leadership. These include the expulsion of political prisoners and stripping them of their Nicaraguan nationality, leaving them stateless. 450 people have been victim of this since February 2023, with 135 political prisoners being forcibly sent to Guatemala in September 2024 alone. The constitutional code has been amended to allow for citizens to be prosecuted of crimes in absentia, which could lead the way for targeting exiled Nicaraguans. Criticizing or standing against the government in any capacity can leave you open to criminal penalties. Thousands of NGOs have been shut down, accounting for around 80 per cent of the total number of these agencies operating in Nicaragua. Journalists are fleeing at alarming rates, scared of what the government will do to them if they stay, while indigenous, afro-descendent and religious groups suffer acute oppression.
“The kinds of reasons that people have been giving for fleeing are the fear of losing their lives, being attacked or kidnapped by paramilitary groups,”Elizabeth throssell
Thanks to the mass emigration of Nicaraguans escaping dictatorship, remittance payments have increased significantly. This is thought to have greatly contributed to Nicaragua’s recent robust economic growth. However, generally, this significant loss of citizens has had serious consequences for this nation of less than seven million people. The demographics of the migrants have shifted over the last few years, with more well-educated Nicaraguans leaving the country in recent times. This has led to a notable ‘brain drain’, “depriving the country not only of political leaders but also all manner of intellectuals, artists, and academics.” If Ortega’s regime is allowed to continue operating in this way, Nicaragua could soon find itself in a situation where there is no one left in the country to save them from dictatorship. Also, remittance payments are reportedly set to drop, leaving Nicaragua’s economy vulnerable to both changing international contexts and the increasingly oppressive domestic political situation.
