|
Nicaragua Privatization and the Private Sector
To win the February 1990 election, Violeta Barrios de
Chamorro promised to represent all sectors of Nicaraguan
society,
including the small but powerful private sector with which
she
was closely identified. Nicaragua's private sector, mostly
organized under the Superior Council of Private Enterprise
(Consejo Superior de la Empresa Privada--Cosep), was
instrumental
in President Ortega's electoral defeat. Private industry
had
suffered heavy losses during the struggle to overthrow the
Somoza
regime and then fared even worse during the decade-long
administration of the Sandinistas.
Nicaragua's private sector also was gravely affected by
the
five-year United States trade embargo directed at
destabilizing
the government of President Ortega. One year after the
trade
embargo began in 1986, the government had already shifted
much of
its economy away from dependence on trade with the United
States.
The private sector, which in 1985 produced 56 percent of
the GDP
and 62 percent of Nicaragua's most important exports,
suffered
from diminished credit and from cost increases and delays
for
essential supplies.
The private sector had led the political and military
opposition to the Sandinista government. By election day
1990,
the Nicaraguan private sector held high expectations that
it
would benefit from a change in government and that it
would be
compensated for the injustices it felt it had suffered
during the
Sandinista years. Privately owned factories and land had
been
confiscated, abandoned, or shuttered or had suffered war
damage
during the Sandinista era. Private industry looked to
exercise
the political and economic power it had enjoyed under the
Somoza
administrations. The private sector also hoped for a
return of
nationalized property and privatization of government
assets
still dominated by representatives of the Sandinista
government.
In some cases, rehabilitation of the factories and
firms
required only reactivation of idle capacity; other assets,
however, including both agricultural and industrial
machinery,
had frequently deteriorated beyond repair. In some cases,
assets
had been deliberately destroyed or sold. Much of the
Nicaraguan
private sector remained on the sidelines in 1990, waiting
for the
government to lure it with promises of security for its
investments and of repair of private property at public
expense.
The Nicaraguan industrial sector showed only a mild 3
percent
recovery by the end of 1990, mostly as the result of
renewed
access to overseas markets
(see
fig. 10). Threats of urban
labor
unrest, renewed hostilities in the countryside, poor
infrastructure, political tensions, and delays in passage
of
property laws returning private property to previous
owners
continued to discourage most investment. A leery and still
belligerent private sector stood ready to turn its
political
struggle against the new Chamorro government and to do
battle
with labor unions and other groups identified with the
Sandinista
revolution.
In 1990 the government initiated a privatization effort
to
transfer more than 100 of Nicaragua's 350 state-owned
companies
to private ownership. The process included the outright
sale,
devolution, or liquidation of assets. The government
holding
company established to privatize state-owned assets
initially
identified forty companies to be sold within six months
and an
additional fifty to be returned to their previous owners
or
liquidated at a later date. Industrial workers would later
negotiate retaining 25 percent ownership of enterprises
sold,
based on a claim of value added, or "sweat equity," during
the
Sandinista period.
State-owned enterprises contributed about 40 percent of
the
gross national product
(GNP--see Glossary)
in 1991. Most
state- owned enterprises were former Somoza properties, although
some
had been confiscated under agrarian reform from absentee
owners
or from the Contras (short for
contrarevolucionario--see Glossary).
The government also agreed to give back 50,000
hectares of fifty-six rural properties provided that
owners pay
for improvements made during the revolution. Another
70,000
hectares went to workers, former army officers, and
demobilized
Contras.
By mid-1992, the government of Nicaragua had also
returned
two slaughterhouses to their previous owners and sold a
third.
The government privatization company tendered bids for the
administration of two of the largest shrimp processing
plants in
the country, one located in Corn Island and the other in
Bluefields. A bid was also sought for the sale of a ship
manufacturing and maintenance plant in Bluefields.
Data as of December 1993
|
