Interview with Dr. Antenor Rosales Bolaños, President Central Bank of Nicaragua

Tortilla con Sal, July 22nd 2011

Tortilla con Sal : Dr. Rosales, can you give us a brief account of ALBA's importance for Nicaragua's economy?

Dr. Antenor Rosales Bolaños : There's no question that any analysis of the Nicaraguan economy has to take the Bolivarian Alliance of the Americas into account in the sense that it's fundamental for a country like Nicaragua in the development of social and economic programmes. We have to remember that prior to the current government of reconciliation and national unity, in Nicaragua we were unable to generate the energy the country needed for production. Nor, of course, did we have the capacity to generate the energy needed by the population in general.

In 2007 one can clearly see that as a result of ALBA, Nicaragua began a process that would ensure the production of energy so as to make the notorious power cuts that were a feature in Nicaragua a thing of the past under the government of reconciliation and national unity. No economy can sustain itself let alone grow without the capacity to generate and distribute energy developed throughout the country and especially in the regions, areas and sectors of the economy that need it most. That's the first point to make , the transcendent role of ALBA in Nicaragua in the generation of the energy needed for production. It is an element we cannot avoid stressing from the outset of any analysis.

Next we have to point out that ALBA has been decisive in enabling us to meet one of the central  formulations of Nicaragua's trade policy. Nicaragua's trade policy is based on the need to increase our exports given that we have an agro-export model subject to and influenced by the limitations characteristic of a country like Nicaragua. A small economy. A vulnerable economy. An economy without natural energy resources.

We depend on oil. To date we do not produce oil. So for the export development model which has been the path taken by Nicaragua to achieve its current levels, the impact of trade is decisive. Self-evidently, ALBA and especially Venezuela in this context have played a fundamental role, because it has now established itself as Nicaragua's second export market.

Historically, up until 2006, Nicaragua's principal market used to be Central America, but with the Free Trade Agreement with the United States and with the arrival of the Bolivarian Alliance of the Americas, our reality is different. The United States is the first market for Nicaraguan products but the second market, growing substantially, is Venezuela.

In this way, we are meeting one of the central elements of Nicaragua's trade policy, market diversification. And, before, we depended a great deal on the Central American market and the United States market. Now, we are talking about the United States market, the Venezuelan market, the Central American market, the Russian market to which we are exporting meat and where we are interested in developing agricultural investment projects , in cacao for example. And there is the Agreement of Association with the European Union.

Thus, it's clear that with ALBA this expression of the national interest, the opening up of new markets, has been realised and of course the opening up of the supply of new products to overseas markets. If you recall, we have typically exported cattle and coffee. With ALBA now, a new market has opened, but also new products, for example black beans, which were not part of Nicaragua's export production. Given the demand in Venezuela, the demand in that ALBA member country, Nicaragua funds the production of black beans for export to the Venezuelan market.

Both from the point of view of energy generation and from the point of view of trade and of the supply of oil guaranteed under Petrocaribe, the vision of ALBA has been decisive in driving economic planning without forgetting or understating the importance of ALBA's development cooperation on social programs in Nicaragua promoted by our government of reconciliation and national unity.

TcS :  Would it be true to say that ALBA has managed to solve definitively some of the Nicaraguan economy's basic structural problems?

Antenor Rosales : The supply of oil from Venezuela, a member of ALBA, within the Petrocaribe framework, has been vital to develop the social and economic program of this government. We ought to remember that via Petrocaribe Venezuela supplies us with 10,000 barrels of oil a day. Obviously that has a direct impact on the national economy because Nicaragua is still not able to generate energy with other kinds of resources that would allow us to develop Nicaragua's complete productive capacity. We have the potential to produce wind power, hydroelectric power taking advantage of our water resources, geothermal power from the range of volcanoes in Nicaragua and obviously oil based power.

As we change Nicaragua's energy generating base, oil supply from Venezuela will continue being decisive for any government in Nicaragua. It is impossible to imagine a government in Nicaragua that would not have a relationship with Venezuela, self-evidently within the ALBA framework,  that would allow that supply of oil which supersedes the agreement of earlier decades known as the San José Pact under which Mexico and Venezuela supplied Central American coutnries with oil under certain conditions.

So that supply of oil guaranteed by Venezuela, a member country of ALBA along with Nicaragua, along with the Nicaragua's exports and the fact that Venezuela has become our second export market have been crucial in achieving the national economy's levels of growth. Remember we have had growth of around 4% and last year of 4.5% in our gross domestic product, basically thanks to the policies of the Nicaraguan government together with the full participation of the private sector  which has led to growth in Nicaraguan exports and especially agriculture related exports without forgetting manufacturing exports.

But it is obvious that the sale of cattle, of meat, of milk, of sea foods, of gold have all turned Nicaragua's agro-export model into a vital factor that has lessened the effects of the international economic crisis felt in all the countries of the world and especially in our region. We can see that in 2009 which was the most complicated point of the international economic crisis, the drop in Nicaragua's economy was only 1.5%, much less than occurred in other Central American countries. There's no doubt that would have been much harder to contain in Nicaragua if the power cuts that affected Nicaragua before this government of reconciliation and national unity had continued.

TcS: What effect has ALBA had on employment and other factors important in the country's economic development?

Antenor Rosales: Employment is of great importance in analysing the economic situation of a society, particularly in a country like Nicaragua. Here, in Nicaragua's case, we have to make some important observations. The data clearly reflect that we have had growth in the formal employment register. I'm referring to the register of people insured by Nicaragua's Social Security Institute.

That growth definitely shows a rise towards having 574,000 people registered in our Social Security Institute and when we look at particular sectors like the Free Trade Zones in “007 we had 90,000 people employed that diminished through 2008 and recovered slowly through 2009 up to the current levels that we have in 2010 and 2011. That gives us an idea, a panorama of how the political economy of the government has developed the formal employment sector of the economy which has meant an increase in the number of registered employed.

But that isn't the complete reality of employment in Nicaragua. Because if we look at the figures, we can see that the agricultural sector in Nicaragua ha had export growth of 30% a year. But, when productivity levels have not changed greatly, for that export growth to be credible in terms of production volumes without increased employment is difficult to explain.

What's happening is that the employment generated by that agro-export model which has empowered the productive capacity of the agricultural sector  is employment that will not necessarily show up in the Social Security data and it is a challenge that we Nicaraguans have in that agricultural sector where it is obvious that there has been an increase in employment but which is not reflected in the formal employment numbers registered in the Social Security Institute

But without any doubt, the finance for raising meat production in Nicaragua, milk production, production of black beans, peanuts and all Nicaragua's export drive have a direct impact on employment which as I have explained and as I insist is clear from the formal employment figures but is not reflected in other figures, those of people not registered and it is obvious that there has also been an increase in the number of people in Nicaragua's labour force.

TcS : Can you comment on opposition attacks against ALBA in Nicaragua  in terms of regulation on the use of resources and of welfare-ism?

Here the important thing for the Central Bank  has been the concrete pressure for accountability by any government to its citizens and I think it is not particularly difficult for people to access our Central Bank web site where they can find all the information relating to ALBA's development cooperation. Here we have to remember that Nicaragua has an agreement with the International Monetary Fund, the policeman of the world's economy and that in agreement with the IMF we here in Nicaragua have said there is no difficulty at all in making public the use of ALBA's development cooperation and that didn't happen before. In the last two years we have been giving twice-yearly reports on the ALBA resources and how they are used.

Nor can we in Nicaragua's government of reconciliation and national unity forget that control mechanisms exist in Venezuela as well. ALBA and its presence in Nicaragua are not  a matter of    discretionality for Nicaraguan officials. They are subject to the relevant Venezuelan law. In the case of Nicaraguan bodies participating in economically productive programmes or social-productive programmes and social programmes funded by ALBA in Nicaragua, they are obliged to make reports of their financial situation and balance sheets. Furthermore, the latest commitment  with the IMF is for Nicaraguan cooperatives, and people know which organization that points to, to publish in the best form possible, periodic and thorough current financial information on those bodies.

We are going to implement a rule via the relevant body, in this case the Institute that regulates Nicaragua's cooperatives, whereby the financial results, the income and expenditure accounts and the balance sheet of the cooperatives have to be made public for citizens to review. And that has to be done because we are working with a project that is neither a donation nor a private foundation doling out resources to the most needy sectors in Nicaragua. A policy of assistance does exist, but that is different.

One is talking there about looking after those who require help immediately, either from the government or from those ALBA projects. I'm talking about programmes for children, about mother and infant programmes, which are clearly assistencial to the extent that they address realities in this country, in our society. So the State via its main instrument, the National Budget, or with programmes of this kind, promotes them to help the most needy.

But the general concept as to the use or the objective of the resources made available by ALBA or by Nicaraguan social and productive programmes and projects is to turn those who receive that funding into economic agents. It's not a question of giving people a chicken or a cow or a pig to eat so that rural people have food.

It is a programme fundamentally aimed at women in Nicaragua, many single mothers and at the rural family sector who thanks to their particular experience and the characteristics of rural families in Nicaragua can develop production sufficient to meet their own consumption by means of a Productive Bonus promoted by the government. They can turn into economic agents developing pork and egg production and the sale of milk from the cows they receive.

The concept is not, “take this so you have something to eat” but rather “ take this so you can produce and eat in a way that's self-sufficient”. But in no way can it be said that this government of reconciliation and national unity has an assistencialist policy in general. There is a policy of support for the most needy. That's obvious and clear. But generally, the policy is to integrate broad sectors of Nicaraguan society, above all in rural areas, as economic agents. And the experience we have had tells us that this is yielding results.

In some ways it has been successful and in other ways obviously there have been failures because we cannot say that every project promoted by a government, whether or not it's a revolutionary government, is going to be successful. Any government is going to have successful policies and also policies that fail. And within those same successful projects, some sectors will work successfully and others won't. They are policies that through the life of their implementation are overcome difficulties and correct mistakes. These projects are formulated and reformulated along the way so as to achieve the most strategic objectives which in this case is the incorporation into productive life of Nicaraguan women and rural families.

I think it is vital to reduce poverty levels. This government of reconciliation and national unity does not believe just doling things out is going to end poverty in Nicaragua. It is handing over the tools that will allow the most vulnerable sectors and I should use the term excluded, because they were not born into that position of vulnerability of their own free will. The system excluded them. A model was developed that did not allow them to integrate as economc agents which is what we are interested in along with a vision of sustainability.

TcS  How basic is it for ALBA's development to achieve a redistribution of wealth and resources?


Antenor Rosales : I understand the ALBA projects as projects that generate wealth, that generate production so as to allow the integration of people who were not always given the chance to be productive for lack of technical assistance, for lack of land, or through not having secure title to their property or for lack of credit. Because we have to say that a high percentage of coffee production in Nicaragua for example, one of the most sensitive export products is in the hands of small and medium sized producers. And from where do the big cattle wholesalers get their bullocks to fatten? Is it not from the small and medium sized cattle farmers?

So here we are faced with projects that are aimed at generating wealth, but not a concentrated wealth but rather a wealth spread out among the greatest possible number of actors in a given sector, agriculture for example, helping them realize their productive capacity with the precise aim  of achieving a redistribution of the national wealth but not by stripping it away from someone to give to someone else. Rather by from the outset ensuring that everyone, or as many people as possible are productive and in that way via paying our taxes, by good use of contracts, by creating employment we can develop a Nicaragua in which the levels of poverty and extreme poverty are reduced as far as possible.

TcS : What vision do you and your colleagues have for ALBA's development in the region, for example the role of the Bank of ALBA?

Antenor Rosales: The first thing to say on that is that the ALBA Bank is one example of ALBA's move towards creating a financial architecture responsive to the needs of the Latin American peoples. The Bank of ALBA is one component but other components exist like the Single System for Regional Compensation Payments and also the well known but little explained supranational companies which are all parts of ALBA alongside, of course, the Bank of ALBA.

Because we have a supranational company called ALBA-Medicines which will buy medicines at the better prices  that could the individual countries that make up ALBA. We have a supranational company  linked to transport, air transport as well as sea transport. These are ideas that ALBA has steadily been turning into reality.

The Bank of ALBA was one of the first expressions of this new financial architecture that LABA has tried to develop, but let's focus if you will on some of the projects. We fund two types of projects via the Bank of ALBA. Projects with loans and projects with grants. Among the projects funded by loans you have ALBA-Medicines and another supranational company, ALBA-Education. Here the Bank of ALBA funds projects with grants. But other supranational companies we fund with loans, for example, ALBA-Telecommunications, ALBA-Environment, ALBA-Transport, ALBA-Energy.

What level will these projects and this financial architecture that ALBA seeks to develop reach? It's going to develop to the extent that ALBA itself develops and consolidates. If ALBA's development remains weak then that architecture is not going to reach the specifications required. If ALBA grows stronger you can rest assured that ALBA's financial expression will make qualitative leaps because while it's true ALBA has its bank, but is there an ALBA-Insurer?

We need an insurance company because with the creation of supranational companies you're going to have trade, you're going to have a merchant marine, you're going to have markets moving goods from one country to another. But who is going to insure that merchandise on the move? The existing insurance companies?

In that case one would be working with a mixed financial architecture and obviously ALBA does not want that. So we have some way to go still. For example, the ratings agencies. ALBA needs ratings agencies, insurance companies, the Bank, which exists. ALBA needs logistical capacity for transport.

I should highlight here that without the ALBA Bank, developing these projects would be impossible. And that Bank is working and is making progress. It is present in all the ALBA countries. Cuba already has a branch open. In Nicaragua we do not, yet. We have to wait for a decision by the Ministerial Council of the ALBA Bank.

Three months ago the Ministerial Council met and I was able to take part to evaluate the balance sheet for 2010 and the budget for 2011. In any case, the Bank of ALBA is the way ALBA is going to develop a new international financial architecture and right now is working to finance projects with loans and with grants and to develop the supranational companies


TcS : Certain sectors of Nicaragua's left wing political opposition have criticised the government for depending too much on the IMF. Can you comment?

Antenor Rosales : Firstly, you should not forget that we are members of the International Monetary Fund. In our case we have a programme with the Fund. The United States is also a member of the Fund, but does not have a programme with the FUND. We are part of the International Monetary Fund and we are in the Board of the Fund with a shared place along with Mexico, Spain, Venezuela and Central America.

We are part of the Fund. We demand more participation in the Fund. That is why we backed the candidacy of the President of Mexico's Central Bank, Agustín Carstens to be Director General of the Fund. Because within the Fund we demand greater weight for the economies that were not founders of the Fund when it began.

We have a programme with the Fund because we are convinced that it is important for the world in general to know that Nicaragua has truly responsible policies at a macroeconomic and monetary level, and in terms of our exchange rate and taxation. We should not forget that when we undertook a programme with the Fund it was because we had worked out a financial and economic programme for Nicaragua. And we put it to them, “This is what we have come up with now let's discuss a programme...” and at the time it was called a programme to Service Growth and Poverty Reduction and now is called a Programme to Service Broader Credit.

And what this programme with the International Monetary Funds means is that investors do not have to engage in extensive research to discover how Nicaragua behaves in terms of financial adn monetary stability and it summarizes what the international financial and economic community are saying about Nicaragua.

And what do they say about Nicaragua? They say Nicaragua has a prudent tax policy, that we are a society, a State, a government which while clearly favouring disadvantaged sectors of its society is well aware that investment, and national productive capacity is all that will permit employment growth, income redistribution and poverty reduction.

So it is not that we are pet pupils of the International Monetary Fund. What we are is a government committed to the economic growth necessary as a basic and indispensable requirement necessary for Nicaragua to make progress not just in terms of democracy, freedom and respect for human rights. But also to make progress in terms of material prosperity which is impossibnle to achieve with high levels of poverty.