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An interview with Alberto Guevara, Nicaragua's Finance Minister
Daniel Ortega's government has received much criticism in the national press in relation to high prices and an accelerating inflation rate that reached almost 12% in the first six months of 2008. Unfavourable comparisons are made with other countries and it has also been suggested the ALBA programmes have contributed to high inflation. At the end of July, Tortilla con Sal spoke to Nicaragua's Finance Minister about inflation in the country.
TcS : Can you give us a panorama of the main factors affecting inflation in Nicaragua?
AG : Talking about inflation is to talk about something composed of various things. There are internal components and aspects of an international character that affect a small, open economy, highly dependent on the external sector. So that is the first thing to evaluate when we are talking about Nicaragua and the Central American region. All of us are subject to the damaging effects of the increase in international prices of products that have a direct impact on national production and on the results of that production. In first place is the crisis in energy which is having a strong impact on our economies.
And it is useful, when we are talking about inflation to try and establish the differences that exist in the way processes are worked out in Nicaragua and how they are worked out in, for example, El Salvador. Because patterns do exist which if we break them down can show us that there are differences and that these cause different impacts, necessarily, in the case of oil. In Nicaragua, the energy framework is weighted 80% towards oil consumption. In other words, we depend 80% on oil. So therefore the shock for us is absolutely greater than for El Salvador which depends on oil for barely 38% or 40% Sometimes people want to draw comparisons without taking these realities into account.
There's another aspect for example, that is very important to consider and that is the exchange rate. El Salvador is dollarized and so the inflation trajectory in El Salvador is going to be more in line with the inflation trajectory internationally in those countries that use the dollar as their currency of reference. While we have a sliding devaluation which is at 20 córdobas to the dollar, not at one to one. That also has an important inflationary effect.
And a third thing that I think is important to consider has to do with how the parameters are measures that help us to calculate inflation in the country. I am talking about the basket of the Consumer Price Index. So here the weighting of food products in Nicaragua is almost 45%. In Honduras, the weighting for food products is about 35%. In Costa Rica it is somewhere under 30%. So that international rise in food prices has also had a domestic impact, given the weighting that it has in the make up of our prices.
So the boom in oil prices is a very important cause. It is a tragedy for our countries. To give you a figure that I think might help prick the world's conscience as regards the tragedy we are living through, 70% of our exports go to pay the oil bill. Here practically nothing is left to invest in social programmes or in economic or social development. Oil is eating up our economies. Oil is eating up our highways.
The contracts we were undertaking with the World Bank, the Inter-American Bank or whoever it may be, in order to build a highway of 300 kilometres, let's say, today with the increase in oil prices and its impact, because it is a universal cost, now we can only build perhaps 150 kilometres and that's if we act right now and that is something becoming constant. Because there's a cycle in the process of appraising highways. We have to invite bids and when we invite bids we have to go with amounts that we already know are below the real cost and so the contracts will end up being declared void.
And every day that passes with that increase in the oil price, that tragedy going on in the world right now, I think the developed world could give a response. I think that if there were a consensus between everyone about what is the reality of oil then oil could not be subject to the volatility of financial bubbles. It could not be subject to future prices. It could not be subject to countries' individual policies because oil has to do with the very life of the planet.
So that is a powerful reason why inflation is being generated in the world. Really not a single country has escaped, not even the developed countries. I just came back from the Untied States and there the price of fuel for vehicles is higher than we have here. It is something that shows we really are seeing a shock.
There are other reasons that have to do with inflation and that has to do with the structural aspects of our economy. We have prices that are structurally high. For example, investment costs, interest rates are structurally high in our countries. Because it is difficult to resort to the international market to get resources to finance and set up production or investments in our countries, because , as well as the normal cost they apply country risk factors or some other factor in such a way that makes those rates structurally high here. And it has to do too with the poor development of our financial system. All that together also makes it harder for us to produce competitively with an overall impact that might keep inflation to a minimum.
There are other reasons, that I think our countries have been steadily eliminating. For example, Nicaragua has been subjected to structural adjustment policies for about 17 years. That does not cause us to generate inflation via an excess in money supply. Nor does it lead us to generate inflation via fiscal imbalances. No. Because we are very adjusted. And now, at a time when we really are beginning to have some success in our macroeconomic programmes, we are beginning to be affected by external factors that are leaving our countries without any fiscal capacity.
But that's not the only problem. The problem is the lack of any real coordinated response from the international financial organizations that are working with us to maintain macro-economic stability at any cost. Because there are no new resources. There are no new cash resources we can make use of so as also to exploit the advantages that accrue from an increase in world food prices when our countries are food producers. We are net food producers. Theoretically, we ought to be able to take advantage of this kind of situation and we cannot.
We are just about on target to increase food production so as to avoid famine in our countries. And in Nicaragua, since we have a successful revolution here, we are talking about managing to reach maximum production of basic grains, of beans, of rice, of products that are a useful part of the basic basket of products in Nicaragua, but also we are thinking of people in Central America because we think in terms of joint projects, of regional projects. Projects in which all of us together seek how best to face our problems. And there the quality of any responses we get is really important. We have not met with totally satisfactory responses in those we have got from the international financial organizations so far.
So the result of all this is that the fundamental balances in our countries deteriorate and that could lead us towards potentially greater risks of inflation despite the fact that we are working to try and eliminate all the collateral elements, working on all those aspects that from the point of view of government policies, the politics of the State might serve to weaken the impact of those risks.
Thank goodness those impacts are not too bad yet, because we have made progress on policy. We are negotiating directly with producers so as to reach agreements jointly with them that permit us to keep costs as low as possible. And we are eliminating some tariffs for them on raw materials that are vital for producing bread for example or other things vital for people's survival. That is the context we are in. It is a very inflationary context.
TcS : What weight within that inflationary context does it have - I think it was in March 2006 that the US Federal Reserve stopped publishing figures of M3 and since then various independent analysts have calculated that right now the supply of money and credit in the US is up around a range of 16% to 20% -what weight does that have for the inflationary context here in Central America?
AG : Well, that's an issue that has a direct impact. The reality is that Central America's biggest trade partner is the United States. So it is simple when we know who is that fundamental trade and economic partner using the Stopler-Samuelson theorem we can easily work out that any policy action in the United States is going to have a big impact on our economies. Only in our economies the effect will be an inverse one. It is an old saying that when the United States catches a minor cold then here we end up with pneumonia. That is the reality.
So the fact that the dollar is weakening in the world is a reflection that the argument being made about an excess amount of dollar liquidity in the world cold be showing up when you look at the dollar in relation to tradeable currencies that are equally important in the financial world like the Euro or the Japanese Yen. We are going to find that the dollar is losing influence, losing strength against the Euro. Now it is not just two or three points like it more or less was when we started. There the gap now is 40 or 50 per cent an unbridgeable gap in monetary and financial terms that is creating a very serious situation in our countries.
For example simply to fund our European embassies from the budget just from the point of view of prices is becoming unmanageable for us. We have had to seek ways of adjusting salaries, rents, the necessary operating costs of our embassies and that has immediately increased dramatically, not by two or three per cent but by forty or fifty per cent. Not that we are making improvements. That is barely to keep up previous spending levels. On the one hand.
On the other hand, the problem we have is that all our trade on average is in hard North American cash, in dollars and so it happens that the dollar loses force in the international context and turns into weak money for us. Because I cannot go and buy much in Europe with those dollars. Those dollars turn into 75 cents Euro on me. Now I cannot buy what I bought before that situation arose.
So that makes a heavy load for us in our foreign accounts, it affects our exchange system and affects it fundamentally in an inflationary way. Because United States inflation is one of the components of domestic inflation in countries highly dependent on their foreign trade and more so than ever if we are trade partners with the United States. So whatever happens to the dollar had an immediate impact on our countries. We are beginning to have difficulty channeling investment from other countries, from Europe for example. If I want to bring a tractor from Europe it no longer costs me the same dollar per Euro. It is simply much dearer.
But furthermore, the problem of weakness in the North American currency is what is leading the United States to take domestic policy action that also works against the possibilities for our markets to enter the North American market. For example, faced with the mortgage crisis they have produced billions of dollars to try and resolve their domestic situation. And that turns into a shower of dollars falling into our countries and creates problems for our exchange rate and fundamentally for our export competitiveness.
The terms of trade turn very difficult for our countries in conditions where we have neither candle, nor burial. We become simply passive receivers of that kind of policy. Right now, for example, the solution to the North American crisis is still not clear, the housing crisis, the financial crisis. And the responses the US government is offering are right for the US government, for the US people, in the sense that they are expanding budgetary spending. They are producing resources from wherever they have them and increasing internal spending to try and sustain more or less stable conditions but they have not been able to do so.
There is a crisis situation for North American workers who are being dismissed by the thousand. There is a crisis situation in the supply of some products and all that immediately turns into a problem for our economies because when they are dismissing even North American workers, there is that much less opportunity for emigrants from our region who represent a flow of important remittances for our economies. Opportunities for them are just diminishing or else they are turning to less well paid economic activities or else simply disappearing from the North American job market.
The same is happening in Europe and all that creates pressure on us because a significant part of the resources that come in the form of family remittances serves to give our countries financial and monetary stability. Those remittances turn into a monetary tool that strengthens our reserves and allows us to maintain a dynamic internal economy. But in the measure that starts to diminish then it generates a scarcity of reserves. That translates into a shortage of cash in people's hands and that immediately affects price levels.
In effect, the North American crisis, that still has no sign of a solution, no one up to now has been able to show me that we in fact know for sure when it will end, that crisis is rather like a dark night where one still sees no light at the end of the tunnel. There is no way out. No possibilities present themselves. That leads our countries to have to make adjustments. And that means more unemployment, less production and less budgetary capacity in our countries to fund social projects and all that impacts directly on inflation.
TcS : If one reads or listens to the country's news media, there are various economists who comment on inflation. And one notes a couple of things. One is that they tend to make unfavourable comparisons between Nicaragua and the rest of Central America. And the second is that one notes the lack of concrete proposals on their part to make things better. What's your opinion of the remarks of economists in the media?
AG: When we talk between colleagues we have to talk as colleagues to be consistent. One can't just talk off the top of one's head. When someone talks about inflation they have to have some model in mind because one cannot talk about inflation making it up as one goes along. If one talks about inflation one is dealing with one of the most well analyzed issues. it is one of the most familiar issues. It may well be that inflation is the issue most studied in Nicaragua. So there are plenty of models, methods and ways of measuring things.
What seems to be going on is that sometimes colleagues with a high level of specialization forget fundamentals and they cannot just start talking about comparisons as regards inflation if they do not first lay out what their presuppositions are for arriving at the analysis they end up making. If they are offering a model so it can be seen whether or not it is valid, for example like the model presented by the Central Bank which is published. In other words, we are presenting a model on which we base our inflation analysis, we have a methodology to calculate the Consumer Price Index, one that is scientifically argued and one commonly accepted in all the countries in the region.
We cannot start talking about comparative situations that are not pertinent if they fail to take into account what I was saying to you at the start. Like, what exchange rate those countries have and what exchange rate we have. Or what is the relative weighting or importance of the oil make-up of Nicaragua's economy in relation to other countries. Or what is the weighting that family food consumption in Nicaragua in relation to other countries.
Nicaragua is a country we received after 16 years of neoliberal policies in a dramatic crisis situation with 80% of Nicaraguans living in poverty measured at US$2 per day per family. And when you looked at 50% of families the figure was US$1 a day per family and if you keep on going down then it becomes inhuman. To the extent that I think many of these reactions are less technically based and more intended to maintain a state of anxiety, to create what are called expectations, artificially, something specialists know has a direct impact.
We should all be working so that expectations can be better controlled. But every time someone comes out with one of those headline grabbing analyses that in the end lack any scientific basis or technical basis, they are not offering a serious model recognized as such by some suitably qualified institution. Let them offer that and say, here is my model, these are my presuppositions. This is the Consumer Price Index I am working with. Any other way is impossible and fellow economists know that. So I am loth to criticize them because I respect everyone's point of view but I do want to ask them to be responsible. In fact Daniel Ortega's government is implementing policies that have lessened the possibility of a greater inflationary impact as a result of the current crisis.
TcS : One of the things that puzzles plenty of people who are not economists is that most countries in Central America do not use an official sliding scale for their exchange rate against the dollar. But Nicaragua does. And superficially that makes one think that automatically one is faced with inflation of 5% a year. Can you explain something with regard to that?
AG : The thing is that Nicaragua has a very vulnerable economy. I am not really proud to have to say that we are among the poorest countries in Latin America. That is what the neoliberal model bequeathed us. It is only now with the government of President Daniel Ortega that we are working to try and diminish the impact of the scourge of inflation on the poor. Because inflation strikes the poor hardest, because it is the poor who seek to survive from one day to the next trying to buy something they can take home to their children to their homes. While people with more resources can buy at one go and lessen their costs for a good while. But the poor person cannot. The poor person has to survive from one day to the next.
So what is going on then? Making regional comparisons one necessarily has to start from the deep differences that exist between us. What happens then? The policy of pegging the exchange rate to a clear sliding scale is something that is absolutely correct from the point of view that all the economic actors can be clear about what that exchange rate scale is. In Nicaragua, it continues to work. We have done studies to try and reduce the rate of slippage. But the truth is that taken as a whole the critical national situation does not permit us to reduce the rate because we end up talking about situations that are not in tune with reality.
Practically we have a quasi-dollarized economy. But wages are not dollarized and they are a basic cost of the economic system. So we have that problem that people get paid in córdobas but pay for things at dollarised prices. And that has to do with the system of markets that has been developed for years now in Nicaragua. We continue working under a free market system. But we are putting special emphasis on turning this market into a really fair market. We are stuck with free trade because we have relations with many of the world's countries but we are focusing on that trade being fair.
So for people who want to understand why we continue using a sliding scale exchange rate, it is simply because that system is still valid for us. It continues to work and allows us, for example, very resilient macroeconomic
stability because the main variables that help us assess basic macroeconomic balances are in line with an official annual currency adjustment of 5% at the moment. We have evaluated the possibility of lowering it. But we have not thought about eliminating it because that could lead us to a situation in which the national currency is overvalued and that would be worse. It would be a worse indirect inflationary tax than if one has clear game rules.
TcS : From the point of view of the Finance Ministry what have been the government's key measures to control inflation?
AG : The measures we have been developing in our country since the government of Comandante President Daniel Saavedra Ortega took office have been aimed primarily at maintaining the health of public finances. The public finances are healthy and that is an important achievement that means the rest of the monetary and financial system also stay within an acceptable range of well being. But that fiscal health is characterized mainly by a lack of excess spending without clear funding sources. So any expense has to have its financing clearly defined so as not to create inflationary pressures that are going to affect the poor and we have already noted that inflation affects the poor most of all.
That was also accompanied by what I would call radical savings measures, radical in the sense that for years we struggled to eliminate mega-salaries from the State institutions. Here they were damaging. Some public officials that were earning as much as US$30,000 in just one month. That is something that every time I recall it seems unthinkable to me. It seems to me one of the things that ought to make us consider what kind of conscience these people had about developing policies to defeat poverty.
Here there were individuals earning exorbitant salaries that never in their life would they earn anywhere else in the world. But they were earning them here. So I use the term radical because President Ortega said, this is my salary and everyone else earns less relative to this. And as Finance Minister obeying Daniel's orders, we then applied norms for public officials' salaries leaving them within ranges that were acceptable but very much lower than what previously was earned by the average Minister. That is a very important measure that freed up resources that were assigned straight away to social policies the government was beginning to development that were made up in a first phase of ensuring free education, free health care, food production programmes called Zero Hunger and the funding programme for small business initiatives for poor people in urban areas related to the Zero Usury programme.
So that, plus eliminating the discretionary use of credit cards. Not one public official uses an official credit card. They can use their personal card if they want to, that is not forbidden to anyone. But not one of the State because the resources we have for the budget belong to the people and we cannot misuse them. We have policies and action to reduce public spending on luxury items. Spirits are totally, completely excluded. How can you be buying gallons of the most expensive whisky with public money to celebrate the least little thing? All that has disappeared.
We have cut back the purchase of vehicles only to what is necessary and where we had to we eliminated luxury vehicles for work vehicles, which are the ones we really need. And so on, in that way, with joint action and policy ordered by the President from the very first day he took office, it was my job to implement that and I have not encountered resistance from anybody because the compañeros who are in charge are all revolutionary sandinistas. We all come from that crucible of the Sandinista Popular Revolution.
And so we are committed to a new project, a different project, in which you are going to find aspects of the values intrinsic to human nature, to solidarity, to complementarity to sovereignty, to things that have to do with us not being here to get perquisites but rather to serve the people. All that has gone into public policy so as to cut back the fiscal burden. Now I can tell you for certain that resources reach the poor via programmes that mean they can emerge from poverty through production.
Because we also found numerous projects that generated inflationary pressures,projects supposedly aimed at protecting the most dispossessed but in which more than 40% went on running costs, in consultancies, in studies, in sub-contracts to sub-contracts of services that were the duty of the State to do but which were farmed out to others. And all that did was remove huge resource flows from projects that were operating without delivering anything much to the poor.
All that we have tried to eliminate from a fiscal point of view. But what else have we done? We have ensured a medium term fiscal plan and schedule that is well advanced and structured and which has helped us in our negotiations with the International Monetary Fund, the Inter-American Development Bank, the World Bank, so as to try and articulate a vision of human development that allows us categorically to set a long term horizon for our country. What I am saying simply reflects the vision of Comandante President Daniel Ortega.
From the very first day he told us to use prudent policies from a fiscal point of view, so as to guarantee funding for social policies without endangering financial stability and that is what we have been doing. We have progressively incorporated all these cost-cutting policies so that, assisting the productive sector too via the Tax Office and the Customs Office with tariff and tax policies that reduce the burden on the production of goods that affect the poor directly, we have been able to reduce inflationary pressures.
I want to tell you that in Nicaragua after Hurricane Mitch (in 1998 trans.) inflation took off up to 28% and that was when oil was less than US$50 a barrel. Today, with Hurricane Felix that wrecked all the northern area of Nicaragua's northern Caribbean coast and which is still a tragedy for us, we are channeling resources from everywhere to try and help the indigenous communities, the Miskitos, the Mayagnas, the Sumos, the Ramas, who live in the area so they get basic relief. But note that the thinking is always the same.
We are going to develop Nicaragua on the basis of a model that changes the structure of power to one of citizen's power so that people become the agents of their own development, starting from direct participation in government management and we are doing this because we know that is the most democratic way for the people to go, with us as their assistants, so as to reach a new level of social and economic development in Nicaragua.
TcS : Lately, Minister, you and your colleagues in government have reached an important agreement with the IMF and it looks as though the IMF in general and the other international financial institutions that affect the economic life of the country seem very satisfied with the government's achievements, do you think that is an accurate observation?
AG : I have to say that from the moment we in the Sandinista Front and the Nicaragua Triumphs Alliance offered a programme of government to the people, we laid out the basic points for our government. And on that basis we developed Nicaragua's economic and financial programme and from that we implemented economic and financial programmes with the IMF. In other words, all that we are doing is not done to satisfy the IMF or the World Bank or the Inter-American Development Bank of the Central American Bank for Economic Integration. Everything we are doing is because we understand what we must do to give impoverished people in Nicaragua a chance to escape from poverty.
And we know very well that if we do not have economic stability, if we do not manage to have a good environment to attract investment, if we do not manage to channel initiatives to generate employment for our people, then we are not going to meet our historic programme of taking the Nicaraguan people to a higher level of economic and social development. So everything we do from the point of view of fiscal and economic decisions and policies of all kinds in this government of President Daniel Ortega stems from our collective conscience under the leadership of Daniel which has meant we developed those actions and policies. And he has always been very clear. With or without the IMF that is what we are going to do. Because it is not to satisfy someone else.
That is why we understand that is the right way to go and we have to continue so as to give our people that opportunity we have talked about. We think of that as a higher revolutionary phase for Nicaragua, where at long last, under different conditions to the ones that made the Sandinista Popular Revolution, we are re-inspiring hope. You would see if you had the chance to join the activities that take place at the meetings of Comandante President Daniel Ortega. You would see a people full of hope. You see the people spontaneously express satisfaction at the President's policy implementation.
We had energy rationing here for 12 hours a day. That is inhuman. Today there is no rationing. After less than a year and a half of government. And that means that our compañero Daniel did all he had to do to make sure we managed to give the people that satisfaction. Imagine what it means that there is no energy rationing in terms of production, in terms of domestic economy, in terms of access to water, electricity and so on.
TcS : We have just come from a meeting with the compañeros of the Caruna Caja Rural Nacional cooperative. And one of the things that was impressive in the presentation they made of Caruna's activities was the impact on production of the investment Caruna is able to make thanks to Venezuelan cooperation. How important is that investment from Venezuela for the country's economic development?
AG : I prefer to use the term Venezuelan participation, because when some people see it in terms of cooperation they think it is an official cooperation and want to confuse things so as to give it another interpretation. No. Venezuelan participation is strategic for Nicaragua. It is a strategy with the revolutionary meaning that Comandante Hugo Chavez has given the Bolivarian Revolution. I think in our countries, given the habitual context we have lived and from which we are coming, we have no alternative. We do not have alternatives to change the correlation of terms of trade in which the prices of the goods we import constantly rise while the price of the primary products we export constantly falls.
In that context, in that international market, in that savage capitalism, we have no alternative. In that savage capitalism in which every resource that you need to get for your country, come what may, is made available with political and ideological interests or with conditions that become more and more difficult to meet so that you end up stripping away from peoples their right to self-determination. There are no choices for us in that kind of set up, in that world of selfishness, exorbitant profits where nobody cares about ecological balance or the conservation of the environment we live in, where people only seek profit. In that world we do not have alternatives.
So in Latin America, thank goodness, exists ALBA. The ALBA of the people. ALBA is a non-traditional response based on values like solidarity and complementarity, respect for sovereignty, recognition of unequal development among countries, the need to search for joint policy responses among everybody, to look for viable alternatives that really do favour our countries' social and economic development. So in the ALBA framework Nicaragua now forms part of that Bolivarian alternative for the peoples of our America. We get advantages like the fact that today we do not have energy rationing.
Sometimes people see that as something easy. It is not easy. For 16 years neoliberal governments misgoverned our country and I say misgoverned not because I want to criticize. They misgoverned because the number of people in poverty grew and because poverty won our across the whole of Nicaragua. Nobody can feel proud of that. That's why I say they misgoverned. The very people that had the most harmonious relations with the United States, with the big countries that affect our lives, they were unable to resolve the problems of the power cuts or the energy problem. Who knows where we would be in Nicaragua under those kinds of policy frameworks?
Within the ALBA framework we have had flexibility only a brother can give you. For example the electricity generating plants. Venezuela never said to us they would sell us those plants or rent them to us. Venezuela told us "Brother , you need them, I was bringing them for us but here, you take them, we'll sort out later how we settle up." It's like when you are thirsty and your friend or your brother has a glass of water and says, here, drink this. That is crucial.
That is why I tell you it is strategic for Nicaragua the contribution and participation of Venezuelan financial mechanisms or institutions that have allowed us via Caruna for example - a private company, completely private - to help thousands of rural workers and their families who had been forgotten by the neoliberal system, who were unable to get credit to work their plots of land, who had been unable to get technical assistance to improve their productivity, who had been unable to access markets that let them market their produce equitably, at a fair price - none of that existed. So via Venezuelan participation those resources have been made available and I can say for sure that today I feel content because on the journeys I make I see the fields green again. And that is a sign that here there is going to be production, food and that there is not going to be famine in Nicaragua.
TcS : And that should also have an effect on inflation?
AG: Here it is important to touch on that issue. Because it is an issue that some commentators have wanted to manipulate. And what I have said is the following on that. While no one shows me via a serious scientific model that Venezuela's participation stokes inflation, since that has not been demonstrated, because the determinants of inflation in Nicaragua are clearly identified
And those determinants in no way show that resources, either from Venezuela or from the Millenium Challenge Account, channelled directly into production are going to cause inflation. Impossible.
It is impossible because they are not resources entering the market to fill the economy with dollar bills. No. They go to fill up the reserves for production. This allows rural workers and their families to recover their life, the essentials of their life because the essentials of life for rural people is their attachment to the land and they are able to cultivate now and to eat now and to give their children food so they no longer go malnourished and the excess they are able to take to market. So that in no way causes inflation.
On the contrary. What I know of Venezuela's participation is that it has reduced inflationary pressures on the costs of fuel for public transport, for example. That is totally anti-inflationary. What I know of Venezuela's participation is that all the resources channeled through Caruna or whatever other financial mechanism have all gone directly towards production, to the building of schools, churches and refuges. That's worth noting, the building of churches, of schools, of health centres, in the devastated northern region of Nicaragua's northern Caribbean coast. Not under the concept of a traditional school but schools that also double as refuges for their communities. From what point of view is that going to generate inflation?
I said the following not long ago when I was asked about this. Because to me it seems irresponsible to talk about that in those terms when you don't have the least element to show that Venezuela's participation, or to speak more justly, that international cooperation has inflationary implications for Nicaragua. Or on any model where resources are directed towards productive activity. I know of none in my experience and I have studied many inflationary models in the world.
I know of not a single one that shows me that this kind of cooperation, which is benign in terms of national production and of the economy's dynamic, in any way turns into superfluous expenses rather than being channeled to produce schools, or housing, or farm units so that people can, as I should say, get reborn. That is to get reborn. I don't know if you have been able to visit Nicaragua's rural areas so as to know what they used to be and what they are now. That is the hope that one sees in people. That is what I cal re-inspiring hope.
There is not the least chance of anyone serious showing the contrary and if they have data to hand then I ask them to please publish it, present it to people to the world because I think such a circumstance would be worth a Nobel prize, someone discovering such a thing would mean that all we rational economists are mistaken.
TcS : Could you talk a bit about the outlook you see for the country's economic development between here and 2011 and your hopes as regards inflation?
AG : I think the model we are developing in Nicaragua is a model supported by our country's natural economic base which is agriculture and cattle which for years were neglected because specialists who know about these matters asked us why we were going to produce food and that we'd do better to import food because it was cheaper to do that. And that led to thousands of Nicaraguans having to emigrate because rural production seized up. It was an ideological thing more than a pragmatic one.
So the model we are developing is oriented to reactivating the medium, small and micro production base that sustains our economy and is the dynamic for Nicaragua's economic activity. This model we are developing is allowing a massive participation by the people in regenerating productive processes, social processes, processes of cultural transformation of our national identity. It is an integral model in which the perspectives for economic development are generating real hope. I said that in my visits to rural areas one can see fields green over again that were once dead for years through lack of investment, lack of cultivation.
If you go from here to Rivas on both sides of the highways where for years there was nothing, now you see cultivation of platano, rice, maize, cattle everywhere, fruit trees. You'll see a dynamic production spurred by the model of the Productive Food Bonus for example that we designed for 75,000 families over five years that, with Venezuela's participation, we might double or even triple. That is going to lead us to regenerate everything to do with agriculture or forestry or all the activities related to cattle rearing.
So that restoration of our productive base starting with this type of special programme is the way to escape from poverty productively, sustainably in the long term. The agricultural programmes that are being designed in the Ministry of Agriculture where my comrade Ariel Bucardo who is a connoisseur of Nicaragua's countryside, a farmer himself, a rural leader who really understands the countryside. I have listened to his presentation of programmes for agricultural development to compañero Daniel and how together they have developed policy and action to reactivate the countryside.
From here to 2012 our development model with food production as an important focus is going to allow us to really reduce poverty. That is my first hope. I see it because I have to fund from the budget many of the actions that are being carried out in the countryside. But also from the Economy Ministry you are going to see us develop many important activities to reactivate manufacturing production, in the industrial development of farming related activities.
So we are talking about melding industrial investment with agriculture-related investment so as to add value in our economy. We are working also with my comrade Juanita in the Environment Ministry so as to conserve water sources so that we can have more sustainable ecosystems, more harmoniously in tune with nature so that production develops in our country without destroying the environment.
That has to give us hope that in future we are going to have abundant, sustainable production that helps our people to eat in the first place but also to have employment and that we are going to be bequeathing to our children in truth a better Nicaraguan more productive, deeper rooted, more humane, more social. From the economic point of view I can foresee that all the programmes and projects we are developing are already beginning to meet success and starting from next year we are going to see substantive production in areas in which Nicaragua almost stopped producing.
We are importing maize when we have soils where you can throw maize and it will grow on its own. We are importing beans when you can throw beans on our soil and they will grow on their own. We are losing cattle because they are being taken elsewhere because there were big investments based on debt that we still have now and the cattle never reached their full potential.
So what I can safely say with regard to 2012 is that the economy has developed an initial base over this first year and a half that is very solid and consistent, as seen in our ability to absorb the impact of Hurricane Felix. One way or another we have absorbed the external oil and food shocks. And while it is true they had inflationary effects, they are not of the dimension they might have had because we are changing our energy makeup and that is strategic for our country, for our production and for the life of our people because we are also protecting the environment.
We have mass participation from people via the citizens' power councils or, put better, via citizens' power as a new power structure allowing people to observe, watch and socially audit the programmes and projects of the government. All that has to give us hope. It is no longer possible for me to get any old idea and act on it without people being there to indicate I may be wrong. We are not here to behave that way.
So I believe one has to recognize the leadership of compañero Daniel. It is compañero Daniel's leadership that has made possible the articulation of all Nicaragua's revolutionary forces, which are the most democratic forces, as it happens, because they are those that allowed the Sandinista Revolution to eliminate the Somoza dictatorship and create the bases of the Constitution that now governs us. And it is that that gives us the rules of the game for our country so that in the moment of losing the 1990 elections, power was handed over and the Revolution worked with the people to return again and re-inspire hope, returning to carry out this victorious revolution. I don't think the Revolution can go into reverse now
That is the greatest hope I have because I know it is based on the motor that drives every revolution which is the people. And it counts with a solid, mature leadership, proof against anything, that has shown responsibility as much in its political decisions as in its economic ones, in its social decisions and even when necessary in its military ones. Because I am not going to conceal the fact that Sandinistas know how to struggle in every context. But today we are in combat in a different way. Today our enemy is the scourge of poverty. And you can be sure we are going to defeat it.
In the long run what I understand by my vision, from the perspective of the model we are developing which I believe is going to be successful and that we will see that very soon, very soon in every area. I think Nicaragua is being reborn. I think Nicaragua is going to have a unique opportunity in its history to rebuild its social relations, to rebuild its productive relations, to rebuild its bases for a more just society.
But fundamentally I think the revolutionary impulse that President Daniel is relaunching at the head of our people, of our country is the guarantee of the success of our model, of our programme and I am sure that we will continue to have a stable economy, we will continue having very healthy public finances, there will continue to be opportunities for foreign investors who want to come and invest in our country, certain that they will be able to expatriate their profits so long as they obey our country's laws and don't suffocate our workers. In Nicaragua there are opportunities for everyone.