"We are going to have GDP growth, and we're no longer talking about the Monthly Index of Economic Activities but about Gross Domestic Product, of between 4 and 5%, which is important"

Journalist Dennis Schwartz

How is it worked out?

Minister Iván Acosta

First, one can see financial activity recovering, which was one of the sectors most delayed during the reactivation, credit is increasing little by little; there is a positive impact on deposits, deposits are close to 4% similar to in their best figures which were in 2018, March, at 4%; Reserves exceed by more than US$1,500 million the best figures of 2017 in December; that is, we are talking about over US$4,300 million as against US$2,750 approximately.

We are talking about more than US$1,500 million extra in of reserves, so we have a much stronger Central Bank than in 2017, much more solid, 3.2, 3.3, of the entire monetary base, is supported by the Central Bank.

On the other hand, we see a fiscal performance expressed vi taxation with a lot of activity, April was extraordinary and May is even better. So the accumulate results from January to May in tax and fiscal terms is on a very good path and supports the budget expenditure, which is the most important thing.

And looking directly at the expenditure, there is an important fact. Spending for 2021 at this same time was 38,000 million córdobas; spending for 2022 has accelerated to 43,000 million córdobas. In other words, there is an execution of 13.5% year on year above how spending behaved up to May last year.

That is a very important indicator, that is why I was saying, 2021 was an exceptional year in economic performance, in growth, across all the numbers, and if we look at expenditure, it means that the construction of roads is accelerating, the impulse in drinking water and sanitation is continuing; more resources are being invested to make and impact on employment and above all on the welfare of the population.

In the first months of this year, up until May 2022, 22,000 new jobs have been recovered, which is also important from the point of view of the Social Security Institute records; therefore, all indications suggest that the economic evolution of 2022, as of May 31, is in line with the projections made by the Central Bank, that we will have a GDP growth, we are not talking about the Monthly Index of Economic Activities but about Gross Domestic Product, of between 4% and 5%, which is important. 4 and 5% would place us, according to those data that you have probably seen from ECLAC and the World Bank, would place us close to those that are going to have the best performance in the Economy of 2022, in spite of the turbulence and fluctuations of the international economy.

Journalist Dennis Schwartz

When we talk about spending, people believe that we are standing still, and in order to spend more we have to receive more, through our activity.

Words by Iván Acosta

Fundamentally, the budget is a question on which one probably always wonders, how is the expenditure financed? The fundamental of the Nicaraguan economy and the economic policies and public policies defined by the President of the Republic Daniel Ortega, is that, most of the expenses must be financed with tax revenues; that is to say, expenditure expands as a higher growth rate of tax revenue is achieved, and this is expressed in the budget deficit.

In the last 7 or 8 years, or about 10 years, a decade, the budget deficit has never been higher than 2 points in that decade; that is to say, the amount of resources from tax revenue, from other budget revenue, plus the evolution of previous savings allows us to finance the Budget, adding in too some bond issues in the securities market and also international financing via loans or donations, if they are loans or donations these are incorporated to the Budget.

When one looks in the end at what you have in your favor and what you spend, it is very important that the Nicaraguan economy, financial policy, fiscal policy has been very prudent, that is to say, seeking the greatest efficiency and strengthening savings at opportune moments so as to be able to resist shocks such as the one in 2018, or the pandemic. I think this is very important, that is, we are always spending according to what we have, not spending beyond what we have.

Journalist Dennis Schwartz

It is very fine work, to be making adjustments, to be carrying out, where possible and not stopping the social programs that are fundamental. Based on this, controlling prices in fuel, energy, imports of the agricultural products that are required now that we are in the rainy season, how is it being achieved? How do we maintain it?

Minister Iván Acosta

The global economy is suffering from several shocks, a set of shocks that have had an impact on the global international economic performance.

First, the pandemic has had an impact on the main international economies and has caused what is elegantly called the disruption of the supply chain, which means that it is difficult to move containers from port to port. This makes all international transport prices more expensive and this has an impact on the final price to the consumer.

On the other hand too, definitely the European war, as I call the war in Ukraine, the war in Europe has also had an impact in terms of the supply chain. On the other hand, international inflationary issues to do with a very strong accumulated inflation in the main centers of international trade, in this case Europe and the United States, these are transferred to the global economy.

But it is also important to say here and make clear that the erroneous, aggressive policies of sanctions, affecting important oil producers, in this case Russia, have had a very strong impact on one of the leading products forming prices.

When we talk about oil, we are talking not only about gasoline and diesel, but also about fertilizers and other oil derivatives. As we say, downstream, oil has a lot of impact on Industry, on petro-chemical processes, and those prices are transferred to the Economy.

Nicaragua is part of the global economy, and so, since February, President Ortega has given us instructions to look ahead as best we can and to formulate solutions that guarantee the least impact on our population, on consumption, and above all to protect Production.

So, what has been done? Even in his speech of May 4 and May 18, President Ortega referred very clearly that we had to adjust to the new times and face the turbulence or fluctuations of the economy. And thus, there are 4 or 5 containment measures that are having a positive impact to offset as much as possible the effects apparent in the global economy.

First of all, the most important, very important resources have been invested in keeping the price of gasoline, diesel and cooking gas stable. This has been stable for several weeks and has been managed since the beginning of the year, and this has been observed, it is very easy to verify, that Nicaragua has managed to contain the prices of this product that has a great impact on transportation, on employment, on production and on the satisfaction of the population. We are even talking about cooking gas, so that food can be served at home; in other words, this is very important for all consumers, for all families.

Secondly, there is a very meticulous management policy, the issue of the electricity tariff in which there is a policy that began back in 2019, to take all measures to maintain tariff stability in energy, which is another of the leading prices of the Economy. If energy rises, the whole chain of productive costs rises, but it also has a direct impact on Nicaraguan families.

There, the policy of containment measures and energy stability for the consumption of less than 150 has been guaranteed for a long time, but as of 2019 the electricity tariff has been stabilized, in spite of the high costs of fuel oil, that is, the fuel to produce energy, to generate.

This has to do with two effects, it is necessary to clarify: First, that since the Government took office in 2007, we have worked to transform the electricity generation matrix; that is to say, a very important amount is being generated. 60, 70% of the generation is  from renewables, so this isolates it from the global impact of oil, but there is an important part, which is still generated with fuel oil.

So it is important that the Policies defined by Comandante Ortega  include controlling those rates, and that guarantees that the rates have not fluctuated since 2019, but they have been controlled via a clear Policy of Rate Subsidy to protect the Production, Employment and Tranquility of the Nicaraguan Families.

On the other hand, there is a whole production promotion policy, to ensure the supply to the market, one of the most important issues against inflation is that there is production, and for that we must promote, we must attend to producers, we must assist, we must transfer capacities to the producers in order to guarantee good production. Besides, with a good rainy season there must be a good production and a good supply to the market.

I'm sure you have followed the line of price movements of the last 2, 3 years when in difficult moments there has already been a lot of price stability in the market. There are always fluctuations, there are moments when something is scarce and it goes up, for example cheese goes up to 80 córdobas and I'm sure it is around 40 córdobas today. But in general, strong price stability helps us to contain the inflationary effects in the country.

We have been ensuring, as instructed by Comandante Daniel, the search to ensure the supply of sensitive products such as flour and wheat for production. We have a program that we are working with the private sector to ensure stability in the long term, so that there are no supply problems.

It is a very important and fundamental issue fighting price inflation; also to ensure, another very important issue, to mobilize inputs, fertilizers for production. This will definitely have an impact on supplying the market for production, and this ensures price stability, which is an international issue.

When we say that it is an international problem, there is 8.3 inflation in the United States, the last time that was seen was in 1973, then one is talking about an inflation level of approximately, practically almost 50 years ago, that is what one is seeing, and addressing it is a very important task.

Journalist Dennis Schwartz

And are you afraid that it will happen again now?

Minister Iván Acosta

Already now in the United States, in this case the largest global economy, they are taking and facing measures, raising the interest rate a little to contain inflation, but they have not been successful because for sure the impact of fuel prices, of oil is wreaking havoc on the economy.

Journalist Dennis Schwartz

They are being hit hard.

Minister Iván Acosta

For example, there is an issue that we probably do not remember because it's something that has already happened before, 2, 3, 4, 5 years ago; normally fuel, gasoline was at 2 dollars 72 cents, that is the more or less average price in the United States 1, 2 years ago, and today it is at 5.20, 5.30; it has doubled.

Never before has the US price of oil, fuel, gasoline or diesel been above or similar to the prices in Central America, it has always been about a dollar and a half below; now, it is either above or at par, and that has a big impact on the Economy, in this case of an important Economy.

But going back to how we are doing, which is not a global issue, at the end of May we can confirm that the preliminary numbers of Exports are growing 18.5%, more than US$1,880 million exported; at that rate of 18.5%, having closed in 2021 at US$3,600 million indicates that we are going to end the year above US$4,000 million.

This is a forecast, a projection, in other words, we should be above US$4 billion. Why are we going to be above US$4 billion? Because the volume of coffee exports has increased and prices are on the rise, US$335 has reached today; gold remains above US$1,850 and volumes are also increasing; industrial slaughter of cattle remains at a similar pace to last year and with the possibility of increasing and with good prices; this has an impact on the import basket.

Likewise, in products derived from sugar cane, we are talking about rum, more is being exported; peanuts, tobacco products, even dairy products and beans are growing significantly with respect to 2021.

That is to say, you have a higher total export volume of 2% higher than in 2021, and in values it is 18.5% higher; this indicates that we are going to have higher exports than in 2021, I estimate about US$400 million more than in 2021, together with a positive impact on the domestic demand, because there is a good volume of family remittances arriving in the country. The Central Bank said that they grew 26% in April, and I believe they will continue to grow in May.

On the other hand too, investments have been recovering; the Central Bank also announced that in 2021 it closed at more than US$1,200 million and this rhythm will continue. That is to say, if all the sectors, investors, private sectors, producers, transportation, commerce, popular commerce, popular markets continue working hard, we are going to have a very good year, regardless of the turbulence or fluctuations in the international economy.

Journalist Dennis Schwartz

That is what is foreseen at a global level, what had been calculated to be going up has in fact collapsed. But our economy, thank God, is well managed.

Minister Iván Acosta

The World Bank and the Monetary Fund are financial institutions. These banks are very conservative, with the indicators they have had, they have reduced the growth expectation by 0.5%, they had estimated the global economy growing at 3.4% and they have lowered it to 0.9%, and the emerging economies, the emerging markets and economic development have been adjusted by 2 points less, from 5.4% to 3.4%. It is important to clarify that.

In the case of Central America and even Latin America it has been adjusted less, but we have Central Bank Indicators indicating that despite the fluctuations we remain between 4% and 5%.

Probably our expectations have been modified a little, but the hard numbers are maintained, giving us a growth between 4% and 5%. That is, 4% and 5% is what we grew at for a decade, approximately 4.7% and the last five year period of 2017, the previous five year period, 2017, 2016, 2011 grew 5.3. So we would be in a known range, where the Nicaraguan Economy has shown its performance and that is close to its potential GDP, as economists say. It is close to its described capacity.

On the other hand, and it is very important, so I am going to emphasize this, if I am producing, if I am finding Markets, and I am getting good prices, and my internal demand is supported by the family remittance transfers, and also investments are coming back. In other words, if my trade balance is going well, foreign investment and private investment are reactivating, and we have a macroeconomic stability policy keeping sufficient resources in the Central Bank, so that the banking sector is funded, and we have a good execution of expenditure, and the public investment program is at the same pace as in 2021, all of this means that you have good results, regardless of what may be forecast abroad.

I'm not just saying this to be contrarian, but if you continue at the same pace, with the same improvements, you should have better results than elsewhere. So we foresee that we are going to be the economy with the best evolution in Central America.

Journalist Dennis Schwartz

We are talking with Compañero Iván Acosta, Minister of Finance and Public Credit, about the economic stability that our Country is experiencing thanks to the good management, under the government of Comandante Daniel and Compañera Rosario, implementing social programs, while investments are increasing, and we are growing economically with small and medium producers, and those who have already invested too. This creates openings, because the banks are looking for where to put more money, and they have more money, now they are the ones who are looking for their clients to lend to them.

We are talking about this economic stability that we Nicaraguans have thanks to Government Policy. We say, physically healthy mind, healthy body; healthy country, healthy economy, and we are advancing in this way also by managing public investment. In relation to the priority investments that we have, what are they?

Minister Iván Acosta

The priority investments that have been defined since 2007 by Comandante Daniel Ortega, President of the Republic and Compañera Rosario, who have placed great emphasis on improving the competitiveness and productivity of the country, we have concentrated on 8 fundamental sectors, and of these 4 are very visible.

It is very visible everything that has been done in electric energy, the electrification program whose coverage is already at 99.2%; this is very important because it gives competitiveness, it gives Dignity to those who were excluded for almost 200 years and incorporates them as protagonists and economic agents. We are talking about 92.2% after having been at 52%, 53%, 54% until 2007.

We are rapidly approaching 6,000 kilometers in terms of investment in highways, what we call transportation programs, when here the most highways we had was 2,000 kilometers and of those only 600 kilometers were in good condition.

These are issues that are very visible, we are talking about building the bridge over the Wawa River, and it is not that we are thinking about it, any more than we were merely saying there will be a road to Bilwi. We are building the bridge over the Wawa River, a bridge of more than 350 linear meters, that set of bridges.

There has been enormous progress in drinking water and sanitation, bringing drinking water to municipal capitals that were excluded for centuries; we are talking about Bluefields and Bilwi too, we have even invested in Chinandega and Masaya, which are Pacific departmental capitals, but we have also reached the center of the country, Santo Tomás, Acoyapa; work is being done there; there is an important effort in water and sanitation in Nandaime. In other words, these are broad programs, with big investment and this is very visible to the population.

Another one of the programs and we might say the largest investment in hospital infrastructure in Central America, which is a very visible issue, is how world class hospitals are being built in the departmental capitals, but also in the municipalities where there are a large number of primary hospitals.

We are talking about the improvement of the quality of services, investment in the improvement of the quality of services in well-known hospitals in Managua. The "Manolo Morales" hospital is not the same as it was 20 years ago, the "Manolo Morales" has had investment in the operating theaters; in Granada 18 million córdobas are being invested at this moment.

So there is this program for hospital infrastructure and improvement of services, and this had its moment of benefit for Society at the time of the impact of COVID, with the capacity to attend a pandemic that was a headline issue in many countries. For example, in Guayaquil, or what happened in Italy in the Milan Area, (...) in New York too, the impact it had in the United States.

Here COVID could be addressed because there was planning and strategic vision by Comandante Ortega, to invest in health and education. Education and health are fundamental issues that had been abandoned during the long and dark years of neoliberalism from 1990 to 2006. That has changed and it is very clearly seen in public investment. But there are also other important investments that have been advancing that are probably less noticeable; for example the strategic improvement to the port of Corinto.

It is well known that this is linked to economic activity, that it is linked to export and import, but there is a national investment strategy of almost US$200 million in ports, improvement of airports, including Bluefields and Corn Island, important modernization improvements.

But back to education, there is also a sustained policy of improving educational infrastructure, investing in quality, in what we would call improvements in all the pillars that influence secondary education. That is to say, not only in the infrastructure but also in the conditions of access to Internet, information technology, the social policies of education, the policies that minimize desertion, by guaranteeing the best conditions, the school meals program falls within this educational policy.

We are designing a program to strengthen the teacher training colleges, the entire teacher training college network, which is a very important issue; there is an effort to strengthen Telecommunications. You may have heard about the broadband program that has to do with rural telecommunications, and certainly being in Managua one cannot imagine how someone from El Tortuguero, or from the region of El Tortuguero communicates with the rest of the country, how it is interconnected. So this is a rural telecommunications program and it is very important to incorporate it.

The ones I am mentioning are programs that of course if you are not involved in them, then you cannot see it happening, but the whole country is getting connected, no matter from which rural hamlet you are connecting. This has been a part of the modernization of the country during the governments of Comandante Ortega.

There is a strong impulse for production, we are strengthening or Technological Development Centers, for example to do with improvements in research for the development of seeds resistant to climate change. We are talking about strengthening the bovine traceability system from IPSA, strengthening testing laboratories, technical capacities and infrastructure of all kinds are also focused in that area.

There are issues that one probably has questions about, like how much coffee has been exported; exports in 2006 were high, 1.8 million quintals, but now 3.5 million quintals are being exported: in other words, we are talking about an additional 1.6 million, this has to do with an effort of private investment, investment in the entire production chain, but is also due to strengthening of the public sector through INTA, IPSA ensuring that through the Ministry of Agriculture this production activity gets addressed.

You remember the roya coffee disease, when there was a private-public effort to solve that issue; and those issues are important in terms of investment.

And there has been a municipal and national coordination to carry out the Streets for the People program. It is important the number of streets that have been built with municipal and national government effort, this has a great impact on the improvement of the quality of life of the Community and the Family, the individual, the People. These are important improvements.

So there is all that set of investments that are very relevant, and the State too has also been modernizing, improving its capacities.

There are also a number of important sports investments that are being inaugurated on a weekly basis, like the improvement of stadiums, almost 100% of the stadiums are now illuminated at the municipal level. These are changes and there are also improvements, modernization and construction of new buildings.

We are not only talking about the Alexis Argüello center, or the National Stadium, we are talking about installing infrastructure to make sure that sports become a bastion of development, in this case social, educational and community development, but also to produce good sportsmen like Jonathan González to go abroad to bring more resources for the Country.

Definitely the Government via public investment has a very important range of investment, and we usually highlight those that are more visible, we are talking about energy, transportation, hospitals, education. But there are also very important interventions such as the modernization of public service facilities; in other words, there is a sustained effort to have better facilities every day so as to provide better service to the public, and that is where we must focus our efforts.

Journalist Dennis Schwartz

We addressed it practically every day but it is good to remind ourselves, how the international economic environment is affecting Nicaragua; how the rise in fuel prices has worldwide effects and also increases in the price of some products, especially certain goods to do with producers and everything they need for their production for the first harvest, and this undoubtedly, in Nicaragua is being addressed with much urgency conscientiously talking about what we can do.

Minister Iván Acosta

You talked at the beginning of the program, in your introduction, about the threat of Stagflation, they say that it is stagnation and inflation, they mix the two words, and basically it refers to moments in the economy that are really very threatening when you see that prices are shooting up, causing high inflation but with low growth, or even without growth, which can mean poor growth plus inflation.

This is an issue that is being addressed in the global economy, and it is an issue that we have to address in Nicaragua. What are the classic measures? Increase in interest rates, with which we have to be very careful, because if the interest rate is increased a lot, investment goes down, and if investment goes down, growth goes down; in other words, if you have low growth and you increase the interest rate a lot, you have an additional negative impact on the issue of growth, and through growth there is employment, production.

So, these issues have to be finely tuned; but well, the classic thing is that if you increase the interest rate, you have to make efforts from the production side to keep the markets supplied. In our case, in addition to keeping our market supplied and working hard for food security, we have to produce enough surpluses to be able to look for food markets.

We produce a lot of food, therefore it is very important to produce when it is being said that there could be an international food shortage; in that case we will be able to sell more beans, more dairy products, more meat, more coffee, more sugar. So it is very important to work on that in order to have enough supply for our market and also to support our exports.

On the other hand, as I was telling you, inflation comes from several agents, that is, there are several products or free price agents, we are talking about oil. Oil touches the electricity tariffs, it touches water production, so the first thing to do is to address the issue of cutting the escalation of oil prices, because it is the most widely distributed. To control energy prices.

And on the other hand, to facilitate sufficient supply to the market; a well supplied market also contains prices. Part of inflation is impossible to stop because it already comes in the products, they are finished products that arrive to our markets, that is to say, if you buy corn flakes for example, the corn flakes already comes with its final price and enters the market carrying all the international inflation.

So from the point of view of ensuring that the economy is not negatively impacted, it is important to promote greater investment, to create the necessary conditions for investment to continue. What are the basic conditions for investment to take place? Working hard for macroeconomic stability; fiscal discipline, that is to say low deficits and monetary stability, these are a great attraction to investment and we have seen that investment continues to come, which is important.

Journalist Dennis Schwartz

In addition, there is great recognition of Nicaragua in this regard.

Minister Iván Acosta

There is another important issue, namely to maintain what we call a stable debt perspective. For example, there are countries here in Central America that have 75% or 80% of accumulated debt, while we are around 52% or 54%; so that is very important. There are publications on this, so this is public information that can be verified; and these are important indicators for investment, and when investment comes, employment gets generated to counteract the threats of recession and economic decline, above all.

That is why I was telling you that there are important economic indicators: employment is growing, 20,000 in the first 4 or 5 months of the year, that is very important; exports are growing; production is growing. Not only exports in terms of price, but also the volume of exports is increasing.

There is also the important element, domestic consumption, that is, what sustains domestic demand are many resources flowing from employment abroad; family remittances are indeed arriving and that too gives stability to the economic activity.

Journalist Dennis Schwartz

Compañero Iván Acosta, Minister of Finance and Public Credit, thank you for your visit; we hope to see you soon here, next time with Alberto Mora. Be well.

Minister Iván Acosta

Thank you very much, Dennis.