2005BrownCloke NeoliberalreformgovernanceandCorruptioninCentralAmerica

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Neoliberal reform, governance and corruption in Central
America: Exploring the Nicaraguan case
Article in Political Geography · June 2005
DOI: 10.1016/j.polgeo.2005.01.008
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Neoliberal reform, governance
and corruption in Central
America: Exploring the
Nicaraguan case
Ed Browna,*, Jonathan Clokeb,1
a
Department of Geography, Loughborough University,
Loughborough, Leicestershire LE11 3TU,
United Kingdom
b
Department of Geography, Durham University, Science Site,
South Road, Durham DH1 3LE,
United Kingdom
Abstract
This paper explores the limitations of the dominant neoliberal perspective on governance
and institutional reform, with a particular focus upon anti-corruption initiatives. Over recent
years, the International Financial Institutions (IFIs) have been promoting a specific discourse
on corruption that separates it from its historicity and the specific political economy within
which it develops. The paper sets out to analyse this dominant discourse, juxtaposing the
language of transparency and accountability used by those promoting anti-corruption
initiatives with the socio-political reality of a specific political culture/system e in this case that
of post-revolutionary Nicaragua.
Following a brief general discussion of the dynamics of governance reforms in Central
America, the growth of international interest in combating corruption is discussed and
* Corresponding author. Tel.: C44 1509 222738; fax: C44 1509 223930.
1
Tel.: C44 191 3341897; fax: C44 191 3341801.
0962-6298/$ - see front matter Ó 2005 Elsevier Ltd. All rights reserved.
doi:10.1016/j.polgeo.2005.01.008
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a critique of the dominant approaches towards the issue outlined. This critique is then
extended through an exploration of the evolution of anti-corruption initiatives in Nicaragua
under the administration of President Arnoldo Alemán (1996e2001), which saw both an
expansion in internationally sanctioned anti-corruption programmes and a catalogue of
abuses that eventually culminated in Alemán’s jailing under his successor.
Ó 2005 Elsevier Ltd. All rights reserved.
Keywords: Corruption; Nicaragua; Governance; Neoliberalism
Introduction
Until the late 1970s, Costa Rica’s democratic political culture and freely elected
civilian government was virtually unique in Central America. For most of the
20th century, the region had been subject to the most brutal and entrenched
of authoritarian oligarchic regimes. Now, 30 years on, that situation has
undoubtedly been profoundly transformed. All Central American countries
now have elected civilian governments, although this followed more than
a decade of bloody conflict across Nicaragua, El Salvador and Guatemala (Sieder,
1996).
This movement towards democracy, however, did not take place in a political
vacuum. The slow democratization of Central America in the 1980s was a response
to the political turmoil of the preceding years but it also took place under intense
pressure to liberalize and open up states and economies to external investment and
control.2 These developing democratic structures, because of the vulnerability of the
regional political economy to this external intervention, cannot, therefore, be seen as
a part of an integrated process of territorial/national development as was the
European experience. Instead, Central American democratization has had the effect
of intensifying some fundamentally exclusionary characteristics of the Central
American state, at a time of increased vulnerability to international influences
weakened capacity of the state to foster internal economic and systemic development
(Pérez Baltodano, 2001).
2
This has also been accompanied by a gradual trans-nationalization of the region’s economic and
social make-up that has seen remittances from Central Americans living and working abroad (chiefly,
but certainly not exclusively, the US) grow to constitute one of the most important sources of foreign
exchange.
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3
Central America’s dominant political classes enthusiastically adopted the
neoliberal3 development strategies4 so vigorously promoted by the IMF and the
World Bank, as well as USAID and the Interamerican Development Bank (IADB).
This neoliberal model prioritized the rapid implementation of market-led economic
reforms e the policies of trade liberalization, privatization and deregulation central
to the structural adjustment programmes implemented across the South (Mohan,
Brown, Milward, & Zack-Williams, 2000). Nevertheless, over time, this narrowly
economistic focus of reform has been broadened somewhat through recognition of
the need for social compensation programmes (the most recent expression of which
has been the poverty reduction strategies of the Highly Indebted Poor Countries
(HIPC) initiative in Honduras and Nicaragua), and political reforms that have
attempted to ‘modernize’ political institutions and more firmly establish a
system of liberal democratic states in the region. These institutional reforms were
promoted by the IFIs under the banner of ‘Good Governance,’ through
initiatives designed to improve the efficiency, accountability and transparency of
government.
This focus upon improving governance in Central America reflects what
happened across the South during the 1990s as the IFIs, retreating from all-out
3
We use the term ‘neoliberal’ to refer to the series of market-oriented policies (including trade
liberalization, privatization, deregulation and fiscal austerity) that have dominated international agendas
since the late 1970s. We agree, however, with Peck and Tickell (2002) that, whilst there is an essential core
of ideas underlying neoliberalism as a political project, this project has been advanced, adapted and
transformed through a range of regionally and locally specific neoliberalizations (see also Tickell & Peck,
2003).
4
A series of fascinating debates have been emerging over exactly how Central America has changed
following the social explosions of the 1970s and 1980s and the consolidation of a new regional variant of
neoliberalism in their aftermath. It is beyond doubt that the Central America of the early 21st century
differs greatly from that of the late 1970s but there are different perspectives on how to characterize those
changes and their causation. William Robinson has perhaps advanced the most systematic consideration
of these issues (see, for example, Brown, Catalano, & Taylor, 2002; Robinson 1997a, 1997b, 2001). He
argues that there has been a fundamental transformation in the underlying model of development in the
region and that ‘‘globalization has exercised ultimate structural determination’’ (Robinson, 2001: 531) in the
production of those changes, which must be located within an understanding of the region’s re-articulation
to the world capitalist system. Other commentators do not follow Robinson’s insistency on the primacy of
these global forces. Thus, whilst Robinson sees the emergence of new dominant groups within the Central
American elite and the consolidation of more democratic political spaces as primarily reflecting changing
global circumstances, others give greater emphasis to the mediation of external factors through local
political cultures and histories and the struggles of regional actors. Vilas (1995), for example, interprets the
emergence of the new democratic political system as reflective of the dominant classes’ inability to defeat
the revolutionary challenge to the old oligarchic order but does not see such a fundamental break with the
past as Robinson. Indeed, some commentators suggest that despite the changes in the forms of political
domination and the emergence of new economic subjects (both of which differ from country to country), it
is, in fact, the same interests, or indeed families, that fundamentally control the region. In essence, they
argue, the consolidation of the neoliberal model across the region in the 1990s has reinforced oligopolistic
control in a relatively smooth reinvention of the historical status quo. The truth, as ever, perhaps lies
somewhere between the two extremes. As Woodward, Jr. (1999: 289) puts it, by the end of the 20th century
‘‘the dominant class in each state is both larger and much more complex.’’
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antagonism towards the state, began paying greater attention to both the role of the
state in facilitating ‘development’ (now interpreted in a far wider sense than the
narrow growth-based definitions of the 1980s: see the World Bank’s ‘Comprehensive
Development Framework’) and the problems of policy implementation. The
specific foci of the programmes initiated have included such elements as
public sector management (including the efficiency of government departments,
public utilities and any remaining public enterprises), the decentralization
of public service provision, the management of national electoral systems, judicial
reform, the professionalization of the civil service and national accounting and audit
procedures.
These reforms, however, have largely been financed through concessionary
finance (rather than outright grants) which means that they have added to the
region’s already crippling debt burden which, for Nicaragua (as of December 2003)
stood at $6.5 billion, despite Nicaragua’s participation in the HIPC process
(CEPAD, 2003). In addition, the contradiction between introducing programmes
intended to decrease already-minimal state regulation and reduce the size of the
state, whilst simultaneously expecting diminished state mechanisms to strengthen
their control over state expenditure seems to have escaped the architects of
governance initiatives within the IFIs.
Contradictions notwithstanding, a wide range of international and regional
organizations has been involved in these reforms in Central America. In the case of
Nicaragua, the most important actor is the IADB who, as of April 2002, had a $705
million portfolio of Nicaraguan projects. Twenty-six percent of that total was
dedicated to strengthening the Nicaraguan financial system and ‘supporting the
institutional framework;’ although even the 28% devoted to ‘poverty reduction’
includes sizeable projects of public sector reform (such as the overhaul of the social
security and education systems). In addition, large parts of the $12.5 million
portfolio of the IADB-administered Multilateral Investment Fund are devoted
to institutional reform, particularly business regulation and public procurement policies (all figures from IADB, 2002). The IADB’s involvement in Nicaragua is
complemented by a portfolio of World Bank projects including, for example,
a $20.9 million Economic Management Technical Assistance project (World Bank
website), as well as USAID’s ’Rule of Law & Good Governance’ programme, which
received US$43.6 million between 1998 and 2003 (USAID Nicaragua website).
Additional governance-related projects have also been financed by (amongst others)
the EU and individual European governments, the UNDP and the Taiwanese
government. As this list of funders confirms, institutional reform is big business in
Nicaragua.
The IFIs and Central American governments alike have been extremely upbeat about the apparent successes of these ‘Good Governance’ programmes. They
are frequently lauded as having been responsible for the flowering of an open,
democratic political culture across the region, for the institutionalization of free and
fair elections, for strengthening the rule of law and encouraging greater participation
by civil society in the formulation and monitoring of government policy. The
IADB’s introduction to the Stockholm Conference of the Donor’s Consultative
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Group on reconstruction following Hurricane Mitch perhaps best summarizes this
perspective,
‘‘Hurricane Mitch hit Central America at a critical moment in its history, during
a period of hope, but at a time of difficult transitions. Since the 1987 Peace
Summits, the last decade has seen sustained efforts for peace and democracy,
economic reforms and regional integration, which have been in a process of
consolidation in the region. Enormous progress had been achieved, thereby
creating conditions for sustained development, the strengthening of the civil
society and better management of natural resources’’ (IADB, 1999a).
Serious questions remain, however, over what has really been achieved. The harsh
realities of life for most Central Americans mean that few feel any benefits from
changes to their political systems. The insistence that political liberalization should
take place within the framework of neoliberal economic liberalization appears to
have ensured that any consolidation of democracy in Central America has been
accompanied by increasing poverty levels, declining living standards, decreased
access to, and coverage of, basic social services and significant increases in inequality
(Bradshaw & Linneker, 2002; CCER, 1998; CENIDH, 1999; CEPAL, 1999;
Dijkstra, 1999; Escaith & Morley, 2001; Linneker, 2002; Vargas, 1999).
The evidence for such trends, whilst strong, is also hotly contested. In the case of
Nicaragua, a range of widely divergent indicators is cited by the government and its
critics (and frequently contradictory figures are utilized by different branches of
government).5 There is increasingly a sense of one hand washing the other e Central
American governments produce statistics showing improvements under liberalization in return for continued funding, whilst IFIs use the figures as evidence that their
continued intervention is justified. Whatever the precise figures, the profound crisis
facing the rural poor by the end of the 1990s dramatically and tragically intensified
the impacts of Hurricane Mitch in Nicaragua and Honduras at the end of October
1998, a disaster which also served to illustrate the continuing environmental damage
5
These controversies have not merely arisen from methodological differences. There are also serious
question marks over the validity of much official data. Over the years, the need for Central American
governments to provide economic statistics that give evidence of meeting the targets (most recently HIPC
targets on poverty reduction) set by the IFIs and thus gain access to further loans, has been matched by an
increasing need on the part of the institutions themselves to produce such favourable figures, in order to
deflect the increasingly vociferous international criticism of their policies. An unfortunate system of
statistical and financial quid pro quo has therefore arisen, especially visible in countries such as Nicaragua
where the resources for gathering economic data have never been great, and where the accuracy of such
figures has been diminishing as fast as their collection has been centralized under the Banco Central de
Nicaragua (BCN). In 1996, for instance, shortly before the accession to power of Arnoldo Alemán’s
government, the BCN registered the rate of open unemployment as 51.1%, but following the change of
government in 1997 there was a change in the methods employed to measure open unemployment, with the
result that it magically dropped to 24.1% (CENIDH, 1999). This figure was subsequently absorbed into
the mainstream by organizations such as CEPAL and the UNDP, who stated blithely that in 2000 the rate
of open unemployment in Nicaragua dropped from 10.7% in 1999 to 9.0%, better than many European
countries.
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being wrought by the region’s externally driven model of economic development (see
Brown, 2000a; Holt-Gimenez, 1998; Mowforth, 2001).
Even when considering the impacts of the governance programmes more directly
on their own terms, some serious question marks can also be raised. Firstly, the
formal democratization process established through the consolidation of national
electoral systems has not been the uncompromising success that it is often presented
as. Serious misgivings can, for example, be raised about the conducting of specific
election campaigns, such as the 1996 presidential elections in Nicaragua (see Brown &
Hadjipateras, 1996). More generally, a growing disenchantment with electoral
politics and the wider technocratization of politics can be discerned from a growing, if
inconsistent, level of absenteeism.6 In countries such as Nicaragua and El Salvador,
indeed, there is an increasing sense that the old left/right divisions of revolutionary
struggles and counter-insurgency wars, increasingly sanitized of all ideological
fervour, are slowly being absorbed into the previously existing clientelistic power
structures of the region, with the spoils of the state resources going to the winner.
Secondly, for all of the fanfares about public participation emanating from the
IFIs recently (see, for example, the World Bank’s Participation and Civic Engagement
website), the involvement of civil society organizations in the formulation of policy
remains at best partial.7 Most Central Americans do not feel that they can exert
much influence on the most important factors affecting their lives. Thus,
proclamations over the achievements of democratization and better governance
need to be weighed against the impacts of stringent cuts to public funding and the
apparent lack of real progress in the struggle for greater transparency and
accountability, despite any number of individual initiatives and internationally
funded projects. Within such a context, the policy focus upon good governance
and institutional strengthening can appear far removed from the lived reality of
most Central Americans, especially when one considers just how much money has
been spent on such programmes over recent years (see figures cited earlier in this
paper).
Such concerns are not unique to the Central American region. Globally, the IFI’s
pre-occupation with governance has been criticized for its narrow procedural and
institutional focus (offering technical solutions to what are essentially political
challenges) and for its subservience to the dictates of economic liberalization. In
6
The evidence on absenteeism is actually quite mixed, although the general tendency across Central
America has been for it to increase. In Nicaragua specifically, whilst the level of electoral abstention was as
high as 45% in the municipal elections held on 5th November 2000, the turn-out for the 2001 elections was
extremely high at around 80% according to OAS estimates, reflecting the continuing polarization of
Nicaraguan politics between Liberals and Sandinistas and the whipping up of fears of the possibility of the
return of Daniel Ortega to the presidency (Cupples & Larios, 2005).
7
The failure of the Nicaraguan and Honduran governments to adequately involve civil society
organizations in the formulation of national poverty reduction strategies as a part of the HIPC initiative
was highlighted by civil society representatives from both countries (The Social Forum on Foreign Debt
and Development of Honduras and the Civil Association for Emergency and Reconstruction of
Nicaragua) during a visit to the UK in June 2002.
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terms of the latter, the IFI’s focus on good governance appears to have less to do
with ensuring that the citizens of individual countries enjoy better services, more
confidence in their legal systems and more rights over those elected to serve them,
and more to do with ensuring the ‘success’ of economic liberalization. This
particularly (if not peculiarly) economistic reductio ad absurdum is nowhere clearer
than in the idea itself that better governance can be purchased by the provision of
funding for anti-corruption and governance initiatives. Amongst the IFIs, there
seems to be little appreciation that, if corruption in an aid-dependent political culture
(as is the case with most highly indebted poor countries) is endemic, then more
funding for the same system must inevitably become the focus of more corruption e
the creation of new posts and committees to absorb available funding is scarcely,
after all, a new phenomenon.
Further south, the failure of this vision of institutional reform is visible in the
popular uprisings in Ecuador, Bolivia and Argentina, where large sections of the
population, experiencing an increasing sense of disenfranchisement, have resorted
to direct action and civil disobedience. It can also be no coincidence that
democratization in Latin America as a whole has increasingly brought to power
such (at least theoretically) anti-neoliberal leftist/progressive governments as that of
Gutierrez in Ecuador, Chavez in Venezuela and Lula of Brazil. Ultimately, reforms
of governance under the IFIs have not so far been the apolitical technical or
procedural transformations that the institutions would have us believe. They
embody a particular vision of how states should operate and what purposes they
should serve. For more detail on these general debates see, amongst others, Baylies
(1995), Brown (2000b), Campbell (2001), Hildyard and Wilks (1998), Kiely (1998),
and Sojo (1999).
It lies beyond the scope of this paper to analyse all of the constituent elements of
institutional reform across Central America over the past decade. Instead, as a way
of providing a focus to these debates, we explore one particular element consistently
prioritized within those programmes e those measures designed to combat
corruption. The ensuing sections of the paper are organized in the following way.
Firstly, the growth of interest in combating corruption globally is analysed and the
nature of the dominant approach towards the issue outlined. Secondly, a critique of
the mainstream perspective on corruption is offered. Thirdly, the specific case of anticorruption initiatives in Nicaragua under the administration of Arnoldo Alemán
(1996e2001) is used to explore our critique of the mainstream approach in more
detail.
The international crusade against corruption
We do not intend to offer a detailed conceptual analysis of corruption here since
we cover the far-reaching debates on the nature of corruption and the limitations of
the dominant neoliberal perspective on the issue in much more detail in Brown and
Cloke (2004) which acts as a companion piece to this more regionally focused paper
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(for other general material on corruption we would direct the interested reader to
Robert Williams’ four volume guide to the literature: Williams, 2000; Williams &
Doig, 2000; Williams & Moran 2000; Williams & Theobald, 2000). It is, however,
worth making a few more general comments here before going on to explore how the
anti-corruption agenda has been pursued within the Central American context.
The past decade or so has seen a dramatic growth in the international attention
paid to corruption and how it might be combated. This reflects a number of factors.
First, fears that the problem itself is expanding, reflecting the increasing
opportunities for illicit activity which globalization (particularly market deregulation
and financial liberalization) embodies. Second, even if these fears are unfounded
(any data on the incidence of corruption is inherently unreliable and undoubtedly
partial), globalization has made it more difficult for regulatory authorities to tackle
the phenomenon e underlining the importance of international cooperation and new
forms of trans-state legislation. Third, the impetus behind the growing presence of
corruption in the international spotlight derives from belated IFI interest in recasting
the place of the state within economic reform processes, as well as a growing
realization of the importance of institutional efficiency and transparency to the
effective functioning of the state apparatus and its legitimacy. As a final and by no
means inconsequential factor, the end of the Cold War and its accompanying geostrategic imperatives has meant that it is no longer necessary (or advisable) for the
rich capitalist countries to treat former anti-communist allies with scrupulous
politeness (similarly allies of the former socialist bloc no longer have any particular
strategic importance).
The interplay of these factors has led to a plethora of new international initiatives
against corruption including the signing of new international agreements, the
creation of new international bodies and the formulation of diverse anti-corruption
strategies, which have attracted large amounts of funding from the major
institutions. Across the South, international commitments have been backed up by
the funding of wide-ranging programmes of institutional reform, designed to
improve public accountability and transparency as a part of the good governance
programme described in the Introduction to this paper. These programmes
encompass such elements as judicial reform, strengthening of the public institutions
responsible for the financial oversight of government, reform of public procurement,
freedom of information legislation, civil service professionalization, electoral reform
and frequently a series of measures designed to involve the wider public in anticorruption initiatives (e.g. media campaigns, ‘whistle blower’ lines and so on).
These measures are, however, only part of the dominant strategy; the mainstream
perspective is that the public sector is, by definition, the place where opportunities
for corruption are created. The most effective means of combating corruption,
therefore, is seen as reducing the size of the state sector. The World Bank (1997: 35),
for example, suggests that ‘‘economic policy reform should be a main pillar of an
anticorruption strategy’’ and that ‘‘deregulation and the expansion of markets are
powerful tools for controlling corruption.’’ Whilst the USAID Handbook on Fighting
Corruption claims that ‘‘the more activities public officials control or regulate, the more
opportunities exist for corruption’’ (USAID, 1999: 13).
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In Brown and Cloke (2004) we offer a detailed critique of this mainstream
neoliberal perspective and explore a range of wider shortcomings of existing
(particularly IFI) literature on corruption. This critique centres on the following key
themes:
1. In all countries, legal and regulatory mechanisms are subject to the specific
cultural dynamics of the political economy within which they are located. In
Latin America this political economy is heavily imbued with cultural imprints
such as persistent military intervention, a caudillismo that has developed into
powerful patronage/clientelism networks and external intervention by powerful
private/governmental/multilateral forces. Treating ‘the state’ as if it were
a neutral monolith existing outside the complex interplay of such forces is not
simply unrealistic, it renders invisible the interchangeability/permeability of
private/state actors that has caused many Latin American states to develop into
unrepresentative and rapacious mechanisms. In such a context the anti-state
mentality of the IFIs could appear as little more than a carefully crafted
discourse, designed by a powerful set of actors unwilling to face up to their own
responsibility in the economic instability of the region and the concomitant
rampant corruption.
2. The inability of mainstream approaches to deal with the complexities of
corruption can be traced to their debilitating antagonism towards the state. This
problem is deep-seated and tied into the very definition of corruption, since that
employed by the major institutions and NGOs treats corruption as a phenomenon of the public sector alone. That this is unrealistic in the extreme is borne out
by the sheer multiplicity of types of corruption, their historicity, cultural diversity
and global extent. The complex historical roots of such diverse practices as
baksheesh in Arab countries, hongbao in China, matabiche in Central Africa, la
propina or la mordida in Latin America, pots de vin in France, and back-handers
and graft in the rich anglo-saxon countries (usefully listed in Abramovici, 2000)
and their existence in a multiplicity of differentially cultured states and societal
types suggest the need for a much more sensitive approach.
Attempts at definitions of corruption that might reflect this diversity are
consequently commonplace (and problematic). For our purposes, a version of
the definition offered by Reno (2000: 458) suffices, which suggests that corruption
is: ‘‘behavior on the part of actors dominating nodes of power in contravention of
developing notions of reciprocity or obligations to citizens.’’ As Reno points out,
corruption is efficient predatory behaviour on the part of such actors and, in the
absence of a properly functioning state/legal system, may not actually constitute
a violation of laws. In the case of poorer countries, external governmental,
multilateral or private use of resources frequently acts to reinforce this
behaviour, not only decreasing incentives for those in power to protect those
in their charge but replacing them with incentives not to. Under these
circumstances, we postulate as absurd the assumption that the down-sizing of
the state will automatically have a positive impact on corruption; rather our
contention is that examples such as the Nicaraguan case explored in this paper
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suggest that there are manifold mechanisms whereby liberalization can in fact
exacerbate corruption. Our argument is not that the state cannot comprise
a major source of opportunities for corruption, but rather that to accept
a discursively prejudiced definition of corruption as uniquely linked to the state
may serve political agendas but will ultimately defeat anti-corruption initiatives
that have such a definition as their guide.
3. The neoliberal perspective sees corruption as simply about the rent-seeking
behaviour of public servants. This leads to treatments of corruption as a problem
requiring largely technical solutions in the form of ‘improved’ economic policies
and/or institutional forms. As a consequence, there is little recognition of the
more complex political motivations frequently underlying corrupt actions or
the complexities of even defining corruption in different political and cultural
settings. Writers such as Maruyama (1996) (cited in Garely, 2001) have addressed
this through explorations of the cultural relativity of what is termed protocorruption, arriving at descriptions of a variety of social practices that it would be
anachronistic and acultural to describe as corruption, but which have subsequently evolved to be so labelled. These types include mutual exchange (similar
to today’s barter trade or LETS systems), functional lubrication, bribing under
pre-communism, kindergarten mentality, over-protectionism and amakudarism.8
There plainly needs to be more recognition of the complexities of the politics,
cultural specificity and historicity of corruption e a treatment of the issue that
does not descend into platitudes and one-line definitions, sensitive to the political
economy of individual countries and that somehow reflects different cultural
norms and codes of behaviour without becoming meaningless in its relativity.
4. There has also been a tendency to view corruption as a uniquely Southern
phenomenon. As Hawley (2000) suggests ‘‘(m)ost commentators on corruption.dwell on developing countries, not industrialized ones. Most scrutinize
politically-lax cultures in the South, not the North. Most call attention to the petty
corruption of low-paid civil servants, not to the grand corruption of wealthy
multinationals. Most focus on symptoms such as missing resources, not causes such
as the deregulation of state enterprises. Most talk about bribe-takers, not bribegivers.’’ In a global economic environment in which bribes paid by multinational
businesses are conservatively estimated to run to US$80 billion a year (Hawley,
2000), this is an unforgivable bias. The activities of firms such as Westinghouse,
Enron, Balfour Beatty, Amec, Acres and BAE show that in the post-war
development era a complex ‘development’ industry has arisen to key into the
preference of the World Bank and IMF for large-scale infrastructure projects,
and which is responsible for the growth of corruption on a massive scale, paid for
8
The practice of amakudari in Japan essentially means that retired bureaucrats move into comfortable
positions in the upper echelons of the very industries or sectors that they used to control. All of the
channels and networks are already in place from their previous ‘life’ within a ministry and the perks and
kickbacks are completely institutionalized and totally guaranteed from day one. As the name suggests,
‘descent from heaven’ is guaranteed to be a very smooth ride (Weston, 2002).
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by such multinationals. Neither is there any sustained engagement with questions
of external intervention and the political economy of NortheSouth relations.
5. Geographers are well-placed to play an important role in addressing these
limitations and advancing a more sensitive set of approaches towards corruption
by providing: (i) a more holistic account of the geographical scales at which
corruption operates; (ii) comparative analyses of the impacts of different policy
instruments and anti-corruption strategies particularly in relation to their
attempts to fire the popular imagination and bring local populations on board;
and (iii) questioning the universalizing assumptions of much of the mainstream
analysis of the issue.
In what remains of this paper we attempt to deepen this critique through an
exploration of the limitations of the dominant approach to corruption as it has been
manifested in Nicaragua over recent years. We explore the complex political cultures
of corruption in Nicaragua, the impacts of the liberalization agenda of recent years,
the measures taken to try and control corruption, the role of international actors
within the formulation of these strategies and the reaction of Nicaraguan civil society
to the measures.
The anti-corruption crusade in Nicaragua: introductory thoughts
‘‘The new Nicaragua which we are constructing is also a society based upon
institutionality and transparency, where the functions and attributes which the
law gives to the different powers of the state are respected, where laws and clear
regulations are applied consistently and impartially to each citizen, restricting the
discretionality of state functionaries and avoiding favouritism.’’
(authors’ own translation from a speech by Nicaraguan President Arnoldo
Alemán to the Consultative Group Meeting for the Reconstruction and
Transformation of Central America, Stockholm 25 May 1999)
‘‘Survey after survey demonstrates that the population perceives an increasing
lack of transparency in the management of the Nicaraguan state. It is becoming
impossible to grasp the extent of the scandals that come one on top of the other,
almost invariably involving top government officials who fail to display the
slightest remorse, embarrassment or scruples for having used state resources as if
they were part of their personal or family accounts.’’ (Envio, 1999: 7)
The two citations above illustrate clearly the problems involved in any academic
treatment of corruption, especially when the country concerned is as polarized and
strife-riven as Nicaragua is. Expressed in the same year, they suggest starkly different
accounts of the transparency and accountability of the Nicaraguan political system.
In 1999, because of the malfunctioning Nicaraguan justice system, there was little
beyond the increasing weight of accusations against then-President Arnoldo Alemán
and a worsening position, then 77th out of 91 on Transparency International’s
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corruption perception index (Transparency International, 2001), to aid in reaching
a conclusion as to their accuracy. Events since then, as the incoming administration
of Enrique Bolaños has unearthed the extent of the corruption of his predecessor,9
have confirmed the validity of Envio’s depictions of Nicaragua’s political system in
1999 over the Alemán government’s. Despite considerable inflows of funds destined
for governance reforms, specific anti-corruption measures and detailed governmental
treatises and proclamations on how Nicaragua was becoming more transparent, the
reality was that the extent of corrupt personal enrichment and political manipulation
that occurred under the Alemán administration was extreme even for Nicaragua.
Nicaraguans are not the only Central Americans who would do well to question the
sincerity of their governments’ embracing of the anti-corruption agenda. At the end of
the 1990s, most Central American leaders had been quick to assimilate the new anticorruption mentality. As a result, the language of transparency and accountability
became the latest in a series of international buzzwords to be found liberally scattered
throughout government documentation and speeches. Accompanying the rhetorical
flourishes, new government departments, ‘think tanks’ and anti-corruption offices
were created, national anti-corruption plans drafted and national institutions, such as
the offices of the Comptroller General or national ombudsperson, strengthened (see
Gutierrez, 2001; USAID, 1999). National initiatives were complemented by a range of
activities at the regional level; the Carter Centre hosted a number of regional
conferences, whilst the OAS (through its foundation ‘the Trust for the Americas’)
promoted the agreement of an ‘Interamerican Convention against Corruption’ which
was adopted in 1997 (OAS Anti-Corruption website; Robinson, 1998; Trust for the
Americas, 2001). USAID, meanwhile, initiated a website (www.respondanet.com) as
a clearing-house and forum for corruption-related issues.
Despite the substantial sums now being spent on institutional reform, all of this
activity appears to have been incredibly slow in producing results, fomenting fears that
the rhetorical commitments to combating corruption may be little more than cleverly
constructed attempts to capture the international resources now available for
institutional reform. Just to take one, admittedly flawed (see the discussions in Brown
& Cloke, 2004), indicator, the Central American republics continue to perform poorly
in the annual transparency indexes calculated by Transparency International. In the
2001 Corruption Perceptions Index, for example, three Central American countries
appear in the worst third of the 91 countries surveyed: Nicaragua (14th), Honduras
(18th) and Guatemala (24th) (Transparency International, 2001).
Corruption scandals continue to occur across the region with monotonous
regularity. Specific cases include that of El Salvador’s finance secretary Miguel
Lacayo (Gutierrez, 2001: 154), the ‘boozegate’ scandal and the growing number of
cases being brought against high-ranking Guatemalan politicians (Gonzalez, 2003;
Hernandez, 2001) and a range of allegations of impropriety in the post-Mitch
9
It should not be forgotten, however, that Bolaños had also been a senior member of the previous
administration (vice-president) and had gained politically from the use of illicit funds in the 2001 elections.
Factors that, at the time of writing, could bring down his administration.
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reconstruction process in Honduras (Jeffrey, 1999; Rodgers, 1999; Transparency
International Newsletter, 1999).
In the first draft of this paper, we had suggested that Costa Rica had escaped these
controversies and was an, at least partial, exception to the regional corruption
trends. Costa Rica does continue to score much more highly in transparency indexes
than its neighbours (41st in the 2004 TI index) but recent events, and in particular the
scandal surrounding ex-President Miguel Angel Rodriguez, suggest that this does
not tell the whole story (Alves & Johnson, 2004; Gutierrez, 2001). For a detailed
discussion of corruption in Costa Rica see Gonzalez and Solis (2002). These other
cases fade into insignificance, however, when compared to the Alemán case in
Nicaragua. Cases such as these help to ensure that the Central American people
remain far from convinced that anti-corruption programmes have actually been
successful in combating corruption across the region.
The following section moves our focus more specifically on to Nicaragua and the
initiatives and forms of discourse about corruption that took place there during the
government of Arnoldo Alemán. We draw particular attention to the public
pronouncements on corruption of both government and aid donors, contrasting
these to the events of this period.
The Alemán case: an overview
‘‘Without good governance it is impossible to wage a frontal war against poverty
and to solidify the structures of stable development’’.
(Opening remarks by President Arnoldo Alemán, Consultative Group meeting
for the reconstruction and transformation of Nicaragua, IDB headquarters,
Washington D.C., May 23e24, 2000.)
Former-President Alemán10 of Nicaragua was sentenced to 20 years imprisonment
in 2003 for the theft of public funds in excess of $100 million, the first time that any
public figure has been sentenced to anything for corruption in Nicaragua, so some
progress is plainly being made in combating corruption.11 At the same time, it has to be
noted that the clientelistic political system that enabled Alemán to commit such grand
10
Arnoldo Alemán grew up in a privileged but not overly wealthy liberal family. He remained in
Nicaragua during the revolutionary years, during which time the FSLN confiscated his family’s property
and nationalized the bank where he worked. Alemán himself was also imprisoned by the FSLN. Throwing
himself into the political opposition to the Sandinistas, Alemán campaigned for a seat on Managua’s city
council in the 1990 elections. Having been elected, he manoeuvred successfully to get himself selected as
mayor. He used this as a power base from which to develop his presidential ambitions, his own personal
fortune and an overt programme of public works. Drawing upon support from Cuban and Nicaraguan
exiles in Miami, he also used this period to construct an alliance of liberal parties to challenge for the
presidency in 1996 with the full support of the US government.
11
Although at the time of writing the final draft of this paper Alemán had recently been released from jail
into house arrest, a move orchestrated by Daniel Ortega via his control of the Nicaraguan judiciary.
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larceny is still firmly in place and that whilst he was in the process of diverting such
a huge quantity of money, aside from expressions of general concern by the
Consultative Group and other international actors, a public façade was maintained
(particularly by the IADB) that the government of Nicaragua was making a determined
effort to combat the corruption of which its own leader was the worst example.
The struggle against corruption had been a rallying cry of the opposition to
the Somoza dictatorship since the misuse of reconstruction funds following the
Managua earthquake of 1972 but the issue largely faded from view during the
revolutionary years until the aftermath of the piñata in 1990.12 Thereafter,
questions of transparency and accountability gradually began to figure in
the institutional reform programmes that accompanied the renewed access to
international funding of the neoliberally inclined governments of Violeta Chamorro
(1990e1996) and Arnoldo Alemán (1996e2001). It was, however, during the
latter’s administration that the funding and implementation of anti-corruption
efforts really began to take off (Langseth & Pezzulo, 2000). This culminated in the
formation of a National Integrity Committee, chaired by then vice-president
Enrique Bolaños, which began operating in 1998 with input from the World Bank
(through their Economic Development Institute’s Governance team). This
was intended to provide a forum where ‘‘representatives of the branches of government
and Nicaraguan civil society’’ could collaborate in the promotion of ‘‘integrity and
openness at the national level, prevent and combat corruption and foster values of
honesty, public spirit and ethics in the citizenry’’ (RN, 1999a: 4). This approach was
coupled to externally funded programmes of institutional modernization, involving
such elements as the reform of the Nicaraguan state’s financial management and
auditing systems, civil service reform, tax system reform and further privatization
initiatives.
The culmination of this two-track approach was the articulation of a National
Integrity Plan presented to the Stockholm Conference of the Donor’s Consultative
Group in May 1999 (RN, 1999a). At the time, all of this activity earned the
Nicaraguan government significant praise from donors and observers. In April 1998,
for example, USAID Nicaragua’s budget application for the following financial year
suggested that the Alemán government had initiated ‘‘bold steps to increase openness
and accountability in its operations’’ and had ‘‘taken a very public stance on anticorruption’’ (USAID, 1998: 12).13
Work on this National Integrity Plan accelerated in the aftermath of Hurricane
Mitch, as the international response to the disaster gave further impetus to the
12
The piñata (named after a traditional party game in which children smash open a paper maché toy
filled with sweets or other treats) occurred in 1990 when, following the loss of the elections held in that
year, the FSLN systematically looted goods, money, properties and vehicles held by the state before
handing over power to the incoming UNO government of Violeta Chamorro. These items were either
taken by the Frente as being necessary to equip itself to function in the new democratic environment, or
were simply stolen by individuals within the FSLN.
13
Other examples of supportive evaluations of the Alemán government’s efforts include Seligson (1997,
1999) and, to a lesser degree, Langseth and Pezzulo (2000).
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institutional reform process and donors sought assurances about the accountability
of the use of reconstruction funds14 and initiated a system for monitoring
implementation under the ‘Group of Five’ mechanism.15 The international
community seemed relatively optimistic about this enhanced focus upon transparency, with USAID using their Central American experiences as an exemplar in
their 2001 Latin American budget submission (USAID, 2000) and some
commentators suggesting that Central America might take on a leadership role in
the development of mechanisms of accountability (CLACDS/HIID, 1998: 4).
Nonetheless, even as these measures were being implemented, the Nicaraguan
government’s ability to deliver on its promises of transparency was already being
undermined. The most egregious example concerned the head of the Nicaraguan
Inland Revenue (the DGI), Byron Solis Jerez, a close friend of President Alemán.
Jerez had used Nicaraguan tax revenues (via PETRONIC, the state petroleum
company) to pay for the construction of a palatial summer house, as well as issuing
cheques to a firm owned by his brother in Miami (La Prensa, 03/04/2000). The work
done on the Jerez summer palace was also paid for by donated funds from Hurricane
Mitch reconstruction projects (Bodan, 2000a).
The formal case against ex-President Alemán himself (and his 13 co-accused, who
included Jerez, most of whom had earlier fled the country) sets out a whole catalogue
of abuses over this period. These included irregularities in relation to a heliport,
a television station and a cement company, tax evasion, lavish trips abroad, and
widespread money-laundering through front businesses and banks. The total
amount involved, $100 million (and this is only what has been detected) is the
equivalent of $200 for every man, woman, and child in Nicaragua (CEPAD, 2002;
the full accusation can be found on the website of the Nicaraguan presidency, see
ODC, 2002). By the end of the Alemán presidency, one observer suggests that
Nicaragua had descended into an ‘‘advanced state of habitual corruption. (where)
corruption is promoted, expedited and protected from the highest state levels, in this
case the presidency itself, and from the different fiefdoms controlled by President
Alemán’s cronies’’ (Rafael Cordova, cited in Envio, 2002: 2).
The international dimension
As we argued earlier, whilst corruption in any country has important internal
dynamics, it should not just be seen as a domestic issue. The dynamics of corruption
relate as much to the changing relationship between internal and external actors as
they do to the arena of domestic politics and political culture. The inaction (or even
14
See World Bank, USAID and IADB contributions to a session on these issues at the Stockholm
Conference of the Consultative Group held in May 1999 (IADB, 1999b).
15
The ‘Group of Five’ is a group of five nations (Canada, Germany, Spain, Sweden and the USA) who
agreed at Stockholm to monitor the transparency of reconstruction and transformation in the region. The
group now also includes Japan.
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active collaboration) of external actors under conditions of increasing international
flows can provide great opportunities for illicit activity at the highest levels.
Furthermore, such is the reciprocal onus on IFI and debtor country governments to
provide positive assessments of the impacts of institutional reform, that important
contradictions and inconsistencies can be buried under reams of cosmetic statistical
information, positive action plans and well-meaning but often pointless documentation. It is this, as much as anything, that allowed the looting during the Alemán
presidency to occur.
To explore these inconsistencies in a little more depth, it is worth looking at
specific examples of the occasionally surreal communications passing between the
government of Nicaragua and the IFIs on the subject of governance. Following
the May meeting of the Donor’s Consultative group in 2000 in Washington, the
Nicaraguan government (RN, 2000a) wrote in a letter of intent to the IMF dated
August 30th 2000:
‘‘In the structural area, the National Assembly passed legislation to help improve
transparency and efficiency in government procurement. Laws relating to the
central bank, commercial banks and the Superintendent of banks approved in the
fourth quarter of 1999 strengthened the autonomy of the central bank and
improved the legal basis for prudential regulation and supervision of financial
institutions.’’
This statement was clearly accepted at face value by the institutions (see IMF/IDA,
2000). At the time that it was written, however, Nicaragua had actually passed
through something of a banking crisis (the Nicaraguan banks INTERBANK,
BANIC and BANCAFE all collapsed in the period 1999e2001) and yet there is no
acknowledgement of this crisis and its impacts. There was also no comment from the
IMF/IDA on the blatant lack of success of earlier commitments to banking reform,
which had been articulated in a letter of intent to the IMF in January 1998. This had
stated that ‘‘(m)easures are being undertaken by the government to ensure the
soundness of the banking system. Improvement in the regulatory framework and in its
implementation shall be furthered in order to reduce discretionality, enhance banking
competition, and increase bank solvency through increasing the capital base’’
(RN (1998), Nicaragua Letter of Intent and Memorandum of Economic Policies
to the IMF, 555 January 9, 1998).
Furthermore, legislation passed by Nicaragua’s National Assembly in this period
was controlled by a pact between the two major parties (FSLN and PLC), effectively
dividing up the government between them. As a consequence, laws promoting the
autonomy of the Central Bank and the Superintendency were effectively meaningless
since the regulation and supervision of financial institutions were effectively
what the political party executives, many of them board members of the financial
institutions being regulated, decided it was. Exactly how meaningless can be
readily discerned by the figures e between 1990 and 2002 eleven Nicaraguan banks
went bankrupt, disappearing with massive sums in loans and customer savings
unaccounted for.
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In a similarly Orwellian fashion, at the same May 2000 meeting of the Consultative Group in Washington, Sr. Enrique Iglesias, the president of the IADB,
commented:
‘‘The good government embarks on modernization of the institutions of the state,
permitting them to be able to provide public services in an effective manner with
transparency and responsibility in the use of public funds, including international
aid. In such a spirit, we support the recently approved Law of State Contracting,
which mitigates for a greater transparency in public acquisitions and contracting.
At the same time, we also support the Law of Comptroller Reform, which makes
for a greater independence and professionalism in the actions of this state entity.’’
(Iglesias, 2000, authors’ translation)
The reform of the Comptroller’s Office had been demanded by the international
community following Alemán’s ousting of the former independent Comptroller
General, Agustin Jarquin Anaya, who had shown an uncomfortable predisposition
towards doing his job properly. This had resulted in his being briefly jailed by
Alemán in November 1999 for enquiring too closely into the exponential enrichment
of the president16 and his close circle of family and friends.
The FSLN/PLC pact had then turned the Comptroller’s Office into a college
of comptrollers, individually picked by the two party leaders and led by an
unconditionally loyal supporter of Alemán. By creating this college of political
appointees, the PLC/FSLN pact sought to control all enquiries undertaken by the
state office responsible for ensuring the legitimate use of public funds. Thus, the
reforms being praised by Sr. Iglesias had, in effect, politicized the Comptroller’s
office. Moreover, those promoting the reform had themselves played invidious roles
in effectively neutralizing the independence of that office. In other words, the
president of the IADB was praising the most corrupt members of the government of
Nicaragua for the introduction of a law that had exactly the opposite effect of that
which he claimed for it; demonstrating either a lamentable lack of understanding of
the dynamics of Nicaraguan politics or a blatant lack of concern for the actual
outcomes of the institutional reforms funded by his organization.
International concern over the extent of corruption in Nicaragua under the
Alemán administration was, however, not entirely absent. Individual donors
expressed severe reservations about the Nicaraguan government’s record on
corruption in the initial months after Mitch (Vukelich, 1999) and, following the
Stockholm Conference, several individual projects were abandoned when donors
discovered irregularities (e.g. Denmark e La Tribuna, 2/11/99) whilst the
disbursement of other project monies was delayed mainly because of fears over
corruption (El Nuevo Diario, 23/10/99; La Prensa, 29/10/99). Even the US
ambassador, Oliver Garza, began to press Alemán over the growing charges against
16
In 1990, when he became mayor of Managua, Alemán declared a patrimony of some $26,118, which
had increased to $309,993 when he left that office in 1995 and was over $990,000 by 1997 (El Nuevo Diario,
26/02/1999).
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him in March 2000; although as late as mid-1999, USAID officials were still talking
of the ‘exaggerated’ and politicized nature of the claims being made about high-level
corruption in the Alemán administration.17 This, nonetheless, appears to have done
little to influence the behaviour of the Alemán administration.
The unavoidable conclusion must be that as the centralization of powers under
the presidency, the corruption of the political process and the exponential growth in
actual corruption continued in Nicaragua, all of the responsible authorities
(domestic and external) abandoned responsibility in order to maintain the façade
of a political and macro-economic status quo. For all of the IFI experience with, and
insistence on, conditionality in relation to economic policy, their attempts to force
the Alemán administration to respond to the corruption charges fell on deaf ears.
Thus, whilst in September 1999 the IMF had taken the unprecedented move of
making its support on Nicaragua’s accelerated inclusion into the HIPC initiative
conditional upon progress in the fight against corruption (relating particularly to the
Jerez case and the constitutional reforms of the PLCeFSLN pact), in December
2000 the country was allowed to enter without any demonstrable progress having
been made.18
The absence of more systematic IFI condemnation is all the more inexplicable
when it is realised that corruption in Nicaragua takes place under the spotlight of
a fierce and independent press. The two daily newspapers, La Prensa and El Nuevo
Diario (of diametrically different political orientations) kept up a constant barrage of
revelations and exposés throughout the period 1996e2000. La Prensa in particular
played a major role in bringing to light documentary proof of corruption in the Jerez
case, publishing document after document in the face of absolute refusal to
investigate by the police, the judicial system and the responsible state authorities.
The dailies were backed up by magazines such as Confidencial and Envio, whose
commentary examined in minute detail the overt dishonesty of PLC officials e proof
of corruption was everywhere, but subordinated to economic ideology and perceived
geo-political priorities.
The descent to the levels of corruption that occurred in Nicaragua under the
Alemán administration was not the fault of the IFIs or the international community
more generally but the institutions did appear strangely reluctant to broach the
growing problems. There was also a failure to make connections between the
escalation of corruption problems and the evolution of other areas of policy under
IFI control and influence (e.g. the privatization process) and they continued to
advocate policies that in many ways fuelled the problems. Despite the large amounts
of international money ploughed into them (and despite the initial statements of
17
From personal interviews carried out by one of the authors in 1999.
However we do recognize, as the example of Kenya shows (see World Bank, 2004a), that where the
IFIs do eventually show the will to act against corruption, this raises profound questions concerning
national sovereignty and levels of responsibility and provides brief glimpses of the hidden political
economy that the current discourse on corruption acts to conceal (for example, the role of bank staff in
corrupt allocation of contracts, the need for the Bank to appear successful and the political pressure
brought to bear by richer countries with vested commercial interests and so on).
18
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praise and support), the anti-corruption efforts of the National Integrity Plan and
the continual process of institutional strengthening and other ‘good governance’
initiatives, fell far short of their intentions in Nicaragua and, in some cases, merely
provided further sources of patronage for the clientelistic political system. It is only
when analysing the political realities of Nicaragua at that time in more depth that it
becomes obvious how anti-corruption initiatives were rendered impotent, not just
through the actions of a corrupt president and his circle, but also by the very way in
which the Nicaraguan political system functions.19 The section that follows explores
the recent dynamics of that system in a little more detail.
The Nicaraguan political system: the PLCeFSLN pact
For many Nicaraguans, the worst thing that Sandinista ex-President Daniel
Ortega has done (and there are many issues competing for their condemnation e
ranging from the alleged abuse of his step-daughter to the Sandinista’s own piñata) is
to have reached a political agreement with Alemán that legitimized and accelerated
his abuse of the Nicaraguan state. Key to the explosion of corruption in Nicaragua
in the late 1990s was the packet of 16 constitutional reforms approved by the
national assembly of Nicaragua on 9th December 1999. These reformed laws were
a big step backwards from the democratizing changes to the constitution of 1995
(ICEP, 2000), and through them the caudillos of the PLC and the FSLN effectively
divided up the spoils of the estado botin (the booty state) between them.
For the FSLN, the reforms of 1999 guaranteed possession of a series of businesses,
farms, agricultural co-operatives and residential properties that they had appropriated
in the piñata of 1990. Rent arrears from some 240 state businesses in FSLN hands since
1992, a sum of some US$50 million, were also written off. The FSLN were guaranteed
a seat on the managing committee of the Superintendent of Banks and the Central
Bank, as well as seats in the Comptroller General’s Office, the Supreme Electoral
Council, and 40% of all the offices in regional, departmental and municipal electoral
bodies. They were further guaranteed 40% of the electoral budgets for the general and
municipal elections and a reduction in the number of votes required for a second round
in the presidential elections from 45% to 35%, a change important to Ortega’s
presidential aspirations. Managua was also divided into three municipalities giving
the FSLN a better chance of winning overall, whilst leaving the PLC in charge of the
wealthy areas from which their support was derived. The FSLN also gained seats on the
ruling bench of the Supreme Court, posts in all the Appeals Tribunals, Criminal and
Local Courts throughout the country and positions in the ruling committee of the
19
Some of the worst elements of Nicaragua’s political culture have actually been magnified through the
processes of economic and political reform financed by the IFIs over the past decade. We examine the
economic processes by which the Nicaraguan political economy became the clan-based patronage system
that it now is (with a particular focus on the processes of liberalization/privatization during the
post-revolutionary transition after 1990) in a further paper currently under preparation for the journal
Critical Perspectives on International Business.
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national assembly, whilst FSLN-controlled banks were guaranteed participation in the
potentially lucrative Wet or Dry transoceanic canal project.
For the PLC, the pact saw the FSLN agree to stop disruption of government,
using its influence to dismantle unions in the state businesses ear-marked for
privatization e ENITEL (the state telecoms company), ENEE (the state electricity
company), INAA (state company responsible for bridges and aqueducts), the airport
and the ports authority. Most importantly, the PLC gained control of the office of
the Comptroller General at a time when it was becoming embarrassingly effective. As
a failsafe, Arnoldo Alemán also attempted to secure his further immunity from
prosecution upon leaving the presidency by the conferral of a deputy’s seat in the
national assembly as of right.
The PLC also gained control of the Supreme Electoral Council, and thus the
national electoral process (from the counting of votes, to setting the electoral budget
and the constitution of the local electoral boards), the Supreme Court and other
justice tribunals. Finally, the PLC achieved the promulgation of a series of laws
privatizing a series of state businesses whilst allowing members of the PLC
government to work in them as shareholders or associates. The privatization of
ENEE, ENITEL, the international airport, INAA and the state bank BANIC were
all done in ways permitting the PLC and party functionaries to profit from the sale.
The pact and the above reforms were more than a de facto recognition of the
bipartite political divide that has been the political reality of Nicaragua since 1996,
they were an attempt to write that political division into the constitution and into the
legal system. Even more importantly, in dividing up the Supreme Electoral Council,
they attempted to write all other political opposition out of official election
processes.
The need for good governance
Our concentration on the inadequacies of the interventions of the IFIs and the
impacts of the broader political economy upon the path of institutional reform in
Nicaragua should not be seen as suggesting that there is not a need for better
governance and enhanced institutionality in Nicaragua. Quite the contrary, it is the
lack of transparency of state institutions, the limited public access to government
data and the lack of professionalism of the civil service, which have facilitated the
abuses that have occurred. These factors are gradually being tackled by the current
Nicaraguan government but there will be no magic solutions to what are deep-seated
problems.
Immunity from prosecution has been perhaps the single most effective block to
transparency of government in Nicaragua. As of 1999, the Nicaraguan constitution
allowed for immunity from legal action for the President and Vice-president, the
magistrates of the Corte Suprema Electoral and the Corte Suprema de Justicia and
members of (diputados) the National Assembly, as well as members of the
Contraloria General, ministers and vice-ministers of state (Ley de Inmunidad No.
83 of March 1990, Capitulo 1, Articulo 1). Section 3.1.2 of the National Integrity
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Plan dealt with reform of the executive branch of government and notes the passing
of Law 290 in 1998 in order to promote efficiency and openness in the public sector.
Nevertheless, far from making this situation better, Law 290 actually made the legal
situation worse, by effectively conceding to the president the discretion to impart
immunity to other functionaries where (s)he sees fit. Under this law, the president
was given the right to create sectoral cabinets wherever and whenever it was deemed
necessary, and to bestow official GON rank to whoever it was deemed appropriate,
with all the privileges that might entail including immunity from prosecution.
In other words, the president arrogated to himself the right simply to bestow
government patronage at will, a further centralization of powers.20
Armed with this, understanding how it was possible for Arnoldo Alemán and his
family to have stolen over $100 million becomes more apparent; this was a sum
equivalent to the entire USAID budget for Nicaragua for the financial years 1998, 1999
and 2000, which averaged some $35 million (USAID, 2000). Additionally, this sum
deals only with that amount taken by Arnoldo Alemán and family. As a mere
consequence of logic, hundreds if not thousands of his deputies, governmental
appointees and party loyalists must also have been involved in their own corruption,
petty and otherwise. Plainly the amounts stolen from the Nicaraguan public purse
during the Alemán presidency must have been several multiples of this $100 million
figure; this without mentioning the quantities extracted by the FSLN for their support.
The lack of impact of freedom of information and transparency laws is another factor that has facilitated high-level corruption in Nicaragua. Information
technology is still a rare commodity, and written and printed records often tend
to be used to obscure fact rather than reveal it. These are frequently destroyed by
the authorities responsible for them, as for instance when the financial files of the
alcaldia of Managua from 1990 to 1996 were destroyed by (then-alcalde) Alemán
when they were requested by the Comptroller General as a part of the investigation
into the financial affairs of the alcaldia of Managua.
These problems have been accentuated by the minimal transparency of
government accounts, and the power exerted by the presidencia to divert money
where it wishes. In 1997, for instance, the budget for the Republic passed by the
National Assembly contained a mysterious element for ‘internal debt’ of C$940
million, which no-one could explain and which was therefore unaccounted for
(Envio, 1997).21 The government budget has frequently contained an element of the
surreal, given that the budget submitted to the national assembly for the following
year is invariably far less than the actual total spent; ‘slippage’ is simply spent
20
Later on in the Plan, section 3.1.15 does note the concern of civil society over the Law of Immunity
within the Nicaraguan legal system, and makes some mention of responding to these concerns, although
this is something that still remains to be tackled effectively in Nicaragua.
21
Other examples of this are the unhindered access to $62 million requested in the budget of 1999 for the
presidencia for use at the president’s discretion, the calculated $17 million annually being paid by state
companies direct to the presidencia and for which no account appears in the national audit, and indeed the
$47 million, $87 million and $56 million which were paid to the Banco Central de Nicaragua under the
mysterious title of ‘politica economı´a’ for 1997, 1998 and 1999 (Téllez, 2001).
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illegally. The budget for 2000, for example, increased illegally by C$1404 million
during the first few months of the year (El Nuevo Diario, 14/12/2000), an overspend
subsequently legalized by the National Assembly retrospectively.
Transparency of state functions clearly requires a system of laws and regulation
that is understood, and the requisite people and mechanisms to operate it. The
manual of accountability issued by the government of Nicaragua in November of
2000 states:
‘‘The reform and modernization of the public sector requires as one of its’ central
components the implanting of a civil service system and administrative career
structure based in merit.At the same time, there exist no modern, homogenous
systems of personnel administration in the state institutions, so that the
government of Nicaragua has made a promise to initiate the process of
modernizing its’ civil service, with the objective of professionalizing the civil
service of the state administration so that it can count on the services of
professional civil servants, impartial and efficient, promoting the development of
an administrative career and contributing in this manner to the continuous
functioning of the state administration.’’ (RN, 2000b, authors’ translation)
The manner in which successive Nicaraguan governments have chosen to fulfill
this promise has been to select only party members and in particular close relatives
for the majority of state offices. The ‘familiarization’ of the state essentially involves
the suborning and disposal of offices in strategic positions as a direct personal favour
to the donor; beneficiaries of this personal largesse plainly owe no loyalty to the state
or the people of Nicaragua. The employing of relatives and party workers therefore
inflicts very real economic damage on an already desperately poor country.
President Alemán appointed numerous family members to various state posts,
but Alemán was by no means alone in this. As of 5/1/2001, for instance, the then
vice-president and current President of Nicaragua, Enrique Bolaños Geyer (now
attracting such praise for his fight against corruption from the international
community),22 had at least 16 members of his family in state posts of one description
or another. Two of the assessors he appointed to the National Integrity Committee,
for example, were nephews, whilst a further nephew was appointed as a delegate of
the National Development programme in Carazo. In addition, one of his wife’s
nephews, Fernando Abauza Noguera, was appointed DGI (Inland Revenue)
delegate for Masaya in January of 1997, some five months before he actually came
back to live in the country in May 1997, having in the meantime obtained Canadian
citizenship (El Nuevo Diario, 05/01/2001; Goitia, 1998; Roiz Murillo, 2001).
In theory, all government action is governed by the constitution or respective laws
and regulations passed by the National Assembly, but in practice this is frequently
subverted by a ‘‘Shadow State’’ (Reno, 2000) of the clientelistic structures, systems of
22
It lies beyond the scope of this paper to explore the successes and failures of the war on corruption
being waged by the Bolaños administration. This will form the focus of a further paper on these themes.
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23
personal obligation and political arrangements that supercede all democratic and
juridical regulation. As an example, Article 5 of the Ley de Contratacion (the law
governing contracting and licensing of purchases of services and goods by the state)
of Nicaragua says:
‘‘The State is obliged to plan, programme, organize, develop and supervise
contracting activities in a manner through which its necessities are satisfied in the
most convenient time and in the best conditions of cost and quality. The
proceedings must be structured, regulated and interpreted in such a form that they
permit the selection of the offer most convenient to the general interest, with
quantifiable conditions of speed (of execution), rationality and efficiency.’’ (RN,
1999b, authors’ translation)
Article 3 gives a list of those goods excluded from the necessity of being regulated
by the process, which, by itself, is comprehensive enough to remove most goods from
formal regulation. Even so, the reality of what happens in Nicaragua demonstrates
how the law exists on paper only. The reality of state contracting can readily be
demonstrated by, for instance, the following example. On the 25th September 2000
ex-minister of transport Jaime Bonilla, in his declaration to the investigating
Controloria, stated that he personally had supervised the progress of a road built by
the construction company MODULTECSA (which built the summer palace of
Byron Jerez, using Hurricane Mitch disaster relief funds) from Masachapa to San
Juan Del Sur, frequently visiting the works at the weekends because it was in his
native department. It was subsequently revealed that this road did not in fact exist,
and that no traces could be found of any construction on the dirt road that did exist.
There then developed a concern for the whereabouts of the C$277,307 paid for the
construction of this non-existent road and the part played by the ex-minister
(appointed on the basis of his friendship to Alemán) in the disappearance of the
money.
Nicaragua is by no means unique in the frequent discovery of non-existent roads
and infrastructure for which large sums of money have been paid; neither is it unique
in the corrupt forms of clientelism and caudillismo taken by the political economy
which disrupt the proper use of public funds. What makes Nicaragua different is the
causal links that corruption has had to the symbolic position it came to occupy in the
Cold War, and the complex network of relationships that this position gave its
political economy to the political establishment of the United States and, in
particular (as the interference of Governor Jeb Bush of Florida in the elections
of 2001 clearly demonstrates), to the Republican party. We explore the importance
of these geo-political factors in more detail in Brown and Cloke (2004). Much of
Alemán’s assumption of his own invincibility came from his prior enjoyment of USsupport as the only figure in Nicaraguan politics deemed capable of ‘dealing with’
Sandinismo.
One final point to make from the Nicaraguan experience under Alemán is that
anti-corruption initiatives must assume the hostility of government to high-level
institutional reform and must use active civil society participation to overcome this.
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Opinion surveys reveal, however, the perception that corruption is actually getting
worse,23 although some commentators (e.g. Seligson, 1999) claim that this may
reflect a greater awareness of corruption (and hence the success of the programmes),
rather than a worsening of the problem itself. Of course, corruption levels are
notoriously difficult to measure but even a public perception that the problem is
getting worse (despite the anti-corruption efforts) can be problematic in itself since it
encourages cynicism and weakens support for democratic change (Szeftel, 1998).
All of this suggests the importance of public scrutiny of the exercise of power and
increased civil society involvement in decision-making to the successful outcome of
‘Good Governance’ programmes, yet even the international institutions promoting
that agenda recognize that lack of meaningful public participation in the embedding
of anti-corruption programmes within local political systems remains an intractable
problem (see Langseth & Pezzulo, 2000; USAID, 1999). When institutional reform
goes hand-in-hand with an expansion in the perceived incidence of corruption, as
was the case in Nicaragua under Alemán, the longer-term involvement of the
population in anti-corruption initiatives becomes even more problematic and
unlikely, further undermining their possibilities of success.
Conclusions
‘‘When I hear criticisms of Daniel Ortega and Arnoldo Alemán, I wonder if we’re
not criticizing the part of them that exists in ourselves. By this I don’t mean that
what they have done or continue to do is not objectionable, not spiritually and
materially damaging to the majority of our people, including the indigenous and
mestizo peasant communities. But I do not believe that Ortega and Alemán are
particularly perverse. I believe that they make more visible the serious defects of
our political culture, our illegitimate state and the mechanisms created to
administrate the country.’’ (Allan Bolt, 2001: 23)
We started off this paper by suggesting the limitations of institutional reforms and
the good governance agenda in Central America. Our focus on corruption during the
recent Alemán administration in Nicaragua has reiterated the point that institutional
reforms (and particularly anti-corruption efforts) can never be dealt with separately
from the political economy that acts as host to them. In the case of Nicaragua and
the other Central American countries, the complexity of governance and transparency issues are inextricably mixed up with Cold War and post-Cold War
neoliberal realpolitik in a way that makes treating corruption as if it were a problem
of economics or of jurisprudence a waste of time.
23
For Nicaragua, examples include: Seligson (1997, 1999) carried out for USAID; CIET International
(1999, cited in Langseth & Pezzulo, 2000) carried out for the World Bank and the Vice Presidency
of Nicaragua; a survey of businesses carried out by M&R Consultants for Confidencial (Bodan, 2000b)
and a variety of surveys carried out by the IEN (Instituto de Estudios Nicaraguenses) e see
http://www.ibw.com.ni/wien/.
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The uniqueness of the Nicaraguan case has historical roots that derive specifically
from Nicaraguan culture (although there are some factors in Nicaragua’s
socio-cultural context that can be found in many Latin American countries) e the
eradication of corruption cannot, therefore, simply be an external effort and will not
be activated by the efforts of outsiders. The liberal, conservative and leftist factions of
Nicaraguan politics are still beset with the clientelism and caudillismo that developed
before and after the Somoza dictatorship, and unless there is a radical change in the
internal structures and democratic proceedings of such parties, corruption will remain
a legitimate form of social capital in the Nicaraguan political economy.
A fundamental trait of corruption in Nicaragua (as in all countries) is that it is
itself an index of the interrelationship between government and the private sector, the
efficacy of regulatory mechanisms and the political needed to maintain a necessary
separation between the two, not sufficiently grasping this is a mistake which seriously
undermines IFI dictates as regards transparency and governability. In the most
successful capitalist countries over the last two decades there has been continuous
movement towards closer private sector/government relations; even if a small aiddependent country like Nicaragua were disposed to resist, how would it do so? Given
the cultural cognitive model of family/friendship-controlled banking and commerce
that is the norm in Nicaragua, no government could be expected to wave a magic
wand and repair the system. In particular, since the state and private sector, rather
than being distinct and separate, are a complex and intermingled mesh in which it can
be virtually impossible to distinguish boundaries, the clientelistic networks which
control government are inseparable from those which run the private sector.
Similarly radical change has to be undertaken within the FSLN if it is to rediscover
the moral authority that Sandinismo used to enjoy. The legacy of the revolution of
1979e1990, for instance, is currently less the programmes and initiatives that were
implemented during that period and more what has happened as a result of the piñata
of 1990, and the decision of the FSLN to become a political party for which the use of
power was its own justification. As Sergio Ramirez said in his book Adios Muchachos:
‘‘The FSLN was not prepared, as a whole, to assume its role of party of opposition inside
a democratic system because it had never been designed for this. Its vertical structure
was the inspiration of Leninist manuals, of the impositions of the war and of caudillismo,
our oldest cultural heritage’’ (Ramirez, 1999: 149, authors’ translation). The most
striking confirmation of this is Daniel Ortega’s continued domination of the party
and his willingness to manipulate the democratic institutions of the country in the
pursuit of personal/political gain (evidenced most recently in his role in the release of
Alemán from jail in December 2004).
Moving beyond the specifically Nicaraguan issues and returning to the general
critique of anti-corruption initiatives which we advanced in the initial sections of this
paper, it is clear that if the IFIs wish to confront corruption realistically, then
questions of political and cultural context such as those explored in this paper
(together with a whole host of other issues such as conditionality, external
intervention and transnational accountability) must be taken into account when
trying to design mechanisms to improve transparency and governance. Above all,
the IFIs must examine themselves and their own complicity in the development of
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corrupt systems (see footnote 18); the ideological baggage that surrounds both IFI
perceptions of the state and the beneficial effects of liberalization and deregulation
must be abandoned.
The US is already having far more impact on the struggle against corruption with
the denial of visas to Nicaraguans being investigated for crimes of money-laundering
than all of the external pressure from donors (although the irony of this is of course
that the prior evolution of state forms and practice owe much to the geo-political
patronage systems laid down by the US during the Cold War). Since the agencies
and organizations that are responsible for the disbursement of aid and loans have
themselves a fiscal responsibility to the sources of the funds they disburse, there is no
reason at all why similar investigations into corruption cannot be carried out by such
organizations, particularly in the case of countries where a weak legal system makes
it unlikely that the powerful will go to court.
Existing mechanisms for combating corruption, such as the World Bank’s list
of blacklisted companies, must be seen to have an effect on the companies and
individuals concerned if they are to have any meaning. The largest number of
companies from one country on the blacklist is from the UK, and yet none of these
companies have suffered even the penalties reserved for fraud within their own
national legal systems. Detection of corruption and bribery must be met with the
impositions of penalties, particularly since stopping corruption must mean the
punishment of the bribe-payer as well as the bribe-taker. Undertaking investigations
and blacklisting individuals and organizations in poorer countries from office would
send a powerful message e but only in the case that the IFIs first put their own house
in order. If it continues to be the case that aid/loan disbursement by IFIs,
multilateral and unilateral donors is dominated by the geo-strategic concerns of the
rich north (for instance in favourable treatment of governments with oil and/or
mineral resources) then all initiatives to stop the growth of corruption will fail,
taking place as they will be in a system that is itself corrupt.
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