The Sandinista Front, led by Daniel Ortega and Rosario Murillo, will win the next presidential elections for the 2021-2025 period, despite having the lowest level of approval in the last decade, warns the Analytical Unit of The Economist in its latest report, published on January 27.
“Opinion polls indicate that there is growing dissatisfaction with the FSLN driven by mismanagement by the Government in the coronavirus outbreak (Covid-19), as well as concern about the deterioration of the economic situation and growing public insecurity,” cites the report.
According to surveys, only a quarter of Nicaraguans approve and support the president’s management. This makes him “politically vulnerable” to compete in free and fair elections. Therefore, they foresee that Ortega can make modest concessions on electoral reform in an attempt to legitimize his victory.
“They are likely to be superficial, since the FSLN would maintain control over the Supreme Electoral Council, the Judiciary and other important institutions,” the British publication highlights.
Even if the opposition manages to unite and be allowed to participate in the elections, it will not be able to achieve a change because Ortega ruled out the possibility of allowing fair elections with the approval of laws and reforms that prohibit the participation of citizens that it considers disloyal or a threat to the country.
However, they foresee that Ortega’s victory in the elections will cause much social unrest. Such they believe will tarnish the country’s medium-term perspectives with investors, lacking confidence in the rule of law. It could also produce fractures within the Sandinista Front itself, says the Economist.
“The regime has used the active participation of the Police forces to end the rebellion, strengthen institutional cohesion, and threaten with retaliation if the opposition tries to rise to power. So far this has been enough to ensure the loyalty of security forces. However, there is a high risk of fractures within the regime if economic and political conditions worsen radically,” it explains.
Economy improves, but quality of life will not
In 2021, after three years of recession, the country’s economy will rebound. The Gross Domestic Product (GDP) is expected to rise 3.5% or more, as public spending and fixed investment consumption increases. As they explain it, private consumption will grow with the arrival of remittances and exports.
However, since between 2018 and 2020 there was a strong economic contraction due to political, social, economic crises and the pandemic; the rebound has a low basis of comparison and this indicates that it does not necessarily mean that the population’s living standards will improve.
Furthermore, the Ortega administration will be threatened by the sanctions and restrictions imposed by the United States Government. Therefore, the government is expected to seek to restart relations between the two countries now with the new US government.
“We remain skeptical that bilateral negotiations will produce such a result. United States efforts to promote democratization in Nicaragua have typically enjoyed bipartisan support in the United States, and this is likely to continue under the Biden administration. Neither do we expect the Sandinistas to accept any political reform that forces them to give up control over state institutions,” it warns.
Social Security Reforms in 2022
In this context, Ortega is expected to focus on maintaining the country’s macroeconomic stability as done until now. However, it is expected that the regime will be forced to consolidate public finances and that in 2022 it will have to make reforms to social security. But the improvements that these reforms will bring will be brief because while there is no solution to the sociopolitical crisis, the INSS will not be able to increase its taxpayer’s base.
“Economic recovery, along with aggressive tax enforcement efforts, will help boost revenue. However, the bill for expenses will increase more significantly as the government raises spending to strengthen its political base,” they explain.
In addition to this situation, the State must assume the deficits of the Nicaraguan Social Security Institute (INSS), the National Electric Transmission Company (ENATREL), the Nicaraguan Electricity Company (ENEL) and the Water and Sewerage State Company (ENACAL).
“Our baseline forecast assumes that the government will be able to cover most of its financing by assuming new debts. On the foreign front, most of the new financing in US dollars comes from CABEI and official bilateral creditors. On the domestic front, the Government will continue to issue bonds in local financial markets. However, it will have to offer high interest rates to attract investors, which will raise the debt-servicing costs,” they stated.