Recession in Nicaragua: Massive Layoffs, Small Businesses Close

Experts use the word “recession” for “a state of decrease in economic activity over a period of time,” but for the Nicaraguans that suffer its effects, it’s nothing less than a disaster that depresses their businesses, cuts their income and puts the welfare of their families at risk.

Public accountant Roger Zamora Lopez, who lost his job last June, is one of the hundreds of thousands of citizens to suffer the effects of this economic debacle.

For over seven years he worked as a cashier in an auto-parts shop in Managua. When they let him go in June, they merely said that they’d call him in again if “thing improved.” He waits for this call every day.

One year shy of turning 60, Zamora began to worry about his employment in mid-May when he began to note the lack of customers. “Many days they had us clean the spare parts, or advance the inventories so that we’d at least be earning our pay,” he recalled.

“At the beginning of June, they told us that things were difficult, but that they weren’t planning to downsize their workers. To compensate, they began to make us take our vacation time. “In my case, I exhausted my vacation time, then worked one week more. At the end of the month, they handed me my pink slip,” stated this Managua resident, noting the fact that he had the “good luck” of having grown children, and only has one minor child to care for.

His greatest worry is that he won’t be able to obtain work again because of his age, and he’ll be left without a decent pension at the moment of retirement.

He’s currently holding on to the money he received as his final pay settlement.  Although he wanted to open a food business, that isn’t an option either as the crisis worsens.

“A recession is the phase of the economic cycle in which economic activity is reduced: investment diminishes as well as public and private consumption, at the same time that unemployment increases,” explains economist Alejandro Arauz.

No more beds to assemble

“During the recessive process that began in April, the greatest effects were felt in the contraction of consumption (which really began in May of 2016), a contraction that can be explained by the fact that ours is a seasonal economy based around agricultural cycles,” Arauz stated.

Another area that’s also been severely affected is industrial and manufacturing production,” especially “the small and medium size companies that are the majority.” The population suffer as their capacity to acquire food and needed products has dwindled because of the crisis.

Cesar Augusto Briceno, who works as a carpenter, is a first-hand witness to the truth of what Arauz is saying.

Briceno explained that he knew things weren’t going well in his work when they began to offer furlough days, to be covered by earned vacation time. He was working for a company that put together the beds for a very large Nicaraguan store, a business whose name he declined to reveal, in case “they call me back.”

He stated that before the crisis they would assemble up to 150 beds a week, but later the orders were so greatly reduced that they didn’t make up this quantity in an entire month.

“In May it was clear that things weren’t going well, since when our vacation time was all gone, they told us that we could take our days off in advance, and that later we’d make them up. They ended up taking them out of our final pay,” he said.

Briceno did everything in his power to emigrate to Costa Rica: he obtained a passport, got the visa and bought a ticket. However, he doesn’t want to take the risk because he doesn’t have a guarantee of work. “I have three children and a wife to support. I can’t leave without knowing that I really have a job,” he confided.

No customers, no guests

Economists from the Nicaraguan Foundation for Economic and Social Development (Funides), in conjunction with the large businessmen affiliated with the Superior Council of Private Enterprise (COSEP), analyzed the march of the national economy, later elaborating a report entitled “Examination of Economic Activity in Nicaragua.”

This document, which covers up through July, notes that “the sale of internal consumer goods – those goods and services that are commercialized in the local market – have been one of the areas most affected by the crisis.”

In addition, “the most affected economic activities are those related to tourism (small and large hotels, tour operators, restaurants), the distribution of automotive vehicles, construction (developers, contractors, and providers), and trade and services.”

Small businessman Oscar Fuertes can testify from personal experience about the difficulty of living in your own flesh the story told by the data that Funides collected from the companies affiliated with COSEP.

For Fuertes, the crisis has translated into the loss of renters and of customers for his photocopy and printing business near the University of Central America and the Nicaraguan Engineering University. “Business overall has fallen more than 50%. We’re functioning at a minimum,” he commented.

Fuertes owns a building with fifteen furnished rooms, and he explained that he’s reduced the rent from US $150 a month to US $100 a month to try and attract new renters. “I rent these rooms to students who come from outside Managua, but since classes have been suspended, there’s no sense for them to remain in Managua. At present, only two rooms are occupied,” he indicated.

He stated that his photocopy and printing business reflects an equally desolate panorama. “I had to lay off one of my employees, because I didn’t have the money to pay him. The print runs for workplaces have been reduced by nearly 90%, while the demand for photocopies is about 50% of normal.”

Fuerte’s situation is similar to that of all the businesses around the universities, where there’s nearly zero movement of customers. “I had nine workers, and I had to dismiss almost all of them. Only two are left,” stated the owner of another place of business who asked to remain anonymous.

Fuertes pointed out that he’s been able to keep his two businesses open because he doesn’t pay rent. “It’s a family business and that’s helped me, since I don’t have a lot of extra expenses.”

“The above underlines the importance of the government having the political will to seek a peaceful solution to the current sociopolitical crisis, to put an end to the repression and the criminalization of protest,” concluded the Funides report, which was released to the public only a few hours before the National Police announced that they would criminalize the protests, dissolve a protest march before it could begin, and arrest six citizens, among them two elderly women.