As Nicaragua, survivor of a brutal Cold War-era proxy-war, contends with the global downturn, we wonder which of two popular political fashions it is adopting. Is it following the populist-socialist route of Venezuela or the populist-capitalist route of Brazil?
Venezuelan President Hugo Chávez’s brand of crony-socialism, and populist anti-US rhethoric goes by the name of “Chavismo”. Chávez has squandered Venezuela’s oil wealth to get geopolitical influence. Venezuela’s economy has also suffered from the nationalization of important sectors, now run by Chávez’s toadies . Uncertainty has caused human and financial capital to flee and made Venezuela more reliant on volatile oil earnings. Inflation has soared and the bolivar has been devalued de-facto, if not de-jure. The IIF (Institute of International Finance), estimates that Brent crude prices below $70 per barrel during much of the next two years could put into doubt Venezuela’s servicing of its foreign debt. The miseries of Chavismo are not purely economic, it has intimidated political opponents and critics, some of which are in exile.
Brazil’s President Luiz Inácio Lula da Silva, widely known as “Lula”, has created his own political fashion. “Lulismo” entails populist posturing that rivals Chavismo’s in ridiculousness, if not in intensity, but is tempered by economic orthodoxy. Under Lulismo, Brazil has benefited from the recent commodity boom. It amassed foreign reserves of $200 billion while paying for Lula’s Bolsa Familia subsidy to poor families. The World Bank puts Bolsa Familia among the world’s best targeted poverty relief programs. Lulismo’s support of sound monetary policies, under Central Bank President Henrique Meirelles, has helped create the opposite of Chavismo’s capital flight; Brazil battles an influx of foreign money seeking high interest rates and a currency appreciating against the dollar. While payment on Venezuela’s foreign obligations are threatened, Brazil has investment-grade bond ratings. Lulismo’s merits cannot overshadow its inanities that range from Lula’s racial theories (he blamed the Sub-prime Crisis on “white men with blue eyes”) to political corruption that reached into the President’s family. Unlike Chavismo, Lulismo has no economic or political refugees.
Daniel Ortega, former guerilla leader and President of Nicaragua, has nationalized no private asset in his second presidency. Conflicts have arisen with international companies, but these have been resolved through negotiations. Ortega’s Nicaragua claims to be open to foreign investments. It is implementing an economic program agreed with the IMF. New incentives are in place to attract investments in tourism and energy. Labor arrangements that are more business-friendly are being negotiated to respond to the global downturn. However, inconvenient alliances with Chavez, Iran and even Russia, has investors worried and uncertain, particularly Nicaraguans. Furthermore, accusations of fraudulent municipal elections have led the US and European countries to cut off aid. In the opinion of a former government official, Ortega is not adopting the economic aspects of Chavismo, though he seems willing to borrow some of its political tactics. Ortega seeks to chart a course between Lulismo and Chavismo; a difficult task given the long-run incompatibility of political intimidation and economic freedom.
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