Newspaper article The Christian Science Monitor

Nicaragua's Reform Teeters after Top Economist Resigns

Newspaper article The Christian Science Monitor

Nicaragua's Reform Teeters after Top Economist Resigns

Article excerpt

THE resignation of President Violeta Barrios de Chamorro's top economic official last week is placing new strains on her relationship with conservative business leaders. It may also signal a shift in economic policies.

Francisco Mayorga's departure Oct. 31 as head of the Central Bank followed disagreements with other members of Mrs. Chamorro's Cabinet over how to deal with Nicaragua's severe economic crisis. It also came less than a week after the government signed an agreement with opposition Sandinista labor union leaders which softened many of the measures Mr. Mayorga had adopted to reduce runaway inflation.

Leaders of Nicaragua's business community, however, refused to sign the agreement, known as concertacion (consensus-seeking). As a result, while appeasing the Sandinistas to avoid labor strikes, Chamorro faces a challenge from the right wing.

"We have to ask just what this government is doing, as they move closer and closer to the Sandinistas," says Ramiro Gurdian, a leader of the Council on Private Enterprise (COSEP). "They go into these talks and just concede, concede, and concede some more. Then Mayorga is out. If they continue like this, the government may not last."

Mr. Gurdian represented COSEP at the concertacion dialogue, which drew together dozens of government, business, and labor union leaders. He says Chamorro officials are reneging on promises to privatize the economy and dismiss thousands of state workers to reduce a monthly budget deficit estimated at $7 million. Although the deficit had been reduced from roughly $28 million a month in May, Mayorga wanted it eliminated entirely to spur economic recovery.

Mayorga, the architect of Nicaragua's monetary reforms, reduced inflation from more than 100 percent when Chamorro took office six months ago to about 30 percent last month. But these policies, particularly the efforts to fire thousands of state employees, earned him the wrath of the Sandinistas, who dubbed him the "czar" of the economy. …

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