"The challenge… is to send a strong and unequivocal message that there is zero tolerance for corruption." Miguel E. Martínez IDB Operations Manager

By Peter Bate

Consultative groups, a mechanism increasingly favored by the international community to funnel aid to distressed nations, rely on an almost instant rapport between donors and beneficiaries. If all goes well at these diplomatic events, plans are supported with pledges and substantial funds soon flow.

The May 23–24 Consultative Group meeting on Nicaragua, however, did not immediately fit that model.

The meeting will help restore mutual trust, said the Nicaraguan foreign affairs minister
(Photo: Arlette Pedraglio, BID)

The event was scheduled to follow up on Nicaragua’s efforts to rebuild and transform its economy and its public institutions from the destruction caused by Hurricane Mitch late in 1998.

The floods and mudslides triggered by Mitch, one of the worst natural disasters to ever hit Central America, killed more than 3,000 people and caused around $1 billion in damages to Nicaragua’s infrastructure and economy. In order to help the whole region recover from the catastrophe, the international community pledged to provide more than $9 billion in a mix of humanitarian aid, long-term financing, and debt relief to the affected countries at an earlier consultative group meeting held in Stockholm in May 1999. Nicaragua’s share would comprise some $2.6 billion.

At the time, the beneficiary nations and the donor community agreed unanimously that the tragedy caused by Hurricane Mitch could be turned into an opportunity for Central America to overcome its legacy of poverty and to cement its democracies.

But while subsequent consultative group conferences dwelled largely on technical aspects of the reconstruction of physical infrastructure, the improvement of social programs and the deployment of preventive measures against future natural disasters, the Nicaraguan meeting was dominated by debates over controversial reforms of the Central American country’s public institutions.

The most heated discussions examined the consequences of a political pact reached in March between the ruling Liberal Party and the opposition Sandinista Front and incidents of alleged corruption involving top government officials. Some donor countries have reacted strongly to these issues in recent months, and in a few cases have frozen their support for a reform program involving the Nicaraguan audit office.

Donor countries’ delegates stated that Nicaragua would have to prove to the rest of the world that its recently reformed audit office does have teeth. Many of them also voiced concerns about the impact of the Liberal-Sandinista pact on ensuring a level playing field in Nicaragua’s electoral system.

Nicaraguan President Arnoldo Alemán’s officials defended their political reforms as sovereign decisions taken by a sovereign country. They asked why a much-criticized agreement between former sworn enemies like the Liberals and the Sandinistas should be bad for Nicaragua but good in other strife-torn areas of the world. For their part, the heads of the Nicaraguan electoral court and the national audit office stated that they would prove their independence by their deeds rather than just words.

Debt relief. Establishing an effective system of checks and balances to stamp out corruption is important in any country. In Nicaragua’s case it is even more so because ensuring transparency in government is one of the preconditions for obtaining enhanced debt relief benefits under the initiative for Heavily Indebted Poor Countries. With a $6.3 billion foreign debt it can hardly afford, obtaining a reduction of at least its multilateral obligations remains a top priority for Nicaragua.

Summing up the Consultative Group’s deliberations, the meeting’s chairman, IDB Operations Manager Miguel E. Martínez noted that the delegates recognized that Nicaragua had made considerable progress in terms of maintaining macroeconomic stability, fighting poverty and reducing its vulnerability to natural hazards. However, he added, delegates felt that Nicaragua must strive to make its public institutions more transparent.

“The challenge,” Martínez said, “is to take concrete actions, to send a strong and unequivocal message that there is zero tolerance for corruption in Nicaragua.”

Sounding a conciliatory tone, Nicaraguan Foreign Affairs Minister Eduardo Montealegre said that the candid discussions that had taken place in the two-day meeting could set the stage for restoring mutual trust between his country and the donor community.

“We take with us to Nicaragua your sincere and frank observations in order to fully discuss them and to implement many of the commitments reaffirmed here. I am convinced that after days of deep and wide reflection, we will remember this meeting with you, our friends, not as the Consultative Group, but as the Constructive Group,” Montealegre said.