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Gas Goes Up 177 Percent; Prices of Other Basic Goods to Rise

June 8, 1987

MANAGUA, Nicaragua (AP) _ The leftist Sandinista government is raising the price of gasoline by 177 percent starting today, as part of a package of economic measures that will increase the price of basic goods and raise the minimum wage.

Nicaraguan officials said they were instituting the price and wage hikes to strengthen Nicaragua’s economy, battered by five years of war with U.S.-supported Contra rebels. But many Nicaraguans said the 30 percent increase in the minimum wage would not compensate for the price increases.

President Daniel Ortega announced Saturday the government was increasing the minimum wage and raising the price of 54 basic consumer goods. He also said new taxes would be levied soon on capital goods, non-essential consumer items and the sale of some raw materials for agriculture and the construction industry, in an effort to reduce the government’s huge budget deficit.

He said the wage hike would be retroactive to June 1, but did not say when the other measures would go into effect or how much they would be. The legal minimum wage varies according to regions and occupations.

The government announced Saturday night that the price of gasoline would go up, effective today, to 500 cordobas - $7.14 a gallon at the official rate. The gallon measurement in Nicaragua is equal to four liters, slightly larger than a U.S. gallon.

A tractor driver’s minimum salary is 80,894 cordobas a month, or about $1,156 at the official rate. The minimum for a house maid is 12,000 cordobas, or about $171.

The price increases add to the woes of the Nicaraguan consumer, who faces annual inflation currently estimated at 777 percent and the effects of a U.S. trade embargo that has kept many products and spare parts out of the country since May 1, 1985.

Private economists, speaking on condition of anonymity, said the Sandinistas’ economic package was put together after the Soviet Union criticized their management of the economy.

The Soviet Union has supplied most of Nicaragua’s crude oil for the past three years. A week ago, Nicaraguan officials said Moscow announced it was cutting shipments by 40 percent, allegedly due to changes in the world oil market. On Saturday, Ortega announced the government was cutting its fuel consumption by 5 percent.

″The gasoline price increase has annulled the salary increase, since transportation rates will also go up and basic products will be even more expensive,″ Nilo Salazar, general secretary of the Construction Industry Carpenter’s Union said in an interview Sunday.

″We were expecting a salary increase of 80 percent, because of the high increase in the cost of living. But the Labor Ministry and the president have decided something else,″ he said, calling Ortega’s decision ″unilateral″ and claiming it violated the Constitution.

A constitution promulgated by the Sandinistas last year says that workers have a right to take part in the government’s economic decision-making process.

The cordoba, once a fairly stable currency, has been losing value since the Sandinistas seized power in a 1979 revolution that overthrew President Anastasio Somoza, a rightist pro-American strongman.

The official value of the cordoba is 70 to $1, but that exchange rate is mostly used by the government to pay for essential imports, such as oil.

On the government-approved ″parallel″ market, the cordoba is now valued at 5,000 to $1, and the black market rate is 7,000 to $1.

A majority of wage-earners can only buy essential goods on the government- controlled market, and even these are scarce and rationed. Most goods can be found on the black market, but the cost is prohibitive.

″I don’t know what a bricklayer, who used to earn 1,609 cordobas a day and now will earn 2,098 cordobas daily, is going to do with this new increase. A bottle of soft drink costs 500 cordobas, which is two hours work for him. And that is not just,″ Salazar said.

Salazar, who is a member of the small Socialist Party and supports the Sandinistas, said the country is going through a crisis ″as a result of North American aggression,″ but the government ″should also think about the workers.″

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