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World Bank Memo: Sandinistas Make Economic Recovery Tough

April 1, 1991

MANAGUA, Nicaragua (AP) _ A World Bank memo says the government would like to sell off state-owned land and businesses, but that opposition Sandinista control of the police and trade unions is blocking efforts at privatization.

Barricada, the party organ of leftist Sandinistas, who ran this country of 3.5 million from 1979 to 1990, published a memo Monday from the chief of a World Bank delegation that visted Nicaragua for two weeks in January.

The Associated Press obtained a copy of the memo, written by economist Baran Tuncer and directed to the bank’s Latin America Division chief, Marko Voljc, and the World Bank confirmed its legitimacy.

But a World Bank spokesman said the document ″doesn’t reflect the bank’s current vision.″ It ″only sums up the points of view held at that time by the group that visited Nicaragua,″ said Ciro Gamarra, of the bank’s Latin America division.

The memo said many in Nicaragua fear that because of political conflict, and ″the fact that the supporters of the previous regime are still in control of law enforcing agencies, including the police, it will not be easy to enforce the right to ownership to property.″

Massive Sandinista confiscations of property in the 1980s created a giant state sector. Breaking up these lands and returning them to private hands is ″cumbersome″ and sometimes meets with ″unlawful resistance,″ the memo said.

Violeta Chamorro, who won the February 1990 elections, favors an IMF- approved free market economic plan, but public spending is ″unsustainably high,″ and little progress has been made in lowering it, the memo said, predicting economic ″instability″ in 1991.

The memo says the efficient operation of some 400 state enterprises is ″not possible without cuts in (state) employment.″ There are about 110,000 state workers.

After Chamorro’s victory, the Sandinistas used the pressure of their well- organized mass following to keep control of the police and armed forces, which they had built up to fight U.S.-backed counterrevolutionaries during the 1980s.

The strong Sandinista-organized labor unions have opposed job cuts. The memo says workers are ″highly politicized and militant,″ and that their resistance ″could potentially derail the process of privatization.″

The government in March devalued the national currency by 80 percent, part of a plan aimed at ending three years of hyperinflation that reached nearly 13,500 percent in 1990.

Nicaragua has sought soft loans or other aid to pay $360 million it owes the World Bank and the Inter-American Development Bank, and thus become eligible for new credits.

But at a meeting of development banks last week, banks only promised to review the country’s economic situation on April 15.

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