The U.S. Places Conditions on Millennium Funds for Nicaragua

The United States has determined that Nicaragua can receive benefits from the Millennium Challenge Account (MCA) only if it improves economic liberty and governance.

“Nicaragua can request a new agreement … we are willing to work with any administration in the formulation of a second account agreement,” but it would be better if the Ortega administration, or its successor, “indicates improvements related to economic freedoms and particularly governance issues,” stated U.S. Ambassador Robert Callahan.

The rejection of the Ortega government to investigate the electoral fraud in the municipal elections in 2008 cost Nicaragua $61.5 million that the Millennium Challenge Corporation had earmarked for development of rural areas.

In 2006, during the last year of Enrique Bolaños’ government, the MCA decided that Nicaragua was eligible and allocated $175 million to fund major projects in the west, but the electoral fraud of 2008 committed by the Sandinistas led to the withdrawal of more than a third of the aid.

Even this first project could have been taken up to the benefit of thousands more people, perhaps in the north of Nicaragua, but Ortega ignored the invitation from the MCA to apply for a new funding package.

Ignacio Velez, Director of the MCA in Nicaragua, said that his U. S. counterpart agreed to implement the model proposed by the Nicaraguan authorities five years ago because it was focused “on rural areas where there is more poverty than in the urban areas.”

It was decided that they must come face to face with three situations: the deterioration of roads in Leon and Chinandega; property matters that prevent the owners of plots from accessing bank credit; and the poor growth and the fragility of business in the area.

In response to this triad more than $100 million was approved for the design of 360 kilometers of roads and prioritizing the construction of 211 kilometers of five major roads in the region, leaving the designs of others ready to build as soon as they get new resources.

They also spent $7.2 million to improve ownership and $32.9 million to boost rural business development, including “some 120, 000 farmers, ranchers, fishermen small entrepreneurs and members of cooperatives,” according to a count done by Ambassador Callahan.

The benefits might have been greater if it had not been for the cancelation of most of the funds. The diplomat said that the decision was taken in response to the “incongruent actions” of the Nicaraguan regime in the criteria of governance by refusing to investigate “public credible accusations of irregularities in the municipal elections of that year.”

Callahan added that “the Government of Nicaragua was officially notified of the decision and after seven months without a response, we had to take the painful decision of partially suspending the program in compliance with the criteria of governance included in the account agreement.”

This made it impossible to build the Nejapa-Izapa road, 58 kilometers long and one of two highways that connect the west of the country with the rest of the territory, as well as the La Paz Centro-Malpaisillo-July 15th Villa road, which is an extremely important region.