Laws, Loans And Decrees Hit The Pockets Of Nicaraguan Consumers

This year laws and decrees have been approved that affect the purchasing power of Nicaraguans

This year laws and decrees have been approved that affect the purchasing power of Nicaraguans

In the first 67 days of 2019, the Government of Daniel Ortega has promoted the approval of laws, ministerial agreements and loans that negatively impact the economy of Nicaraguans, because they promote unemployment, informality, the reduction of the purchasing power of the population and the illiquidity of companies, in a crisis in Nicaragua since April 2018.

On February 1, through Presidential Decree 06-2019, published in La Gaceta Diario Oficial, the Government made official the reforms to social security that increased the contribution of workers from 6.25% to 7% and that of employers from 19 % to 21.5%, for companies with less than 50 workers; and 22.5% for companies with 50 or more employees.

- payin the bills -

The reform to the social security also originated changes in factors for the calculation of pensions that, finally, reduce it an average of 35%.

It was the announcement of increases in payments and reductions in benefits in April 2018 that prompted Nicaraguans to rise up against Daniel Ortega. Despite the quick retraction by government, it plunged the country into what is now 11 months of violence and repression that has left more than 325 dead and thousands jailed.

The reform that was announced on January 28 of this year forced business owners to lay off employees or renegotiate contracts to deal with new payments to social security and keep businesses afloat.

On the same day that the government announced the social security reform initiative, it also disclosed the tax reform bill, which was approved in the National Assembly and came into force on February 28 of this year.

- paying the bills -

As a result of these reforms, the list of popular consumer products exempted from Value Added Tax (VAT) was reduced, such as toilet paper, matches, soaps, toothpaste, pork and beef ribs, beef tongue and chicken fillets, to mention some.

Asamblea Nacional (AN)

The fiscal reform exempts productive items destined to agriculture and raising cattle, pork and poultry as long as the producers receive the endorsement of the Ministry of Finance and Public Credit (MHCP).

Representatives of the agricultural sector point out that it is difficult for small producers to access these benefits, due to cumbersome bureaucratic procedures that require time and money to be able to meet, due to mobilization expenses, among others.

Increase in Income Tax

In addition, the final minimum payment of Income Tax (IR) for large taxpayers contemplates an increase of 1% to 3% for large taxpayers and from 1% to 2% in the case of the main taxpayers.

- paying the bills --

The Nicaraguan Foundation for Economic and Social Development (Funides) explained that social security reforms, tax reforms, the issuance of treasury bills and a loan from the Taiwanese bank for US$100 million are intended to finance the public resources for the operation of the Central Government and the Nicaraguan Social Security Institute (INSS) in 2019.

On March 7, the National Assembly approved the Law creating the Banco Nacional (National Bank), which also authorizes the purchase of Banco Corporativo S.A (Bancorp) that was included in the US sanctions linked to PDVSA (Venezuela state oil company) and Albanisa.

Legislator Alfredo César expected the purchase will put the State of Nicaragua in the spotlight of the United States Department of the Treasury, explaining that the purchase of Bancorp could cause contamination of the State. For César, the acquisition will be questioned internationally.

In addition,, given that the Bancorp purchase was made through bonds, the country would incur greater internal public debt, which aggravates the financial situation of the State.

Minimum Wages Frozen

Last Thursday, a minimum wage freeze was announced. The commission that negotiates the Minimum Wage agreed to stay in permanent session and meet the last Thursday of each month until August, to review the economic behavior of the country.

Gasoline and Electricity

Although the prices of fuels in Nicaragua are not regulated by the State, they are taxed with a selective consumption tax and the Nicaraguan Energy Institute conducts a weekly monitoring of price fluctuations.

The increases registered so far in 2019 are justified by the variations in international prices of these products. On Sunday, gasoline prices rose to more than 32 cordobas per liter.

And with the approval of a package of reforms to the country’s electricity sector in mid-February of last year, the subsidy was reduced to many Nicaraguan households.

Households registering a consumption between 101 and 125-kilowatt hours will have only a 40% subsidy in the social rate and those who consume between 126 and 150-kilowatt hours will receive only 30%.

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Nicaragua Adopts the Cuban – Venezuelan Model

In early October 2018, Daniel Ortega’s regime installed a state of siege via a Police decree prohibiting civic marches. The OAS Inter-American Commission for Human Rights warned at the time that Ortega instituted a de facto State of Emergency. He had essentially suspended constitutional rights such as the freedom of assembly and mobilization, free speech, and a free press.

The goal of the state of siege was to wipe out the independent civic protest and to suppress and divide the opposition. Further, they aimed to impose a false normality through repression. With this, they hoped to coopt the large business leaders and reestablish the regime’s political and economic alliances.

Nevertheless, looking at the facts, Ortega instead deepened his national and international isolation. In addition, for two consecutive years he aggravated the economic recession and the social crisis. This continued until the negligent management of the Coronavirus health crisis brought him an unexpected political invoice. The mismanaged public health crisis wore down the credibility of his leadership, even among the members of his own party.

The regime now announces the imposition of new punitive laws. There’s a push to allow the use of life sentences for certain crimes. There’s a new law to regulate supposed “foreign agents”, and a “cybercrimes” law, better known as the “Gag law”. With these, the regime is recognizing the failure of the police state. The repression never succeeded in squashing the civic protests. Even without massive demonstrations, the spirit of the resistance remains intact.  Despite the National Coalition’s stumbles and the lack of a united national front, today the resistance is greater and better organized. It now has a presence in all of the country’s municipalities.

In the next two weeks, the regime’s parliamentary steamroller will assure the approval of that combo of punitive laws. These impose severe jail sentences for any and all opposition, a majority who represent over three-fourths of the electorate.

However, in reality, the regime has never needed legal pretexts to repress and imprison. Almost two years ago, the police assaulted the offices of Confidencial and Esta Semana and executed a de facto confiscationThis was done without the backing of any judicial orders. Yet, despite the television censorship, they never silenced us. We continue our truth-based journalism. Meanwhile the independent press – persecuted, harassed and sometimes exiled – now enjoys much more credibility and influence than the official machinery.

The latest Cid-Gallup polls confirm that the majority of the population no longer believes the government’s lies about COVID-19. The express burials and the Ministry of Health statistics on pneumonia fatalities and COVID-19 tests speak for themselves. These facts refute the daily monologues of Vice President Rosario Murillo.  Because of that deception, every day political support for Ortega and the FSLN shrinks still more. His backing among the public employees, both civilian and military, continues eroding.

In reality, the “Gag Law” is aimed at threatening the honest and professional public servants. It is meant to keep them from leaking information to the press and the public regarding acts of political corruption.  Such acts are occurrences that the regime wishes to hide.

The “Cybercrimes Law” also threatens users of social media with jail time. However, the dictatorship will continue losing the battle for the truth in social media. They can’t control the massive exercise of free speech and the use of new information technologies now at the service of citizens.

These punitive laws aren’t a symptom of strength, but rather of the political and moral defeat of a minority regime. Why, then, does Ortega need to impose them against wind and tides?  There are at least three hypotheses to explain this imperious political necessity.  All are based on the regime’s urgency to adapt the Cuban and Venezuelan “model” of repressive authoritarianism to Nicaragua.

First, they intend to make full use of the Constitution and laws as one pillar of their repressive strategy. However, they don’t want these as guardians of rights, but as a means to criminalize democratic liberties and civic protest. Clearly, it’s not a carbon copy, but this strategy definitively reflects the Cuban and Venezuelan “model”. The regime is adapting that model to fit a dynastic family dictatorship with the aim of liquidating the democratic project in Nicaragua.

Expedited by the “Law” he’s mandating, Ortega will now be able to eliminate organizations of civil society. He will also control any eventual adversaries and political competitors, by criminalizing them as “foreign agents”. The Venezuelan experience demonstrates that despite high international political costs, the Cuban “model” can prove effective in giving the regime stability. Through this model, pure and harsh repression can be draped in a “legal” mantle. For Ortega, this translates into an incentive to accumulate political hostages and gain time.

Secondly, the regime intends to take over the agenda of justice and present itself as a punisher of “hate crimes”. The latter would now carry a sentence of life in prison. This, in the end, is merely a defensive act. It responds to the need to assure the Sandinista bases that they’re not the ones under the gaze of justice.

Those accused of true “hate crimes”, crimes against humanity, crimes with no statute of limitations, are in the regime’s inner circle. The finger points to members of the Ortega-Murillo regime who are most directly tied to the repression. However, as in the April killings and the failed official narrative of an attempted “Coup d’Etat”, Ortega will point the finger elsewhere. He’ll try to convince his followers that his own hate crimes can be attributed to the victims.

Thirdly, although the Nicaraguan Constitution proclaims political pluralism, this combo of punitive laws assures there’ll be no competitive elections. With these laws, Ortega has ratified his stance for the November 2021 elections. Given this, it’s illusory to expect some electoral opening from a regime that’s willing to play All or Nothing. Though they risk further international sanctions and a declaration of illegitimacy, they’ll be celebrating the elections with no competition and without transparency.

Will we arrive at the opening of the 2021 electoral campaign without a political reform?  The answer to this interrogative doesn’t depend on Ortega, but on the political opposition.  Ortega has already decided to radicalize his authoritarian model. Meanwhile, the opposition continues to be paralyzed. They’re discussing which electoral box is the safest, in imaginary elections in which they haven’t even been invited to participate.

Meanwhile, the national debate must center itself on determining the most effective strategy. The opposition must work on joining forces, weakening the regime, and altering the balance of power. They must thus force a political reform on the regime, one that results from national and international pressure. First, the reform, with or without Ortega, and later free elections.


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