TODAY NICARAGUA – In less than two years, the sanctions issued by the United States have complicated and almost dismantled the financial framework that the Ortega regime built with funds from Venezuelan cooperation, outside of state control.
Their main businesses and the institutions they have used to move their capital are now contaminated and without a doubt, with it, their economic stability has also been hit.
On January 29, 2019, the United States Government announced that Alba de Nicaragua (Albanisa) had been hit by the sanctions imposed on the state-owned Petróleos de Venezuela (PDVSA), which owns 51 percent of the company shares of mixed capital.
This has functioned as an umbrella for countless private businesses, since a cooperation agreement was signed between Nicaragua and Venezuela in 2007, promising two-way benefits and projects that were sold as emblematic, but never saw the light.
It is estimated that oil cooperation with Venezuela has allowed the entry of more than four billion dollars, which have been managed in a discretionary manner.
That was the beginning of a chain of sanctions that would hit the finances of the Ortega regime. Economist, Róger Arteaga, explains that the strategy of the United States Department of State has been clear from the beginning, to target the businesses of the presidential family.
“Undermine the financial scheme of the Ortega-Murillo family,” says Arteaga.
Only in 2019, the sanctions targeted Albanisa, the Banco Corporativo (Bancorp) and the fuel business, through the Distribuidora Nacional de Petróleo (DNP). In total, nine companies have been sanctioned: the Zanzibar company, the Servicios de Protección y Vigilancia (El Goliat), Difuso Comunicaciones y Mundo Digital and the Caja Rural Nacional (Caruna), this past Friday.
1. First hit: Albanisa
But how have the United States sanctions affected the main businesses of the Ortega regime? Let’s start with Albanisa. Six months after the sanctions, the company that had positioned itself since 2009 as the main importer of fuel oil, derived from petroleum used to generate electricity, stopped importing it.
Statistics from the Ministry of Energy and Mines (Mines) on oil imports from January to September 2019 indicate that Albanisa only imported one hundred thousand barrels of Liquefied Petroleum Gas (LPG), equivalent to US$2.87 million dollars.
The sanctions also deepened the debacle of exports, which had already been on the wrong track since 2014, as a result of the economic situation that Venezuela was facing. Milk, meat, beans, and coffee were sent to that market, which at its best, in 2012, achieved sales of 444 million dollars.
The sanctions against Albanisa completely dismantled Alba Alimentos de Nicaragua (Albalinisa), the export arm of the dictatorship and through which it controlled the commercial business between Venezuela and Nicaraguan businessmen.
Such has been the impact of the sanctions, that Venezuela went from occupying the second most important market for Nicaragua and by 2019, shipments were practically reduced to zero, a trend that continues to date.
2. Second Hit: Bancorp
For economist Enrique Sáenz, all the sanctions have meant blows, some of greater magnitude than others. Three months after the sanctions on Albanisa, the Treasury Department sanctioned Banco Corporativo SA. (Bancorp), this was indicated to have been “created as a subsidiary of the Venezuelan government and founded in 2014. Bancorp is the bank used by the Ortega regime to launder money from Albanisa. Bancorp is used by President Ortega to launder money from the Sandinista National Liberation Front,” the statement said.
Shortly before the sanction, Bancorp tried to dissociate itself from Albanisa and PDVSA, but to no avail. On April 17 he was appointed along with Laureano Ortega, son of the presidential couple, “for being involved in a vast network of corruption”.
According to Sáenz, the sanction to Bancorp meant that “they cut off a financial management arm of the business conglomerate and the transfer of funds.” By not having that “arm” there is no longer an instrument that facilitates centralizing funds, channeling credits, and relating to international level.
The Bank managed about US$2.55 billion dollars corresponding to six trusts at the end of 2018, according to an audit by the British firm Moore Stephens, which returned to Caruna before the sanctions reached Bancorp, in an attempt to decontaminate, which did not work.
The regime sought to protect the bank and ordered the State to buy it for 743.05 million córdobas (about US$23 million dollars) from the General Budget of the Republic, despite the fact that the operation was approved by the National Assembly, dominated by Ortega, it was never published in La Gaceta, the official Gazette. The sanction caused the dissolution of the bank.
“Having cut off that financial arm once again exposed this centralization that they had done with Caruna’s assets,” Saenz explained.
3. Third hit: DNP and Zanzibar
The third strong blow would come on December 12, 2019. The company Distribuidora Nicaragüense de Petróleo (DNP) together with Inversiones Zanzíbar were sanctioned for controlling, financing and laundering money from the Daniel Ortega regime.
Journalistic investigations by LA PRENSA revealed that fuels had become one of the main businesses of the Ortega regime. Before the sanction, DNP was the main importer of petroleum derivatives. Two days after the sanction, the regime nationalized, by means of a law sent urgently to the Assembly, the company’s fuel inventories, with the aim of avoiding a shortage.
It is still unknown which company is handling these inventories, but the truth is that the sanctions caused the sudden closure of several gasoline stations. For more than six months, 15 DNP stations have been out of operation for alleged maintenance, but in all this time no type of movement related to it has been observed.
La Prensa reported that according to the analysis of César Arévalo, a specialist in hydrocarbon markets, in the last ten years, DNP obtained an approximate profit of US$426 million dollars, an average of US$42.6 million dollars a year.
The business had been run by Yadira Leets Marín, ex-wife of Rafael Ortega Murillo, eldest son of the dictatorial couple Daniel Ortega and Rosario Murillo. Before the sanctions, the Ortega Murillos tried to protect their main family business, transforming the image of the stations and disassociating them with the DNP. However, this did not prevent the United States from prescribing “financial death.”
For economist Sáenz “having taken the business from DNP that was a blow not petty cash, but large cash income.” Although these sanctions have put the Ortega regime in serious trouble, forcing them to make unsuccessful legislative moves, who continues to finance it?
Sáenz explains that this is due to the fact that the regime has had the opportunity to compensate, not totally, but partially, with another business: energy.
The regime obtains profits from thermal plants that are paid for installed power, but that generate little, it also does it for purchases of cheaper energy in Central America that is sold more expensive in the country, not to mention the increase in the electricity rate, which at the end of 2019, was calculated increased by almost 20 percent, in disguise. “In a way, that is still the main source,” said Saenz.
4. Fourth blow: difficulties in operating power plants
Arteaga recalls that although there are assets left to these companies, their transactions cannot be executed by the national or international financial system, their financial operations are blocked. The economist explains that the State Department “is not going to stand idly by” sanctioning institutions, and that later, they use front men to continue to feed the presidential family financially. Any person who is found to function as a frontman for the institutions will be punished, explains Arteaga.
In fact, LA PRENSA has reported that several Alba Generación plants are paralyzed and obsolete because the United States sanctions have prevented it from importing its spare parts, but even so the State continues to pass it under the concept of payment for installed capacity.
Patricia Rodríguez, a specialist in energy issues, explains that the sanctions have had an impact on electricity generation. For example, the thermal plants of Albanisa, the “Che Guevara” now generate very little; however, high contracts are still being paid with these thermal plants, while other mechanisms are used to compensate for this lack of generation, for example, with imports from the regional market.
Now, with respect to Distribution, in the hands of Disnorte-Dissur, it is not known who is responsible for the remaining 84 percent of the company, since the State is in charge of 16 percent.
5. Fifth blow: The Goliath
Along with DNP and Zanzibar, on December 12, 2019, the United States also disbanded the security company El Goliat, which has received millions in government contracts and provides protection services for Ortega’s family businesses, according to the Treasury Department when it applied the punishment.
Only in September 2020, the Managua Mayor’s Office decided to hire this company for one year to take care of four sports facilities: the Dennis Martínez National Stadium, the Alexis Argüello Sports Center, the Michelle Richardson Swimming Pool Complex and the tennis courts located in the first stage of the Luis Alfonso Velásquez Park. The total amount of the contract was 10.1 million córdobas.
The mayor’s office did not reveal how many bidders participated in the public tender.
6. Sixth hit: Digital Diffuse
On July 17, the United States once again stabbed another business belonging to the Ortega Murillo family: Difuso Digital, “a public relations and advertising company that produces most of the radio and television advertising campaigns for the Government of Nicaragua, various government institutions and the Sandinista National Liberation Front ”.
Through this company, the presidential family profited from State funds through advertising production, which was financed with the General Budget of the Republic, becoming unfair competition for other companies that are in this advertising market, mostly little.
In 2018, LA PRENSA also revealed that the Nicaraguan Tourism Institute (Intur) awarded contracts to Difuso Digital for the “advertising and propaganda service for renting the rear spaces of buses for the installation of printed advertising on adhesive vinyl”, contrary to directly Law 737, Law of Administrative Contracts of the Public Sector.
Without Bancorp, without exports to Venezuela and with a fractured fuel business, how do the new sanctions affect Caruna?
7. Seventh hit: Sanctions against Caruna
Although it was to be expected that the sanctions would reach the Caja Rural, and therefore, it would be believed that the regime moved its money with premeditation, the blow is still strong.
Sáenz, who has closely followed the entire framework that the oil agreement has involved since its inception, explains that it is possible that the regime has tried to replace its capital with “bulkhead companies and front men, but that has a limit, they cannot do it everything, nor can they trust so many figureheads, “he said.
He recalled that there are more than US$2.5 billion dollars in 2018, which surely grew in 2019, and moving that amount of money in an economy like the Nicaraguan is not an easy task.
Sáenz considers that the decision to transform the Public Property Registry into clandestine, sought the constitution of these companies that would allow them to divide and disguise their capital, but the dilemma is that not everything can be placed. What is unknown until now is how much money from the Ortega-Murillo family was blocked.
Some sanctions obstruct their “pipeline”, others bleed it, and others, sterilize businesses, because banks no longer open accounts, they can no longer be subject to credits, that is, “there is an alteration of the business microclimate of these companies” argues the economist.
Caruna was sanctioned for “having materially assisted, sponsored or provided financial, material or technological support or goods or services in support of Banco Corporativo (Bancorp), an entity whose ownership and interests in the property are blocked in accordance with EO 13851”.
8. Eighth hit: And the Seminole Hotel?
The Ortega-Murillos had already suffered a setback caused by the consequences of the socio-political crisis that developed their brutal response to the civic protest in 2018.
LA PRENSA investigations confirmed that Albanisa bought the Hotel Seminole, which closed its doors in mid-2018 and two years later, it still hasn’t reopened. There is no clear explanation of what is happening with the hotel, which is part of the Ortega-Murillo business network.
The hotel, with 85 rooms and located in a central area of Managua, was bought together with two cattle farms that the Seminole Tribe had in the Chiltepe peninsula, where 3,000 head of cattle of the best quality grazed. The acquisition would have been around eleven million dollars and was publicly recognized by Ortega himself.
The second poorest country in Latin America
But beyond the impact of the United States sanctions on the fortune of the Ortega Murillo family, which calls itself the Government of the Poor, the truth is that these sanctions have exposed the economic power that Ortega has built throughout almost 15 years in the government, while Nicaragua remains the second poorest country in Latin America.
The World Bank recently warned that more than 240,000 Nicaraguans had fallen into poverty in the last two years of economic and political crisis, reflecting the fragility of the new non-poor that the government celebrates, while their businesses grew in the shadow of the corruption and at the expense of the treasury.