Foreign and Defense Policy, Latin America

Nicaragua and Venezuela’s Well-Oiled Relationship

Venezuela’s Hugo Chavez might be joining Fidel Castro as an ailing anti-American, pro-Iran strongman who ‘dies’ in the media every so often.

Or he might actually die.

AEI’s Roger Noriega examines the possible fallout in Venezuela, arguing that “now is the time when an attentive public is open to messages about recovering the Venezuela’s democratic republic.”

There will be consequences for America as well, which the Obama administration has been strangely silent about, but there will undoubtedly be implications for other countries in the region, which will echo in the rest of the world.

Take Nicaragua. It was 25 years ago this week that the International Court of Justice handed down a 12-3 decision condemning U.S. intervention in Nicaraguan affairs. Not surprisingly, the international community is largely silent on Chavez’s ongoing intervention in Nicaragua.

But it is precisely this type of intervention which will be thrust into the limelight with Chavez’s end.

In the most egregious case, Venezuela gives huge amounts of money through an opaque arrangement of private and public entities. ALBANISA, a private company in Nicaragua which is not required to disclose its books, receives oil revenues from the Venezuelan PDVSA’s sales to Nicaragua’s PETRONIC, a company over which the Ortega administration has oversight power. A portion of the revenues are kept in ALBANISA—estimated to have had total funds of about $125 million in 2009—and is widely considered to be used to prop up the Ortega regime. This has led to political controversy in recent years. Last year the IMF took issue with this lack of transparency ever so briefly, temporarily refusing to disburse the remainder of funds for a Poverty Reduction and Growth Facility project in Nicaragua. But the controversy, predictably, slipped quickly out of the international limelight.

The fragility of a Nicaraguan regime heavily dependent upon these Venezuelan “funds,” in turn dependent upon the strong friendship between the two heads of state, becomes all the more apparent with the absence of  Chavez, the senior partner. Though the funds are meant to support mutually beneficial regimes (for the leaders at least), the Nicaraguan population and the Ortega regime have both become heavily dependent upon this money, which likely makes up a significant portion of the national budget. The implications of this arrangement are profound, and are becoming increasingly precarious. Its cessation would significantly reduce the standard of living and economic security in Nicaragua, while its continuance results in the derogation of explicit political rights. This will be further aggravated by the impending November 2011 Nicaraguan presidential election, in which President Ortega is only able to participate through a series of corrupt Supreme Court rulings and presidential decrees.

The perfect storm of political unrest in Nicaragua coupled with a debilitating illness of the Venezuelan president could easily disrupt the status quo. This would open the door for other countries—namely the United States and European states—to resume the aid and soft power influence in Nicaragua that has steadily declined with Chavez’s increased role over the last decade. But this cannot happen if those countries which stand to fill the post-Chavez void are not paying attention.

Of course, it is entirely possible that a transition from Chavez’s regime to the next will occur without a hiccup. But while the United States and the international community at large have seemed content to let Chavez’s Venezuela act like a petulant child for the last decade, it should take this opportunity to consider the international ramifications of his potential fall from power.

Margaret McCarthy is a public affairs assistant at AEI.

4 thoughts on “Nicaragua and Venezuela’s Well-Oiled Relationship

  1. Dear Margaret
    I want to express my congratulations for this document about the relationship between Ortega y Chavez. My name is Pedro Mantellini former PDVSA Corporate Senior Advisor in Strategic Planning and External Affairs.
    You are right about that the International community has let Chavez to act in the development of a Totalitarian Regime and export this concept to the other Latin American countries with the help of the Venezuelan oil, and all this besides the bad economical situation inside Venezuela.
    I do not know what is happening with the International community, they are blind, as they have been also blind with the political situation in Cuba. This is really ashamed. Regards, PEDRO MANTELLINI

  2. Umm, yes and (mostly) no.

    “…the Nicaraguan population and the Ortega regime have both become heavily dependent upon this money…”

    Certainly true for comrade Daniel and his thugocracy. For the Nica population? Not so much…

    Most of what Albani$a retains is lost in a black hole know as the (wh)Ortega-Murillo caudillo. There is zero transparency — it is the ultimate slush fund.

    Your “estimates” of the Albani$a funds is off by a huge factor ~10x. Petronic/Albani$a buys about US$700 million in oil and derivatives each year; 95% of this comes from Tio Hugo. The accord provides for 50% payment with the balanced financed over 25 years (future debt for the next generation — sound familiar???).

    More than US$1 billion out there “somewhere” — no sign of it as it is off-books and under the control of comrade Daniel. To say the money has been expended on projects for “The People” is lie. As someone who lives and works in Nicaragua, if US$1+ billion had been invested ANYWHERE on ANYTHING here, we would have noticed.

    As for the international community being either asleep or inattentive: so what? Tio Hugo and comrade Daniel have spent years railing against “imperialism”. They want less “intervention from the empire”. Fine.

    They built their coffins, now let them use them…

  3. I feel that the money has been put to good use. I for one have seen some of the funds get to the poorest. I know for sure that another government would not bother with the poorest, big mistake.
    It seems that the poorest segments of most countries are being ignored. This will allow for major shifts in ideology like what is happening in Nicaragua. Hey Loco, where do you hangout that you are sooooo blind, TontoGringo

  4. Although I know too well the sting of Chavez’ meddling (his petrodollars influencing the 2006 election and practically bankrolling the Sandinistas who would otherwise be suffering from loss of European aid due to fraudulent electoral processes ever since said election), I don’t see what evidence the ICJ would have against Venezuela or Hugo Chavez for their intervention in Nicaraguan affairs.

    On this point you have compared the intervention of the United States with that of Venezuela in a way that does not do credit to the violent and documented (see: the 20th century) episodes of US intervention in Nicaragua.

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