Venezuela's Chávez bankrolled Nicaragua with $1.6 billion since 2007

Venezuela upped aid to Nicaragua last year by 15 percent to $511 million, more than making up for diminishing aid flow from other countries, according to a report released Wednesday from Nicaragua's Central Bank.

Since President Daniel Ortega returned to power in 2007, Venezuelan President Hugo Chávez has provided his comrade with $1.6 billion in total aid, according to a Monitor tally of Central Bank figures. That growing pool of petro-dollars has supported Mr. Ortega's political programs and perhaps even saved his nation's fledgling economy from collapse, according to opposition analysts and the president himself.

The Venezuelan aid, managed privately by President Ortega and his inner circle, has given the Sandinistas access to more discretional funding than any other government in Nicaragua’s history and also helped the economy grow by 4.5 percent last year, faster than any other Central American economy except Panama.

Despite the encouraging numbers, some worry that NIcaragua is increasingly putting its eggs in one basket. The new report reveals Nicaragua's growing dependency on a tenuous financial arrangement that is contingent on revolutionary ideology and the tight political friendship between Ortega and Mr. Chávez.

The International Monetary Fund (IMF) last October insisted that Nicaragua open the books on Venezuelan aid amid growing concerns about the possible effects that it could have on the country’s economy. The government’s answer came in the form of this week’s Central Bank report on foreign aid that was quietly posted to its website Wednesday.

The report provides more questions than answers for economists, journalists, and opposition politicians who have been eagerly awaiting its release. It provides detailed and line-item expenses on all foreign aid except that from Venezuela.

“In the case of Venezuela, we find – once again – only large sums of money listed under generic titles," says economist Adolfo Acevedo. "It’s obvious no one can verify any of this data."

For example, while the report mentions certain amounts of Venezuelan funding earmarked for special Sandinista social programs, most of the aid use if listed under vague titles such as “food security” ($19.4 million), “humanitarian assistance” ($15.4 million), or the more ambiguous “other projects” ($35.5 million). Meanwhile, aid given by the US and 20 other foreign donors is detailed in line-item format for specific programs.

The IMF has not yet commented.

Nicaragua’s growing dependence on Chávez

Although peppered with ambiguities, the Central Bank report does offer some new insights about Nicaragua’s increasing dependence on Venezuela. As other countries continued to reduce aid to Nicaragua by hundreds of millions of dollars last year – some due to concerns over the government’s commitment to democracy, while others due to internal restructuring of foreign aid programs – Venezuela has more than covered the difference.

Overall, donations to the Sandinista government from traditional donors was down 37 percent last year, while bilateral aid for Nicaragua dropped by 25 percent, according to the report.

All of the Venezuelan aid was given under the concept of “private loans.” None of it was a gift, according to the report. Indeed, in some way, Nicaraguans are even paying for some of the aid, as "discounted" Venezuelan oil is sold at the gas station for more than $5 a gallon for regular – the highest gas prices in Central America.

While $511 million is sofa change for oil-rich Venezuela, it has made a world of difference for Ortega's otherwise impoverished government, whose annual budget is only $1.6 billion – the same amount he has received from President Hugo Chávez over the past four years.

“Nicaragua now has three economies: a formal economy, an informal economy, and a parallel, dark-side economy of Venezuelan dollars controlled by Daniel and a small group of people who are his closest associates and main beneficiaries,” says opposition lawmaker and Liberal Constitutional Party vice-presidential candidate Francisco Aguirre, of the National Assembly’s economic commission.

“Without Venezuelan aid, Nicaragua’s economy would be limping along with anemic levels of growth, if any at all,” he adds.

The fact that the national banking system is “flush with equity” and the economy is projected to grow 3.5 percent in 2011 – unprecedented in an election year – is an indication that “Daniel Ortega has decided to unleash some the Venezuelan money into the economy,” Aguirre says.

Lack of transparency and oversight to Ortega’s enormous slush fund has raised numerous questions and concerns about corruption, mounting debt, and unfair business practices occurring under the cloak of the Bolivarian Alliance for the Americas (ALBA), a leftist alliance of eight Latin American and Caribbean nations led by Venezuela.

The opposition has for years pressed Ortega’s administration to include the Venezuelan aid in the country’s cash-strapped budget, but he has refused. Instead, leaders of the ruling party have used the petro-dollar windfall to create a Sandinista shadow economy of new “ALBA businesses” that operate in a gray area between public and private sectors, with no third-party oversight.

ALBAleaks reveals suspicions over money flows

Nicaragua’s award-winning journalist Carlos Fernando Chamorro attempted to shine some light on alleged ALBA corruption last month in an investigative report based on allegedly leaked documents from an unidentified insider who claimed to have access to secret books on ALBANISA, a joint Venezuelan-Nicaraguan oil company linked to Ortega.

The investigative report, titled ALBAleaks, revealed how ALBANISA has claimed a three-year loss of $20.7 million, despite making $400 million in sales in 2009 alone. The article concludes that the ALBANISA – the main gateway for Venezuelan aid entering Nicaragua – has devised a “sophisticated scheme of transferring funds and indirect subsidies to other related businesses.”

In other words, someone in Ortega’s government inner circle is allegedly making a lot of money from ALBANISA’s reported losses.

In a country accustomed to political scandal, the ALBAleaks report caused only a minor stir. Several opposition lawmakers cried foul and claimed it provided evidence of government corruption, but did nothing to investigate the issue further. Administration officials attempted to discredit the report by saying it was based on old information.

The Comptroller General’s Office, meanwhile, said they were meaning to do an audit of ALBANISA, but didn’t have the funds to do so.

“What this shows is that the institutions in charge of public oversight don’t work,” says Mr. Chamorro, the journalist. “They are controlled by a government that is above answering to anyone.”