Nicaragua And ALBANISA: The Privatization Of Venezuelan Aid
By Brendan Riley
After Nicaraguan President Daniel Ortega took office for his second presidential term in 2007, Venezuela’s Hugo Chávez announced his plan to meet Nicaragua’s oil needs. The leaders’ ideological ties led Ortega to push for Nicaragua’s membership in the Alianza Bolivariana para los Pueblos de Nuestra América (ALBA). The Venezuelan President established this political bloc with the intention of countering the U.S. ambition for a Free Trade Area of the Americas or Acuerdo de Libre Comercio de las Américas (ALCA). Comprising leftist nations such as Venezuela, Cuba, Bolivia, and Ecuador, ALBA seeks to promote an ideology of solidarity that emphasizes social welfare policies rather than the kind of competitive capitalist agreements that have pervaded throughout the hemisphere in its recent history. While ALBA serves as a symbolic opposition to the free trade agreements that the U.S. has negotiated with desperate Latin American regimes in the past, many skeptics have debated its practical impact due to a lack of concrete results produced by the Chávez-led body. Nicaragua’s simultaneous membership in the Central American Free Trade Agreement (CAFTA) suggests that ALBA does not quite play the revolutionary role to which its proponents initially aspired.
ALBA has proved a destabilizing force in an already polarized political environment. In Nicaragua, Venezuelan cooperation through ALBA led to the creation of a private company called ALBANISA (ALBA de Nicaragua, S.A) to manage the anticipated investment funds. The company has come under a great deal of heat: as a privately held company, ALBANISA is not required to disclose its funds to the public. However, it has turned out that the government has used its funds for state expenses. The secrecy enveloping ALBANISA expenditures has led some to fear the worst.
Allegations of corruption and mishandling of money highlight the lack of transparency surrounding ALBANISA’s operations. In the nation’s young and unconsolidated democracy, the company’s practices add fuel to the fire of the country’s existing political turmoil. Opposition members allege that the Ortega government has been embezzling these funds. Although this accusation remains difficult to prove, the state must acknowledge what could be the legitimate fears and suspicions of the public. Therefore, it should begin by including these funds in the national budget. This transparency will allow the public to hold the government accountable for how it uses the ALBANISA funds. In pursuing transparency, the state will increase civic faith in Nicaragua’s democratic institutions and enhance the constitutional process by providing the nation’s elected representatives with the means to allocate this money in a way that serves the public interest.
ALBANISA: What It Is and How It Works
The creation of ALBANISA followed the commencement of Venezuelan oil transfers to Nicaragua, cemented by the signing of the ALBA Energy Agreement.1 The company plays an unusual role in the fairly complex process of ALBA’s oil cooperation model. PETRONIC, the semi-private Nicaraguan petroleum conglomerate that features partial state ownership, purchases and receives oil from Venezuela’s state-owned oil enterprise, PDVSA.2 PETRONIC then resells the oil and delivers all revenue to ALBANISA, a private company featuring joint-ownership between Venezuela’s PDVSA and Nicaragua’s PETRONIC. Then ALBANISA sends half of this revenue back to Venezuela in exchange for the oil while delivering another twenty-five percent to an ALBA social fund. ALBANISA itself retains the remaining twenty-five percent of oil revenue.3 In the end, this intricate process is intended to benefit Nicaragua through reduced oil prices.
Controversy surrounds the future of the funds held by ALBANISA. Because it technically remains a private company, ALBANISA does not need to subject its finances to the constraints of Nicaragua’s national budget. However, it is widely known that the Ortega administration oversees the expenditures of such funds through its participation in PETRONIC. Given its autonomy, ALBANISA appropriates and allocates funds without any oversight by the National Assembly, which approves the national budget each year. This means that ALBANISA expenditures of such funds are not subject to any effective checks; no one knows how much money the company handles, how much it spends, or where that money goes. The lack of transparency surrounding ALBANISA expenditures suggests the possibility of corruption and mishandling of funds. Moreover, it further encourages the downward spiral of public faith in government.
Scandals, Controversies, and Allegations
Aside from the fact that ALBANISA enjoys immunity from budget oversight, the company has garnered notoriety due to suspicions of illegitimate activities. The most prominent complaint concerns ALBANISA ownership. José Francisco López Centeno, then president of PETRONIC, managed the company’s affairs as its vice president until late 2009. While his simultaneous management of the two companies offered no immediate cause for alarm, his time as Secretary General for the ruling FSLN party did.4 Many observers accused the company of being subservient to the interests of the party and, by extension, the Ortega administration. However, the circumstances of López Centeno’s dismissal from ALBANISA alarmed the public on a greater scale, as a report by Venezuela’s PDVSA found that “serious failings” had occurred in the handling of the company. The report noted that some 1.4 million córdobas (nearly US $70,000 of ALBANISA funds) had gone unaccounted for, though unofficial sources claim the figure could be much greater. As a result of the report, López Centeno was removed from his position.5,6
Rafael Paniagua, a Venezuelan citizen, came to direct ALBANISA’s affairs following López Centeno’s dismissal. His work with the company has also generated uproar among Nicaraguans. At the beginning of this year, the ownership of opposition television station Channel 8 changed hands amid rumors of government involvement. While Ortega denied playing a hand in the ordeal, Paniagua declared that ALBANISA had indeed purchased the station. Paniagua spoke about the acquisition to El Nuevo Diario, an opposition newspaper, declaring, “The only thing I can assure you is that ALBA is here to stay because ours is a nation-building project.”7 Nicaragua, a nation hypersensitive to breaches upon its self-determination due to its history of intervention by foreign actors, erupted in anger at the idea of a Venezuelan-controlled nation-building project within its territory. The response arose from all over the political spectrum, as even Bayardo Arce, one of Ortega’s economic advisors, publicly refuted Paniagua’s claims, saying that Chávez may have “a nation-building project in Venezuela, but in Nicaragua he has no such project.” He went so far as to call Paniagua “crazy.”8 Nicaragua’s strong sense of nationalism coupled with Paniagua’s remarks forced the state into a precarious balancing act in which it must maintain strong ALBA ties while promoting the nation’s sensitive sovereignty.
However, many among the opposition fear that Paniagua spoke the truth. Given ALBANISA’s closeness to the government and the ruling party, many believe the FSLN now has effective control of Channel 8. Carlos Fernando Chamorro, a prominent journalist who hosted two programs on the network, has parted ways with the station as a result, stating that he wanted to cooperate with the Ortega government “neither directly nor indirectly.”9 Many feel that this latest move embodies the President’s creeping authoritarianism and is an effort to stifle dissent. However, given the disputed nature of the station’s sale, one cannot immediately confirm or deny such allegations. On the other hand, one can acknowledge that the ALBANISA affair has exacerbated tense relations between the state and the opposition. Reports that the President’s sons, Juan Carlos and Rafael Ortega Murillo, help manage ALBANISA transactions further worry those who are skeptical about the company.10,11
Curbing an Unchecked Power
In February of this year, the Comptroller General’s Office announced that it would conduct an audit of ALBANISA. The decision followed an audit of PETRONIC that revealed a few irregularities in the company’s management.12 Although Venezuela owns a majority share of ALBANISA, the Office claims the audit coincides with constitutional requirements due to the state’s partial ownership through PETRONIC. However, Paniagua maintains that they can only audit the PETRONIC share of the company.13 The audit has not yet come to fruition, as it will be a lengthy endeavor. Regardless, the Comptroller General’s pledge to audit the conglomerate shows promise that a system of checks and accountability may be in effect. One can only hope that they do execute the audit, doing so fairly and independently of interested parties.
While the findings may or may not reveal the truth to the allegations lodged against the company, they will not automatically assuage the skeptical opposition. In a political society so polarized, the government must act with the utmost transparency in order to encourage a loyal opposition. If the audit reveals no misconduct, the opposition will attribute the conclusion to a government institution manipulated by the country’s infamous pact, deeming the investigatory body a mere puppet of the administration. Although one may lack the necessary evidence to draw this conclusion, many Nicaraguans rightfully view the current condition of state institutions in this way. Therefore, the Ortega administration must include the ALBANISA funds and expenses in the national budget to dispel these lingering suspicions. If the group has nothing to hide, Ortega can only gain from this move. Some Ortega supporters may say that, because of its obstinate nature, the opposition will never acknowledge any good deed done by the President; however, this argument acts as a self-fulfilling prophecy, excusing divisive governance and poor state decisions while further polarizing the political environment. The extensive reach of the ALBANISA controversy highlights the urgent need for transparency in this process.
Assets, Projects, and Investments: ALBANISA Matters
Although some may downplay ALBANISA’s importance in today’s Nicaragua, the business conglomerate has its hands in many projects within the country. Estimates place their total funds managed at US $250 million and US $125 million in 2008 and 2009, respectively.14 Because international oil prices dictate the company’s holdings, the decrease in price does not automatically translate to a decrease in activity. On the contrary, ALBANISA manifests itself in over ten different projects, or Albitas, which include investment in and operation of electricity, credit cooperatives, agriculture, transport, construction, security, and other industries.15 Also, reports have surfaced detailing a number of new construction projects, a plan to irrigate Lake Cocibolca (also known as Lake Nicaragua), as well as investments in hotels, security, and gas.16,17 Through its US $50 million purchase of the Swiss mining company Glencore’s assets, ALBANISA acquired roughly seventy-three percent of the country’s crude oil storage facilities.18 These numerous projects illustrate the company’s significance as well as the predicaments created by its semi-private status.
Moreover, many of its critics allege that the state uses ALBANISA to invest in ideological and political projects. Given that the company handles funds through ALBA, which itself has its base in a shared ideology among its member-states, concerns abound that its further the Ortega administration’s political agenda. When the Millennium Challenge Corporation (MCC), a U.S. government corporation that focuses on promoting economic growth in underdeveloped countries, cancelled its US $62 million package to Nicaragua due to transparency concerns over the disputed 2008 municipal elections, ALBA pledged to replace the aid with US $50 million.19 While Venezuela maintains a clear interest in keeping its allies afloat, the move rang symbolically for the ALBA bloc. Proponents of the Bolivarian ideology consider the MCC an agent of free-market economics as it uses data from the International Monetary Fund (IMF) and the Heritage Foundation, organizations they view in a similar light, to assess the degree of economic freedom at play.20
Likewise, ALBANISA works to promote Ortega’s ostensibly leftist ideology by investing in social programs like Hambre Cero in addition to infrastructure projects. It handled Venezuelan funds aimed to increase salaries of public sector employees, a move that generated criticism from the IMF due to its inflationary concerns.21 Following a two-week strike by the National Transit Coordinating Committee that froze the nation’s public transportation, the government agreed to subsidize fuel for taxis and buses thanks to assistance from Venezuela through ALBA.22 Furthermore, when Nicaragua was suffering from energy rations and constant blackouts, ALBA provided generators that resolved the crisis. However, many suspect that the generators, since privatized, will indebt the Nicaraguan people with high electrical rates.23 In May of 2010, the state implemented a salary hike—named the “Christian, socialist, solidarity” bonus after Ortega’s redefined ideology—for thousands of public sector employees. More skeptical onlookers criticize the move as an act of clientelism, seeking to placate voting constituents.24 These moves illustrate the concerns that ALBANISA has become an ideological tool for the state.
Enhancing Transparency and Good Governance
Many view the ALBANISA issue in simple terms: if the government has nothing to hide, it should include the company’s finances the national budget. While this logic may oversimplify the complexities of the company’s existence, it proposes the most reasonable action that the government should assume to defuse such a controversy. Thus, one ponder why the Ortega administration refuses to do so. In a speech given in May of this year, President Ortega rhetorically posited, “If ALBANISA were a transnational corporation, do you think it would work to better the workers’ salary…?”.25
The underlying logic of Ortega’s statement illustrates his motivation to maintain ALBANISA as it is; he believes that others do not desire to promote the progress, welfare, and justice of society in its actions the way that Ortega’s government does. This logic extends to his impression of the role of the private sector as well as opposition policymakers. While this deterministic picture may seem extreme, the failed neoliberal policies pursued by previous administrations have contributed to the massively unequal distribution of wealth and underdevelopment of Nicaragua’s poorest sectors of the population. However, Ortega misleadingly paints himself as the last-standing guardian of the poor, excusing ALBANISA’s usurpation of budgetary power in the name of an ostensibly valiant mission to help the impoverished. This messianic rhetoric reeks of a benevolent dictatorship, which some disillusioned Nicaraguans sadly will embrace.
In a young democracy, such authoritarian temptations can set back the progress towards full democratic consolidation; Nicaragua must resist this acquiescence to authoritarianism and supplant it with a firm belief in its tenuous democracy. Therefore, the Ortega government must subject the ALBANISA finances to rigorous legislative oversight. By enhancing budgetary transparency, the state can strengthen the state of democracy in the country, undo previous damage to its international reputation, and prove to its citizens that the government does respect the civil will. While one must remain hopeful, President Ortega’s actions as of late leave little room for optimism.
References for this article are available here.
This analysis was prepared by COHA Research Associate Brendan Riley