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Latin America Investment News on Viva Tropical

Nicaragua: More Loans than Grants Fund the Country

Article Summary:

In 2007, the first year of the government of Daniel Ortega, the public sector received a total of U.S. $684 million (U.S. $430 in donations, and only $254 in loans). Now the situation seems to be revesing at the end of his administration, when the international community entrusted only U.S. $ 503.4 million to the country, which is spread almost equally between loans and grants.

Photo Credit: Estrategia y Negocios

Original Article Text From Estrategia y Negocios via Google Translate :

Nicaragua: More and More loans and Less Grants

In 2007, the first year of the government of Daniel Ortega, the public sector received a total of U.S. $ 684 million (U.S. $ 430 in donations, and only $ 254 in loans), the Report of Official Cooperation External 2011, published by the Central Bank of Nicaragua.

According to that document, the situation was reversed at the end of the period of Ortega, when the international community entrusted only U.S. $ 503.4 million, spread almost equally between loans and grants.
The $ 180 million difference between one year and are explained almost entirely from the decrease of U.S. $ 183 million was observed in the amount of donations between 2007 and 2011, reflecting not only the international realities, but also response of the donor community to the municipal electoral fraud in November 2008, mainly.
Alberto Guevara, president of the Board of Central Bank, says that if Nicaragua is getting “more loans and fewer grants, is because the world is seeing that Nicaragua is able to fend for itself. This was a government target since 2007, when we said we did not want to follow the world with an outstretched hand. ”

In contrast, the private sector, which had received only U.S. $ 369 million in that same 2007, he jumped very significantly, to raise U.S. $ 906.1 million in 2011, which multiplied almost 2.5 times the trust received the external sector.

More money for banking sector
“The external formal cooperation addressed to the private sector reached USD 906.1 million in 2011, of which $ 827.5 million (91.3%) were loans and $ 78.6 million in donations,” says the report of the Bank.
He adds that “foreign official aid received by the Nicaraguan private sector in 2011, was channeled into a 72.1% through the financial sector, in the amount of $ 653.1 million. This allowed the banks, finance companies, credit unions and microfinance institutions provide resources to the production and trade of the country and meet the demand for financing of the different economic agents. ”

The remainder of cooperation addressed in 14.3% (U.S. $ 129.4 million) in economic infrastructure (mainly electricity), 4.3% (U.S. $ 38.5 million) to the social sector (health, education and other social services), 2.3% ( U.S. $ 20.6 million) to the productive sector (mainly agriculture) and 7% (U.S. $ 64.5 million) to other sectors. ”
In analyzing the document, the economist Adolfo Acevedo, said that “the reduction in aid flows has been mainly due to the decrease in disbursements of liquid resources.”

By adding the amounts received by the private sector with public sector shows that the country was U $ 63.8 million more than in 2010, and $ 357.6 only in 2007. The increase in the latter case is explained by the increase of bilateral resources that got the country between two dates, which went from $ 560.1 million U in 2007, to $ 917.2 million in 2011.

Most of these resources (U $ 747.7 million in 2011), went to the private sector while the private sector received only $ 169.5 million … despite the ‘generosity’ in Venezuela.

The growing ‘generosity’ Venezuelan
Given the importance of cooperation represents Venezuela (of which many sectors are still fearing that ever becomes public debt), the Official External Cooperation Report 2011 devotes a special chapter, which detailed that it went from U $ 533.0 million in 2010, to $ 609.1 million in 2011.

The possibility of a collection officer can not be totally excluded. “Concessional loans Venezuelan cooperation represent a debt that although classified as private, originated in an agreement from state to state … and there is a risk that can be transformed into public debt,” said economist Jose Luis Medal, in study ‘Towards a public budget to promote the development of Nicaragua’, commissioned by FUNIDES.

Particularly noteworthy are the $ 557.4 million received last year by way of “oil cooperation”, which exceeds by $ 220.4 million funds received for the same item just a year earlier.

Over the past four years (2008 – 2011), Venezuela gave Nicaragua “under the ALBA-TCP (Bolivarian Alternative for the Peoples of Our Americas – Treaty of Commerce of the People)” a total of $ 2,046.1 million , of which U $ 1,423.4 million for the oil cooperation.

Acevedo Economist notes that “as always, there is an extremely detailed report, by source, project by project, in the case of loans and grants to public officials, and official grants to the private sector, but not true with official lending to the private sector, which mainly are represented by the credit of Venezuela, associated with the supply of oil. ”

This expert does not understand that with so many indicators showing record growth in 2011, the country has grown relatively so little.

“The oil cooperation from U.S. $ 337 million in 2010 to U.S. $ 557.4 in 2011, an increase of 65.4%. Considering that foreign direct investment grew by over 90%, reaching a historical record of GDP, remittances also reached record levels, as well as exports (they represented 65% of GDP), not you will understand why the economy grew just 4.7%. ”
According to the Report of the Bank, U of U $ 178.2 $ 557.4 million of Venezuelan cooperation were used for social projects, while the remaining U.S. $ 345.6 million for projects productive partner.

In the case of social projects include the $ 59.4 million of the bond of solidarity, which includes being delivered to older adults, the $ 45.9 million grant to transport, and U $ 31.1 earmarked for “housing infrastructure,” a section also repeated in the breakdown of socio-productive projects, which are assigned to U $ 3.8 concept of “housing infrastructure funding.”

Another $ 147.2 million were used to finance energy sovereignty, U $ 26.8 million to finance the development of fair trade, and $ 25.8 million to fund additional agricultural production and forestry.

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