In response to U.S. sanctions against President Daniel Ortega’s inner circle, he said that he would boost the popular economy to reactivate growth and face the Nica Act, which can mean for Nicaraguans a dangerous remedy given that it can worsen the productivity and income of millions of workers, economists warn.

Unemployment in Nicaragua forces many to make a living on the streets, that is, in the informal sector.  La Prensa

In addition, Ortega did not say in his speech how he would provide technical and financial assistance to this economic segment, at a time when money is the most scarce in the government, due to economic stagnation and the reduction of tax revenue.

The Nica Act, approved by the U.S. Senate is a legislative initiative that seeks to close the financial tap to the Ortega regime internationally. Ortega, therefore, seeks to cushion the impact by promoting the popular economy.

The problem is that the popular economy which Ortega wants to promote as a new economic model in Nicaragua is nourished by self-employed workers, who in Nicaragua tend to be characterized by low levels of productivity, precarious income and lack of access to technology and financing.

Economist Luis Murillo explains that the popular economy plays an important role, providing sources of survival to large segments of the population, and therefore requires support, but clarifies that Nicaragua could not live on the popular economy because most employment generated in this is precarious and informal, with very low productivity and income.

“None of the governments has been concerned about a real policy to be able to support this sector, an innovation policy, a credit policy, but rather an incentive for informality to be generated: no tax payment, no registration of its operations, formally and practically the policies were only directed to the big company through subsidies,” said Murillo.

The economist warns that if Nicaragua were sustained only by the popular economy, poverty levels would rise, many would fall into destitution and chaos would be greater, a situation very similar to that of Venezuela.

Murillo said that if the popular economy had been in place for years in Nicaragua, the situation today would be different, but under the current context, the country could not survive.

According to calculations by economists, in Nicaragua, seven out of every ten jobs that are generated in the economy are created by the microunits, which employ 1 to 5 people as self-employed workers with low qualifications and in some cases without remuneration when they are of family micro-businesses.

It is basically jobs created by the population itself to survive.

Therefore, economists say that if Ortega now intends to promote the popular economy, the first blow will be suffered by productivity and therefore the already low income of workers.

Economist Murillo argues that Nicaragua has depended for years on external resources, and changing that economic model is difficult.

“This country has a small, highly open economy that depends on external resources. In this country, the economic model that has been used has been supported through cooperation, with family remittances, donations, and direct foreign investment; If Nicaragua is isolated due to the Nica Act, the popular economy has a problem and it is the fact that the country can not process its own raw material,” said Murillo.

Article originally appeared on Today Nicaragua and is republished here with permission.


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