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IMF Loan Conditions for Nicaragua Require Privatization Measures That Would Enrich Corporations at the Expense of People

Dec. 4, 2002

IMF Loan Conditions for Nicaragua Require Privatization Measures That Would Enrich Corporations at the Expense of People

Conditions May Violate Nicaraguan and U.S. Law

WASHINGTON, D.C. – Loan conditions expected to be imposed on Nicaragua today by the International Monetary Fund (IMF) could result in bulk water exports and higher consumer water prices, enriching corporations at the expense of the Nicaraguan people, according to a network of citizen groups working to oppose water privatization measures in Nicaragua.

Despite widespread opposition to the prospect of a corporate takeover of Nicaragua’s vital water resources, the executive directors of the IMF were to vote on new conditions that require Nicaragua to sell its major hydroelectric dams and the state hydroelectric company called Hidrogesa. The IMF has pushed forward with these loan requirements despite a law passed unanimously in August by the Nicaraguan National Assembly that suspended all private concessions involving water uses until a national regulatory framework could be established.

“IMF loan conditions should not contradict the unanimous decision of the Nicaraguan National Assembly to suspend private concessioning of water,” said Sara Grusky of Public Citizen’s Water for All campaign. “Has the IMF told President Bolaños of Nicaragua that he must override the decision of the National Assembly in order to qualify for new loans and debt relief?”

The new law stemmed from concerns about corruption and the lack of any regulatory framework governing water use by whatever private company would run the hydroelectric facilities. The law safeguards the country’s water resources until further notice, although the IMF would, in effect, supercede the national law if it approves the new loan conditions today.

“The IMF is taking an Olympic leap over the laws of our country including our Supreme Court, the Comptroller General’s Office, the National Assembly and our constitution,” said Ruth Herrera, a representative of the National Network in Defense of the Consumer, a Nicaraguan organization. “One has to ask if any of our democratic institutions will be respected.” Herrera and Public Citizen are working with Centro Humboldt, Centro de Estudios Internacionales, and Centro Nicaraguënse de Derechos Humanos in Nicaragua, as well as the Quixote Center, Nicaragua Network and Latin America Working Group in the United States.

The privatization process has been fraught with alleged corruption and irregularities. Early in 2002 – before the IMF loan conditions – Enron bid to buy the hydroelectric dams. But when Enron failed to comply with conditions of the sale, the contract was transferred to Coastal Power of Texas. However, the bid was so low, estimated at only 20 percent of the plant’s value, that the comptroller general of Nicaragua began a review of the process. This incident prompted the National Assembly to pass the water law.

In addition to violating Nicaraguan law, the new IMF loan conditions contain requirements that violate U.S. law by imposing user fees for Nicaraguan children to attend schools. The new agreement will require the government of Nicaragua to implement “school autonomy” legislation that reduces national government funding for schools. Only parents who can afford the fees for textbooks, supplies, uniforms and other items – costs known as user fees – will be able to send their children to school. If approved, this would violate U.S. law; in November 2000, Congress passed legislation requiring the U.S. executive director at the IMF to vote against any loan that includes “user fees” for education or health.