Sanctions and Sanctimony: The RENACER Act and the futility of US policy in Nicaragua

Two weeks ago, the US House of Representatives passed the RENACER Act by a large margin with the hope, one assumes, of putting pressure on the people of Nicaragua to rethink voting for Daniel Ortega. That election took place on November 15, and Ortega won anyway – though, predictably, with opposition figures decrying the numbers. 

The entire election process in Nicaragua has been under scrutiny by the United States, European Union and multilateral bodies for over a year now. As far as the United States goes, it has routinely called for “free and fair” elections, all while the US State Department puts the whole foot of the US government on the scale in an effort to tip the outcome of the same election. Meanwhile, the United States’ firm commitment to achieving a stable non-Sandinista electoral coalition in Nicaragua is now celebrating 30 years of failure*. In typical US style, it is marking the occasion not with reflection, but by doubling down on that failure with more sanctions.

To be clear, US hypocrisy is not a reason why anyone in Nicaragua should accept the violation of human rights. So, It is certainly worth pointing out that 15 candidates for next week’s national and local elections in Honduras have been murdered since October, while an opposition presidential candidate was just arrested for money laundering. Also worth noting that President Bukele in El Salvador has jailed many of his foes, is in the process of pushing through a new law to scrutinize non-governmental organizations, and is even engineering a path to re-election, despite a constitutional limit of one term. All these moves have been met with silence (Honduras) or muted critique (El Salvador) by US policy makers – certainly no talk of wide-spread sanction. Of course, for people in Nicaragua who are critical of Ortega and see opportunities to voice those criticisms narrowing, the fact that folk in Honduras and El Salvador may be worse off is not much consolation. 

Nevertheless, as evidenced by this divergent treatment, we know, everyone knows, that the United States government is not really promoting democracy in Nicaragua. I’m not sure the State Department actually knows what it is doing – but nothing it has done has helped opponents of Ortega one bit. The opposition is more fragmented today than it was before April of 2018, and that is at least in part the result of US ham-handed “civil society” engagement, conducted alongside a very public commitment to remove the FSLN from power – ostensibly through elections, but who knows what the next step will be now that the electoral route is closed. 

Publicly, at least, the next step is enhanced sanctions. On Tuesday, November 9, Biden signed the RENACER Act into law as an official response to the elections in Nicaragua (to which point it is important to note, the RENACER Act was introduced in March of 2021, and was thus NOT constructed as a response to the elections, but as an effort to sway them).

So, what is in the RENACER Act?

The RENACER Act:

Presents the “sense of the Congress” that Nicaragua’s status under the Central American Free Trade Agreement shall be reviewed by the Biden administration. Threatening the removal of Nicaragua from CAFTA has been discussed by a handful of members of Congress – this bill pushes the initiative further. 

Amends the NICA Act to require extensive reporting and oversight on the part of the Treasury for any loans given under the humanitarian exception written into the NICA Act’s mandate to oppose new loans from the World Bank and Interamerican Development Bank. This is a response to new lending in the wake of the hurricanes that struck NIcaragua last November;

Expands targeted sanctions, e.g. sanctions against individuals which can involve freezing assets held in the United States, blocking travel and/or even invalidating international contracts. This section largely reiterates what is in the NICA Act already, but it goes further in actually providing specific suggestions for sanctions (I quote directly from the act as it is instructive): 

“officials in the government of President Daniel Ortega;

“family members of President Daniel Ortega;

“members of the National Nicaraguan Police;

“members of the Nicaraguan Armed Forces;

“members of the Supreme Electoral Council of Nicaragua;

“party members and elected officials from the Sandinista National Liberation Front and their family members;

“individuals or entities affiliated with businesses engaged in corrupt financial transactions with officials in the government of President Daniel Ortega, his party, or his family; and

“individuals identified in the report required by section 8 as involved in significant acts of public corruption in Nicaragua” [referenced below]; 

 

Adds Nicaragua to a list of countries subject to sanctions over corruption;

Mandates a “classified” report on corruption involving Ortega, his family, and members of the government. (Why classified?);

Mandates another classified report on the activities of the Russian Federation in Nicaragua;

Mandates a report on Nicaragua’s purchases of military equipment and foriegn support for intelligence services.

And, another report on human rights violations in rural areas;

And yet, another report concerning restrictions on press freedom.

 

Sanctioning the families of Sandinista party members is particularly revealing. Sanctioning members of the Sandinista party, for simply being party members, and their families, has nothing at all to do with promoting democracy. Presumably people will have to also demonstrably engage in corruption to be sanctioned. But if that is the case, why identify categories of people based solely on political affiliation for investigation?  Are Constitutional Liberal Party legislative representatives immune to such sanction? It is hard to read this as anything other than an attempt to intimidate Sandinista party members.

Further, the RENACER Act extends multilateral sanctions by doubling down on the NICA Act’s proposed limits on the World Bank and IDB funding. Though William Robinson and others have tried to minimize this impact, the NICA Act did lead to a suspension of assistance from the World Bank, which did not extend any new lending to Nicaragua in 2019 and most of 2020. It also led to a serious reduction in lending from the Interamerican Development Bank, even during the worst months of the COVID-19 crisis last summer – with only one program funded in August of 2020. Lending was haltingly renewed following the hurricanes in November of 2020, but multilateral program funding in Nicaragua still lags behind other Central American governments. The RENACER Act won’t immediately change any of this. Nevertheless, the US government is determined to make new, if limited humanitarian spending harder to deliver.

The one feature of the RENACER Act that could have a huge impact is the threat to Nicaragua’s participation in CAFTA. Nicaragua has done better than other countries under CAFTA’s rules. The much feared impact on rural communities from agricultural dumping from the US was moderated by Nicaraguan government support to rural communities, which was extended through opening credit access, housing and infrastructure expansion.  Nicaragua now imports less food than it did in 2006. Meanwhile, the Sandinista government encouraged foreign investment in multiple sectors and expanded free trade zone operations. The result was that Nicaragua led Central America in economic growth for many years prior to 2018, but also became more dependent on the United States as a trade partner – more so since Venezuela’s economic collapse (thanks to US sanctions) has effectively closed off that market. 

 

It is not clear that the US has the legal standing to unilaterally expel Nicaragua from CAFTA. Certainly doing so will set up a fight in the shadowy trade dispute courts that govern the world’s economy, where investor rights supersede sovereign considerations. The mandated review is thus probably more of a bluff than a serious policy proposal. That said, threatening to expel Nicaragua could scare investors away, and given the fragility of the economy in recovery, that could do damage. Time will tell. 

 

In the end, while the “international left” debates what Nicaraguans should be doing, we remain focused on what US Americans should be doing about the very real democracy deficit in the United States – the one that leads the US government to act with impunity all around the globe as it seeks to pick winners and losers in elections from Haiti to the Ukraine – and, yes in Nicaragua. The US government does not always get the outcome it wants – but it never stops trying.   

 

*Just to note that while it is true that US pressure and financing did lead to the formation and eventual electoral victories of non-Sandinista coalitions in 1990, 1996 and 2001, all of those coalitions collapsed shortly after taking office. They governed little, but oversaw the deconstruction of most public institutions and the impoverishment of the majority of Nicaraguans. Seems that opposition to the FSLN is not really sufficient as a governing strategy. A lesson lost on US policy makers, as well as most of the opposition organizations they fund.

 

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