Months of Deadly Unrest Devastate Nicaragua’s Economy

Two days after protests began in Nicaragua in April, a foreign auto components company was meeting at a hotel in the city of Leon when smoke from a burning university building just a block away billowed above the hotel’s colonnaded courtyard.

The visitors quickly cut short their event and began changing their travel plans to exit Nicaragua. Within three months, the El Convento hotel itself was forced to close for lack of business, as a sister hotel in the same city had in June.

Nicaragua’s economy has been devastated by the nearly five months of unrest sparked by cuts to social security benefits that quickly evolved into calls for President Daniel Ortega to step down.

In June, the country’s economic activity was down 12.1 percent compared to a year earlier, according to the central bank. Economists estimate 200,000 jobs have been shed, including as many as 70,000 in the tourism sector, which has become Nicaragua’s top source of foreign currency in the past two years.

Revenue at hotels and restaurants plunged 45 percent in June compared to 2017, according to Nicaragua’s central bank. Similarly, construction suffered a 35 percent drop and retail 27 percent. Some $900 million in deposits fled Nicaragua’s banks. They responded by tightening their lending to preserve liquidity, thus also contributing to the economic slowdown.

Nicaraguan Union of Agricultural Producers says more than 12,000 acres of private land have been occupied by government supporters in what business leaders have called confiscations in revenge for their support of the protesters.

The producers say 91 percent of the land occupied by squatters was used for farming and livestock.

Victor Hugo Sevilla, the general manager of both Leon hotels, continues checking email, but said “I haven’t gotten any requests from foreigners for reservations. We have received five, maybe eight, rate inquiries from domestic (travelers), but no firm reservations.”

Leon, Nicaragua’s second-largest city, was among the places where protests and roadblocks were most intense. From the beginning, those protests were met with violence from riot police and civilian government supporters. In July, they violently cleared the roadblocks and ran protesting students off occupied university campuses.

More than 300 people have been killed in the unrest, according to human rights groups. The government calls the protesters “terrorists” and says it defeated an attempt to drive Ortega from office that was sponsored by the U.S. government and domestic opposition, including some in the private sector.

Ortega conceded this month that the roadblocks and unrest have cost the country jobs. In an interview with Spanish news agency EFE, he said domestic tourism was starting to return, but “where there has been more of a problem is in attracting international tourism, because this situation tends to repel the tourists.”

A major factor has been that the countries that send Nicaragua’s big-spending foreign tourists, including the U.S., Canada, Spain and England, issued travel warnings urging their citizens to avoid travel to Nicaragua.

Major airlines such as American and United cut their flights to Managua from three per day to one. Spirit, Delta and other carriers trimmed their flights as well, said Jose Adan Aguerri, president of the Superior Council for Private Enterprise.

The council, which is Nicaragua’s main business chamber, joined the call for a national strike Sept. 7. The Civic Alliance, formed to represent a broad swath of Nicaraguan society in a stalled dialogue with the government, said the strike aimed to push the government back to dialogue and to protest the arrest of alliance members and other political prisoners.

The country’s primary tourist destinations like the colonial gem Granada and the Pacific coast surfer paradise San Juan del Sur began feeling the consequences of the unrest almost immediately. Hotels and restaurants cut back hours, then days and eventually closed completely.

For years, Ortega enjoyed a relatively stable relationship with private businesses. Since returning to power in 2007, the one-time Marxist rebel commander had softened his views and largely left Nicaragua’s private sector to do what it wanted.

The relationship was criticized by some as a tacit agreement to keep the country’s business elites out of politics. In an interview in July with Venezuela’s Telesur network, Ortega said his understanding with Nicaragua’s private sector had been strictly economic and not political.

In April, however, the country’s business interests, caught off guard by the social security system changes, quickly joined the opposition. As the social and political crisis deepened, the private sector became increasingly outspoken in calling for Ortega to move up elections.

Mario Arana, director of the Nicaragua Association of Producers and Exporters and a former head of the central bank, said the private sector decided to get more involved when student protesters were killed.

“When there was an overreaction here to a civil, peaceful protest by the students, where people began to lose their lives, society suffered a social explosion where the private sector aligned with the people,” he said. “The private sector is committed to trying to find a negotiated exit from the crisis.”

Juan Sebastian Chamorro, who leads the Nicaraguan Foundation for Economic and Social Development, said the government has shown signs that it recognizes the severity of the economic impact. It has issued new debt, adjusted rules to tighten the selling of dollars and cut public spending as it forecasts a 10 percent drop in tax revenue.

Whether any of that will be enough to stop the economy’s slide is doubtful unless it’s accompanied by a political solution that restores stability, experts said.

For years Leon had been at best a day trip for foreign tourists beginning to explore better-known Granada or San Juan del Sur. But the city had worked hard to get attention and Art Collection Hotels had bet on its prospects by opening its second hotel, La Recoleccion, in 2017.

“We had high expectations for this year,” said Sevilla, the manager of the closed hotels.

He had 113 employees between the two properties. They were able to suspend 67, which will enable them to come back without losing any benefits of seniority, but the rest were laid off. He has remained in touch with some of the workers. Those still around are taking whatever work they can find, but he estimated at least half left the country, with most of those seeking tourism sector jobs in Costa Rica.

The hotels have 190 reservations for November — the start of the high season — but that’s less than half what they had in November last year. Still, he hopes they can start working their way back again in October. Even if that works out, he predicts a slow climb back to normalcy.

Cafes and shops selling handicrafts around Leon’s historic center were open this week, but a number of hotels and hostels in the area were shuttered.

“I think it will take at least 12 months, maybe more, to be able to restart the tourism engine,” he said.

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