By Carlos Fernando Chamorro
Report from Managua
Nicaragua competes with Haiti and Honduras in the ranking of the poorest countries in Latin America, and has one of the highest rates on the continent concerning the perception of corruption—even exceeding the average of African countries, according to Transparency International.
However, Nicaragua has experienced some unexpected changes in the last two years, and the country now strives to be recognized as a good international example in the fight against corruption. In a region where the rule is to denounce abuses made by the ex-governors while giving them almost unrestricted impunity (see, for example, Alberto Fujimori in Perú or Abdalá Bucaram in Ecuador), Nicaragua can point to the case of Arnoldo Alemán as the only ex-president in Latin America who has been convicted of corruption.
But the end of the story is yet to be written, for Nicaragua is very much at a crossroads.
The Alemán era
Arnoldo Alemán began his public career as mayor of Managua (1990-1995), where he was known both for a successful building program and for a series of corruption scandals. People used to say about the mayor: "He steals, but he makes things," alluding to the visible improvements in the main streets and approach roads to the capital—improvements that boosted his popularity.
After winning the presidential election as candidate of the Constitutional Liberal Party (PLC—Partido Liberal Constitutionalista), Alemán took office in 1997. One of his first acts was to announce an austerity program. With great fanfare, he tore up the credit cards of high-ranking officials in front of television cameras, proclaiming public saving. At the same time, in a move less visible to the public eye, he substantially increased the salaries for high-ranking officials. During his administration, ministers and advisors earned monthly salaries ranging from US$10,000 to US$20,000, tax free—undoubtedly among the highest salaries in Latin America. Ironically, the record was held by the technical secretary of the presidency, who earned a monthly salary of around US$23,000 for designing the anti-poverty strategy of the country.
In 1999, a few months after Hurricane Mitch whipped Nicaragua, leaving behind more than 3,000 dead and a social catastrophe, Alemán reached a political pact with Daniel Ortega, leader of the opposition Sandinistas (FSLN—Frente Sandinista de Liberación Nacional). Officially, it was said that the so-called pact of the leaders was made to avoid strikes and social protests from the opposition and was celebrated by the International Monetary Fund and the World Bank as an "agreement to make governing possible." But the real purpose of this agreement, which led to a constitutional reform, was to distribute the institutions of the state in proportion to the power managed by the two main political parties of the country.
The political pact created an institutional earthquake that affected all of the spheres of public life, but state transparency was its main victim. For instance, the Comptroller's Office, which had one independent officer in charge, increased in size to five comptrollers: three of whom belonged to the government party and the other two to the opposition. Ditto for the Supreme Court and the Supreme Electoral Council.
In the absence of counterweights among the powers of the state, corruption permeated vast sectors of society. Even the Catholic Church, which then was considered the most trustworthy institution, got caught up in the whirlwind of public corruption. The only institution that remained clean was the press, which managed to keep and strenghten its independence in spite of the hostility and official economic pressure.
A lonely voice in the desert
During Alemán's administration (1997-2001), the media conducted numerous investigations and denounced many cases involving public corruption. Some of these findings still stand in the public eye as a token of corruption of the Alemán era. Such is the case of the highway El Crucero-Los Chocoyos, better known as "the presidential highway." Located 20 kilometers from Managua, this magnificent engineering piece of work of 18 kilometers cost US$6 million, but carries little vehicular traffic. The only explanation behind such an economic irrationality is that the highway crosses three fincas (estates) owned by Alemán, including his present residence, known as El Chile. But when a journalist asked the president of the Comptroller's Office why he did not investigate, he official answered that "influence peddling" was not categorized as an offense in the Penal Code.
The Alemán era was categorized by a wide range of corruption, from grotesque robberies and bribery to sophisticated legal and financial schemes to loot the state.
A journalistic investigation by the weekly Confidencial showed that during Hurricane Mitch, Byron Jerez, who was considered Alemán's "strong man" in the government and served as the minister of internal revenue (at the same time that he was treasurer of the PLC), allegedly diverted funds assigned to social reconstruction to build himself a little summer palace on Pochomil Beach.
In another, more sophisticated scheme of corruption, Jerez allegedly diverted funds from taxes through a triangulation of credit notes of different institutions that finally ended up in his own companies registered abroad. For one of those journalistic investigations known as los checazos, Jorge Loásiga, from the investigative unit of the newspaper La Prensa, would later win an international award sponsored by the Open Society Institute.
Naturally, such media investigations were discarded by the government, including even Vice President Enrique Bolaños, who asked for "more and more proof."
As Alemán's vice president, Bolaños was in charge of the Integrity Program (Programa de Integridad) financed by the World Bank. This was a million-dollar program for education, prevention, and preparation of laws, but without practical consequences to stop corruption because of the lack of political will. A cartoonist from La Prensa qualified the vice president as "vice accomplice" and pictured him in his cartoons as an obedient butler at the service of Alemán.
The "new era": following the steps of the press
That's why, when Bolaños took office in January 2002 and proclaimed a "new era," after having defeated Daniel Ortega, there were no major expectations of changes in public transparency. In spite of Bolaños' own personal record of integrity and his promises of institutional reforms, the political scheme for sharing power between the two major parties remained untouched in the rest of the government. Even after leaving the presidency Alemán benefited from the pact: As ex-president, he automatically obtained a seat as a deputy and was immediately elected president of the Parliament, against the will of Bolaños.
Facing the confrontation of power instigated by Alemán from the Parliament, Bolaños tried to reinforce his authority as president. And thus began a struggle for power between these former allies that, in the end, would have positive consequences for the country in the fight against corruption.
A few days after Bolaños took office, the first scandal burst out when the press secretary of the government refused to pay a check for US$300,000 to a Mexican company. This was the last payment from the state for a total of US$1.3 million authorized by Alemán in a fraudulent operation, supposedly to modernize the state television channel. The case of Channel 6 resulted in the first trial for corruption pointing to senior members of the government.
Later, additional charges were filed against Jerez, the old "right hand" of Alemán, in an unrelated matter. He was accused of having organized a network for buying and selling luxury cars, using state funds. Jerez was captured, formally accused, and then sued in eight other judicial actions. In June 2003, Jerez was convicted and sentenced to eight years in prison for illegally diverting state funds to his private businesses.
As investigations ensued, more evidence of how Alemán's administration squandered funds turned up. During his five years in office, the ex-president charged US$1.8 million in discretionary expenses to an American Express card paid by the Central Bank.The expenses billed to this card covered payments for items such as jewelry, perfume, carpets, and clothes in high-quality stores. More specifically, there was his engagement party in the exclusive Biltmore Hotel of Miami for US$46,609; his honeymoon in Italy for US$25,955; 11 days of holiday in Egypt for US$98,282; as well as charges for US$30,878 for stays at the Hotel Taj Mahal in India and US$13,775 in the Ritz Carlton of Bali.
Finally, in August 2002, Bolaños and government investigators presented a formal complaint against Alemán and 13 others for the case of la guaca (hidden indigenous treasure). Alemán was accused of transferring more than US$100 million of state money to accounts abroad, under the name of a political foundation controlled by Alemán's family that also triangulated money to firms or accounts related to the economic interests of Aleman's relatives.
In a dramatic message to the country, Bolaños accused Alemán directly: "Arnoldo, I am sad, hurt, and disappointed to see the undeniable and overwhelming proofs that point at the ex-president of the Republic as the author and accomplice to such terrible crimes," he said.
Alemán was indicted on charges of money laundering and fraud, thus beginning a political and legal battle to bring him to justice. The case showed the extent to which the anti-corruption agenda that, during Alemán's administration, had been promoted solely by the media had become the official agenda of the government, with the wide support of public opinion and civil society.
The support of the international community
Without the parliamentary support of his party, the president sought the backing of the public and the international community to advance his anti-corruption agenda. Bolaños benefited from the change of direction in the U.S. policy that placed the anti-corruption fight as one of its priorities in Latin America. The messages from Washington to the Alemán family were direct. First, the American visa was withdrawn from Jerez, then from Amelia Alemán, sister of the ex-president, and finally from Arnoldo Alemán himself.
Consequently, the president played the anti-corruption card enthusiastically, though this could mean the total rupture with the party that took him to power. With the exception of seven liberal deputies who decided to back Bolaños, more than 42 deputies of the PLC tightly gathered to support Arnoldo Alemán, complaining that the ex-president was subjected to "political persecution" under the anti-corruption investigation.
In the political battle to submit Alemán to justice, Bolaños also appealed to the parliamentary support of his old political enemy, the FSLN. Finally, on December 12, 2002, under pressure from the press and the civil society, a weird alliance embodied in Bolaños, Ortega, and the Bush Administration got the minimum votes necessary to strip Alemán of parliamentary immunity and bring him to justice.
Alemán was sentenced to prison and placed under house arrest. Later he was transferred to a cell, where, as of the end of March 2004, he was awaiting the results of two trials.
Byron Jerez, tried on money laundering charges related to the Alemán case, was acquitted.
First lessons of shock therapy
With a former president in prison, the true test of the anti-corruption fight has moved to the judicial system. Very few believe that this institution, discredited by the influence that political parties exert on the Supreme Court, could really administer justice without submitting to political negotiations of the PLC and FSLN. In fact, in the last months of 2002, the anti-corruption fight had already suffered some setbacks in the courts, and there are fears that the whole process might be at a standstill.
Meanwhile, the Alemán affair offers some lessons:
First, the fight against corruption has restored the international community's trust in the country, but this has not meant automatic economic support. European countries provided Bolaños a US$500,000 anti-corruption fund to strengthen the Attorney General's Office and the Public Ethics Office (Oficina de Ética Pública). However, government efforts to obtain extraordinary external support and to repatriate the stolen funds that are in banks in the United States and Panamá require an extremely lengthy process.
Second, the imprisonment of a former president accused of public corruption has the effect of shock therapy. In the business world there are complaints that everything moves more slowly because officials became more careful and now stick to the rules when approving contracts. In the short term, this can be harmful to certain businesses that demand quick decisions. But in the long term, such deep attachment to the rules may be the best incentive for keeping clean.
Third, the showy effect of having in jail a "big fish" is a thousand times more effective than million-dollar investments in prevention to modify the behavior of civil servants and transform political culture in the face of corruption. Without deep changes in the laws and a reliable judicial system, these changes will hardly be sustainable.
Fourth, it is essential to maintain and invigorate the coalition among the press, civil society, and government to preserve the initiative when fighting corruption. In Nicaragua, this coalition is already being relaunched around a law for access to public information and a project to deepen citizen participation and the decentralization of the state.
Fifth, the credibility of the anti-corruption leadership is vital to sustain the process. In the case of Bolaños, his leadership has been affected by citizens clamoring for transparency and for ethical congruence, especially in view of the bloated salaries high-ranking government officers earn—including that of the president himself, who in addition to his presidential income, receives a lifelong pension as former vice president. In response to repeated public criticism in the projected budget for 2004, which was sent to Parliament on October 15, the president finally relinquished his vice-presidential pension and reduced the salaries of the governmental elite by 10 percent.
Peer review commentary is presented as a counterpoint to this report. The views expressed are those of the peer review panel, and not the author.
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