The International Monetary Fund (IMF) defines State Capture as the efforts made by companies or clans to “shape the laws, policies, and regulations of the State for their benefit” and, at the same time, “provide illicit private gains to public officials.” This description vividly illustrates what Daniel Ortega did with institutionality, using it to convert the capture of the State into one of the five pillars that sustain him in power through repression and exclusion. The other four pillars are: criminalization of democracy, propaganda of fear and lies, monopoly of violence and international isolation.
State capture raises resources to benefit the regime in four ways: through the use of state agencies, laws passed to confiscate; the use of force, fear, judicial uncertainty; tax revenues, and foreign debt.
- The use of autonomous state agencies for self-enrichment or enrichment of the circle of power is extensive. It includes activities such as those used in the management of the consortium of companies of Alba de Nicaragua, S.A. (Albanisa), and the Nicaraguan Petroleum Company (Petronic) to control the fuel market and the nearly 4 billion dollars left to them by the oil agreement with Venezuela. Another method includes using frontmen, who act as directors or shareholders, of companies that allow the regime’s shady transactions and are rewarded with public contracts.
- The use of Law 1040 and Law 1055. Both laws, which were approved for repression, have allowed the confiscation of universities, companies, and assets of natural and legal persons. This reflects the absence of judicial safety and the permanent threat of losing everything and ending up in jail, which the private sector permanently faces.
- The appropriation of tax revenues to sustain the kleptocratic system increases tax extortion of companies and is also fed by the growing collection of indirect taxes from the increase in the amount of remittances that, due to the forced migration caused by the repression, have doubled since the outbreak of the crisis in 2018. In addition, there is no fair or transparent redistribution of income. For example, some workers of companies operating under the Free Trade Zone regime have denounced that their salary contributions are withheld. Still, these are not registered with the Nicaraguan Institute of Social Security (INSS).
- The use of external debt to invest in activities that contradict the country’s development needs but benefit companies in the circle of power is a clear example of how state capture hampers Nicaragua’s progress. More than 75 of every hundred dollars allocated to the Public Investment Program are spent on road construction instead of prioritizing social investment. Between 2017 and 2023, Public Investment spending related to infrastructure works went from 29 to 54 percent of the total, and spending on education remained stagnant.
The lack of scrutiny of international loans and the increase in family remittances whose use in consumption contributes 20 percent of tax revenues through Value Added Tax (VAT) and tax extortion present a clear picture of state capture.
Auditing the contractual clauses of these loans is vital. We demand that the external funders be held accountable for the use of these resources and suspend the loans that do not benefit the people but rather the Ortega Murillo clan.
For more details on this issue, please read the study: State Capture in Nicaragua: The Case for International Pressure.
The international community continues to act against the abuses of the Ortega Murillo dictatorship
The civic rebellion of April 2018 caused the cruelest of repressive responses by Daniel Ortega and Rosario Murillo, who first murdered dozens of citizens to instill fear and stop the protests. Given the failure of that measure, they relied on imprisonment, confiscation, banishment, and, more recently, denationalization of opposition members. Since the dictatorship took power in 2007, it has suppressed citizens’ rights and public liberties and then seized the state to maintain its hold on power.
The Group of Human Rights Experts on Nicaragua (GHREN), created by the United Nations Human Rights Council (UNHRC), the Organization of American States (OAS), the United States Congress, the European Parliament, the United Kingdom Parliament, and the G-7 Foreign Ministers, has called for and made a series of recommendations to governments and international organizations on how to react to and act against the abuses of the Ortega-Murillo dictatorship.
These recommendations coincide with and reaffirm the position and suggestions that the Concertación Democrática Nicaragüense (CDN-Monteverde), through its lobbying work, has put forward in recent years in international forums and to various political and social actors.
They emphasize the use of international forums to denounce human rights violations and press for a democratic solution to the crisis through free and fair elections that fully respect citizens’ rights.
The OAS created a Voluntary Group, open to the participation of the member states, to monitor Nicaragua and asked the Inter-American Commission on Human Rights (IACHR) to continue presenting periodic reports to promote actions that guarantee the effective exercise of representative democracy, the rule of law, and the protection of human rights.
The American Congress has extended the deadlines and pressured the Executive Branch of government to implement the bipartisan laws Nica Act and Renacer. In addition, it promotes the joint work of the governments of Canada, the European Union, Latin America and the Caribbean, the Holy See, the International Red Cross, and the UN in search of a solution to the Nicaraguan crisis.
The recommendations regarding justice establish that the State must be held accountable for its obligations under international conventions and put an end to impunity to promote legal proceedings against those responsible for the abuses and crimes before the national and international justice systems. Options for taking Nicaragua to the International Court of Justice (ICJ) will also be reviewed. Furthermore, to expand sanctions against institutions and individuals involved in human rights violations and crimes.
Other options are to review the DR-Cafta with the United States and other trade agreements in force so that, when evaluating Nicaragua’s compliance with international norms on money laundering and financing of terrorism, the Financial Action Task Force of Latin America (Gafilat) should take into account that Ortega uses these mechanisms to persecute opponents, even outside the country. The International Monetary Fund (IMF) has been asked to include governance issues in the subsequent periodic evaluation of Nicaragua, known as Article IV.
They recommend including guarantees of human rights compliance in credit contracts with the Central American Bank for Economic Integration (CABEI) to prevent it from continuing to strengthen the Ortega Murillo regime.
In view of the closure of almost 4,000 Non-Governmental Organizations (NGOs) and most of the independent media that now report from exile, they suggest helping them strengthen their capacities. They also suggest facilitating conditions for the students affected by the closing and confiscation of almost 40 private universities to resume their studies abroad.
Moreover, to guarantee refuge, identification, and mobility to the hundreds of people that Ortega officially or de facto rendered stateless and to support the countries that have taken in almost 800,000 Nicaraguans who have migrated.
The G7 Foreign Ministers called for the release of political prisoners, an end to the generalized repression against civil society and indigenous peoples, and free and fair elections.
The list of entities and countries that share these recommendations is ample. But to prevent the Nicaraguan crisis from worsening and spreading to other countries, especially the United States, due to irregular migration and Ortega’s sell-out policy with Russia and China, consistent intervention by the international community is required. In the short term, this will enable everyone to move from words to specific policies and actions that will put an end to the abuses of the Ortega Murillo regime.