Page:RS22836 (IA RS22836-crs).pdf/4

 Since no single party won an outright majority in Nicaragua’s 90-member National Assembly in the November 2006 legislative elections, President Ortega and the Sandinistas (FSLN) must form alliances in order to enact legislation The FSLN has generally relied on an informal alliance with the Constitutionalist Liberal Party (PLC), dominated by jailed former President Alemán, to pass legislation. In December 2007, however, the PLC broke with the Ortega government by voting against its plan to increase the power of the country’s Citizen Power Councils (CPCs), which are funded by the executive branch, over the existing municipal authorities. The PLC has since aligned with Eduardo Montealegre, who, [sic] until recently was head of the ALN, to contest the ruling FSLN and its allies in the November 2008 municipal elections. Those elections will test the strength of the FSLN, which currently holds 87 of the country’s 153 municipalities.

Economic and Social Policy. In 2008, the Ortega government faces the challenges of boosting the country’s moderate growth rates (GDP growth was 2.9% in 2007) and reducing poverty. According to the World Bank, although overall poverty has declined in Nicaragua since the country’s return to democracy (from 50.3% in 1993 to roughly 46% today), more than two-thirds of the rural population is impoverished. While Nicaragua made some progress towards development in the 1990s, much of those gains were reversed by the devastation wrought by Hurricane Mitch in 1998. As a result of sluggish growth rates, some social indicators for Nicaragua have shown little or no improvement since 1993. Nicaragua is highly dependent on foreign aid, which contributed 26% of its budget in 2006. It is also dependent on remittances sent from Nicaraguans living abroad, which totaled some $656 million in 2006 and accounted for 17% of the country’s GDP. The official unemployment rate is about 5%, but underemployment is a major problem and some 60% of workers are employed in the informal sector, which doesn’t provide social security and other benefits.

The Ortega government has adopted a poverty reduction strategy and a 2008 budget in line with International Monetary Fund (IMF) recommendations. As a result, the IMF and the World Bank have cancelled roughly $200 million and $1.5 billion respectively in foreign debt owed by Nicaragua. President Ortega is expected to announce a development plan by mid-2008 that is likely to emphasize sustainable agro-industrial development. Obstacles to Nicaragua’s growth prospects in 2008 will be the rising price of oil and the economic slowdown in the United States, which could affect trade and remittance flows.