Instituto
Henry George ...
Managua, Nicaragua
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Instituto
Henry George ... |
38th
and 39th CE Economics Courses Graduate
IHG to Publish New Version of
P&P in Spanish
IHG Building Construction Advances,
Slowly but Surely
IHG Predicts Collapse of Nicaraguan
Economy by 2009
LVT Principles Find Expression, Receive
Attention
38th and 39th CE Economics Courses Graduate
The Instituto Henry George's 38th and 39th intensive "Comprender la Economía" (CE) political economy courses graduated 49 and 38 students respectively in March and April. Once again, more than 90% of the graduating students signed the IHG demonstrative petition expressing their support for a national study of the LVT solution in Nicaragua. 13 superior level graduates of the 38th course and 8 of the 39th participated in the post graduation meeting. Many expressed interest in doing volunteer work for the IHG. The IHG plans to offer the next CE course in June or July, when the new IHG classroom will hopefully be operational. The IHG also hopes to unveil its new version of the CE course, which will be adapted to the all-new Spanish edition of Progress and Poverty being produced by the Instituto's Director. Click here for complete "Comprender La Economía" Course Statistics, 2000-2008.
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IHG to Publish New Version of P&P in Spanish
The IHG is currently finalizing the printable version of a new abbreviated version of Progreso y Miseria in Spanish to be used in the IHG's "Comprender La Economía" (CE) course and hopefully to be distributed nation-wide. The new version is an adaptation of the original text of Henry George, which maintains the organizational structure of the original work so that readers can easily refer to the original, in Spanish or English, for more detailed explanations as expressed by the original author. The second revision of the text has been completed and is undergoing a final proofing for printing in July, 2008, for use in the next CE course. The IHG will also be updating the CE Study Guide, course syllabus, teacher guide, course visuals and test questions, to concur with the organization of George's original text and the language of the new abbreviated text. During the latter part of the year, the new text will be subject to a third read-through and revision by a focus group made up of CE superior level graduates, to insure its Latin American readability and Georgist conceptual integrity. Further development, in an effort to contemporize and make the book more attractive and readable, will include an annotation sidebar with examples, graphs, drawings and photos from Nicaragua and/or America Latina to illustrate the main points revealed and argued in the text, and an emotive reading of the text on CD, or on DVD, along with the study materials, all of which will be distibuted with the text itself.
IHG Building Construction Advances, Slowly but Surely
In the last couple of months, construction of the IHG's "Centro Internacional Educativo Henry George," has been slowed due to problems of incompetence with the building contractor, as well as to the growing economic instability in Nicaragua, which has made procurement of some materials difficult. Finally, the IHG has been able to contract with a more experienced builder, and the final expansion of the basic structure has begun. The current phase will last another four to five weeks, depending on the raining season, and then the surfacing and interior design work will begin. Although the entire building may not be functional until as late as October of this year, if construction moves ahead as planned, the IHG could be hosting its first CE course in the second floor classroom as soon as August of this year. This will depend on the IHG being able to obtain assistance with funding to cover the cost of purchasing desks, chairs, a projection screen, and a PA system, to outfit the 100-student capacity classroom facility. Because funding from "Georgist" funding sources is extremely limited or non-existent for Georgist educational projects, the IHG hopes that individual supporters of its activities will feel encouraged by the commitment and consistent progress of the IHG project to donate funds to assist the IHG in obtaining the mentioned capital equipment it will need in order to initiate its activities in the new building.
The front wall of the IHG
installation was finally completed in May.
IHG Predicts Collapse of Nicaraguan Economy by 2009
If the Nicaraguan government continues its present course of protecting private property of public domain monopolies, and impeding private production and commerce with inefficient and cost inflating taxation, the IHG predicts that Nicaragua will experience a major economic crisis by the end of 2008, or in the first trimestre of 2009, after the municipal elections. This crisis will manifest itself as a total paralysis of the economy in almost all sectors (transportation, commerce, government, etc.), and will probably result in rationing of basic utility services and essential products, as well as violent social protest, partial anarchy in the streets of the major cities, and banditry in the coutryside. The apparent cause of this meltdown will be the continuing spiralling inflation of prices in the face of stagnated local wages, diminished family remittances, hold-ups in international monetary aid and credit, and economic sabotage instigated by local and international right-wing political and economic interests to discredit Nicaragua's leftist government. Nicaraguan inflation is expected to reach 7.5% in the first half of this year, and it has recently been predicted that the annual inflation will end the year at over 21% (in 2007, it was 16%; in 2006, it was 9.4%). It is very possible that this rate may further accelerate to a situation of hyperinflation as the crisis deepens, especially if the government continues to subsidize prices and raise nominal wages by decree. This crisis, which is further deepened by the government's practice of subsidizing economic activities with scarce public funds, by constricting private production and commerce with inefficient and costly taxation, and by defending speculative holding of productive lands by private monopoly interests, will inevitably collapse the economy. In the current paradigm of privatization of the public domain (land) the crisis can only be ameliorated and put off in the short term by increased and ongoing international loans and charity, for which Nicaragua is becoming increasingly dependent on Venezuela and other leftist-dominated ALBA pact countries. But if those and other sources are not willing nor able to continue an ongoing bail-out of the Nicaraguan economy, Nicaragua will necessarily have to fall into the predicted paralysis. It is also possible, if a Republican president is elected in the USA, that a regional conflict may be provoked by the US government against the most mititantly "defiant" leftist countries in Latin America, primarily Venezuela, using the Colombian leftist insurgent group FARC as a "terrorism threat" pretext for military conflict, with the Colombia army as the US government's military proxy, and Colombia itself as a physical beachhead for US troop involvement. (Note the renewal of the USA Southern Command fleet and the ongoing campaign to demonize Venezuela and hyper-terrorize the image of the FARC.) The advancement or realization of this pressure could cause an unexpected change in the political situation in countries like Nicaragua, but would only serve to deepen the economic strife of the region. Behind all the symptoms and apparent "causes," of course, lies a single cause: the institutionalized private monopoly of the public domain, the private property of land and all things natural, which causes ever-increasing poverty in the face of any and all manifestations of material "progress." Only new economic policies which facilitate the transfer of at least some of the public tax burden off of private production, and onto the value of comunally created land and natural resource values, can reverse the current inexorable trend toward total economic dysfunction, deeper political tyranny, and dangerous social strife in Nicaragua.
Below are some news summaries relevant to Nicaragua's probable impending economic collapse.
Nicaraguans who earn their living by scavenging garbage in Managua's municipal garbage dump blocked the entrance to the site in March to protest against the local authorities who, they claimed, were extracting the most valuable garbage from the trucks' loads before they reach the dump. There are over 1,600 people who live near or in Managua's largest garbage dump who work daily collecting recyclable materials, and another 400 or 500 who wash and sell the materials. Of the 1,600 garbage pickers, over 500 are between the ages of 7 and 18 and many are mere children. Over 30% of the children who pick trash in the garbage dump are contaminated with lead, mercury and DDT. As a result of the protest, the Ministry of Health warned that the city was on the brink of an outbreak of disease due to the presence of over 3,000 tons of waste on the city's streets. One proposed solution was to raise the wages of the garbage truck crews so they would not pre-pick the trash and solve the problem by "dumping better quality waste." Another proposed solution was to "get the workers out of there, train them and employ them in something healthy and productive." In the end, the municipal government couldn't afford either alternative, but somehow they managed to reach an agreement where the better quality trash might be shared between all scavengers. How long will this "solution" work before the trash pickers are back on "strike?"
These trash collectors, who earn a
mere survival wage, were accused by dump pickers of unfairly
hoarding the "good trash."
The remittances that Nicaraguans living abroad sent to their family members in Nicaragua reached US$739.6 million in 2007, according to the Central Bank of Nicaragua. This was the highest figure in the last two decades according to the Bank. In 2006, the figure was US$697.5 million; in 2005 it was US$615.7 million; in 2004, US$518.8 million. Between 1994 and 2003, the average amount was only US$234.1 million. The Central Bank predicts that in 2008 the value of the remittances will reach US$800 million. The remittances received each year quals approximately 60% of the value of Nicaragua's exports, and is greater than the total amount received in official foreign aid (about US$500 million in 2007). Of the US$800 million expected to be received by Nicaraguan families from abroad in 2008, about US$600 million will come from the United States and about US$200 million will come from Costa Rica. About 20% of Nicaragua's 5.2 million citizens live abroad, principally in the United States and Costa Rica. Nicaragua remains the second poorest country in the hemisphere with a GDP of aprox. $5.5 billion and aprox. $1000 GDP per capita, in 2007. Are the skyrocketing prices in Nicaragua the cause or the effect of these growing remittances? What will happen to the Nicaraguan economy if the deepening US recession starts to diminish these remittances?
The Nicaraguan government plans to increase the country's generation of electricity from renewable sources, such as hydro and geothermal sources, from 27% to 67% over the next six years. Currently about 75% of the electricity produced in Nicaragua is generated by burning fuel oil. Unfortunately, the government "simply does not have the money" to invest in such projects, and will be obliged to borrow, or look to private investors, to make possible this change. On March 7th, it was announced that Iceland offered to donate US$5 million to rehabilitate Nicaragua's geothermal laboratories and to train and advise Nicaraguan technicians and engineers on geothermal energy production. Given its many volcanoes, Nicaragua is perfectly suited to geothermal energy production. On March 12th, the government announced that Iran's will loan US$233.4 million for the construction of a hydro electric plant in Jinotega. The loan, which still needs to be approved by the Nicaraguan National Assembly, should be paid back within ten years at an interest rate of 5%. Construction of the mega project, which will generate 70 megawatts of electricity, will be carried out by an Iranian company, and will begin at the end of the year and should be completed by the end of 2011. Nicaragua currently uses approximately 490 megawatts.
The World Bank has warned that Central America and the Caribbean will be badly affected by the US economic crisis because "traditionally those countries have had strong links with the US in terms of markets, tourism and remittances," and because it imports a significant amount of food and fuel from the US. Meanwhile the Nicaraguan Foundation for Social and Economic Development criticized the government for not taking a more active role in reducing the spiraling inflation which has been affecting the nation over the last 18 months. In 2007 Nicaragua was rated 111th among 131 countries in terms of competitiveness, down from 95th in 1996.
On April 22, Nicaraguan President Daniel Ortega admitted that nine Free Trade Zone Factories (maquilas), owned by Taiwanese companies, are to close during the course of the year. Ortega said that companies which are leaving have decided to do so for "purely economic reasons," and will install new factories in countries like China and Vietnam where wages are lower than in Nicaragua. The factories which are to close are leaving approximately 16,000 workers without jobs. These nine factories are added to the list of the three factories which closed last year, as well as one which closed earlier this year. Currently a total of 112 factories owned by multinational companies operate within Nicaragua's Free Trade Zones. Most produce garments and accessories which are exported to the US. The President of the "Superior Council of Private Enterprise" said that the 33% increase in the minimum wage which the government introduced during 2007 "alters the operational costs" of free trade zone factories. The Sandinista Workers Central Union called on the government to introduce "urgent measures" to guarantee employment for the workers of the nine companies, but it doesn't seem likely that the government can simply "create" employment, more than it can raise total wages by decree. In a country where the majority of the best land is held out of production for private speculative gain, the 16,000 unemployed workers will have little option for employment besides accepting lower paying quasi-jobs in the informal sector, or emigrating illegally to another country.
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During a government rally on May 1st, the Nicaraguan Labor Minister listed labor rights achievements of the government during the last year and a half, including the signing of 47 collective bargaining agreements benefiting 91,000 workers and a 33% minimum wage increase. She also mentioned that the government programs "Zero Hunger" and "Zero Usury" have created over ten thousand new sources of employment, mainly for women. On top of this, she said, 1,169 new cooperatives have been created during the last year. But union leaders questioned the government's commitment and called for resolution of 60,000 cases of workers' claims against employers pending in the labor courts. "We need a strong, capable Labor Ministry with a bigger budget," they said. They pointed to rising food prices as the most critical problem for Nicaraguan workers and demanded that the Administration either significantly increase wages or to freeze the prices of basic products. Unfortunately, either option will only further distort the economy and accelerate the inflation rate.
On May 14th, the Nicaraguan Central Bank revealed that the International Monetary Fund (IMF) had decided to retain the first loan disbursement of a three year (2007 - 2010) economic program, primarily due to the Nicaraguan National Assembly's failure to pass legislation, required by the IMF, to criminalize electricity theft. The three year program contemplates a US$111 million loan, US$39 million of which was scheduled to have been disbursed during the first few months of 2008. These kinds of loans, at the cost of increased national debt payments, just barely cover the cost of the existing anti-productive government operations.
On May 16th, transportation cooperatives called off their 11-day transportation strike when the government raised its offer of a fuel subsidy to US$1.30 per gallon. Nicaraguan bus, taxi, and shipping cooperatives will now enjoy the cheapest fuel in Central America. The government has also offered low interest loans for parts and maintenance. The subsidy will lower diesel fuel costs for the transportation cooperatives to US$3.15 per gallon. In Honduras a gallon of diesel is currently US$ 3.79, while in El Salvador is it priced at US$4.31. The additional US$1 discount was the result of conversations with Venezuelan President Hugo Chavez in which it was concluded that it would be possible for the additional discount to be covered with funds from ALBA (Alternativa Bolivariana para las Américas). Guevara explained that while the initial US$0.30 discount is being covered by the profits the mixed company ALBANISA makes from the sale of oil imported under special payment conditions from Venezuela, the additional US$1 discount will be covered by the collective ALBA fund. How long will they be able to keep on subsidizing the cost of oil? The transportation cooperatives are already complaining that they need the subsidy to be raised along with the rise of gas prices. If government subsidy is the answer to Nicaragua's economic problems, why doesn't the government just subsidize everything? Time will tell that this strike, and the band-aid solution, was just a rehearsal for what is in store for Nicaragua, on a much larger scale, by the middle of next year.
LVT Principles Find Expression, Receive Attention
The government owned and run national water supply company, ENACAL, announced in March that it would begin charging wells owned by private commercial entities for the monthly amount of water they extract. The charge is more than double the normal rate to motivate conservation of the country's aquifiers. This move is a clear recognition that the community has communal ownership of the water supply. The private companies that will be subject to the fee, announced that they would explore all legal means to resist the measure.
In April, the IHG Director had meeting with one of the two most favored candidate for Mayor of the Nicaraguan capital, the former Vice-Mayor, boxing champion and national hero, Alexi Arguello. He and his wife, who acts as his political advisor, were very interested in two ideas suggested by the IHG Director, which were practical applications of LVT principles. The first idea was to develop the rim of the large volcanic lagoon in the center of the city, Laguna de Tiscapa, using georgist principles which involve having the city lease, in long term contracts, rim lots to businesses as state concessions, in which the city would charge just the land value (revalued every year) while the businesses would enjoy tax exemptions on their investment and production costs, as is permitted under Nicaraguan Free-Trade Zone and Tourism Development laws. The candidate Arguello, who was briefly a student of the IHG a few years ago, was very excited about the idea and drew up a sketch of his design ideas for the proposed development.
The second idea which interested the candidate Arguello was the idea of actualizing the Capital's cadastre to be able to collect more tax revenue for the city. The IHG Director pointed out that the cadastre is woefully undervalued and inconsistent, apart from the fact that the city charges very little of the percentage of land value. The candidate commented that in certain parts of the city, the cadastre seems to have raised the assessed value on some lands that have been subject to the benefits of adjacent highway construction. That was good news because it revealed that there is interest in the cadastre to charge the higher land values, but it also showed the inconsistency of the current system. For instance, the house of an IHG member located in a central area which has an asking price of $60k, and a probable real selling price more like $35k to $40k, has a cadastre value of $8k, and pays less than $100 a year in taxes! The IHG Director explained to the candidate that many properties in the Capital are woefully undervalued because the process of updating the assessments is so costly, time consuming, and subject to corruption. The candidate lamented the corruption that goes on between the assesor and the owner who might pay him off to undervalue their improvements. The IHG Director agreed and explained that the corruption indeed came from the error of valuing the improvements, which was also acted like a fine on construction and improvement. The real estate tax in Nicaragua is a national law controlled by the National Assembly (obviously dominated by real estate investors), so the municipal governments cannot independently adjust the specifications of law, they can only execute it within any executive leeway they may have. In that light, The IHG Director suggested that the next municipal government have the cadastre do a land value survey as a "first phase" to the updating of the cadastre, with the formal intention of valuing improvements in the future "when they can get around to it." In other words, they would raise the assessement on land to its proper level and leave the assesments of improvements where they are, and even lower them where legally possible. The IHG Director explained to him that land value assessment was fast, cheap, objective, and didn't lend itself easily to corruption, totally the opposite of the lengthy, uncertain, and costly process of assessement of capital improvements. The candidate liked the idea, as long as there were some way to lower the taxes on improvements, or to lower other taxes on production, so as the make the change revenue neutral or even a net gain for taxpayers in general. The candidate said that the City should have a training seminar on how to do land value assessment using the latest techniques, and he asked the IHG Director if he could bring in a team of experts to Nicaragua in the next year after the elections to do just that. He went on to say that when he was in the Mayor's seat, he would issue a formal invitation for such a team to come to Nicaragua for that end. Being a non-political and non-partisan project, the IHG will contact and make the same proposals to the other major mayoral candidates. On May 29th, the IHG Director appeared on Channel 37 to explain the IHG tax-shift proposal in a one-hour interview.
IHG Director with Managua Mayoral
candidate Alexi Arguello and his wife Karla.
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