Global Policy Forum

Nicaragua: Extreme Poverty Falls - But Opposition Asks 'How'?

A new independent study reports a 7.5% drop in extreme poverty in Nicaragua between 2005 and 2009, which has lifted 327,437 Nicaraguans into the category of living in "poverty," from their previous position in "extreme poverty." Conclusions in the report are based on changes in food consumption, the World Bank endorsed measure of wellbeing, but the report does not explore the causes of these changes. The President of Nicaragua has attributed this development to social programmes under his current government.

By José Adán Silva

Inter Press Service
September 6, 2010

An independent study has confirmed that extreme poverty in Nicaragua fell by 7.5 percentage points between 2005 and 2009, an achievement clouded by criticism of the environmental costs, a supposed lack of transparency and the paternalism of the country's social programmes.

The proportion of extremely poor people fell below the 10 percent barrier, to 9.7 percent of the population last year, down from 17.2 percent in 2005, said Alejandro Martínez, head of the International Foundation for the Global Economic Challenge (FIDEG), which carried out the study.

In absolute terms this meant that 327,437 Nicaraguans were lifted out of extreme poverty, into the category of poverty, according to the results of FIDEG's study, 'Encuesta de Medición de Pobreza Extrema' (Survey for the Measurement of Extreme Poverty).

The study, designed with advice from the World Bank and financed by Switzerland and the Netherlands, found that overall poverty in Nicaragua -- one of the poorest countries in Latin America -- declined by 3.6 points, from 48.3 percent to 44.7 percent, in the period studied.

Leftwing President Daniel Ortega immediately stated that the fall in poverty was due to the different social programmes implemented by his government.

But Martínez said at the launch of the report Aug. 30 that the survey did not look at the causes of the decline, but merely used food consumption as a measure of well-being - the method recommended by the World Bank.

The most critical voices in sectors opposing Ortega, who took office in 2007, expressed doubts about the government's figures on poverty reduction programmes, while social experts told IPS that they are concerned about precisely 'how' poverty was reduced. Among the problems mentioned by the opposition are environmental degradation caused by expansion of the agricultural frontier, and allegations that social programmes are being financed by Venezuelan funds on a discretional basis and without transparent accountability.

Martínez said the FIDEG survey set the extreme poverty line at an income of barely 64 cents of a dollar a day, providing 2,295 calories a day of food.

People with incomes up to 1.60 dollars a day were considered poor in the survey.

The study found that the actual numbers of people below the poverty line increased, because of the natural growth of the population, which has now reached 5.8 million people.

In 2005 there were 2.48 million people living in poverty out of a total population of 5.4 million that year, while in 2009 there were 2.56 million poor people out of a total of 5.7 million people.

Since 2007, Ortega has implemented programmes like the Bono Productivo Alimentario (food production voucher scheme), involving a credit in kind that has provided some 70,000 rural women heads of household with livestock, seeds, fruit tree saplings and building materials, to make their labour more productive and raise their families' standards of living.

He also instituted the Usura Cero (zero usury) plan which provides affordable micro-credit to poor women in the cities, as well as housing programmes for more than 250,000 families, social housing for state workers, street paving in city neighbourhoods and rural towns, and subsidised electricity for marginalised areas.

'All this means raising the Nicaraguan people out of extreme poverty,' said Ortega, according to whom 300,000 families have benefited from the programmes. However, once again, he did not detail the amounts that went into social spending, arousing suspicions of corruption among his critics.

Two days after the official launch of the FIDEG study, Martínez added his voice to the criticism by highlighting a decline in the quality of life of better-off sectors of society, and a rapid increase in environmental destruction because of increased agricultural activity.

The richest 10 percent of the population saw their share of national income decline from 27 percent to 21 percent, a six-point reduction in purchasing power in less than five years.

He also stressed the negative impact on Nicaragua's natural resources. 'We must reduce poverty, yes, but we have to remember that we cannot do this at the expense of cutting down our forests,' he said.

For instance, he pointed out that at the mountain of Cerro Musún alone, in the north of the country close to the Bosawas biosphere reserve, the largest in Central America, the local population is 'devouring' 200 hectares of forest a week.

Mario Arana, head of the private Nicaraguan Foundation for Social and Economic Development (FUNIDES), acknowledged the efforts made to curb poverty, but said factors like the expansion of the agricultural frontier could have had an influence on the achievements.

'There is a tendency to increase the country's production by expanding the area under cultivation, rather than by increasing productivity or diversifying crops. This explains the improvement in rural areas, where extreme poverty is concentrated,' he said.

Rural families are capitalising on government aid, which is positive, but 'this effect could be relatively short-lived if the programmes are run according to political criteria, rather than as sustainable state policies,' Arana said.

Economist Silvio de Franco, president of a prestigious private university in Managua, said the decline in extreme poverty 'does not appear to derive from an improvement in human capital, nor from capital accumulation, but from direct transfers of subsidies of goods and inputs of agricultural products, which may not be sustainable.'

Sociologist Cirilo Otero, the author of several studies on food security and a former international consultant on nutrition issues, said it is 'impossible' to measure extreme poverty by the income available to families for their daily food.

'People in the countryside often don't have a single córdoba (the local currency) in their pockets: they eat what they can fish, what they can hunt, what they can gather, and often they don't eat at all. How can this be measured?' he said.

Otero said the country needs sustainable and progressive education, a progressive fiscal policy, systematic and transparent public expenditure, citizen participation in decision-making and clear social and political rules.

'We hear talk of one billion dollars generated by the oil business, but no one knows how much of that belongs to the state, and how much to Ortega or his party,' the Sandinista National Liberation Front, he said.

'Of the thousands of programme beneficiaries, not one is a member of the opposition. In the presence of social exclusion and corruption, it is hard to believe the government,' he complained.


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