Not so long ago, the fate of democracy in Central America was a prominent and deeply controversial issue in U.S. politics. Throughout the 1980s, Republicans and Democrats clashed bitterly over how to address the civil wars raging in Nicaragua, El Salvador, and Guatemala. In 1983, President Reagan felt compelled to establish a high-profile bipartisan commission on Central America, chaired by Henry Kissinger. The struggle for peace and democratic rule in the region ultimately had a happy ending—at least temporarily. In December 1989, U.S. military forces toppled drug-running Panamanian dictator Manuel Noriega. A few months later, Nicaraguans went to the polls and voted out the autocratic Sandinistas. Two years after that, Salvadoran officials signed historic peace accords with the FMLN guerrillas. And in December 1996, a close ally of the FMLN, the Guatemalan rebel group URNG, signed peace agreements withthe Arzú government, thereby ending a 36-year civil war.

Over the past two decades, Central American democracy has managed to survive. However, each of the region’s four most-populous countries—Guatemala, Honduras, El Salvador, and Nicaragua—is now facing a huge crisis. The main problem in the three Northern Triangle nations is rampant violent crime committed by street gangs and drug-trafficking organizations, including the brutal Mexican cartel known as Los Zetas. In a recent study, former Washington Post reporter Douglas Farahdemonstratedthat the Guatemalan, Honduran, and Salvadoran governments “have moved beyond being weak, somewhat corrupt, and unresponsive to almost non-functional in much of their national territories.” Nicaragua, by contrast, boasts arelatively low crime rate, despite being the second-poorest country in the Western Hemisphere. (As a 2012 CSIS papernoted, two explanations for the relative lack of crime are Nicaragua’s intelligent policing strategies and the nature of Nicaraguan migration during the 1980s civil war.) Yet Nicaraguan democracy is now being trampled by the same Sandinista radical who once built a Cuban-style police state.

Daniel Ortega’s first stint as Nicaraguan leader began with the anti-Somoza revolution of 1979 and ended with the free, internationally monitored presidential election of 1990, in which Ortega was soundly defeated by opposition candidateVioleta Chamorro.After spending several years in the wilderness, he teamed up with then-President Arnoldo Alemán to strike a corrupt bargain (Nicaraguans call it “El Pacto”) that has poisoned Nicaraguan politics ever since. One purpose of the 1999 Ortega-Alemán deal was to protect both men from criminal allegations: Ortega had been accused of molesting his stepdaughter, and President Alemán had been accused of serious corruption. (More on that in a minute.) Another purpose was to boost the power and influence of Ortega’s Sandinistas and Alemán’s conservative Liberal Constitutional Party (PLC).

The most significant constitutional result of the Ortega-Alemán pact was a reduction in the minimum vote share needed to win a presidential election, from 40 percent to 35 percent. Thus, in Nicaragua’s 2006 election, Ortega was able to secure the presidency despite garnering only 38 percent support. Nicaraguan Liberal Alliance candidateEduardo Montealegrereceived 29 percent of the vote, and PLC candidateJosé Rizo received close to 27 percent. In other words, a majority of Nicaraguans voted for one of the two center-right candidates, yet Ortega still carried enough votes to become president. He was inaugurated in January 2007.

At the time, many people expressed concerns about his commitment to democracy. These concerns intensified when Ortega began undermining the independence of public institutions such as the supreme court and the national electoral council. In November 2008, the Sandinistasflagrantly stole municipal elections, including the Managua mayoral election, prompting the United States and European countries tosuspend economic aid.

A few months later, Nicaraguans were reminded of Ortega’s sinister pact with Arnoldo Alemán. After leaving office in 2002, the former president had been sentenced to 20 years in prison for money laundering, but in January 2009 the Ortega-allied supreme court abruptly cleared Alemán of all charges and allowed him to walk free. “Alemán returned the favor,”notedjournalist Tim Rogers, “by essentially forgiving the Sandinistas last November’s electoral theft by providing the congressional votes needed to give Ortega control over the National Assembly, which had been considered the ‘last democratic holdout.’”

By March of 2009, the New York Times Magazine waslamentingthat Ortega had “abused the powers of his office to win near-total dominance of Nicaragua.” The worst was yet to come. In October of that same year, Sandinista justices on the supreme courtruledthat Ortega could seek reelection in 2011, even though the Nicaraguan constitution clearly bars presidents from serving consecutive terms in office and also bars them from serving more than two terms total. Ortega had served his first term in the 1980s, and his second term had begun in 2007, so it was plainly illegal for him to pursue reelection. Yet the Sandinista-controlled supreme court gave him a green light anyway.

Nicaragua’s 2011 national elections, in which Ortega won another term as president, were marked by widespread Sandinista abuses: The European Union’sElection Observation Missionsaidthey “constituted a deterioration in the democratic quality of Nicaraguan electoral processes.”A year later, the Sandinistas again usedfraud and intimidationto sway the outcome of local elections. The U.S. State Departmentciteda number of “irregularities,” such as “citizens being denied the right to vote, a failure to respect the secrecy of citizens’ votes, and reported cases of voters being allowed to vote multiple times.”

Now Ortega is attempting yet another naked power grab. On October 31, his party proposed aseries of constitutional amendmentsthat would, among other things, (1) permanently abolish presidential term limits, (2) reduce the 35 percent vote-share threshold in presidential elections to just 5 percent, (3) dramatically expand Ortega’s ability to govern by executive decree, (4) let him place active military officers in the government, and (5) reverseconstitutional reformsenacted in 1995.As Nicaraguan journalistCarlos Chamorro—the youngest son ofVioleta Chamorro, and a former Sandinista revolutionary—toldthe Economist: “These reforms are aimed at legalizing everything that until now [Ortega] has done illegally.” With the Sandinistas controlling more than two-thirds of all seats in the unicameral national assembly, the reforms are likely to pass.

Will they trigger a major public backlash? Probably not. The sad truth is that Ortega has become widely popular, thanks to his domination of the media and, more importantly, Nicaragua’s solid economic growth. Indeed, the Nicaraguan business community has largely tolerated Ortega’s assault on democracy because of his surprisingly moderate economic policies.Whereas the Sandinista boss presided over capital flight and hyperinflation during the 1980s, he has governed as an economic pragmatist since 2007, supporting the Central America Free Trade Agreement and successfully luring foreign direct investment (FDI). Nicaragua’s official investment-promotion agency reports that FDI went up by33 percentlast year—reaching$1.28billion, an all-time record—after increasing by a remarkable91 percentin 2011. Annual economic growth was5.2 percentin 2012 and is projected to be4.4 percentin 2013.

Nicaraguans have benefited from Ortega’s new approach to capitalism. They have also benefited from their nation’s relatively low crime rate. According to a 2012 CID Gallup Latin Americasurvey, Nicaragua may well be Central America’s safest country: Only 19 percent of Nicaraguans said they had been the victim of a robbery or an assault over the previous four months, compared with 21 percent of Costa Ricans, 22 percent of Panamanians, 28 percent of Salvadorans, 29 percent of Guatemalans, and 32 percent of Hondurans. CID Gallup alsofoundthat 55 percent of Nicaraguans felt their nation was moving in the right direction, making them Central America’s most optimistic population.

Unfortunately, the good economic times may not last. While Ortega has thus far rejected Venezuelan-style socialism, his policies have not improved Nicaragua’s business environment. In fact, they’ve made it worse. Between 2007 and 2013, Nicaragua’s score in the Heritage Foundation’sIndex of Economic Freedomdeclined by 10 percent. Meanwhile, its ranking in the World Bank’sEase of Doing Business Indexhas fallen all the way to 124th, down from 67th in the2007 index. Nicaragua is still the hemisphere’s second-poorest nation, and it is still heavily dependent on economic assistance from the United States, the World Bank, and the Inter-American Development Bank.

For that matter, it is also heavily dependent on petroleum-rich Venezuela, which has provided its ideological ally with discounted oil, massive investment, and all sorts of other aid. (The South American country was Nicaragua’stop foreign investor in 2012.) However, with Hugo Chávez dead and with Venezuela spiraling deeper into asevere economic crisis, Caracas has been reducing its support for Nicaragua, which has contributed to aslowdownin Nicaraguan growth.

Over the long term, Nicaragua will not be able to maintain robust growth without real economic reforms, better public institutions, and a stronger legal system. As Miami Herald columnist Andres Oppenheimer has
written: “Sooner or later, Nicaragua will have to make a national agreement to respect the rule of law or it will never emerge from poverty and despair.” Right now, the country is sliding back toward lawless autocracy.


In his 1986 State of the Union Address, President Reagandeclared: “Surely no issue is more important for peace in our own hemisphere, for the security of our frontiers, for the protection of our vital interests, than to achieve democracy in Nicaragua and to protect Nicaragua’s democratic neighbors.” The region and the world obviously look much different today than they did in 1986: The Soviet Union and the Cold War are long gone, and Nicaragua no longer poses the same geopolitical threat to U.S. interests. Yet the Sandinistas are once again attempting to create a dictatorship, and Nicaragua’s neighbors are once again struggling with rampant violence. Large portions of Guatemalan territory are effectively controlled by the Zetas Cartel, and Honduras is now the global murder capital. (Honduran human-rights commissionerRamón Custodio Lopez hasexpressedfearsthat his nation is becoming afailed state.) And while a March 2012gang trucebetween MS-13 and Barrio 18 has significantly reduced homicides in El Salvador, the gangs have continued to extort and terrorize the Salvadoran people, and their truceappears to be unraveling.

Given all these developments, the U.S. government needs a serious review of its policies and strategies in Central America. To that end, it may be time for President Obama to appoint a new bipartisan panel modeled on the 1983 Kissinger commission.

Jaime Daremblum, who served as Costa Rica’s ambassador to the United States from 1998 to 2004, is director of the Center for Latin American Studies at the Hudson Institute.

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