Ortega Nicaraguan President -- "Iran/Contra" flashback

November 8, 2006

On Sunday, Nicaragua returned Daniel Ortega to the Presidency. Ortega is an ally of Venezuela’s President Hugo Chavez and Bolivia’s Evo Morales, both of whom are against free trade with the U.S. In the 1980’s, Ortega, as head of the Sandinista Liberation Front, swept to power by overcoming the U.S.-friendly Somozo dictatorship. The Soviet-backed Sandinista government provided aid to leftist rebels in El Salvador.

Through much of the 1980’s, the U.S. financed the insurgent “contras” rebellion against the Sandinista by secretly selling arms to Iran, leading to the Iran-Contra Scandal in 1986 which implicated the Reagan Administration in illegal activities.

These activities were the:

• Provision of assistance to the military activities of the Nicaraguan contra rebels during an October 1984 to October 1986 prohibition on such aid.
• Sale of U.S. arms to Iran in contravention of stated U.S. policy and in possible violation of arms-export controls.

In late November 1986, Reagan Administration officials announced that some of the proceeds from the sale of U.S. arms to Iran had been diverted to the Contras. The Iran/Contra Report of Independent Counsel found that some of President Reagan’s most senior advisers and some Cabinet members sitting on the National Security Council (NSA) set up Oliver North and several other NSA staff members as scapegoats to protect the Reagan Administration in its final two years.

The report went on to add that much of the best evidence of the cover-up was made in the final year of the Counsel’s investigation, too late for most prosecutions.

What It Means:

Ortega’s victory means another strike against U.S. free trade interests in Central America. Nicaragua is currently suscribed to CAFTA, and this could now be in jeopardy. Many analysts fear that Ortega’s economic policies, and U.S. sanctions, could lead to an economic collapse similar to the one that engulfed Nicaragua in the 1980’s.

Action Steps:

Nicaragua is a small country, with a GDP of only $16 billion, making it one of the poorest and least influential countries in the world.  Therefore, this election will not impact your portfolio directly. However, the election is important because it is another example of Latin America’s potential shift to anti-U.S. governments. As such, developments there and in other similarly poor Latin American countries should continue to be monitored.

Source:

CIA Factbook, U.S. State Dept. web site; Final Report of The Independent Counsel for  Iran/Contra Matters Volume I: Investigations And Prosecutions, Lawrence E. Walsh Independent Counsel, August 4, 1993, Washington, D.C. United States Court of Appeals for the District of Columbia Circuit

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