A nation in the dark

Ruth Selma Herrera M.
Coordinadora Civil para la Emergencia y la Reconstrucción (CCER)

Privatisation has not resulted in any social benefit for the poorest people. The energy and telephone companies have not only raised the already “dollarised” price of services, but also increased requirements for access to these services and decreased quality. In addition to being a country of poor people, today Nicaragua is also a nation in the dark.

Socioeconomicindicators paint the picture of the inadequate development of basic socialservices in Nicaragua. According to official figures of the NationalInstitute of Statistics and Census (INEC), 43% of the population live inpoverty, 17% in extreme poverty and 40% in acceptable conditions. Almost threemillion Nicaraguans “do not have the necessary means to fulfil their basicneeds.” Recent studies show that 54% of the country’s 5.2 millioninhabitants reside in urban areas; 73% of urban dwellers have access to electricenergy. In rural areas, only 40% have electricity. According to official data,80% of urban dwellers have access to drinking water compared to 28% of ruraldwellers. Sanitation or latrines are available to 95% of the urban homes but toonly 70% in rural areas.

Energy:an undervalued and secret sale

Theprivatisation process was launched in the 1990s under the government of VioletaBarrios, when she implemented radical changes in the political system andreversed the state property regime installed by the Sandinista People’sRevolution. The decision to privatise basic services was put into practice atthe end of the decade, in the context of governments abandoning their socialresponsibilities and of the policies promoted by the International FinancingInstitutions as part of the well-known packages of structural adjustments.

Theincentives to privatising basic service companies, as illustrated by the case ofdomestic energy, are the economic scale at which they operate and the monopoliesthey enjoy. The government sold its undervalued state energy company to UniónFENOSA, a Spanish monopoly, with the agreement that they would not be sanctionedduring the first two years of operation, thus adversely affecting user rights.Unión FENOSA now distributes 95% of the energy in the country to half a millionregistered users. Two years after the contract between the Alemán/Bolañosgovernment and Unión FENOSA was signed, its contents have still not been madepublic despite its being a document of public interest.

Themonopoly has violated approved regulations, schedules of rates, and scope,conditions and quality of service. The “corporate encouragement” theyreceived allowed them to operate with impunity towards users and pay noattention to claims for collection of unfairly charged rates (errors ininvoicing, non-recorded energy, overdue payments, etc.), altered readings of themetres, services paid for but not delivered for public street lighting, voltagefailures, damage to small domestic appliances, loss of products by companies,and so on. Privatisation of energy did not bring about any positive impact suchas greater coverage, lower rates or better quality of service. In practice, thepoorest people are excluded from legally accessing energy.

Duringthe 1990s, the generation of energy was privatised and only hydroelectric energyis still owned by the State. In 2002, the government attempted to privatise twohydroelectric plants, Hidrogesa-Geosa, and the National Water and Sewage Company(ENACAL). However, both actions have been postponed due to legal problems and tothe criticism of consumers, indigenous peoples, the business sector,parliamentarians, and others who have generated opinion and press against theseprocesses.

InSeptember 2002, the National Assembly adopted Law 440, which prohibits grantingwater concessions for any purpose, and the preparation of a General Water Lawwas announced. ENACAL continues to be state owned, but its administrators favourprivatisation. Its rising rates despite poor customer service have aroused muchpublic questioning and criticism.

Inthe case of telephony, corporate encouragement is also economic and involves amarket monopoly, which fails to protect the users’ economic rights. Thetelephone companies have tightened conditions of service and applied drasticmeasures in their commercial relationships such as cutting off users.

In2001, 40% of telephony was privatised in an operation that was highlyquestionable due to its lack of transparency. Although the low bidder was TeliaSwedtel, the concession was granted to Megatel. In 2000, NicaraguanTelecommunication and Postal Institute (TELCOR) sold its cell phone concessionto BellSouth. Recently, the State granted another cellular telephone concessionto Megatel, which together with BellSouth, now “owns” the market. Presently,these companies are facing each other for the control of the market with TELCOR,announcing lower rates, thus creating a trade conflict that might temporarilybenefit users.

Healthand education: concealed privatisation

Althoughin theory the basic health services—health centres, hospitals and outpatientsclinics—continue to be state-owned, in practice they are partially privatised.As from the mid-1990s, the government separated social security from the UnifiedHealth System, giving rise to partial privatisation, first with the appearanceof social security clinics for those who were insured and their families andlater with the creation of differentiated (boarding) services paid for in thepublic hospitals and clinics. As a result, state hospitals presently provideprivate, social security and “public” services, in which even the poorestpeople have to provide “contributions” in order to be treated because of theserious shortage of basic supplies such as medications and surgical equipment.

Inthe public hospitals where differentiated health care has been established, thepoorest families have been excluded from specialised services (such as x-rays,laboratory services, drugs and surgery). These services are restricted to theprivatised areas, excluding non-privatised or “boarding” areas.

TheMinistry of Health is the governing body for health care and has 996 healthunits, 48.3% of which are in the Pacific zone. It includes 31 hospitals, 11 ofwhich are located in Managua. Ninety percent of the Pacific population hastheoretical coverage above the national average. On the Caribbean coast, thiscoverage only reaches 51%, while in the north and centre of the country, wherethe municipalities having the highest poverty rates are located, only 13% arecovered.

Primaryand secondary education have 50% of their establishments privatised, if it isconsidered that in 2001, 37% of the state schools (with an enrolment of 63% ofthe students) had come under the autonomous centre system. Fifty-five percent ofthe primary and secondary school teachers are to be found in this system.Additionally, many educational establishments have been operating under theprivate educational service system since they were founded.

Inprimary and secondary schools, the privatisation of educational services in theschool autonomy programme is associated with increasingly high economic costs tofamilies, who must cover all the operational costs not covered by inadequategovernment contributions. The centres under the state system also request“voluntary” contributions, and their teaching conditions and basic serviceshave seriously deteriorated.

Theimpact of privatisation

Thethesis of the “advantages of privatisation” is far from being fulfilled inNicaragua. Services have become more expensive, quality has dropped and coveragehas become stagnant; at least 50% of the population has no access to electricenergy and communication services. Access to energy and telephone service bypeople in new settlements has been achieved through illegal connections. Thishas caused increased risks to the poorest users. Fires are frequent and adultsand children have lost their lives due to poor connections and equipment. Theprocess of “legalising” energy in the settlements by Unión FENOSA hasbecome a source of conflict between the users and the company.

Nicaraguais not only a country of poor people; it is also a nation in the dark. Theelectric energy service has dramatically deteriorated since the privatisation ofthe National Electric Company (ENEL). People are generally dissatisfied with UniónFENOSA regarding public street lighting: the company does not address the claimsfor this service made by the communities, which are invoiced every month for theservice even when it does not exist. Unión FENOSA refuses to replace damagedstreet lamps and does not provide maintenance of the system. The NationalNetwork for Consumer Defence has developed a strong information policy on theissue, which has led to increasingly stronger complaints by the users. Not onlyhave the rates gone up—an operation questioned as illegal by the consumerorganisations—but Unión FENOSA also frequently applies undue rates forvarious items such as marketing expenses, public street lighting, deposits,delays, non-recorded energy, rental of metres and a Value Added Tax of over 15%.This has led to a greater percentage of income in poor families being devoted topaying for energy, obliging them to seek illegal ways of maintaining access tothis vital service.

ENITEL,the Nicaraguan telephone company, sold undervalued assets to Megatel,and the government granted the exploitation of a cellular telephone band and thebacking to negotiate funds from international banking to finance the 50,000lines offered. The company will substitute conventional municipal telephoneswith public card-operated telephones, although they are more expensive and lessaccessible to the users. Access to service and customer service for repairs hasnot improved and there are plans to close down most of the 60 existing municipalbranches.

Thesector’s union leaders and informed users consider that the State has been thegreat loser in the privatisation of telephones. Not only did it give up a highlyprofitable company, but it also sold its assets at ridiculously low prices withvery advantageous instalments and conditions enabling the “buyer” to paywith generated profits. The State also took on the financial “cleaning up”of ENITEL, which includes claims and pending court cases amounting toapproximately USD 190 million, at the expense of the public treasury.

Becauseof the low quality of basic health services, there are many serious healthproblems, most of which could be avoided. The most frequent causes of morbidityand death are gastro-intestinal and respiratory diseases, and classical andhemorrhagic dengue fever. There is a high rate of premature death due to thelack of prenatal care. Mortality in children under five years of age is onethird higher in rural areas than in the city. Prenatal care in rural areas isless common and the risk of death at birth is greater. Neonatal care represents20.2% of care provided, while postnatal care represents 24% and child care,45.5%. One out of three children is undernourished and 9% are severelyundernourished. Chronic malnutrition is associated with food deficiency causedby the families’ low income level.

Policiesregarding basic services with a gender approach have not been identified. One ofthe exceptions in this field is to be found in health service planning thoughthe Ministry of Health, where some programmes for women’s health care havebeen instituted related to sex and reproductive health education, mother andchild programmes and women’s health problems.


Thedecision to privatise basic services was prepared over several years during the1990s, in light of the political changes regarding the nature of the Statebrought about by transformations in the political system (during the Chamorroand Alemán administrations), and fed by pressure from international agencies inthe framework of structural adjustment plans. These have had a very clear impacton the parliamentary agenda of the past few years.

Ina country where there is no tradition of including effective citizen input inmaking laws or important decisions, the political weakness of the mainopposition party—the Sandinista Front—and the attempts of the government tocombine economic and social policy, have led to decisions on the privatisationof basic services being made without adequate information, without sufficientpublic debate and without the relevant consultations with the important sectorsof civil society.

The author is Coordinator of the National Network for Consumer Defence. The present report has been prepared according to guidelines presented by Social Watch at the request of the Civil Coordination for Emergency and Reconstruction (CCER), with the financial support of the Department for International Development (DIFD) in Managua.