Despite the slogans, the Sandinistas have returned to sanity

AN arch over the road from the airport into Managua, Nicaragua, reads: "Welcome, Hugo Chavez". There is little doubt that the Venezuelan strongman is popular here, probably even more than in his own country.

His following hankers back to the revolutionary days of the Sandinista government in the 1980s, when Nicaragua was a centrepiece of the Cold War: when the radical left-wing government was funded by Cuba and the Soviet Union, and the opposition Contras by the US.

Chavez's status is also down to the $800-million Venezuela gives annually, as a 24-year nearly interest-free loan, to the left-wing Sandinistas.

Still, it is a misleading banner. For Nicaragua is, under the Sandinistas, making progress by adopting the very capitalist policies once so reviled.

As Bayardo Arce Castano, one of three remaining Sandinista comandantes and the economic and financial adviser to President Daniel Ortega, says: "The revolution is not over. It is now happening by other means."

Despite Ortega's occasional radical rhetoric, it is happening with the blessing of the International Monetary Fund. Nicaragua, to coin a phrase, is doing a Trevor Manuel.

Nicaragua was once known for US military interference. US involvement shifted from direct to indirect with the withdrawal of its Marines in 1933 and the seizing of power by the head of the National Guard, Anatasio Somoza, four years later.

Somoza removed all opponents and amassed considerable personal wealth over the next 20 years while the majority of Nicaraguans remained poverty-stricken.

But in 1979 a civil war waged by the Sandinistas under Ortega, which cost more than 50000 lives, ended with Somoza's son (his father had been assassinated in 1956) resigning the presidency and fleeing.

After 40 years of steady growth under the Somozas, the economy suffered a traumatic 35% decline in 1978/79 from which it has never fully recovered.

An already dire situation was compounded by across-the-board nationalisation and land seizures, leading to resistance among the conservative peasantry, which gave rise to the Contra movement.

The Sandinista government created, in the words of one of its close adherents, Dionisio Marenco, "an economic earthquake". It's what Julius Malema would have done.

US president Ronald Reagan's desire to stop Soviet involvement in his back yard led to the US supporting the right-wing Contras, resulting in another 10 years of civil war in Nicaragua.

With the democratic option available as a result of Contra pressure, a fatigued population voted Ortega's government out in February 1990.

When the Sandinistas seized power in 1979, the state had made up just one-fifth of the economy; at the end of the 1980s, this had increased to 80%, when annual inflation was at 33000%.

In spite of consistent growth since 1990, by 2009 the gross national product per capita was at the same level as in 1952.

The chastened revolutionary was replaced by Violeta Barrios de Chamorro, widow of an assassinated newspaper editor. But Ortega won the 2007 elections, recasting himself as a member of the new-wave Bolivarian Revolution led by Chavez.

Whatever the government and the polemic, the roots of Nicaragua's crisis have, however, scarcely dissipated since the days of Somoza.

Nicaragua remains a traditional society with low levels of productivity: the outlook of Nicaraguans is mostly shaped by their immediate rather than long-term needs.

But there is a silver lining. The once arch-imperialist enemy, the US, has become the key foreign market for Nicaragua.

Aid, while important as a social buffer, is not the main tool of development.

The main sources of foreign income, for a country with a gross domestic product of little over $6-billion, come from agriculture (mainly coffee, sugar, meat and bananas, some $2-billion), clothing, tourism and remittances.

The garment industry, which has benefited from access to the US market under the Central American Free Trade Agreement, now employs 100000 workers.

As Bayardo puts it: "This sector generates employment, and that's what enables the economy to get on track."

Or as his Cuban-trained Sandinista colleague Dominisio Marenca says: "There is no choice. It is jobs in the factory or nothing in the street."

Achieving growth has demanded changing the relationship between business and the government.

Under Somoza, the interests of the oligarchs were seen as inseparable from those of the regime.

Under the 1980s version of the Sandinistas, there was no relationship. Now, there is greater maturity.

Nicaragua's Council for Private Enterprise meets monthly with the president, and it has been possible to negotiate even the most difficult of issues, such as wage increases, in a consensual manner and for the long term.

"There is much greater engagement now with government," says council head José Adan Aguerri. "[Ortega understands the need] to collaborate with the private sector and protect employment, not wages."

There are few alternatives to the current policy course.

Given its constraints, especially of education, dealing with Nicaragua's development challenges lies, in practice rather than rhetoric, in improving the productivity of what it already does rather than looking for radical changes or new paradigms.

"We are not going to be Costa Rica. We are going to continue to rely on the rural sector," says Aguerri.

"But we need to increase productivity first rather than try to improve the extent of value we add."

Unsurprisingly, Ortega swept elections last month with more than 62% of the vote. Gauging from the experience of others, Trevor Manuel's course, it seems, is ultimately not only more pragmatic, but more popular than that of Malema's.

• Dr Mills heads the Johannesburg-based Brenthurst Foundation, and has recently visited Nicaragua.