17 October 2001

To: The Hon. Paul Martin, Minister of Finance

Dear Minister Martin,

The Social Justice Committee is dismayed that the IMF has stopped the debt relief program for Nicaragua in the midst of crisis. Nicaraguans are starving because of drought and the collapse of coffee prices, yet the IMF is not satisfied with the government's efforts to cut the budget, build up foreign reserves and privatise public services. IMF documents released Oct. 2 indicate that the HIPC debt program for Nicaragua will not progress until the country complies with fiscal, monetary and privatisation conditions.

We hope that Canada will argue strongly for the immediate resumption of the HIPC process for Nicaragua given the circumstances, and the de-linking of such conditions from debt relief.

There is a quick summary of the context below.

Yours sincerely,
Derek MacCuish, for
The Social Justice Committee

There has been widespread, worsening hunger in Nicaragua since the beginning of the year, with flooding, drought, and collapsing coffee prices hitting the country with a series of devastating blows. A million-and-a-half Central Americans are suffering from hunger following the three-month drought. Floods on Nicaragua’s Atlantic coast destroyed crops of rice, corn, yucca, and bananas, with some 1,400 families now eating the seeds that they used to give to pigs that were swept away by the floods. Their children dying of hunger, 10,000 families have left the coffee plantations where they lived, worked, and grew some of their food, because of the collapse of coffee prices.
Despite the situation of the country, the IMF continues to demand that the Nicaraguan government slash spending, pull money out of circulation, and privatize public utilities. IMF documents released Oct 2 show that IMF staff have decided that Nicaragua has failed to comply with these demands, and the institution has suspended Nicaragua’s debt relief program indefinitely.
This means debt cancellation by rich countries is also put on hold by the IMF decision.

Supplemental information:

From a USAID update 10 Oct. 2001 www.usaid.gov/press/releases/2001/fs011010_2.html

"Persistent dry conditions have caused serious crop damage and severe transitory food insecurity in Central America. According to the United Nations, drought conditions affecting Honduras, Nicaragua, El Salvador, and Guatemala have created the worst crisis to hit the region since Hurricane Mitch in 1998.
Central America is an area prone to natural disasters, as evidenced in recent years by such devastating calamities as Hurricane Mitch and the earthquakes in El Salvador. In addition, nearly two years of unrelenting dry conditions affecting Honduras, Nicaragua, El Salvador, and Guatemala have reduced domestic food production, spurring an increase in internal and external migrations. Economic conditions have worsened at the same time, with low international coffee prices putting coffee farmers out of work and eliminating employment opportunities for many small farmers and landless poor. Emerging evidence from Guatemala indicates that levels of under-nutrition among children under five - already among the highest in the Western Hemisphere - are increasing. Decreased tax revenues resulting from the decline in coffee prices, and the general economic deceleration, which is linked to the economic slowdown in the United States, have limited the ability of national and local governments to respond to these problems.
The Ministry of Agriculture has updated its estimate of losses of basic grains due to the drought. The new estimate is that 20.7 percent of basic grain crops were lost, compared to the 18.2 percent estimate in July, representing an increase from 63,466 hectares to 72,639 hectares. Assessments conducted by OFDA and USAID/Nicaragua from September 16 - 19, and by USAID on September 22 - 23 to the municipalities of El Viejo, Villanueva, Puerto Morazan, and Chinandega, in the Department of Chinandega confirmed that people in the area had very little food, the grain storage facilities were empty, and that there had been a near total crop loss in the Spring planting cycle. One of the most disadvantaged groups identified by USAID is landless farmers, who comprise between 10 and 20 percent of the rural population. These farmers are completely dependent on employment opportunities generated by other farmers and are among the poorest of the already highly vulnerable rural population."

From Envio magazine, August 2001 www.uca.edu.ni/publicaciones/revistas/envio/2001/eng/august/coyuntura.htm
"By early August, the World Food Programme (WFP) was reporting that a drought had affected some 1.4 million people in the region, a million of them in Honduras, and that well over half of this number were suffering near-total crop losses and critical food shortages. Suddenly, starvation and humanitarian aid—two disquieting words that recall recent African tragedies—were overshadowing the election campaign in Nicaraguan public awareness.
The US government earmarked US$6 million in food aid to be distributed through Nicaragua’s NGOs—bypassing the government. WFP began distributing rations of maize, cooking oil and fortified cereal to Nicaragua’s hungry as well as seeds to 40,000 small producers affected by the drought. It has been forced to make an urgent call to donor nations since it only has enough supplies to help half of those in the direst need region-wide make it through the next harvest.
In July, the United Nations Development Program released its Human Development Report for 2001, which documents that one in every three Nicaraguans is undernourished. This figure—the worst in Central America—combined with the country’s high infant malnutrition indices demonstrate that hunger not only exists right now but is chronic, and is putting the country’s future at risk. Among the 162 countries analyzed, Nicaragua is in 106th place.

Coffee crisis

The WFP described Nicaragua, where starvation threatened an estimated 32,600 families, as the most complex case in Central America because it is caused by three separate factors: the coffee crisis in the north-central area, the drought in the north and northwest and, perversely, flooding due to non-stop rains on the Caribbean side of the country. In all cases, the few grain reserves that peasant farmers had once set aside for either eating or the next planting cycle are gone. Two years of drought from El Niño, followed by Hurricane Mitch, followed by two more years of drought have seen to that.
The roughly 10,000 Nicaraguan families that WFP estimates are affected by the coffee crisis have no work and thus no wages with which to buy food. Their starvation has nothing to do with the production of foodstuffs or any rise in food prices, but with an absolute lack of income. Their problem is aggravated by the fact that they have also had to abandon their former living quarters on farms that no longer produce coffee or plant basic grains for the workers, and where even the fruit on the trees has been stripped and devoured. The exodus to the city by some of these families—even if there they are living in indigence—is justified.

Drought on top of dryness

WFP calculates that another 22,000 families are starving because of the drought in 47 municipalities of the dry zones in the western, northern and central regions of the country. Surveys show that between half and all of the first-cycle planting of maize and beans—the peasants’ daily staple—has been lost together with other crops in these municipalities, while the livestock herds have also been severely damaged. Lacking job alternatives, these subsistence farmers literally have nothing to eat."