Nicaragua's ruling junta today nationalized the country's financial system, including private local banks, and outlined a sharply reduced role for foreign banks operating here.
The nationalization, which will include remuneration for the banks' owners, was part of a junta program announced weeks ago in exile. It will take effect immediately as the first step in a government plan to develop a mixed socialist and capitalist economy here.
Junta member Alfonso Robelo said the measures were necessary to protect both the savings of individual Nicaraguans and to "protect Nicaragua's good name abroad" and the country's international credit rating.
Following the fall of the government of Anastasio Somoza last week, he said, "the financial system is totally bankrupt."
Robelo and other junta members told a nationality televised press conference that examination of the country's books revealed that Somoza and other former officials cleaned out Nicargua's treasury before they fled, in some cases writing themselves checks for up to $1 million.
Robelo emphasized that all savings would be protected, along with all other private property.
"In doing this," he said, "I want to make it clear that the junta is exercising its responsibility" to return the country to solvency. "At no time will we touch private property."
The nationalization will affect the country's five privately owned local banks. The prices the state will pay will be determined by recognized norms, Robelo said, payable in federal bonds at 6.5 percent interest over a period of five years.
The three foreign banks operating here, Citibank, Bank of America and the Bank of London and South America, may no longer accept Nicaraguan deposits but will serve principally to channel foreign money into the economy.
By taking control of the banking system, Robelo said, the government intends to set credit priorities, directing funds into those area of the economy it considers the most important. He cited food distribution, employment and agricultural development as currently among the priority areas.
The junta also said it would honor most of the approximately $1.3 billion in foreign debts contracted by the Somoza government except for two outstanding military contracts.
"We are obligated to pay, and we will respect the foreign debt," Ortega said, "even if it were 1,000 times more than it is. We are not going to hand over arguements to reactionary elements in the United States, to give them something to object to."
According to junta member Daniel Ortega, Somoza's National Guard and Defense Ministry purchased $4.1 million in Israeli aircraft and $3.2 million in Argentine weapons and ammunition during the recent civil war. This was at a time when most countries had declared an arms embargo against Somoza.
Of the $5.2 million still owed on the contracts, Ortega said, "not one cent will be paid."
Junta member Sergio Ramirez charged that Somoza had "looted the public funds" before leaving the country, "especially the reserve funds of the national bank leaving us absolutely bankrupt."
In the last days of the Somaza government, he charged, "a number of checked were written" on government accounts, including $1 million to Nicaragua's military attache in its Guatemalan embassy, and two checks totaling $169,000 to Somoza. The junta was trying to stop payment on such checks, Ramirez said.
Although Ramierz said that most of Somoza's holding in Nacaragua were heavily mortgaged and that by the end of 1977, as far as the new government had been able to deduce so far, the Somoza family owed the National Bank approximately $10 million. "But they couldn't take everything with them," he said. "They had to leave the land and the factories."
Arturo Cruz, the new manager of the Central Bank, said that Nicaragua's current net reserve was minus $3.5 million, down from a $150 million surplus in 1977.
Robelo said the banks are expected to open "within two or three days." All financial institutions, along with all business and industry, have been closed for months. There has been practically no money in circulation, and even those with enough savings to buy what little food has been available have not been able to get any cash.
Again emphasizing that private propertly would be respected, Robelo warned that all property owners should expect to make sacrifices until the country is stabilized.
"I want it clear in the minds of all farmers," he said "that we are in a state of emergency. This year, you can't think of whether you will make a profit or not. Profits are secondary.
"It's a question or social necessity to provide food and jobs."
The junta has asked businessmen and industrialists to assess war damage to their plants and to resume production as soon as possible. But junta members emphasize that Nicaragua would need massive amounts of foreign assistance, particularly food in the immediate future. The International Red Cross is now providing food for more than 600,000 displaced Nicaraguans, and planting season for many local food crops has already passed with fields uncultivated.
"We cannot deal with this problem of hunger," Ramirez said." For that we need international aid. But we can tell the people that this food, this medicine, will be scrupulosly distributed. We will never again have here what we had in the past," he said in obvious reference to widespread charges of corruption and fraud lodged against Somoza for his handling of international aid following a 1972 earthquake.
Robelo said the government has asked for $50 million in loans from the Inter-American Development Bank, and had received concrete offers from a number of Latin American countries, but would need much more.
On other issues, the junta said papers were being prepared to ask for the extradition of Somoza, his family and "associates in crime" from the United States, El Salvador and Guatemala. It said it had no plans to control the local press, but that it would not permit any publication to indicate support for the previous government.