The United States will oppose any loan to Nicaragua by the World Bank or Inter-American Development Bank until the Sandinista government makes major changes in its domestic economic policies, the Treasury official responsible for U.S. votes in the banks said yesterday.
James Conrow, director of the Treasury's Office of Multilateral Banks, said the United States would vote against such loans unless the revolutionary Sandinista government takes steps to "revitalize the private sector" and "improve the efficiency of the public sector." Without such measures, he said, money borrowed from the two international lending institutions would risk being wasted.
The United States on Wednesday vetoed a proposal before the Inter-American Development Bank to grant Nicaragua $2.2 million to complete a road-building project. All of the bank's other 42 members voted in favor of the loan, and some members expressed concern that the United States was politicizing decisions that are supposed to be made on economic criteria under the bank's charter, according to sources familiar with the deliberations.
Conrow's comments, made in a telephone interview, appeared likely to add fuel to charges by Nicaragua that the Reagan administration is waging economic warfare against it. In May the administration ordered a sharp cutback in U.S. imports of sugar from that country and redistributed the purchases to three countries Washington is friendly with in Central America: El Salvador, Honduras and Costa Rica.
The United States previously has voted against loans to Nicaragua from the two multilateral banks, but officials had not stated a policy applying to future Nicaraguan loan applications. Conrow called on Nicaragua to curb government subsidies of agricultural prices and allow market forces to play a larger role in the economy.
"When they show progress, we would support them," he said. For the moment, however, "the economic problems in Nicaragua are so widespread that I can't see any loan that we would support until there are some fundamental changes in their policy."
Despite the U.S. charge that its economy is weak, Nicaragua until last month was one of the few countries in Latin America to avoid falling behind in repaying loans from foreign commercial banks. In June Managua failed to make a debt payment of $45 million, according to its central bank president. By contrast, Brazil now is estimated to be $1 billion in arrears.
The Sandinistas, after coming to power in 1979, nationalized the banking sector and holdings of deposed dictator Anastasio Somoza. The public sector amounts to only 40 percent of the economy, however, according to Managua government figures.
The United States regularly votes in the World Bank for loans to countries with predominantly socialist economies, such as Yugoslavia. The United States also strongly supports Salvadoran government reforms that include nationalization of its banking industry and a land reform program that has affected more land formerly in private hands than the Nicaraguan plan.
Nicaraguan Planning Minister Henry Ruiz estimated in a recent interview in Managua with The Washington Post that his country will be short about $100 million in international funds this year that it had expected to receive. Asked if, because of this pressure, Nicaragua would abandon its plans for a mixed economy and join Cuba in the socialist economic system, he said:
"Cuba was isolated. They had to survive. If the same pressure is applied to us, we have to survive. We're not going to commit suicide. If they push us, there will have to be alterations in the plan, but I'd prefer a market that is close to us, a close place to buy and sell. I would prefer normality."
The U.S. position on loans means that Nicaragua will not be able to obtain any loans from the Inter-American Development Bank's Fund for Special Operations, which lends money at special low interest rates of 2 to 4 percent at terms of up to 40 years. The United States can exercise veto power over these loans, as it did with the proposed credit for the road-building project, because Washington contributes most of the fund's capital.
In late 1981, Washington also played the key role in preventing Nicaragua from obtaining a $30 million credit from the special operations fund for a fisheries project. Nicaragua last obtained a loan from this fund--an $8 million credit for a forestry project--in June 1981.
The United States, while holding the largest number of votes, must obtain support from other countries to block other loans by the Inter-American Development Bank or loans by the World Bank. Despite U.S. opposition, therefore, Nicaragua was able last year to obtain a $34 million loan from the Inter-American Development Bank and a $16 million loan from the World Bank.
Conrow said that the United States would seek to convince other voting members of the two banks to join Washington in blocking all loans to Nicaragua until it changes its economic policies.