High Oil Prices Spark Crisis

May 21, 2004

GRANADA, Nicaragua – Soaringinternational oil prices this week shot uppump prices in Nicaragua to a record-high41 córdobas ($2.60) per gallon, sparking anew crisis for this impoverished country’sproductive sector and prompting the governmentto appeal for help from neighboringoil-producing nations.As crude prices reached an historichigh of $41.52 on the New York StockExchange, many Nicaraguans are findingthe price of gas an unbearable burden todoing business.“The price of gas is exaggeratedly high.It is no longer profitable to drive my cab,”said taxi driver Cesar Mena. “My fares don’tcover the price of gas, but if I raise the fares,no one will pay for my services.”THE pump price in Nicaragua, alreadythe highest in Central America, has risen by64% in the last two years, at a rate disproportionateto adjustments in salary and othercosts of living. According to the CentralBank, inflation rates for the first trimesterthis year reached a five-year high of 4.21%,in part because of rising oil prices.Mena said the prices have sparked theworst crisis in the transportation sector inthe 12 years he has been driving a cab. Hesaid the sector is planning a general workstoppage in the coming days.The agriculture and industrial sectorshave also felt the pinch. The NicaraguanIndustrial Chamber reported that rising gasprices have increased production andtransportation costs by 7% in the last twomonths.PRESIDENT Enrique Bolaños lastweek responded to the crisis by announcingthat he would make written and personalappeals to President Vincente Fox ofMexico and Hugo Chávez of Venezuelafor help from the Latin American oil-producingnations. Bolaños’ government alsosent a letter to the leaders of theOrganization of Petroleum ExportingCountries (OPEC), explaining that high oilprices punish poor countries and demandinga reduction in the cost of crude.Opposition Sandinista leader DanielOrtega proposed creation of an emergencygovernment fund to subsidize public transportationcosts during times of oil crisis toavoid raising bus fares for the rural andurban poor.

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