Gov’t Accused of Bad Biz Practices
Another questionable public-bidding process resulting in a concession for a business conglomerate related to the ruling Sandinista Front has raised more serious concerns about the transparency, competitiveness and fairness of the Nicaraguan economy.
On Sept. 30, Orlando Castillo, the Sandinista head of the Institute of Telecommunications and Mail (TELCOR), announced the state regulatory agency has awarded a broadband telephone and Internet service-provider’s license to the newly formed Yota de Nicaragua S.A., a mixed Russian-Venezuelan company with Sandinista shareholders.
Yota essentially had no competition in the bidding process, after TELCOR forbid CLARO and Movistar from competing, and Amnet dropped out. In an interview with the daily La Prensa, Castillo defended the bidding process as “clean” and called Yota, a company that was formed less than four months ago, “prestigious.”
Private sector leaders are calling the telecom concession another “very bad sign” for Nicaragua’s business climate.
“This was not a bidding process, rather the awarding of a preferential concession without competition,” Roger Arteaga, president of the Nicaraguan-American Chamber of Commerce (AMCHAM), told The Nica Times. “The message here is that if you are not in cahoots with the government beforehand, you are wasting your time here.”
Arteaga blasted Yota as a “suitcase company” – one that has no office, staff or contacts in the country. The problem, he added, is not that it’s a “Sandinista company,” rather one that’s tied directly to the presidential couple through third-party sources who “lend their names, but don’t have the money.”
“This is the same thing [former dictator Anastasio] Somoza did, but the [presidential couple of Daniel Ortega and Rosario Murillo] have accumulated more [in three years] than Somoza did in 45 years,” Arteaga said.
Since returning to power in 2007, Ortega has used his contacts and Venezuelan aid to form a network of “ALBA businesses,” named after the Venezuelan-backed Bolivarian Alliance for the Americas (ALBA). Ortega and his ALBA holdings now control the country’s oil import and distribution sector and represent the country’s largest power company, ALBANISA. The Grupo ALBA has also become the country’s largest cattle exporters, and controls interests in the tourism sector and petroleum distribution.
Defenders of the ALBA business dealings claim the investments are in the best interest of the country. After awarding ALBANISA a $500 million power contract last August, David Castillo, the industry regulator, said the new ALBANISA plants would provide less expensive energy and would translate into “a 20 percent lower energy bill” for households (NT, Sept. 4).
That hasn’t been the case so far. Since ALBANISA inked its lucrative deal, energy costs have already increased by 9 percent in the past two months. Since the beginning of the year, energy costs have gone up three times, by more than 15 percent in all.
While Grupo ALBA keeps investing and the costs of energy keep rising, the government is also blocking other private investment in cheaper, renewable energy sources.
The Amayo wind-farm project in Rivas, a $90 million renewable energy company with investors from the United States, Guatemala and Nicaragua, had its $60 million phase II expansion frozen by the government last month, just as the ship with 12 new wind turbines pulled into Puerto Corinto.
The government argued that the project was advancing on phase II without all the necessary permits, even though the company claims it has the necessary environmental permits and a provisional licensing agreement.
At press time, Amayo’s ship had been stuck at the port unable to unload its cargo for more than 25 days, representing a daily loss of $60,000, according to a source close to the company who wished to remain unidentified.
The source said the real reason the government has frozen the project is because the top Sandinistas are allegedly allied with a competing wind-energy firm that wants to invest in Nicaragua.
Under the country’s energy regulations, Nicaragua can only license up to 120 megawatts of wind energy. Amayo currently produces 40 megawatts, and phase II would have brought its capacity up to 63 megawatts – more than half the country’s limit.
The competition is allegedly eyeing the same energy quota, though so far Amayo is the only wind project that has invested in Nicaragua.
In a recent exclusive interview with The Nica Times, retired Gen. Humberto Ortega, brother of President Daniel Ortega, said, “I have good relations with big investors from Asia, the United States, Costa Rica, Panama and mostly Mexico. So I bring them to Nicaragua to see if they will invest here in energy …I try to push investment” (NT, Sept. 18).
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