The two 5,000-gallon water towers lie empty on their sides. The 18 chicken coops house only piles of dirty white feathers.
Adolfo Evertz`s chicken farm outside Managua is a casualty of the government`s fight against inflation.
He says massive currency devaluations multiplied his costs while a deepening recession decimated his market.
”The government brags that it is controlling hyperinflation,” he said,
”but they`re starving the people to death to do it.”
Though Nicaragua suffers from double-digit monthly inflation rates, the pace of price increases has slowed considerably. From 126 percent a month in December, inflation dropped to about 12 percent a month in April.
The decline in inflation is the result of a rigid monetary policy inaugurated early this year with the announcement of drastic government budget cuts.
In addition, the government continued a series of massive currency devaluations and set high interest rates in the state-controlled banking system.
Now, some economists are wondering whether the cure is not worse than the illness.
”It`s like prices going down in a closeout sale. This is a `going out of business` economy,” said economist Francisco Mayorga, who teaches at the Central American Institute for Business Administration. ”We`ve gone from hyperinflation to hyper-recession.”
But the government is calling its anti-inflation policy a success. Citing progress made against inflation, President Daniel Ortega in April announced that interest rates were being lowered in time for farmers seeking credit for the planting season.
Grain producers saw half of their outstanding debts forgiven. Cotton farmers were promised a payment for each ”manzana” (about 1.4 acres)
planted.
Most remaining agricultural debts can be paid at relatively low rates over five years, with one year`s grace period.
It is a high-risk strategy, taken to avert the near-paralysis of the agricultural sector. Farmers, burdened with unpaid debts from the last harvest, had refused to take on the additional loans needed to begin this season`s planting.
But reducing interest rates could fuel inflation. And if inflation heats up, the government banks could run heavy losses, forcing another round of inflationary emissions of money.
”It`s a tradeoff,” said Arturo Grigsby, vice director of planning at the agrarian reform ministry. ”We`re risking slightly higher inflation rates to help production.
”But basically we expect the tendency of declining rates to continue,”
he said. ”Besides, we are expecting fresh money.”
The ”fresh money” is the foreign aid Nicaragua hopes to acquire from Western donors.
Nicaragua hoped to get promises of $250 million from European donors in a 10-nation tour in April by Ortega.
But at a conference of prospective international donors held in mid-May in Stockholm, Nicaragua got promises for only $50 million in additional aid, enough to finance the planting season but not to revive the economy.
Without substantial foreign aid, government officials admit that keeping a lid on inflation while spurring production will be nearly impossible.
”We need some injection of cash to get to the elections (scheduled for February, 1990) without a new round of hyperinflation or a crisis in production,” said Carlos Carrion, mayor of Managua and a top Sandinista Party leader.
Foreign aid is vital to avoid an even greater decline in production this year than last. Official figures show that Nicaragua`s gross domestic product decreased by 8 percent in 1988.
Hardest hit by the decline have been small to medium-size producers such as Evertz. Of the more than 300 chicken farms in production before last year`s crunch, only about 60 remain, says Evertz, who heads the producers`
association.
He says the country`s egg production has decreased by two-thirds since the beginning of 1988, and the production of chicken has decreased by three-fourths.
Like Evertz, most chicken farmers found that they could not pass their rising costs onto consumers, who have seen their real incomes shrink drastically. A chicken dinner, Evertz says, is becoming a gourmet dish.
Though the poultry industry may be an extreme example of the recession`s damage, it is not alone.
The president of the Association of Nicaraguan Businessmen, a pro-government group, estimated recently that 70 percent of the country`s industry was on the verge of bankruptcy.
Overburdened by some of the highest tax rates in Latin America, producers also have seen dramatic increases in prices charged by the government for key commodities such as fuel.
Before last year, gasoline, most of which is donated by the Soviet Union, was virtually given away by the government at a few cents a gallon.
Today gasoline is sold at about $1.85 a gallon, and diesel fuel costs about $1.20.
The government`s policy on interest rates has gone through similarly abrupt changes. The rates, long kept well below inflation, rose earlier this year to more than 60 percent a month on new and outstanding loans to industry and agriculture.
Now the state`s economic planners have switched gears again, promising that in the next four months interest rates on most loans to the crucial agricultural sector will remain at 15 percent.
The government also has promised that the rates on loans to farmers will not top 20 percent a month in the next year. To restore private sector confidence, the government also has promised that the days of land
confiscation for agrarian reform are over.
The question is whether the producers trust the government enough to expand or even maintain the production of crucial exports such as coffee and cotton.
”Many farmers fear that it`s all a game of cat and mouse,” said economist Mayorga. ”They wonder whether the government`s policies have simply been misguided or are, in fact, a Machiavellian scheme to destroy them.”
Evertz, with his chicken farm shut down, is growing fruits and vegetables to make ends meet. He predicts that farmers like himself are likely to respond cautiously to government pleas for more production. ”It`s a question of credibility,” he said. ”It will be very hard for this government to restore confidence.”
