Political Risk Analysis - Election Results Tighten FSLN's Grip On Power - JAN 2018

BMI View : Municipal elections on November 5 in Nicaragua saw the ruling FSLN win a decisive victory. However, concerns over the legitimacy of the election results will increase the chances that the US passes the NICA Act in the months ahead, reducing multilateral funding for the country.

As we expected, Nicaragua's ruling Frente Sandinista Liberacion Nacional (FSLN), led by President Daniel Ortega, posted a decisive victory in municipal elections on November 5 ( see ' FSLN Set To Dominate Municipal Elections ' , May 19). While full results have not yet been published, preliminary results from the national electoral board (CSE) suggest that the FSLN won 68.5% of the vote, likely captured the majority of the 6,534 city council positions that were up for grabs and is leading in 148 of the 153 mayoral races. In second-place was the Partido Liberal Constitucionalista (PLC) at only 16.2% of the vote.

Preliminary Results Of Municipal Elections, By Party
Party Votes % of total
Source: CSE, BMI
FSLN 1,319,865 68.54
PLC 312,223 16.21
CxL 183,572 9.53
PC 25,635 1.33
PRD 23,365 1.21
YATAMA 21,645 1.12
ALN 21,042 1.09
PLI 14,530 0.75
APRE 3,909 0.20

However, turnout was relatively low by the CNE's estimation, at roughly 51.0% compared to 68.2% in 2016's general elections. However, electoral observers have indicated that the CSE's official figure likely overestimates the actual level of participation. The opposition coalition Frente Amplio por la Democracia (FAD) argues that turnout was as low as 20%, and other groups such as a mission from the Organisation of American States (OAS) and civil society group Panorama Electoral (PE) also reported that turnout was likely lower than the CSE's official number. Low participation likely reflects increasing disillusionment with the democratic process in the country after multiple disputed elections in recent years ( see ' Questions Over Election Legitimacy Will Bolster Opposition ' , November 7 2016).

In addition to questioning the official participation figures, the opposition has alleged that the election was not free and fair, which will increase the likelihood that the US takes action against the Nicaraguan government. The opposition's criticisms are based on the following:

  • The CSE is generally perceived to be controlled by the FSLN.

  • The head of the OAS observation mission, Wilfredo Penco, is not seen by the opposition as a credible monitor, due to his endorsement of election results in 2008, 2011 and 2016 that the opposition criticised for lacking transparency.

  • Several members of the opposition Partido Liberal Constitucionalista (PLC) were arrested the week before the elections, and numerous reports of voter intimidation on election day have emerged.

  • Opposition mayoral candidates have resigned due to concerns about a lack of transparency in the process, and one was murdered, though it is unclear if the incident was politically motivated.

  • The FSLN-controlled national legislature altered the country's electoral law in order to make it easier to vote, which the opposition has argued will make it possible to vote twice.

Questions About Legitimacy Increase Likelihood NICA Act Passes

Given these concerns about the electoral process, we maintain our view that the US is likely to pass the Nicaraguan Investment Conditionality Act (NICA) into law in the months ahead, though we note there is currently no timetable for the bill's passage ( see ' Quick View: NICA Act Looks Increasingly Likely To Pass ' , October 5). The law, which has already passed the US House of Representatives, requires the US to veto any multilateral aid to Nicaragua until the country makes democratic reforms. As we have previously argued, this will cost the public and private sector aid amounting to roughly 3.0% of GDP per year, while also creating uncertainty that will reduce the country's appeal to foreign investors ( see ' NICA Act To Widen Deficit From 2018 ' , October 16).

Substantial Aid At Risk
Nicaragua - Support From Multilaterals, USDmn
Source: BCN, BMI

Domestically, we do not expect that the election results will have a substantial impact on the country's political trajectory. The FSLN already held the 134 of the country's mayoralties, and has a dominant position in all three branches of government, meaning that the municipal level victories will only marginally increase the party's power. Moreover, allegations that elections are not free and fair are not new, and in the past have not been enough to bolster the country's heavily divided opposition. We see no reason that the most recent vote will alter this trend. This stability underpins Nicaragua's relatively high score of 66.0 out of 100 in our Short-Term Political Risk Index, placing the country 5th of 17 in Latin America.