ANALYSIS: President-Elect Ortega Faces Daunting Energy Crisis

One of the main challenges facing Nicaragua's president-elect and former revolutionary leader Daniel Ortega is the country's energy crisis, which has caused daily outages in what is one of the western hemisphere's poorest countries.

Ortega, of the leftist Sandinista National Liberation Front (FSLN), garnered 38.1% (854,316 voters) of the vote earlier this month, while Eduardo Montealegre, of the conservative Nicaraguan Liberal Alliance (ALN) party, picked up 29.0%.

Jose Rizo Castellon of the ruling center-right Constitutional Liberal Party (PLC) came in third with 26.2%. Ortega will take over from President Enrique Bolanos on January 10.

The FSLN also picked up roughly the same proportion of national assembly seats (37.59%), followed by the ALN (26.72%) and the PLC (26.47%).

The Daniel Ortega of today is not the radical of yesteryear, as he himself has admitted. Although he promised to continue the economic and political model that has been implemented to date, there undoubtedly will be changes and variations to reflect FSLN's political principles.

Beyond the rhetoric sometimes reminiscent of the 1980s, when Ortega was a staunch opponent of the US and the free market capitalist system, the president-elect has promised to respect private property. He says there will be no confiscations like those that occurred when he was last in power following the Sandinistas' overthrow of the Somoza dynasty in 1979.

According to the FSLN's preliminary government program, objectives will revolve around three pillars: jobs, credit and business, the latter of which places special emphasis on the energy sector.


Ortega is seeking to transform the energy sector - a process already underway - to move away from oil-fired power generation due to high fuel prices that siphon away resources that could go to socio-economic development.

"The state will play an important role in transforming energy generation in geothermal, wind, hydroelectric and biomass," a process that will include local and foreign investment as well as workers, according to the FSLN.

However, the question is how much of a role the state will play in the energy sector and if this will slow down efforts to diversify the energy mix and move forward with fuel self-sufficiency plans.

Indeed, if the state decides to increase regulations for the energy sector, private investors may not be as free as they would like to implement new generation projects.


Another point of contention could be Ortega's close relationship with Venezuela's leftist President Hugo Chavez and how much influence he will have on the incoming administration as he waves petrodollars around.

Early this year, Venezuela's state oil firm PDVSA and the association of Nicaraguan municipal governments (Amunic) created a JV to distribute Venezuelan crude and fuels in the Central American country.

Business groups also will no doubt come knocking on Ortega's door - as they have done with Bolanos - demanding a solution to the country's energy crisis, which they say has hampered economic growth.

The crisis has prompted authorities to make an effort to advance with electric power and oil and gas projects.

The government's hydroelectric portfolio includes the 1,700MW Copalar, 17MW Larreynaga, 21MW La Serena-Los Calpulis and 10-12MW El Barro projects.

In addition, an international E&P tender process is underway for three geothermal blocks with combined potential to generate 1,500MW.

The government has also launched second round bidding for offshore oil E&P contracts with the goal of reducing fuel imports.


"The significance of Ortega's victory for the economy depends on the way he will balance his populist rhetoric with the realism of the possible," according to Manuel Orozco from Washington DC-based think tank Inter-American Dialogue.

"Many rank-and-file Sandinistas have moderated their views and accept the role of markets and political freedoms in making Nicaragua more prosperous. The question is whether Daniel Ortega is with them," Orozco said.

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