IL Postcard

Opposition Leader Faces Criminal Charges for Role in Bank Bail-out

Date: 09/19/2007

Politics in Nicaragua have taken a soap-opera turn, Latin style.

Just a year ago, Eduardo Montealegre ran unsuccessfully for president of Nicaragua against Daniel Ortega. Today Montealegre, currently leader of the opposition political party, faces criminal charges. He's been charged for his role in bailing out Nicaragua's troubled banks in 2001, which allegedly stuck the government with a $500 million tab that it's still paying off.

The Comptroller General's office filed a formal criminal complaint last week against Montealegre and four former Central Bank officials for their role in renegotiating payments for so-called Negotiable Certificates of Investment (CENIs). These are bonds that act like a U.S. Treasury bill and help finance government debts.

As Nicaragua's treasury minister at the time, Montealegre increased the interest rates that banks received for buying government-issued bonds, including for a bank in which the Harvard-trained banker was a partner. Montealegre, who heads the Nicaraguan Liberal Alliance (ALN) party, says the arrangement was necessary to prevent a wider financial collapse.

But the Comptroller General, who was appointed by Ortega's administration, claims it was an "intentional" move to immediately transfer $122 million in private debt over to the government. The banks had been receiving a 7.9% interest rate for CENIs bonds, but after the change, they received about 8.3%. Montealegre's bank was among the biggest gainers, the comptroller alleges.

The move is credited with saving Nicaragua's fragile banking system, although it left the country in greater debt. The controversy plagued Montealegre during his bid to become president and he dismissed the latest accusations as a political witch hunt.

A prominent civics group calls the charges "incomprehensible," saying that either the government has made a mistake in bringing charges for such a complicated matter?or that the charges are politically motivated. Edmundo Jarquin, the presidential candidate for the leftist breakaway Sandinista party, says the criminal complaint against Montealegre is "absolutely a political decision."

The ALN recently formed an alliance with the other main conservative party to block legislation introduced by President Daniel Ortega. Leaders of the two conservative parties say they will vote against any criminal charges that Montealegre faces over CENIs.

Your Latin America Insider,

Suzan Haskins
for International Living

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