At the end of July, Tortilla con Sal interviewed Lic. Jorge Martinez
Gonzalez and Lic. Armando Chible Sandoval, President and Assistant
Manager respectively of the savings cooperative Caja Rural Nacional
Caruna is the body that administers funds made available for development projects in Nicaragua within the framework of the Bolivarian Alternative for the Americas (ALBA). Currently, ALBA's member countries are Cuba, Bolivia, Dominica, Nicaragua and Venezuela. The Honduran government has announced that it too intends to join ALBA shortly. So Nicaragua's
experience is important as an example and model of the economic
alternative based on solidarity and fair terms of trade that ALBA
represents. This interview highlights three fundamental aspects of Nicaragua's experience in that context.
Firstly, it shows clearly that ALBA prioritizes the needs of the
sectors most affected and most marginalized by twenty years of policies
imposed by the rich countries and the international financial
institutions they dominate. Secondly, one notes the threat represented
by the success of the ALBA agreements to the system of economic
domination established via the ruthless economic policies of the rich
countries. Finally, one can see also the key role played by local news
media in defence of the imperialist model of economic, financial and
cultural domination by denigrating, undervaluing and dismissing the
dramatic, encouraging alternative ALBA represents for the region's
TcS : Perhaps you could give us a general overview of Caruna's work within the ALBA framework?
JM : We have an agreement with PDVSA to hold and administer funds. An
agreement that frees up 25% of the oil invoice traded via an oil
distribution company in Nicaragua.
We use that 25% to channel credit to the farming and production sectors
in our country and of that, up until May this year we had placed C$440
million córdobas, a bit more than US$22 million dollars to be more
exact. And we had benefited about 50,000 people in 57 cooperatives of
producers, cattle farmers and small farmers throughout the country.
Those C$440 million, those US$22 million, have been placed at an
interest rate of 8% on the balance, with different payment dates and
periods depending on the activity financed. If it is basic grains, rice
or beans or vegetables then those have a payment period of one year. if
the activity is plantain or similar plants then the payment period is
two years. If it is to develop cattle production or small businesses
then the credit is given over three to five years.
That has benefited those 57 cooperatives and 10,000 individual small
farmers. And Caruna reaches from Bilwi, or Puerto Cabezas, to
Somotillo on the Honduran border with 25 branches throughout the
country. As well as that we use the country's network of cooperatives
to make loans with Caruna so that credit reaches small farmers.
We have alliances in Chontales through the Caja Rural de Chontales, in Nueva Guinea with the Banco de San Antonio,
a cooperative, and we are working also with the Fundación El Rama.
These are the remotest parts of the country. And we are about to open
an agency in Bluefields in the Southern Autonomous Region where we used
not to have any branches.
That is what the funds are used for, from 25% of the oil receipts. The
other 25% freed up goes to the common fund of the ALBA member
countries, Bolivia, Cuba, Nicaragua and Venezuela.
Those countries decide how those resources are invested and we have an
agreement with them to administer those funds. So it is ALBA-Caruna
that manages that ALBA fund.
Both funds originate from the oil receipts but the agreements are with
PDVSA, or PDVSA-Caruna to hold and administer those funds correctly. Of
those funds that have been used, US$20 million has been assigned to the
Streets for the people programme, that's about C$400 million. And for
improvements to public transport initially US$2 million have been
assigned but that will reach US$5 million. That is to say a little more
than C$100 million to modernize transport. And we are also supporting
the construction project Houses for the People, with a first stage of
400 houses for a sum reckoned at US$5 million.
So all that money is going into the country's basic infrastructure,
streets, highways, houses so the least well-off people can… for
example, the houses are available via a credit programme with a maximum
interest rate of 8% with a maximum payment period of 20 years so that
producers or in this case the beneficiaries of the Houses for the
People programme can acquire these houses and be able to pay for them.
The houses have three rooms, with a false ceiling, a porch, a kitchen,
a washing area … they are about 200 square metres. The sites are
located in high value areas.
Those are the main programmes. The total number of families
benefited….because within the global amounts of credit we have talked
about some programmes are quite specific.
We have a programme of artisanal fishing for the Northern and Southern
Autonomous Regions that benefits 830 artisanal fishing workers. We have
a programme of cattle rearing worth US$6 million scheduled to rear
24,000 calves and benefit 1675 producers. We have a programme of
agricultural inputs benefiting 8000 farmers via the distribution of
urea at a fair price, Urea for the People. And in coordination with the
Agriculture Ministry, MAGFOR, we have a programme to distribute seed
and inputs to a total of 87,000 families in that small farmer programme.
And with that 91,720 who are being benefited, we have a total of about
170,000 Nicaraguans benefiting directly from those funds, the ALBA fund
and the ALBA-Caruna fund. Between the two we have 170,000 Nicaraguans
benefiting. So that is the coverage. While it is true that we are still
not in every municipality, with the upcoming result of credit
programmes in collaboration with BANDES, we now have US$10 million for
the Zero Hunger programme which are going to go into the Food
And we have US$10 million for a credit programme for women, for women
owners of small businesses in the country's urban centres. That should
benefit 43,000 individuals. 33,000 women with a loan of up to US$300
per person and 10,000 women via the Food Production Bonus. And the
financial mechanism for this is BANDES, the Social Economy and
Solidarity Bank of Venezuela. They have an office of representation here in Nicaragua.
TcS : And in Nicaragua BANDES channels its funds through ALBA-Caruna.
JM : To a value of US36,958,000.
TcS : And that is in addition to the ALBA funds.
JM : Exactly
TcS : Is that a donation?
JM : Part of the funds are non-returnable, the Zero Hunger programme
which is US$10 million and the US$2,958,000 which are for artisanal
fishing. Those are non-returnable for people in Nicaragua,
so as to capitalize impoverished Nicaraguan families. And the rest,
some US$24 million, are a credit to strengthen the productive capacity
of the agricultural sector, to increase employment opportunities and
also opportunities for women in the country's urban centres to have
productive employment via Zero Usury.
TcS : It would be interesting to know something about the kinds of agreement Caruna has with PDVSA and BANDES.
JM : Well, with BANDES the relation is one of equitable credit,
reasonable payment periods, up to ten years to pay, annual interest
rates of one to three per cent. That is in relation to the loans. The
credit via Zero Usury does not pass 4%. And in the case of credit to
cooperatives for production or cattle rearing, it's the same, interest
is never more than 5%. And for individual producers interest rates
don't exceed 8%. It is a relation of equitable credit.
On the agreement to hold and manage money from the ALBA fund, basically
what we have is an agreement to hold and administer those funds so as
to place them correctly with fair, accessible interest rates that
differentiate them from the conventional banking system and other
financial outfits in the country. And that agreement to hold and manage
the ALBA funds, the ALBA signatory countries decide on how to use it
for the purposes of social investment.
TcS : How is the executive that decides on the use of the ALBA fund made up?
JM : Requests come from society in an organized way via the Citizens'
Power Councils for example to the Association of Democratic Mayors who
are responsible for the street improvement programmes. They make the
request via 102 municipal authorities throughout the country so as to
access the benefits of the ALBA funds. They present the projects to
Caruna. We sign an agreement with them and that project is being
implemented throughout the country.
TcS : But you cannot take the decision just like that. Don't you have to consult with someone?
JM : The ALBA signatory countries decide. From requests from over a
hundred municipal authorities throughout the country both Liberal and
Sandinista. 87 of the country's municipal authorities are Sandinista.
The rest are Liberal. And 102 of those municipal authorities
benefiting from the Streets for the People programme. So they make a
request via their organization which is the Association of Mayors and
each one states the number of blocks to pave, how much it will cost.
They make the proposal for the bidding and issuing of contracts to the
companies who will undertake the work.
It generates employment. It employs local labour for laying the paving
blocks and the pavements and doing all the work involved in that. And
what we do is pay the contractors on the basis of the contracts for the
work they carry out. They have a supervisory system for the work, to
follow up the work, because it would be impossible for us to go to each
municipality. So the municipal authorities participate in the
supervision, follow-up and control.
TcS : Just to be completely clear about this point. You receive the
requests from the municipal authorities. You pass those requests to
whoever says yes or no. But what is the body that authorizes you to
disburse funds for this or that project?
JM : The ALBA Presidents have a meeting. The countries that have signed
up to ALBA on terms of extraordinary cooperation decide. There is an
executive body that takes decisions on the social projects. It is at
the highest level.
TcS : So these decisions get taken at Presidential level?
JM : Yes. For example, the public transport subsidy is via the ALBA
fund. The famous US$1.30 . And we are also talking about 17,000 pairs
of tyres of the 25,000 that were agreed. The automatic barriers for
control of bus passengers too. They are being processed normally. And
likewise the batteries, the lubricants and other inputs. That is a
support fund for the transport sector with credit at rate completely
unknown in the country. Because those tyres are being financed over two
years at 4% interest. That's less than the international rate, less
than the London Inter-Bank Offered Rate, Libor.
TcS : One of the doubts the news media raise, without answering it, is
on the agreement ALBA-Caruna has with PDVSA to pay those loans.
JM : What we are going to pay is 25% of the oil invoice. We're going to
pay over 25 years. We have two years' grace and 23 years to pay with an
annual interest rate of 2% on the balance which depends on the
invoicing procedure. That is what we are going to pay. Because for the
other fund the payment plan is agreed. It is a debt of ALBA-Caruna in
accordance with an agreement signed by Asdrubal Chávez, Vice-President
International of PDVSA and by Jorge Martinez Gonzalez, that's me,
President of Caruna.
That is the agreement for the fund relating to the first 25% and this
is the other one on the other 25% also signed by Asdrubal Chávez and
Jorge Martinez. So in this case this 25% we are placing with a rate of
8%. With 2% we manage to cover our operating costs and get credit to
people out in the countryside and also cover other contingencies that
can occur in managing these finances. We have provision for bad debt
that we add on, apart from the 8%. In the end, in the period available
to pay the credit since the funds are freed in cash by agreement with
the oil distributor to Caruna's account as stipulated by PDVSA, we are
the ones who are going to pay PDVSA. It is not a debt of the Nicaraguan State, nor of any institution of the Nicaraguan State.
TcS : That is a point on which some Nicaraguan economists have
remarked. For example, Nestor Avendaño has suggested that when money is
loaned to IRTRAMMA or ENATREL or GECSA, then that money could turn into
a public debt.
JM : Not at all. I want to say the following on that. In Nicaragua,
during the previous government energy distribution was privatized and
now a multinational company has it, Union Fenosa, a Spanish company.
And what was beforehand a single company was broken up into generators,
transmission operators and distributors. The generators are GECSA, some
private companies, like Corinto, Tipitapa Power, AMSFEL and others.
Those are the generators. The transmission operator is ENATREL which is
a State company. And the distributor is Union Fenosa which charges for
We could say that people are trying in bad faith to sell the idea that
the resources freed up from the oil invoice and that we have made
available to the generating and transmission system is a public debt.
But really it is not a public debt because in parallel we have a
contract with Union Fenosa where they recognize that all the resources
handed over to the petrol companies or to the generators is on behalf
of Union Fenosa.
Union Fenosa receives a subsidy from the Nicaraguan State
derived from the fact that all Nicaraguans consuming less than 150
kilowatt hours a month get a subsidy. That subsidy is paid out by the
Treasury Ministry to Union Fenosa. So then Union Fenosa has an
agreement signed with Caruna saying that they pass that to Caruna so as
to pay what was spent on generating and transmitting by Caruna. The
debt relationship is that Union Fenosa owes Caruna. because Union
Fenosa receives the benefit of services from ENATREL and ENEL and from
its system of generation and transmission because they distribute that
energy and charge for it.
So then, the one responding for that debt is Union Fenosa and those
critics know it and have kept quiet about it. Even the private
generators like Empresa Generadora Energética de Corinto of Cesar
Zamora, AMSFEL,Tipitapa Power, Puerto Cabezas Power too, they are all
private generators. There is no public debt.
TcS : So Caruna has no loan agreement with public bodies in the energy sector or in any other sector?
JM : No. The Nicaraguan State
via a law passed in the National Assembly has an agreement to subsidize
all Nicaraguans consuming 150 kilowatt-hours or a month. Since that
money is budgeted in the Republic's General Budget, it has to be
released via the Treasury Ministry. But because that is sometimes
somewhat slow and sometimes Unión Fenosa urgently needs resources, then
they signed an agreement with us. For example, if we give money to pay
ESSO and confirm to the Treasury Ministry that Union Fenosa has signed
an agreement with us then the money we pay to Esso for fuel needed for
electricity generation and subsequent transmission of that power Union
Fenosa states that it releases and endorses that payment from the
government to them in favour of Caruna.
TcS : No one has explained that in the news media. It is a constant
strategy of the right wing media to raise doubts they then leave
hanging without an answer. They don't follow up their own questions.
Have you had other experiences of that kind of media manipulation?
JM : Almost all our experience of the media, whether it be with regard
to credit or with regard to the ALBA country funds, the media have
tried to misinform or undermine and cast doubt on the transparency of
their implementation. For example they said the street improvement
programme only benefited Sandinista municipalities.
But as I explained to you earlier, there are 87 Sandinista
municipalities in the country and the street improvement programme is
being carried out in 102 municipalities. A good number of the
municipalities benefiting are not necessarily Sandinista. And they say
the ALBA projects only benefit Sandinistas. But where they are doing
those thousand or so streets across the country it's not just
Sandinistas that live there. Liberals and Conservatives do as well, the
whole people live there. Whether they vote for or support the
Revolution is another matter. But no one asks who lives there. The only
thing we know is that on those streets live low-income people, hard
working people, people who spend the summers in clouds of dust and the
winter with great puddles of water and now things are different for
There they try and say they don't understand the contract procedure,
but basically all the country's construction companies are working on
that program even the biggest ones. Private companies like Llansa, de
Guerrero, Oirsa, small ones, medium sized ones, as well as the biggest
ones, are all working. And they all say the mechanisms are transparent,
that they have applied for contracts, offered their services and been
been awarded contracts to pave the streets. That is one example of the
disinformation those news stories wanted to give.
They have tried to demonize the relation Caruna has as ALBA-Caruna with
the Venezuelan cooperation programme. But we have agreements of
collaboration and administration contracts with another 23
organizations, private ones, national ones and international ones. For
example we have agreements with Holland's Rabobank Foundation, with foundations in Italy and in Wisconsin in the United States,
with Swiss Workers Aid, with BECU, with OXFAM-UK, OXFAM-Belgium,
OXFAM-Canada, with the European Union in COSUR in Rivas. So we can say
we have a broad range of agreements, contracts and lines of credit with
But that is never mentioned. All that gets mentioned and demonized is the relation and cooperation with Venezuela
because they want to say the funds are badly used, that there's no
transparency and that they accumulate debt. Even the figures that they
give, in the alleged figures they give, they always give inaccurate
information which is the information they themselves suppose.
TcS : Have you had requests for interviews from local journalists?
JM : Within the framework of our public relations and media relations
we have developed information for national media on what we do, for
example, when we open a new branch or when we hand over a new loan. The
information is public.
But some media, like El Nuevo Diario or La Prensa, have come asking for
information and ask questions in bad faith. We had an event in the
PAEBANIC centre to talk about the agricultural cycle with 63
cooperatives and 100 leaders. We were talking about interest rates,
loans, the sectors we support. And one of those journalists came up to
me and said "Caruna manages the ALBA money……don't you think that
money comes from shady sources?" So when someone starts to talk like
that, I have to say, "Look, excuse me I cannot discuss the matter with
you because you are presupposing things that don't exist or exist only
in your imagination…."
AC : In that event we were explaining the different programmes we had with Wisconsin, Alba Caruna and so on.
JM : We were presenting via Datashow.
AC : So they are watching, all those news media but… they are not
seeing. We put everything on the screen. But the journalists don't see,
What they see is the dark side. They see the words ALBA-Caruna and are
prejudiced. So there's good reason not to help that along when the
journalist concerned is in bad faith and only wants to find something
bad. They just have to see that it's Chavez, that it's ALBA, that it's
ALBA-Caruna and there, it's bad.
JM : What's happened is that our experience with these news media has
been that they misreport the information. If one sets out in good faith
to talk about our programmes about amounts of money or the number of
people benefiting, the headlines they put are "Caruna moves from being
modest cooperative to being a nice little earner" or "Caruna's nice
little earner" and in Nicaragua that means something that smacks of fraud.
TcS : But Caruna has been around for twenty years.
JM : Fifteen years, and in those fifteen years we have now got 15,500
individual members and 25,000 members in the cooperative network with
40,000 affiliates. We are holding C$80 million in our members savings.
TcS : Your experience is mainly in agriculture.
JM : Yes. Our members have those C$80 million. We have C$40 million
plus in capital. We have C$20 million in subscriptions. So we are
talking about more than C$140 million belonging to the cooperative's
members. We process more than C$2 billion a year. In transfers, we
transfer funds both nationally and internationally. We change bankers
cheques. We buy and sell foreign exchange. We carry out all those
financial operations as a cooperative legally authorized to do so and
it's worth noting that we carry them out with operating costs only 30%
of which are generated by interest charges. 70% are generated by the
other financial services that Caruna offers throughout the country.
TcS : So the legal framework for you is the Law of Cooperatives.
JM : Yes. Law 499, the General Law of Cooperatives that makes us a
cooperative body working throughout the country to which we can
affiliate any man or woman prepared to accept Caruna's statutes and
by-laws and also in the case of different bodies, we administer funds
on their behalf in accordance with their interests.
For example we have an agreement with Los Pipitos. Los Pipitos gives
credit to parents of children with disability. So we signed an
agreement and we release to Los Pipitos or to the parents they
instruct us to. They don't have to be members of the cooperative. We
have an administrative agreement with Los Pipitos so Los Pipitos tells
us to give so much to such and such a family who have children with
Or for example, a support program for war victims called Provictima. So
Provictima tells us to give such and such a citizen who was wounded in
the war, either of the army or of the Contra, whatever may be their
background, and we pay out against their identity card. That support
carries zero interest. They give us separately two per cent to cover
Caruna's operating costs in making those loans.
These administered funds assist different sectors in the nation's life
and the funds' owners tell us they are interested in offering loans to
this or that group or sector and that's how we work. It is not from one
day to the next that Caruna that has sprung into life. Of course, the
support the Unity and Reconciliation Government has given the
cooperative sector and the productive sector in general is an
extraordinary effort. We judge it in that way.
It is an extraordinary effort via the rural credit fund, via the
Agriculture Ministry MAGFOR, via the Institute for Rural Development,
via the National Investment Fund, via the agreement BANDES has with
Caruna. If it were not for the relationship President Ortega has with Venezuela,
probably we would not have that credit relationship with BANDES and
that has helped us a lot in reaching the small farmer. And very
probably if another government had been in power we would not have had
access to those funds nor to the funds freed up from the oil invoice.
Naturally, the relationship existing as regards coverage, both in terms
of Caruna's seriousness and the transparency of its controls mean the
government can permit us to have a direct relationship with PDVSA with
regard to the funds they have made available. And naturally it is also
important that we enjoy a relationship of cooperation and alliance with
the government that is using its power in favour of impoverished people.
TcS : One can suppose that increasing production in the country by
means of a broad supply of credit to sectors previously excluded is one
of the aims of this big effort on behalf of people on very low incomes.
And perhaps another objective is to create conditions that oblige other
entities offering credit in the country to adjust their lending
practice to the new reality brought about by government policies in
favour of low income people. How do you see that process and what
changes do you hope to see in the future?
JM : We hope Caruna's impact in the agricultural sector and in the
small business sector will contribute to helping the banks and
financial outfits not regulated by the banking sector make a serious
analysis leading to decisions that improve financial services. And
above all to reduce the cost of accessing credit, because many costs
are added on to the interest that have to do with the way they
calculate their operating costs, their running costs and their
collateral costs. And what we seek is to be an alternative for the
sectors that have traditionally not had access to credit because that
was the idea we started out with in 1994.
Prior to the closure of the National Development Bank, agricultural
credit was available throughout the country and that was when we
founded Caruna, precisely to create other alternatives for farmers. Now
we aim to deepen and consolidate Caruna's leadership as a cooperative,
improve our services, keep our whole system up to date, train people
well, hand back surpluses to the cooperative members, make sure they
are using their membership cards and encourage them to grow as members
of the cooperative.
And more than anything we hope the big business people who are bank
shareholders might be able to, although this is something that one way
or another has been happening, since interest rates have dropped from
an average of more than 20% to 16% or 18%. Credit costs have fallen.
But that we are expecting the finance sources to drop interest rates
without proposing it openly? No. We are going ahead, like the poet
said, we are making our way by walking it.
AC : This is very important. Because if we are talking about the play
of the free market then there are a couple of important things. First
that these 130,000 people once they have an alternative, some economic
sectors, where they were paying and paying without any possibility of
playing a real role in the economy. They are receiving help. A big
percentage did not get any help before. In other words we are moving
from quasi-employment to a real employment for a small business person.
So that makes it more possible for Nicaragua to close the gap a little,
not much but to start closing the gap caused by emigration to other
Now. That family remittances are a great boon? No. Family remittances
are not a blessing at all . For me quite the opposite. They are
dreadful because they leave our gross domestic product in other
countries. There they leave US$5000. Here they place barely US$300. And
these are Nicaraguans who could be producing US$800 or US$1000 for Nicaragua.
Our gross domestic product would be increasing and our per capita
income too. It is something important that hardly anyone sees. Or at
least , those who don't want to see.
On the other hand if we are talking about free markets, as Jorge said,
it is not that we are pressing for interest rates to drop. How is there
any pressure for interest rates to drop? There lies the big concern of
the other micro-credit outfits. If our interest rate was already
averaging 16% or 12 % that has been substantially what we have been
working with, then people realize that there is strong exploitation
from the other financial entities. that is going to make the producer,
the small business person stop and choose. "Pay me 20, 30, 40 per
cent"……."No, why should I if there they are offering at 10%." So
one way or another those lenders have to readjust too and lower the
TcS : In other words people are empowered….
AC : They're empowered. Now they have a chance. Now they have an
opportunity. And that of course helps a lot. And what does that mean
here? For example those 130,000 people benefiting now what is happening
is that things are freeing up resources for them so they have more
income, because if I sow an acre of beans and before I was paying C$200
in interest from that acre, now today I am only paying C$40 or C$50 and
I keep C$150 extra to improve other things. It's true that's not much
in the national economy but we are going to see that what benefits the
members of the cooperatives benefits the national economy too.