A four-step response to Nicaragua’s dictatorial inauguration

Today, another Latin American dictatorship inaugurates itself on the back of an illegitimate election. In Managua, Daniel Ortega and his wife and Vice President Rosario Murillo celebrate their victory in an election marred with irregularities, including the jailing of every leading opposition candidate.

The stakes for Nicaraguans, the region, and U.S. security are high. Nicaraguans are one of the fastest-growing groups of migrants apprehended at the U.S. border. Ortega’s clampdown has demonstrated a path for budding authoritarians throughout the rest of Central America. Iran and Russia have signed cooperative agreements with the Ortega regime to provide security and circumvent international sanctions. 

And then there was Nicaragua’s recent diplomatic switch, after more than 30 years of recognizing Taiwan, to the People’s Republic of China. Dictators like Ortega often engage in “coup-proofing” and “isolation-proofing” maneuvers seen as providing ballast to their regimes. Ortega’s invitation to China should be seen as a naked attempt to consolidate his regime’s desire to install a dynastic dictatorship and hedge against his increasing economic and diplomatic isolation, as dozens of governments denounce his brutal regime.

The presence of U.S. adversaries in Central America is not only concerning from a security perspective; it demonstrates that states under heavy pressure to reform their human rights practices and return to democracy have “options.” The stakes involved in Ortega’s consolidation of power up the ante for successfully bringing long-term, sustained pressure on his regime. Indeed, Nicaragua could become a staging ground for Russian and Chinese power projection on the U.S. doorstep.

The Biden administration deserves credit where credit is due. It responded to the farcical elections last November by signing the RENACER Act, increasing sanctions coordination with international partners, tightening the monitoring of multilateral lending to the regime, as well as studying the ability to suspend Nicaragua from the CAFTA-DR trade agreement. The administration then blocked all persons associated with the Ortega regime, their families and associates from entering the United States.

While some analysts predict a diminishing set of returns to a continued pressure campaign against Ortega, there is much more that the U.S. and its international partners could do. In other words, there is plenty of runway remaining for a pressure campaign to succeed in forcing Ortega to concede, at a minimum, political space for the opposition to organize and the release of all political prisoners. The Biden administration should respond to the illegitimate Ortega regime’s inauguration with four specific actions that could bring long-term pressure against the regime.

1) It should sanction Ortega himself under the authority of the Magnitsky Act for presiding over extreme human rights violations. This action would not only be warranted but bring the U.S. sanctions architecture in line with existing designations on Murillo, the vice president. The U.S. also maintains sanctions on similar heads of state, such as Venezuelan leader Nicolás Maduro.

2) The U.S. should sanction the Instituto de Previsión Social Militar (IPSM), the Nicaraguan Army’s lucrative pension and investment fund. The army has been implicated in grave human rights abuses rising to the level of “crimes against humanity,” according to several human rights bodies. Sanctioning IPSM would update the U.S. sanctions architecture on army officials. Thus far, the U.S. has sanctioned the head of the army, as well as the executive director of IPSM, but not the institution itself. The benefits provided to the army’s upper brass through IPSM partly help to explain its loyalty to Ortega, and at last public accounting, the fund was significantly invested in U.S. markets. Sanctioning IPSM would respond to a significant element of Ortega’s domestic security apparatus.

3) The U.S. should consider freezing Nicaraguan central bank assets held at major banks in the United States. The U.S. has already sanctioned the head of Nicaragua’s central bank, but it has thus far declined to freeze any of those assets held in U.S. banks, such as J.P. Morgan and Morgan Stanley. Doing so could cut off the regime’s ability to pay off and ensure the loyalty of its cronies. However, the window of opportunity is closing quickly, as Ortega will likely pull these assets from the U.S. and move them to the opaque financial systems of Russia or China.

4) The U.S. should also curtail or cut off correspondent banking between Nicaragua and the U.S. This maneuver has two principal advantages: it is faster and also more targeted than a broad-based suspension of the country from the CAFTA-DR trade agreement because it aims at Nicaragua’s economic elite and its private enterprise council, which, despite its rhetorical commitments to the country’s opposition, could seek a “normalization” with the Ortega regime after the inauguration. 

These moves are intended to bring long-term pressure on the Ortega regime, but they also aim to counter the ruling couple’s narrative — that they have prevailed in their quest to cement a dynastic regime and that the U.S. will eventually lose interest, relent or succumb to the siren song of negotiations.

Instead, the message to regime cronies, the army and private-sector elites should be that there is no future with the Ortega regime — not now, not ever. 

The Jan. 10 inauguration of another illegitimate regime in Latin America demands a more robust U.S. response — before the cement dries on yet another dynastic dictatorship in Nicaragua.

Ryan C. Berg is senior fellow in the Americas Program at the Center for Strategic & International Studies (CSIS).