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Growing Nicaragua

Despite Dictators, Revolution, War and, Last Fall, Hurricane Mitch, Tobacco Men in Nicaragua Keep Planting and Rolling
Alejandro Benes
From the Print Edition:
Orlando Hernandez, Mar/Apr 99

(continued from page 2)

"The truth is that in the 1970s, Nicaragua became the alternative in the United States to Cuban cigars and tobacco," Toraño says. "The basic brand, without a doubt, was Joya de Nicaragua, [which] became the standard of quality cigars in the United States." By 1976, Nicaragua was responsible for almost a fifth of U.S. premium cigar sales, second in production to the Canary Islands. The Central American country was also becoming the worldwide alternative for premium leaf tobacco, all of it descended from Cuban seed introduced in the 1960s.

The cigar industry in Nicaragua flourished until the Sandinistas took over in 1979. The new government still supported tobacco, but it took away much of the land. "We continued after that with the Sandinistas, but not farming ourselves directly," recalls Alfredo Perez. "They grabbed all the farms. The government was the owner." The Perez family had already expanded their activities to Ecuador. "We never stopped [working] in Nicaragua," Perez adds. "We couldn't farm the tobacco ourselves during the Sandinistas, but we were the ones who bought the tobacco from the government, gave them technical assistance and sold the tobacco." Now ASP Enterprises Inc., the Perez's Miami-based tobacco business, rents the land from private owners, plants the tobacco directly, processes it and sells it all over the world. (Today, Silvio Perez still oversees the family's tobacco operations in Estelí, while his son, Alfredo, and Alfredo's children concentrate on other aspects of their tobacco business.)

The Sandinistas' impact was widely felt. By 1990, exports of Nicaraguan premium cigars to the United States stood at 1.25 million. "In the 1980s, the tobacco industry practically suffered a great reduction," says Omar Ortez, the president of Condega, Nicaragua-based Agroindustrial Nicaraguense de Tabaco, which makes the Felipe Gregorio, Orosi, La Gianna, Hoja de Habano, Flor de Florez and Diamante brands and employs about 1,800 people. "Factories were working here, but there was not a large amount being produced. There was an increase in the planting of burley [cigarette tobacco] and a reduction in wrapper leaf. Only filler leaf was planted."

During those days, Ortez managed state-owned farms in Estelí and Jalapa. His own family's property was not confiscated because the acreage was too small. "There was not a broad sales structure during the Sandinista years. There was also a reduction in the quality of the tobacco because they were trying to produce volume," Ortez adds, noting that during the U.S. embargo, in the second half of the 1980s, most of the Nicaraguan production was sold to East Germany. Other tobacco insiders have claimed that some Nicaraguan tobacco ended up in Cuban cigars, though the Cubans deny it.

Another problem that arose during the Sandinista regime led to the destruction of the country's wrapper crop. During these years, the Cubans brought technical assistance and additional seed to Nicaragua. But a batch of seed they brought in around 1980 had not been sterilized and it carried blue mold, a tobacco fungus that ravaged the crop and wiped out wrapper production in Nicaragua.

In 1990, the Sandinistas, believing their own public opinion polls, felt confident enough to hold elections in an effort to win crucial international respect and assistance. They were voted out. The widow of Nicaraguan martyr Pedro Joaquin Chamorro, Violeta Barrios de Chamorro, was chosen to lead the government. Her son-in-law, Antonio Lacayo, served as minister of the presidency--a post similar to the White House chief of staff--from 1990 to 1996.

"The most important thing [our administration did] was to try to reintegrate, to the degree possible, the tobacco installations and lands to their owners," Lacayo recalls. (The reintegration was fairly successful, he says; owners were awarded land, though not the same parcels that they had lost.)

"I never thought that a socialist government like the Sandinistas could survive in Nicaragua. So I decided to stay," Lacayo says. "I thought it would be very difficult for the Soviet Union to give the Sandinistas the same kind of subsidy as was being given to Cuba. But then [the Sandinistas' cause was ironically bolstered by] the openness with which the Reagan administration showed its aggression toward that government with the creation of the contras. A lot of European governments with a social democratic bent supported the Sandinistas to demonstrate their independence from the United States. [France's President François] Mitterand did it; [Spain's prime minister] Felipe Gonzales did it; [Italy's prime minister] Bettino Craxi did it, [as well as] some of the Scandinavian socialists. They perhaps did not have the intention of supporting Sandinismo, but they did intend to show within their own countries that they were independent and autonomous from the United States."

By the time the Sandinistas were voted out of power, they had saddled the country with a debt of $12.5 billion, a staggering sum for a nation whose annual gross domestic product then was $1.8 billion, with only $300 million in exports. The service on the debt alone was $250 million. Today, while Nicaragua boasts Central America's fastest-growing economy with a GDP tallying annual increases of 6 percent, the population of the country has practically doubled since 1978. This means that it will take another 25 years of such GDP increases just to return to the per capita income levels of 1977, according to Lacayo.

Under a law that prohibits a president from being succeeded by a family member (a safeguard designed to prevent a re-run of the Somoza dynasty), Lacayo could not run for president in 1996. Instead, he focused his energies on agriculture in the private sector and concluded that the best contribution he could make was by planting wrapper leaf.

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