US-Nicaragua Aid Cut Due To Concerns Over Democracy

07/12/2009 05:12 am ET | Updated May 25, 2011

WASHINGTON — The United States on Wednesday canceled more than $60 million in assistance to Nicaragua, citing concerns about democracy, rule of law and a free market economy in the Latin American nation now led by a former Marxist guerrilla leader.

The board of the Millennium Challenge Corporation, a U.S. taxpayer-funded operation set up by former President George W. Bush to fight poverty in developing nations, said it had cut $62 million from a $175 million program for Nicaragua because of problems in recent elections.

"This decision is made with deep disappointment, as our partnership with Nicaragua has yielded tremendous progress over the past years in reducing poverty through innovative economic growth projects," said Rodney Bent, the corporation's chief executive.

The cut in aid follows a suspension in new U.S. assistance announced last November after municipal elections that the opposition said were marred by fraud. Nicaraguan President Daniel Ortega, a leader of the Sandinistas in the 1980s, declared the protests were unconstitutional.

In March, Ortega accused the U.S. of punishing the poor with the suspension and defended the local elections, in which his Sandinistas won a majority of mayorships, as fair. The opposition said the vote was fraudulent and complained that international observers were not allowed.

Bent said the MCC would only back countries whose "governments actively demonstrate a commitment to democracy and the rule of law, as well as economic freedom and social investment."

"Given the lack of meaningful reforms or progress in these areas by the government of Nicaragua, the board has agreed to terminate these projects," he said. The canceled projects include a property regularization project and improvement of a major road.

Secretary of State Hillary Rodham Clinton, who chairs the MCC board and participated in the Nicaragua decision, said U.S. assistance had to be "as effective and transparent as it is generous."