A Country Held Hostage

By Jill Smolowe

THE JACKAL FLASHED A WICKED smile as he ushered 38 invited guests into the red brick schoolhouse. Before the Nicaraguan government delegates could take in their surroundings in the muddy mountain town of El Zungano, the Jackal's band of former contra guerrillas closed around them in a tight cordon. Training automatic weapons on the hostages, the rightist rebels announced the price for freedom: dismissal of Sandinista army chief Humberto Ortega and top presidential aide Antonio Lacayo, viewed as too easy on the country's ousted Marxist rulers.

Within 24 hours, Comandante 31 and his band of ex-Sandinista officials responded by storming the Managua headquarters of the conservative National Opposition Union (U.N.O.). Seizing 34 people including Vice President Virgilio Godoy Reyes, they demanded the release of the El Zungano hostages and U.S. war reparations of $17 billion. For six days, Nicaraguans feared the worst as mediators sought a compromise between the outlaw bands. Finally, both sides agreed to free all hostages, and the government and former contras signed an eight-point plan aimed at alleviating tensions.

While relief was evident when the standoff ended without spilled blood, most Nicaraguans saw little cause to celebrate. The conditions that provoked the confrontation -- governmental disarray, unpopular political appointments, unsettled land grievances and shattered economic hopes -- remain unaffected. Though few citizens are girding for a resumption of the civil war that despoiled Nicaragua throughout the 1980s, there is a palpable fear that if the two sides do not continue a dialogue, the country will sink from political polarization into chaos. "Our tradition has been to divide in times of crisis," says Jose Pallais, the Deputy Foreign Minister. "The solution has always been for one group to get on top and squash the other."

The spectacle was hardly edifying to Washington. For most of a decade, the U.S. made Nicaragua a prime ideological battleground, spending hundreds of millions of dollars, enduring bitter domestic debate and engaging in illegal- arms deals to face down Managua's Soviet-backed rulers. Only the end of the cold war prompted the two superpowers to bow out. Americans thought Nicaragua's problems were solved when Violeta Barrios de Chamorro was elected President in early 1990.

But she has done little to pull the country out of its mire. When the government faltered on its promise to deliver land and reparations, former contras and ex-Sandinista troops took up guns again to grab territory and settle scores. In Managua the leader who pledged national reconciliation could not even reconcile the players within her own government. Last January the 12- party U.N.O. broke with her, along with Vice President Godoy. That has left Chamorro politically dependent on the Sandinistas, who were allowed to retain de facto control of the army and police forces. Now they too are pulling away as the economy worsens. The legislature is in virtual paralysis, with nearly half the Deputies refusing to attend sessions.

Although the elegant Chamorro still commands considerable respect among the Nicaraguan people and abroad, her detached management style has increasingly isolated her. Through the first 24 hours of the hostage drama, she did not act at all, waiting for her son-in-law and chief of staff, the controversial Lacayo, to return from a trip to El Salvador. Even then she remained out of sight, while other politicians and civic leaders visited or sent representatives to the hostage sites. Before the last prisoners were freed on Wednesday, she left for Mexico, offering no explanation. In the end, the government indicated only half-hearted interest in bringing charges and made it clear that the abductors would be granted amnesty. "The hostage incident was a product of the incompetence and negligence of the government," says economist Francisco Mayorga, chief of the negotiating team. "The President and the people in power are aloof and detached from reality."

Even if Chamorro were more engaged, she would be in a difficult spot. She must navigate between the Sandinistas, who balk at most attempts to decontrol the economy, and the U.N.O. coalition, which denounces every concession given to the former ruling party. Although the President has reduced the public sector, advanced privatization and deregulated commerce, U.N.O. members continue to rail at her for maintaining prominent Sandinistas in top positions. "In the end, Chamorro didn't keep anybody happy," says Rene Nunez, a Sandinista leader.

Nicaraguans fear they have made little progress since voters signaled their hunger for reconciliation and democratic reform three years ago. The hostage standoff seemed like a new production of an old script with a familiar cast of characters. Cardinal Miguel Obando y Bravo headed the government negotiations with the contras, now called the recontras. Former President Daniel Ortega mediated with the ex-Sandinistas, rechristened the recompas, for rearmed soldiers or companeros. Even the costumes and props remained the same. The recompas sported the Sandinistas' trademark black-and-red kerchiefs. The recontras, outfitted in fatigues, hoisted rifles purchased with funds thought to have come from Miami-based backers.

The prospect for more disturbances runs high. Last March recontras stormed the Nicaraguan embassy in Costa Rica and took 25 people hostage. Two months later, the monotonous routine of strikes, denunciations and demonstrations was broken by a blast in Managua that uncovered a well-stocked safe house reportedly maintained by Salvadoran and Basque guerrillas, rekindling fears that the Sandinistas were engaged in international subversion. July brought the worst incident to date: 45 people were killed when recompas clashed with mostly government troops in the northern town of Esteli. The recontras claim that since 1990 about 400 of their men have been killed by recompas. The military counters that it has little control over the renegade recompas forces.

Meanwhile, the political upheaval scares off foreign investors. The government's failure to return all the properties unjustly confiscated by the Sandinistas and to diminish Sandinista influence on policy has also put off some aid donors, most notably the U.S. During the first two years of Chamorro's term, Washington gave nearly $1 billion in grants, loans and forgiven debt. But in July the Senate voted to cut off $94 million in aid, pending the outcome of an ongoing investigation of Nicaraguan army and < intelligence ties to international terrorists. The House will soon decide whether to follow suit.

Chamorro can ill afford to let aid funds dry up. Gross domestic product is growing at an annual rate of less than 1%. Six of every 10 people are unemployed or so underemployed they have trouble buying basic necessities, and 70% of the population lives in poverty. Progress is stymied by battles over farmland, and small landowners, even recompas, complain that they cannot gain access to credit because the Sandinistas control bank disbursements.

Analysts connect the snarl of problems to a single thread: the lack of any patriotic spirit. Says Angel Saldomando of cries, a private think tank in Managua: "There is no political class with a national consciousness, no social base from which to resolve the problems." That leaves Chamorro, out of touch and over her head, fumbling to start a national dialogue. Late last week she seemed to be signaling new resolve as reports circulated that the ex- Sandinista army intelligence chief, now director of army information, was about to be dismissed.

Although the popular sentiment is to see Chamorro finish her six-year term, U.N.O. leaders may conspire to cut short her tenure. If her former allies mount a legislative challenge, Chamorro has little strength to fight back: she now commands the loyalty of only her Cabinet ministers. Yet neither Sandinista nor U.N.O. leaders are clamoring for the job. The truth is that no one wants, or knows how, to govern Nicaragua today.

With reporting by Maria Cristina Caballero/Washington and Laura Lopez/Managua