After two weeks of national protests, during a pro-government rally on 30 April, President Daniel Ortega confirmed plans for a national dialogue mediated by the Catholic Church but with no details on start timelines or participants.

• Outcomes of a national dialogue are unlikely to fully resolve protester demands for democratic freedoms and government transparency.
• The business environment is unlikely to face immediate operational changes as government and coalition dialogue partners strive to ensure economic policy stability.
• Protests may resume if dialogue fails within the month, raising death and injury risks across the country.

Proposals for a national dialogue in Nicaragua come 14 days after country-wide protests began over the government's unilateral decision on 16 April to amend the Social Security Laws governing contributions to the Nicaraguan Institute of Social Security (INSS). The reforms increased contribution amounts paid by employees (from 6.25% to 7%) and employers (on average from 19% to 22.5%) and reduce pension pay-out amounts by 5%. Initial anti-government demonstrations led by university students, retired union workers, and social activist groups in urban centers like León, Managua, and Masaya caused President Daniel Ortega to rescind the changes on 21 April.

However, the police reaction, resulting in at least 43 confirmed deaths and over 400 injured, changed the tenor of the protests to mounting demands for Ortega's resignation; demonstrations culminated with a national "pilgrimage" to the Metropolitan Cathedral on 28 April involving hundreds of thousands of peaceful demonstrators. High-level participants, including private business representatives, invited to formal talks with government representatives on wide-ranging socio-economic and justice issues will need to agree on concrete institutional and democratic reforms to appease public demands.

Burgeoning public discontent

Ortega's government has steadily consolidated power and control over government institutions since its return to power in January 2007. Although the protests (#SOSNica on social media) have been the largest and most violent demonstrations in recent years, the population has become increasingly active in taking to the streets as one of the only tools remaining to express opposition to government actions. In a precursor to recent protests, in early April, university students marched in the capital to denounce the government's failure to protect the Indio Maiz Biological Reserve as it faced destructive fires. Protestors were countered by pro-government Sandinista Youth and a disproportionate number of riot police; similar tactics were observed during youth demonstrations in June 2013 (#OcupaINSS). Elections have acted as another protest flashpoint in recent years with municipal elections in November 2017 resulting in at least five deaths and 70 injured, accompanied by commercial looting, arson attacks, and break-ins to government offices in municipalities including Bilwi, RAAN; Jalapa, Nueva Segovia; and Rancho Grande, Matagalpa.

Police-led reactions to public protests in recent years have damaged the generally high degree of confidence and levels of professionalism once enjoyed by Nicaragua's security institutions, recalling instead the National Guard tactics deployed during the country's years of dictatorship. National Police head Aminta Granera resigned on 28 April over the alleged excessive use of force during the latest protests, but the move is largely symbolic as Granera's authority had been meaningfully reduced over the past two years in favour of Ortega-confidante Commissioner General Francisco Díaz.

Governing alliance breakdown

In addition to mounting popular anti-government sentiments, traditional areas of support for the Ortega government also have been weakened in recent months. Power consolidation and a weak opposition in Nicaragua typically had been balanced by a consensus model used to negotiate policies between the government and the private sector led by Council for Private Enterprise (Consejo Superior de la Empresa Privada: COSEP), shoring up business confidence. However, this consensus had been dropped in recent months as the government excluded COSEP from commenting on changes to the minimum wage and anti-money laundering laws affecting the financial system as well as pushed forward proposals to censor social media networks. Consequently, COSEP rejected INSS reforms, supporting peaceful protests including that of 23 April and calling for a return to consensus-model dialogues. Although COSEP typically would be a primary participant of any negotiations, its role in granting legitimacy to Ortega's regime means that it is unlikely to be trusted by the public, damaging their capacity as mediators. The political opposition also remains weak, unorganized, and mostly outside the 92-seat National Assembly controlled by the majority-ruling Sandinistas – Sandinista National Liberation Front (Frente Sandinista de Liberación Nacional: FSLN).

Outlook and implications

The legitimacy of the Ortega government has been impaired, weakening its capacity to deliver the current policy agenda in 2018 and creating a growing power vacuum in the country. Further complicating the situation is the lack of opposition leadership as the current wave of protests has been the result of national mobilisation rather than instigation by specific groups. Without credible political parties there is an absence of leadership with sufficient legitimacy to represent protester demands. However, it is increasingly likely that talks held between leading community rights activists and labor, academic, and private enterprise representatives will be required to obtain significant institutional reform concessions from Ortega's government if protest escalations are to be avoided. The absence of significant resolutions likely would also increase government instability risks over the next year including changes to important government positions. Failure of the talks could result in Ortega and members of his executive leaving the country prior to the next elections with indicators including a significant outward movement of private capital from the country and expressions of support for Ortega from receptive countries like Venezuela. Despite the upheaval, parties participating in any dialogue or transition committees are unlikely to push for immediate economic policy changes as a means to ensure stability during talks and through the next year including in the case of a transition to reassure foreign investment capital. Similarly, it is unlikely that the United States will act on calls to rush passage of the NICA Act and instead is likely to wait on the outcomes of the National Dialogue. Indicators of a successful dialogue decreasing government instability risks will be if outcomes include concrete measures on government transparency, power concessions including a re-separation of powers, independent appointees to security institutions, and electoral tribunal reforms.