MANAGUA, Nicaragua — As the 5 a.m. train from Granada rolls through the countryside, scores of unlicensed merchants climb aboard with sacks of rice, corn and beans to sell in Managua's Eastern Market.
By law, most grain is supposed to go directly from the farm to government warehouses for distribution at low prices, and until recently, the police would stop the train to seize the sacks as contraband.
So an early warning system was set up. Whenever a railway guard spotted the police, he would radio a coded message--"The country is in danger"--to the approaching train's conductor. The merchants would be alerted to unload, and the rail workers would collect a protection fee from the contents of the grain sacks.
The pre-dawn ritual--beneficial to the farmers, the merchants and the state-employed railway men--worked so well that the government recently suspended the train raids. It also dismantled roadblocks set up on highways two years ago to try to keep smuggled merchandise out of Managua.
In retreating from such ineffective and unpopular measures, Sandinista officials admit that illegal vendors play a bigger role than ever in supplying food, clothing, soap and other essentials to Nicaragua's 3 million people.
Frustrated by their inability to guarantee those necessities to everyone at low prices, the Sandinistas instinctively blame the U.S.-backed contras for crippling the economy. But they are at odds among themselves over what to do about the merchants.
Some See Futile Fight
To some in the government, the vendors are evil speculators who profit from the country's troubles and must be sent to jail or put out of business with more sophisticated controls. Other Sandinistas say it is futile to fight them.
"We are trying to find the right policy," Vice President Sergio Ramirez said in a recent interview. "There is anxiety among some officials to solve this problem by trying to get their hands on everything that moves, but it is impossible. The more free mechanisms we have for the production and sale of food, the less trouble we are going to have."
Although 60% of the economy is nominally in private hands, the Sandinistas set all legal wages and prices and try to control the distribution of consumer goods.
In state-run neighborhood stores, anyone with a ration card is entitled to buy at controlled prices each month a pound of beans, three pounds of rice, four pounds of sugar, 2 1/2 quarts of cooking oil and a bar of soap.
In the grain belt around Granada, the government buys rice for 3,500 cordobas per 100-pound sack and sells it for 4,000 cordobas, about 80 cents.
But government stores are often out of rice, because farmers have sold at least a third of this year's crop to middlemen who can get 35,000 cordobas ($7) per sack in the Eastern Market.
The result is a vicious cycle of shortage and speculation. Farm labor, already drained by compulsory military service, is further diminished as peasants realize they can live better by leaving their land to buy and sell food.
"We cannot work the land anymore because they took away our sons to fight in the mountains," said a middle-aged woman who smuggles corn on the train.
Cattle Across Borders
Cattlemen evade the requirement to sell to the state by driving their herds over the borders into neighboring Honduras and Costa Rica, and this has created a meat shortage. Others slaughter them in secret for sale through private channels.
Earlier this year, police raided a home in Managua's Barrio Revolucion at 4 a.m. as a man with an army knapsack was butchering cattle in a walled courtyard. The butcher and 10 head of cattle escaped, but the owner of the house went to jail.
Contraband also comes from factories and from the very bureaucracy designed to control it.
According to government statistics, slightly more than half of Nicaragua's 1 million workers belong to the "informal sector," a euphemism for unlicensed entrepreneurs who do not pay taxes. At least 120,000 are said to be retail merchants.
The proportions were similar in the 1970s under President Anastasio Somoza, who personally controlled much of the formal economy but left the rest of it pretty well alone.
Today's illegal economy is more pervasive than the figures indicate because so many wage earners have a stake in it. They include factory workers who collect part of their pay in the goods they produce or buy low-priced merchandise in company stores and then turn around and sell at a profit on the open market.
Officials Also Involved
According to Sandinista officials quoted in the pro-government press, they also include army supply officers who skim food rations destined for soldiers fighting the contras, state warehouse supervisors who privately sell parts of their inventories and Internal Commerce Ministry inspectors who take bribes to supplement their meager income.