The US House of Representatives has passed the Nicaraguan Investment Conditionality Act (NICA) of 2017, which aims to cut Nicaragua’s access to loans from international financial institutions in response to what the bill’s sponsors deem “violations of human rights and retrogression of democracy in Nicaragua”. Critics of the bill argue it is an attack on the country’s alliance with Venezuelan president Nicolas Maduro and will harm the more vulnerable members of Nicaragua's population.

HR1918, introduced by congresswoman Ileana Ros-Lehtinen, was passed on October 4 with unanimous consent from both parties. An identical bill has been brought forward to the Senate by senator Ted Cruz and co-sponsors Marco Rubio and David Perdue. If signed into law, the bill would direct US president Donald Trump to leverage the country's foreign influence to “oppose loans at international financial institutions” unless the “government of Nicaragua is taking effective steps to hold free, fair, and transparent elections” and “for other purposes”. A previous iteration of the bill died in the Senate in 2016.

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James Bosworth, founder of emerging markets consulting firm Hxagon, said: "The problem with NICA is that it attempts to undermine what is positive about Nicaragua’s economy rather than target what is negative about its political system. Limiting Nicaragua’s access to the international financial system will limit foreign investment and make the poor of the country poorer without directly costing the Ortega family, or other corrupt government officials, a single cent.

“Unfortunately, as NICA shows, we continue to treat the issues of democracy and human rights on a country-by-country basis of which leader acts as an ally or antagonist.”

While Nicaragua’s relationship with the US has long been complex and at times adversarial – most obviously during the Reagan administration’s extrajudicial support of the rebel Contras – the two countries had been broadly co-operative until recently.

Shannon K O’Neil of the Council on Foreign Relations said the recent escalation stems from the Trump administration’s directionless foreign policy in the region. “There is a strong contingent in the US Congress – including Mr Rubio – that, for personal and electoral reasons, is adamantly opposed to the authoritarian regimes in Cuba, Venezuela and Nicaragua,” she wrote. “Mexico aside, where he has lots to say, Mr Trump doesn’t have strong opinions about the rest of the region, and the policy has been, at least in part, guided by these Congressional voices. Hence the reason Nicaragua’s democratic failings matter to the US, when so many others (such as Turkey) don’t.”

The bill has been roundly criticised by all member states of the Bolivarian Alliance for the Peoples of Our America. The sponsors of the bill did not reply to requests for comment.