WHAT CAN BE DONE about Nicaragua's broken economic glass? After receiving $300 million in aid from the United States last year, Chamorro counted on expected grants and loans from other international sources to revive the economy. Because of the chaotic state of the economy, however, lenders are reluctant to cough up funds until the new reform package announced last month begins to take effect.

But relying on institutions like the IMF instead of proceeding with real reform at home would be a perilous tack for Chamorro to take. Nicaragua certainly needs to reduce its foreign debt. But as Nicaragua's current debt demonstrates, foreign aid, although an attractive idea, tends to increase countries' dependence upon foreign governments rather than building up a strong domestic economy.

In addition, such aid tends to get funnelled into government rather than private enterprise. And those private companies that do receive aid are, more often than not, chosen to please corrupt government cronies rather than to invigorate competitive enterprise.

Chamorro's plan to allow the creation of private banks, illegal since the Sandinista Revolution in 1979, could help provide needed startup capital for emerging small firms. Many foreign banks, including several from Mexico, have expressed interest in entering the Nicaraguan lending market.

But simply creating private banks will fail to address the more fundamental problems in the Nicaraguan economy. Chamorro must stop stalling on privatization efforts. She must gain the political will to defy the unions if she wants to reduce her government's $35 million-a-month deficit. She must stop extending credit to pay for union blackmail if she wants to control inflation.

Most important, Chamorro must free private businesses from the exorbitant taxes and arbitrary regulations begun under Somoza and extended under the Sandinistas. "Reform" will do little to alleviate Nicaragua's overall poverty if promised foreign aid reinforces the prerevolutionary maldistribution of wealth. If aid comes without a freer business climate, small firms and small farmers will suffer at the expense of a retrenchment of the upper class returning from exile.

Before asking for another extension of credit from President Bush, she should take another look at her own plans to pick up the pieces of Nicaragua's shattered glass.

>Five-digit inflation. Falling productivity. Not much has changed.