Divide and be conquered.

THE CROWD waiting to hear former Nicaraguan president Daniel Ortega speak at St. Aloysius Church consisted mainly of middle-aged women with short, greying hair, plus a few leftist students. Mr. Ortega was late, and the small crowd was impatient. The woman behind me remarked to her companion: "We'll wait 'til nine. I want to get back in time to watch the Seton Hall [NCAA basketball] game." Life as a defeated dictator is not easy.

Mr. Ortega was in town as an official member of a Nicaraguan government delegation to the World Bank's Consultative Group. Unlike the rest of the world's newly democratic governments, Nicaragua does not plead for aid as a reward for, or to enable it to undertake, lightning-fast free-market reforms. Nicaragua's case for aid, as delivered by Ortega, is less subtle: Pay up or else.

Pay up or else Nicaragua will return to civil war, a civil war that will destabilize Central America once again. That is the last thing anyone in Washington wants. After the sharply divisive battles over aid to the Nicaraguan freedom-fighters during the Reagan years, most members of Congress would rather discuss check bouncing than current events in Nicaragua.

When Ortega did arrive at St. Aloysius he was the best dressed person there. One recalls that, when in Manhattan a few years ago, he purchased $3,000 worth of designer eye-wear with the Nicaraguan Embassy's Diners Club card. Now, he defends his right to keep property he looted as he was leaving the presidency, including 13 homes in Managua, as necessary to ensure that the new government does not confiscate land from poor peasants to give to rich farmers.

In his two-hour-long speech, Ortega assured the faithful that the Sandinistas still controlled the army and the police. He claimed that he had no problem working with the Chamorro government: "If we can get them to do things we would do, better than we would do them ourselves, then let them remain in charge for a long time."

But why does the Chamorro government go along? "We have to treat them not as they treat us but as we wish they treated us," says the head of the Nicaraguan delegation, Antonio Lacayo, President Chamorro's son-in-law and Minister of the Presidency. While Mrs. Chamorro mainly confines herself to ceremonial duties, Lacayo runs the government.

Lacayo is one of the few businessmen who remained in Nicaragua and quietly prospered under the Sandinistas. This alone arouses suspicion from Nicaragua's educated class. He is bright (an engineer educated at Georgia Tech and MIT), charming, and exceedingly self-confident. Lacayo negotiated the transition agreement with the Sandinistas that kept them in charge of the army, the police, and the internal intelligence services.

Lacayo plays to his audience. Meeting with congressional Democrats he claims he is a social democrat. For a luncheon hosted by the Heritage Foundation, he donned a crimson Heritage tie given to him a year ago after a similar luncheon.

Two years ago Lacayo pleaded for patience from those who urged that the Sandinistas be purged from power as quickly as possible. He claimed that the goal of Mrs. Chamorro's strategy was to divide and conquer.

This strategy appears to be working. Prominent Sandinistas are now publicly challenging the Sandinista leaders, opposing their calls for violence, and denouncing their luxurious lifestyles. Some are calling for democratic reforms within the party; others have left the party altogether. But Mr. Lacayo has abandoned this strategy even as it was bearing fruit.

When I asked him why he brought Mr. Ortega to Washington when he could have brought real Sandinista reformers instead, he explained that he has two choices. Either he can contribute to the divisions among the Sandinistas, or he can help keep them united. If the divisions deepen, the radicals will become marginalized, "and we will have a bunch of little Qaddafis running around kidnapping businessmen."

Around town, Lacayo was all promises. In response to a stern warning, delivered by Secretary Baker in January, that reforms were not moving quickly enough, Lacayo came armed with a plan to reform the police. A source familiar with the plan says it "keeps the same monkeys in different trees"; nothing has been done to bring in new leadership at the top.

At the World Bank, Lacayo pointed out that Nicaragua has controlled runaway inflation and stabilized the currency. He pointed with pride to the diversity of the delegation seated with him, including Ortega, a private businessman, a labor representative, and a congressional member of the UNO coalition (the 14 parties that supported Mrs. Chamorro).

What Lacayo did not say was that the UNO congressman did not have the support of the UNO parties, which, in protest of Ortega's inclusion, had decided not to send a representative. Lacayo did not explain that the businessman did not have the support of COSEP, Nicaragua's leading private-sector council. He also did not say that the labor leader represented one of the increasingly violent Sandinista labor unions.

In turn, Lacayo did not really get what he came for. Aside from a reconfirmation of aid already scheduled for this year, all he took home was vague assurances that aid would continue next year. A press statement issued by the World Bank notes that the restitution of private-property rights is "a necessary element in creating an investment climate conducive to attracting needed capital."

Nicaragua is a much freer place than it was under the Sandinistas. However, as National Assembly President Alfredo Cesar, a former Contra leader who is married to Lacayo's sister, explains: "The Sandinistas were a closed, repressive regime. We now have a closed, benevolent regime."

Secretary Baker repeated his forceful reform pleas to Lacayo privately in Washington. However, until Nicaragua's aid is publicly threatened, Lacayo's promises will probably remain only that. Such a step would risk allowing the discredited Sandinistas to rally anti-American sentiments; but without it, real reforms are unlikely. Suspend the aid, and let the Nicaraguans decide whom to blame.

Mr. Hirschmann is Vice President for Programs at the Washington-based Council for Inter-American Security Foundation.