Since the electoral defeat of the Sandinistas in 1990, Nicaragua has gone from being America’s Cold War foe to being its free-trade ally. Not only did it reject Communism and embrace democracy, it also joined President Bush’s “coalition of the willing” and sent 115 soldiers to Iraq. Last year’s approval of the Central American Free Trade Agreement seemed to solidify its transition.

Having taken two steps forward — to rework Lenin’s famous phrase — Nicaragua now has taken one step back. In the presidential election on November 5, voters returned Sandinista leader Daniel Ortega to power. He prevailed with only 38 percent of the vote. Under Nicaragua’s peculiar election law, which was recently modified by Ortega’s political allies, a candidate wins a first-ballot victory if he captures 35 percent of the vote and holds a 5 percent lead over the runner-up. Eduardo Montealegre, Ortega’s most serious opponent, was hobbled by a split among anti-Sandinista parties, and finished second, with 29 percent of the vote. If the two men faced each other in a runoff, Montealegre almost certainly would win. But he won’t have that opportunity.

Thankfully, the stakes in Nicaragua are not what they were in the 1980s, when the country was a client state of the Soviet Union and, along with Cuba, a beachhead for totalitarianism in Latin America. Yet the return of Comandante Ortega is certainly unfortunate. He would have Nicaraguans believe that he is a changed man: Having chosen “Give Peace a Chance” as a campaign theme song, the onetime Leninist is now supposedly a Lennonist. He prays in church, pushes pro-life legislation, and claims to believe in national reconciliation. But he still condemns “savage capitalism” as if it were the cause of all his county’s woes.

What Nicaragua really needs is a leader who can foster a healthy environment for small business and attract foreign-investment dollars. The Index of Economic Freedom, compiled by the Heritage Foundation and the Wall Street Journal, rates Nicaragua as “mostly unfree” — a big improvement from the days of property confiscation during Ortega’s previous rule, but still far behind the “mostly free” economies of Costa Rica, El Salvador, and Panama. Under Montealegre, Nicaragua might have gained ground; with Ortega, it will be lucky to keep from sliding backward.

An optimist might hope that Ortega will mimic Alan Garcia, who returned to Peru’s presidency earlier this year. He appears to have shed his past ideology and is now trying to negotiate a free-trade pact with the United States. Ortega, for his part, says he’s committed to CAFTA.

Even so, the truism that past performance predicts future performance should give us considerable pause. During their last spell in power, Ortega and the Sandinistas were disastrous for Nicaragua. They sparked a civil war, presided over runaway inflation, and locked up political dissidents. Ortega can’t look to Moscow anymore, but he might easily slip into the orbit of Caracas, where Venezuelan caudillo Hugo Chavez is forging alliances with Iran and North Korea and seeking to stoke anti-Americanism through petrodiplomacy.

The only good news may be that in four years there will be another election — and a chance for Nicaraguans to make a wiser choice.