With no other Central American country the United States has a trade deficit more than with Nicaragua. The United States buys more from you than it sells from you, and not only that: Nicaragua is, in relative terms, the Central American country that exports the most to the US. (60.4% of what it sold abroad in 2019; the highest figure among its neighbors) and the one that imports the least from there (only 27.1%, the lowest quota). Despite, therefore, that Nicaragua is the most privileged country in the region, comparatively, due to the proximity of the large US market, to the regime of Daniel Ortega and his wife, the vice president Rosario MurilloHe does not seem to mind endangering an economic relationship that, without justification, gives a favorable treatment to the poor Central American nation.
Possible financial penalties have just been raised in Washington as a reaction to the authoritarian consolidation of the family Ortega-Murillo, which in recent weeks has detained several opposition leaders and even former comrades of the old Sandinista revolution against the previous Somoza dictatorship.
A bipartisan initiative in the U.S. House of Representatives calls for a revision of the free trade agreement with Nicaragua, integrated into the Free Trade Agreement with Central America (CAFTA, to which those of the Dominican Republic are usually added, also added to the pact). The feasibility of this punishment must be accepted with skepticism, because the process of revision of a treaty takes a long time and in principle should be negotiated with the rest of the countries of the agreement; however, it is clear that Washington can do economic harm to Nicaragua, even though businessmen and citizens in general would be the ones who, above all, would end up being affected.
Fear of Ortega approaching Beijing
For the United States, trade with Nicaragua is small change: it is in the position 62 between your business partners. And although it certainly represents a deficit ratio for the United States, unique in the region, the 2,300 million dollars in favor of Nicaragua in goods and services in 2019 (so far in 2021 the difference is even widening, according to US statistics ) do not constitute a great imbalance for the North American power. After all, the US more than makes up for it with the surplus it maintains with the Dominican Republic (more than 3,400 million) and with Guatemala (above 2,800). These figures, in any case, show the somewhat preferential treatment given to Nicaragua, in transactions that focus on the clothing manufacturing sector, characteristic of very poor countries, with cheap and unskilled labor.
Since the CAFTA entered into force in 2006 in Nicaragua, Nicaraguan exports to the US. have grown 229% compared to pre-treaty levels, and imports have done so 164%, according to the US Department of Commerce.
That has not prevented Ortega from becoming the reference partner of Russia in Central America, but it has made it unnecessary to lie in the arms of China: Ortega has preferred to maintain the exceptionality of the recognition of Taiwan, which has probably been offering you more personal advantages. Herein lies the main geopolitical risk for the United States if it cuts its purchases from Nicaragua: that the small country turns to China, increasing its presence in Central America, something that worries Washington, especially when Watch seems to want a greater entente with Beijing.
Nicaragua has not taken advantage of CAFTA
The Association of Producers and Exporters of Nicaragua (APEN) complains that CAFTA has not served what it was created for. “The impact at the Central American level has not been as expected, there are problems in all countries, the GDP of the countries has not improved,” said its president, Guillermo Jacoby to the Managua newspaper ‘La Prensa’.
In reality, the problem of poverty in Nicaragua should not be attributed to a properly wasted business opportunity, but to the Nicaraguan productive structure and the policies of its Government. It is true that the so-called countries Northern Triangle –Guatemala, El Salvador and Honduras– are not able to overcome their unfavorable economic situation either (a trade agreement with the United States such as NAFTA is not enough: it is an indispensable condition, but not enough, hence the need for other types of aid and investments such as those now promised by the Biden Administration), but Costa Rica and the Dominican Republic Well, it has taken advantage of this free trade with the great North American market, with its competitive policy of free zones, for example (Panama is not part of CAFTA).
Sanctions against the Ortega-Murillo family
The congressmen who promote the revision of the treaty allege that it requires the signatory countries to guarantee legal security for business, maintain free competition and promote transparency and Rule of law, among other requirements. And they assure that the undemocratic actions of Ortega, who is also attacking the business class, previously an ally, go against those principles.
But a review of the treaty requires time (the congressmen propose a period of two months and that for the preparation of a report that would then have to be studied). Furthermore, Jacoby cautions that Washington cannot unilaterally modify what is stipulated in CAFTA, but must be something agreed with the other six countries that comprise it (at first the US signed the agreement with each of the countries, but later it became a multilateral commitment).
The best way not to harm the Nicaraguan population would be economic sanctions directed against specific persons. In recent days, the US Treasury announced economic sanctions against Camila Ortega Murillo, daughter of the marriage leader and coordinator of the Creative Economic Commission, and against Leonardo Ovidio Reyes, president of the Central Bank. Taking into account that the children of the presidential family control various companies, the appropriate thing would be to hinder their activity as much as possible and attack their assets, knowing, in any case, that they may have many subterfuges at their disposal.