Nearshore Americas

Nicaragua the Unlikely Winner in CAFTA-DR Pact with U.S.

Source: Miami Herald / Bellingham Herald

MANAGUA, Nicaragua — The United States free-trade agreement with Central America and the Dominican Republic (CAFTA-DR) celebrated its fifth anniversary this week with American officials hailing the pact’s exemplary success in Nicaragua — the region’s unlikely poster child for economic growth and job creation under the agreement.

For a country governed by a self-declared socialist who often rails against the evils of “savage capitalism,” Nicaragua has benefited from CAFTA more than any other signatory country. And despite the Sandinista Front’s initial attempts to block the trade agreement six years ago, claiming it would be a “death certificate” for farmers and small producers, officials from the now-ruling party now praise CAFTA and claim its successes as their own.

“Since entering into force in 2006, CAFTA has become a key instrument to attracting foreign investment, increasing exports and creating jobs in Nicaragua,” said retired Sandinista military general Alvaro Baltodano, head of the government’s free-trade commission.

Baltodano noted that free-trade zones in Nicaragua now employ 90,000 workers whose jobs are “tightly linked to CAFTA.”

“Nicaragua is the only country that has recuperated and increased its levels of (factory) jobs that existed here before the world financial crisis,” Baltodano said. “Nicaragua is the country that has most benefited from CAFTA.”

Fueled by the recovery of free-trade zones and new access to U.S. markets under CAFTA, Nicaragua’s exports to the United States over the past five years have grown by 71 percent, according to the U.S. government. Nicaragua now has a $1 billion trade surplus with the United States.

“Nicaragua has increased its exports to the United States significantly more than any other country in Central America,” Nicaraguan Foreign Trade Minister Orlando Solorzano told The Miami Herald.

Indeed, Guatemala’s export growth under CAFTA has grown the second fastest, up 26 percent from five years ago, while Costa Rica — which joined CAFTA three years later than the rest of Central America — ranks third, with 14 percent growth.

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Solorzano attributes Nicaragua’s record-setting export growth to the country’s “favorable business climate,” plus the preferential rules-of-origin provisions granted to Nicaragua’s textile sector under CAFTA, giving the country another competitive advantage over its neighbors.


Kirk Laughlin

Kirk Laughlin is an award-winning editor and subject expert in information technology and offshore BPO/ contact center strategies.

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