Robust Investment and Development Expected to Continue with CAFTA
MANAGUA – Nicaragua’s investmentand development growth is a locomotivethat cannot be derailed by any futurechange in the country’s political leadership.And investors can rest assured thatthe “democratic forces” will unite onceagain to prevent former revolutionaryPresident Daniel Ortega from returning topower in 2006, as they have in the lastthree presidential elections.This is the message of Nicaragua’sbusiness-promotion sector, which is predictingthat continued economic growthwill only accelerate when the U.S.-CentralAmerican Free-Trade Agreement (CAFTA)enters into force here, after being ratifiedby the U.S. Congress and Nicaragua’sNational Assembly.Investment-promotion agencies ProNicaragua and the Nicaragua-AmericanChamber of Commerce (AMCHAM) areboth painting a rosy picture of futuregrowth in Nicaragua’s foreign directinvestment and per-capita income.Neither thinks Ortega will win thepresidential elections next year; even if hedoes, they hedge, don’t expect the country’seconomic situation to change much asa result.THE Sandinista leadership, despite itscontinued revolutionary rhetoric, includessome of the leading businessmen – hoteliers,restaurant owners and even bankers –in Nicaragua, notes AMCHAM PresidentRené González.“They are capitalists,” González toldThe Nica Times, adding that there is a realdisconnect between the Sandinistas’rhetoric and their personal economic interests.The political and economic realities ofthe world have changed dramatically sincethe 1970s, González said. The march ofeconomic liberalization and investmentgrowth cannot be deterred in Nicaragua, heassured.The AMCHAM president and longtimeaccountant said that, even in practice,socialism in Latin America has evolvedinto a more business-friendly political systemin recent years. González noted thatleft-wing governments in countries such asBrazil and Chile have developed newhybrid economic models that employ capitalistinvestment to fund social-spendingprograms.Ortega’s continued anti-imperialist,anti-U.S. rhetoric, he added, is just politicalhot air to win sympathy from voters –not an ill omen of changes to come.“No one can stop the economic growthhere,” González said. “Even if we were tohave the Ayatollah Khomeini as our president,he couldn’t stop it.”STILL, the Sandinista National LiberationFront’s impressive victory in theNovember 2004 municipal elections, inwhich the party won 57% of the municipalgovernment posts, has some investors –both potential and current – worried aboutthe former revolutionary party’s positionheading into the elections next year.Real-estate agents claim that althoughthe market is still red-hot here, somepotential buyers appear to be in a holdingpattern, waiting to see what will happen innext year’s elections.María Rivas, associate director of ProNicaragua, admits that Nicaragua – similarto other Latin American countries – willmost likely enter into an investment slumpin the year preceding an election. But shedismisses the anticipated slump to baselessspeculative fears and remains optimistic itwon’t halt progress here.PRO Nicaragua and AMCHAM arealso confident that CAFTA will bear juicyfruit for Nicaragua, which was able tosecure preferential benefits in the area oftextiles – the fastest-growing sector ofNicaragua’s foreign direct investments.In 2003, Nicaragua’s foreign directinvestments grew to $241 million, placingthe country second behind Costa Rica forall of Central America that year. In 2004,the number grew to $260 million.Although tourism is the number-onemoneymaker in Nicaragua’s economy(bringing in a record-breaking $166 millionlast year), the maquiladora (textilefactory) sector is still the number-onesource of foreign direct investments.ALTHOUGH it is still not clear whenthe National Assembly will ratify CAFTA,proponents claim that Nicaragua will growat a whopping 8% annually – double thecurrent growth level – under the trade pact.Nicaragua’s per-capita income, underCAFTA, is expected to double in fiveyears, reaching $1,400-1,600 by 2009,according to AMCHAM’s González.The short-term benefits of CAFTA,analysts predict, will be a dramaticincrease in the country’s maquiladora sector,in which 15 companies are currentlyoperating and an additional 11 – representing40,000 new jobs – have already beenapproved to set up shop here this year.While the maquiladora sectors inother Central American countries havetaken a hit following the Jan. 1 lift on thetrade restrictions placed on China (NT,Jan. 7), the free-trade sector continues togrow in Nicaragua, which, according toPro Nicaragua, has the lowest averagewage in the region, at $0.67 an hour.González said Nicaragua should followthe example of the Asian giant in hopes ofbecoming the “China of Central America.”China’s tremendous economic success– averaging a growth rate of 9% a year –cannot be ignored, González said. Basedon the Chinese model, AMCHAM hasdeveloped a course called “DesigningYour Trade and Investment Strategy forthe United States.” The course, which willbegin this month, will be taught toNicaraguan business leaders by a staff of Colombian teachers.CURRENTLY, 87 companies – mostlyU.S. and Asian – operate in Nicaraguaunder free-trade status, employing 66,000people.While the wages are generally low, ProNicaragua says it is working to attractmore skilled manufacturing jobs (qualityclothing products and electronics) in hopesof creating higher-skilled jobs at slightlyhigher pay.Pro Nicaragua is also aggressively promotingNicaragua as the new “near-shore”destination for call centers to create higher-skilled jobs for the 90,000 Nicaraguanswho graduate from university each yearand enter the workforce.Two call centers are currently operatingin Nicaragua, employing 50 bilingualphone operators who offer customer-supportservices in English for various U.S.companies with 800 numbers.Pro Nicaragua’s Rivas told The NicaTimes the average salary of call-centeremployees here is $350 a month forSpanish speakers, and starts at $500 amonth for English speakers – or roughlyfour or five times the salary of an averagemaquiladora worker.TO develop a bilingual employee poolin Nicaragua for future call-center operations,Pro Nicaragua last year started theWeb site www.nicasearch.com.The response has been astounding,with more than 4,000 applicants registeringonline in less than a year. Of those, theBerlitz language-instruction company hascertified 2,000 as “highly bilingual.”Rivas said Pro Nicaragua expects thenumber of call centers to increase here,because operating costs in Nicaragua (rent,salaries, telecom and utilities) are 30% lessthan in Costa Rica.TOURISM investment is also expectedto grow in the coming years, especiallyin the colonial city of Granada.Granada has 15 hotels and hostels, butthere is still a “room deficiency” astourism numbers outgrow the city’sroom capacity. Three new hotels are beingbuilt in Granada, with plans for moredevelopment.Tourism and foreign investment continueto fuel the construction sector inNicaragua, which grew a monstrous 646%last year.TROPICAL agriculture is anothersector of Nicaragua’s economy that isexpected to benefit from CAFTA, accordingto analysts.Nicaragua is one of the only countriesin the region that grows peanuts andcashews, and melon exports are alsoexpected to grow.New technologies being used inNicaragua’s countryside have helped tomake the agricultural sector more competitivein the last year, AMCHAM’sGonzález said.A team of Israelis recently introducedNicaraguan tomato farmers to a new cultivationtechnology that last year yieldeda harvest 10 times that of the year before.Other farmers are producing hydroponicseedless watermelons, beef that is more tothe liking of U.S. importers, and newcheeses that meet U.S. standards ofsanitation.SOME agricultural sectors will sufferunder CAFTA because they will not beable to compete on the open market,González admitted.Products such as corn and other traditionalstaples will most likely crumple,because – in González’s opinion – “theseare sectors that have no future regardlessof CAFTA.”Expecting an initial displacement ofcampesinos after CAFTA enters intoforce, Nicaragua has secured a $50-milliongrant to deal specifically with thisproblem.Overall, free-trade boosters argue,CAFTA is a necessary tool for progress.“This is our chance to enter the largesteconomy in the world,” González said.
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