MANAGUA – A high-ranking trade representative from the administration of U.S. President George W. Bush last week urged the Sandinista government to maintain a positive investment climate to take maximum advantage of the Central American Free-Trade Agreement with the United States (CAFTA).
Christopher Padilla, U.S. undersecretary for international trade at the U.S. Commerce Department, said that CAFTA is the “common ground” between the United States and Nicaragua, despite ideological differences among the two governments.
“We have different opinions than the government of Nicaragua on some issues, that’s no secret; but CAFTA is common ground. It is the essential foundation of common interest in our relationship,” Padilla told the Nicaraguan-American Chamber of Commerce several hours before meeting with President Daniel Ortega on Feb. 27.
Padilla noted that CAFTA, which on April 1 will complete two years in existence between the United States and Nicaragua, has already resulted in a 30% export growth of Nicaraguan products to the U.S. market, with respect to 2005. That is the fastest growing export rate of any Central American country, he noted.
Padilla said that CAFTA has also generated $600 million in new foreign investment in Nicaragua. However, he warned, the Ortega administration needs to be careful of its rhetoric if it wants to maintain positive growth in the future.
“Capital is a coward,” Padilla said.
“Investors don’t go to places where they fear they will lose their money. For this reason, the message of the Nicaraguan government is of the utmost importance.”
Though the Ortega administration in practice has committed itself to CAFTA – a trade agreement that was passed in the first place thanks to Sandinista support in the National Assembly – Ortega has at times taken a more ideological position against the free-trade agreement with the United States, calling it an example of “savage capitalism.”
Ortega instead has chosen to promote the importance of ALBA, or the Bolivarian Alternative for the Americas, a cooperation agreement among the left-wing governments of Bolivia, Cuba, Venezuela and Nicaragua, which aims to offset U.S. influence in Latin America.
Nicaragua is the only ALBA country to also have a free-trade agreement with the United States.
Padilla said that as far as the United States is concerned, it was “no problem” if Nicaragua wants to trade with Venezuela. He said that the “United States will maintain a relationship of cooperation with any government that respects democracy and the free market, despite political orientation to left, right or center.”
However, Padilla added, Ortega would be wise to curb some of his rhetoric.
“Words matter, because investors have choices to go elsewhere,” Padilla said. “CAFTA,” Padilla said, “created the conditions for success but doesn’t guarantee success.
Investors have the opportunity to go to another country if they don’t have confidence that Nicaragua will continue on the path to democracy and free market.”
Padilla then repeated his message to Ortega in a private meeting behind closed doors later that evening.
U.S. Embassy press spokeswoman Kristin Stewart said afterwards that the meeting with the president, which lasted more than an hour, was “really positive” and that it had touched on a number of issues important to the two governments.
On paper, CAFTA and ALBA are very different agreements. CAFTA is a voluminous commercial accord hatched over nine laborious rounds of negotiations between trade representatives and technical teams, and then subject to final approval by the legislative bodies of each country. The final product is an extensive set of rules for import and export.
ALBA, on the other hand, came into being on Ortega’s first day in office, Jan. 11, 2007 – without any discussion, negotiation or vote.
In contrast to the specifics of CAFTA, ALBA is a vaguely worded cooperation agreement that provides a big tent for any dealings between Venezuela and Nicaragua, all of which carry the ALBA stamp.
Yet despite their differences, both agreements have a similar peppering of political ideology and an agenda for the region.
Ortega has credited Venezuelan aid under ALBA as a lifesaver that has spared the Nicaraguan economy from “total collapse” – a statement that has been discredited by economists and opposition politicians alike.
CAFTA boosters, too, are equally enthusiastic about crediting the U.S. trade agreement as the “principal motor of economic growth” in Nicaragua, as Padilla said last week.
The U.S. trade official announced rather hopefully that CAFTA is “creating a growth in investment, generating jobs, reducing poverty and strengthening institutions for the development of democracy and free market” in Nicaragua.
Recent polls, however, show that most Nicaraguans think the economy is not generating new jobs, that poverty is growing as the cost of living increases, and that public credibility in government institutions is at an all time low.
Economist Alejandro Aráuz says both CAFTA and ALBA have an ideological component, but that CAFTA helps promote production and competitiveness, which is good for the economy regardless of ideology.