Concerns Grow as Economy Continues to Slip

May 22, 2009

MANAGUA – While the Central Bank reports first-quarter numbers that continue to show a decline in economic activity during the first three months of 2009, a forum of producers and concerned citizens met in a downtown Managua hotel last week to put a human face to the data by sounding off on a litany of economic and financial concerns. With the effects of the global economic crisis being felt on all levels of society, Nicaraguan’s top concerns, as voiced at the forum, are falling export levels, decreased production and disappearing jobs.

Some economists claim Nicaragua is already in a recession after three consecutive quarters of negative economic growth and some 25,000 lost textile jobs over the past 15 months (NT, April 17).

Central Bank President Antenor Rosales admits Nicaragua’s economy is taking a hit, but the government has been hesitant to use the “r” word so far.

One of the major concerns expressed at last week’s forum is the diminishing demand for Nicaraguan exports, especially in the textile and agricultural sectors. Many argue the government needs to do more to offset the downward trend.

“The government has the initiative and the responsibility to solve the problems of the people, and not just (look after) its own interests,” said José Luis Romero, a university investigator from the National Polytechnic Institute.

Old and young alike attended the forum, which emphasized Nicaragua’s difficult position as a small, developing economy in an increasingly harsh global environment.

Some say the the Central American Free-Trade Agreement with the United States (CAFTA) has subjected Nicaragua to unfair terms of competition with larger regional economies.

Nicaragua’s traditional agricultural exports are sugarcane, coffee, and bananas and the economy remains heavily reliant on small-scale farming, which was promised new markets under CAFTA.

Overall, however the trade pact has benefited the economy, with exports to the United States up by more than 20 percent. Yet since entering into the free-trade agreement in 2006, Nicaragua has also seen an influx of cheaper foreign commodities from the United States and other more affluent Central American economies, which some say is dampening the country’s own production levels and creating a dependence on imported goods.

“The introduction of transgenic seeds by transnational companies creates a dependency on fertilizers manufactured by the same companies,” Romero said. “This is affecting the campesino economy; the farmers have to pay for the rights to use these seeds, increasing their costs of production and creating more poverty.”

Across town at the Central Bank, the government’s top banker released his first quarter report May 14, substantiating many of the concerns expressed in the citizen forum.

Central Bank President Rosales reported that Nicaragua’s exports have dipped 11 percent in the first quarter of 2009, compared to the same period last year. That amounts to $355 million in lost export revenue, according to the Central Bank.

The numbers also indicate that Nicaragua is faring slightly worse than its neighbors’, with Central America as a region reporting an 8.3 percent drop in exports. In the United States, meanwhile, exports are down 17.6 percent.

In order to avoid recession here, the government is attempting to diversify the national economy and looking abroad in an attempt to strengthen trade relations with the United States, but also with non-traditional partners such as China, Russia, and Iran. In addition, the government plans to inject an additional $385 million in social spending.

 

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