MANAGUA – The Nicaraguan government and the private sector are both celebrating the recent signing of the EU-Central America Association Agreement, which culminates three years of difficult negotiations with new hope for improved long-term relations between the two regions.
The association agreement, which was finalized May 18, is the first of its kind between the EU and any other region of the world, and contains mechanisms to deepen political and economic relations as well as inter-regional cooperation.
The EU also announced two new investment mechanisms for Latin America: the Latin America Investment Facility (LAIF), which will provide $150 million in grants for Latin American infrastructure and socioeconomic sustainable development through 2013, and a special asymmetry fund that will provide loans to Central American governments and businesses.
EU Ambassador Mendel Goldstein said the details of how the new asymmetry fund will operate have yet to be determined.
The complete details of the final association agreement also remain a bit fuzzy.
In fact, the final text of the agreement hasn’t even been translated into Spanish. But the details that have been made public are considered favorable to Nicaragua, which hopes to increase its trade income by $120 million thanks to generous quotas for beef, sugar and textile exports.
Goldstein said the final agreement is “not perfect, but perfectly balanced.” He said it includes provisions to compensate Central America for its economic and developmental asymmetries.
Nicaragua’s business class is already celebrating new opportunities to diversify export markets and gain better access to the 27-nation EU, which represents some 500 million people. Even though Nicaragua has had political and commercial relations with Europe since the colonization of the New World, the EU is still essentially an emerging market for Nica exports, offering plenty of room for growth.
Nicaraguan exports to the EU – over half of which is coffee – have been growing steadily since 2004. Nicaragua now enjoys a modest trade surplus with Europe, despite maintaining a sizeable global trade deficit.
Still, the levels of commerce are unspectacular. In 2008, Nicaragua exported around $213 million worth of products to the EU, while importing some $211 million in European goods, according to the most recent data available from the Nicaraguan government.
In global terms, the EU represents 14 percent of Nicaragua’s export market. By comparison, the Central American market consumes 31 percent of Nicaraguan exports, and the United States 28 percent.
But business leaders note that Nicaragua’s exports to the United States have grown 37 percent under the Central American Free-Trade Agreement with the United States (CAFTA). They hope for similar returns from the association agreement with the EU.
“We want to do the same with the opportunity that the EU is giving us to diversify our markets and become more competitive,” said Roger Arteaga, president of the Nicaraguan-American Chamber of Commerce (AMCHAM). “We want the EU to invest in Nicaragua to generate more wealth here so Nicaraguans can live with more dignity.”
The Superior Business Council (COSEP) also released a statement acknowledging its satisfaction with the “advantageous” terms of export given to Nicaragua’s industrial and agricultural sectors. COSEP called the association agreement a product of successful teamwork between the private sector and the government, and said its favorable terms for Nicaragua show that “results are more favorable for everyone” when both sides can work together with a common vision for the nation.
Sandinistas Claim Credit
The Sandinista government has also been generous in celebrating itself for its role in negotiating the association agreement.
Government negotiators said Nicaragua’s “coherent” position made it the strongest country in the negotiation process.
But as recently as a month ago, President Daniel Ortega’s position looked more pessimistic than coherent. In April, Ortega railed against the EU association agreement, calling it “neocolonialism in disguise.” He insisted that Nicaragua and El Salvador wouldn’t participate in the final round of talks – a claim quickly dismissed by El Salvador, which did not appreciate Ortega speaking on its behalf.
Then on May 6 – less than two weeks before the accord was signed – Ortega again predicted its demise by stressing that conditions did not exist to finalize negotiations.
And Ortega was the only Central American president to skip the signing ceremony on May 19 in Madrid.
But that didn’t stop the Sandinista government from claiming full credit for the successful conclusion of the agreement.
Indeed, the Nicaraguan government went so far as to pat itself on the back for playing a leadership role in process.
Orlando Solórzano, minister of Finance, Trade and Industry (MIFIC), credited his president for representing strong leadership during the homestretch of the negotiations – even from afar.
“He wasn’t there, but he was directing us during the whole negotiation process during the final stretch,” Solórzano told Sandinista media outlets. “There were strategic orders, given by telephone. (Ortega was) in permanent communication giving us orientation about how to handle the very difficult final part of the negotiation process.”
Not Just Trade
EU Ambassador Goldstein stressed that the association agreement is much more “complete” than just a trade agreement. Trade, in fact, is only one of the three aspects of the accord.
“The most important (part of the association agreement) is the support it will give to political and economic stability in the region,” Goldstein told a group of Nicaraguan business leaders at a recent AMCHAM luncheon in Managua.
He said the EU thinks the association agreement will help strengthen the Central American integration process, consolidate its economies and “help Central America overcome recent problems.”
However, when pressed on how exactly the association agreement will do all that, Goldstein limited himself to saying the agreement would help “establish a climate for trade and negotiation to overcome these types of problems.”
When approached afterwards by journalists, Goldstein made a quick exit without going into further details.
AMCHAM’S Arteaga, meanwhile, said he hopes the association agreement will allow the EU to take a stronger role in accompanying Nicaragua on the path towards democracy. He said democratic support will be especially important next year, when Nicaragua enters what’s shaping up to be a contentions presidential election.
The association agreement with the EU, he said, is coming at a time when Nicaragua needs it most.
“We all know about the millions of dollars lost due to electoral fraud (in 2008), which has forced the government to cut the budget several times and punish us with more taxes,” Arteaga said. “That’s not good for investment it makes us less competitive. So we need the EU more than ever now.”