USA slaps Nicaragua on the face for breaking a trade pact
MIAMI (AP), — According to a U.S. official, the Biden administration may try to expel Nicaragua out of a lucrative regional trade pact or to allocate Nicaragua’s valuable sugar quota an other country in Central America as a retaliation against President Daniel Ortega’s crackdown on his enemies.
According to an American official, the economic impact of the actions are still being analyzed and no decision has yet been made.
However, any action that affects billions of dollars in annual trade with America could cause serious economic pain to the country’s business elite who have mostly watched as Ortega’s repressive methods have grown, stated the official.
Eddy Acevedo (son of Nicaraguan immigrants, chief of staff at Woodrow Wilson Center in Washington) stated that Nicaragua’s private sector must make a decision. They can either aid and abette this tyrannical regime that has blood on its hands, or stand with the Nicaraguan people who long for freedom and democracy. This may prove difficult to find given the number of business leaders currently in prison.
The U.S. considers Nicaragua to be a daily witness against the antigovernment activists who were gathered up before last fall’s elections. Ortega won easily a fourth consecutive term, with his likely opponents unable compete. All of the defendants have been sentenced and convicted.
To date, the Biden administration has responded to Ortega’s authoritarian tendencies by targeting members of the president’s inner circle as well as family members with sanctions that cut off their access to U.S.
The 2004 signing of the Central America Free Trade Agreement would have been a significant blow to Ortega’s government. It would also deprive Ortega of valuable export earnings and foreign investments. Nicaragua is the only CAFTA member to have a trade surplus of $2.5 billion with the U.S. last year. This represents 20% of the country’s gross domestic product.
It is not easy to remove Nicaragua from the trade agreement.
CAFTA is an international treaty that was ratified in seven countries. Many U.S. retailers have deep ties to Nicaraguan suppliers, particularly in the textile sector.
There is no expulsion mechanism in the treaty, so Nicaragua’s neighbors and the Dominican Republic would have to pull out of the agreement. They could also negotiate a new deal where other grievances, such as U.S.-negotiated trade agreements that don’t include democracy clauses, like the one used by Brazil and Argentina to suspend Paraguay’s participation in the Mercosur trade pact.
Eric Farnsworth, who was a former U.S. trade negotiator under the Clinton White House, is now vice president of the Council of the Americas. Funded by U.S. businesses doing business in Latin America, Farnsworth said, “It would certainly be messy.” It would send the right message that the private sector should stay clear of Nicaragua.
Farnsworth suggests that the U.S. could refuse to import certain products arguing that Nicaragua is under U.S. sanction. Farnsworth says this is a simpler alternative. This would allow Ortega to sue the United States under the terms of the treaty, which would start a long and expensive process.
Another option, which would see Nicaragua’s annual sugar supply re-assigned to another Central American country, is also under consideration. This would eliminate what amounts to a U.S. subsidy of millions of dollars each year.
Farnsworth stated that a labor-intensive sector like sugar could cause resentment towards Ortega in Nicaragua’s rural areas. This was the scene of the bloody civil conflict in the 1980s between Ortega’s Sandinista Army and the U.S-backed Contra rebels.
Carlos Pellas, Nicaragua’s richest man and largest sugar producer, could be mobilized by choosing sugar. Pellas signed an open letter that business leaders sent to Ortega after 2018’s anti-government protests, asking for Ortega to hold elections. He said that the country’s economy was in crisis. He’s been on the sidelines since Ortega started to crack down, at least publicly.
However, his family had significant properties that were expropriated under Ortega’s 1980s regime and they could be at risk of being retaken.
Ortega has sent out a clear message of support to any economic elites that might be opposed to him. Police arrested two business leaders and the president and vice-president of the top business association in the country in June. They were charged with money laundering, inciting foreign interference, and acts that reduce the country’s independence.
Similar charges were brought against him by his political adversaries.
The U.S. Congress passed Renacer Act just before the November elections, giving Ortega more power. The law included a mandate that the White House must review Nicaragua’s participation to CAFTA. It also required a report on Russia’s security ties to Nicaragua. This report is due late this month.
Manuel Orozco is a Nicaragua expert who spoke at the Inter-American Dialogue and said Ortega’s government has already violated several parts of the trade agreement, particularly labor provisions.
He warned, however, that CAFTA’s dissolution could lead to its downfall and even benefit Ortega. Ortega could then try to reimpose U.S. tariffs and blame Biden for the increased cost to consumers.
Orozco stated that it was a double-edged weapon. “It could bring in more revenue for Nicaragua if you attempt to dismantle CAFTA.”