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Trade Note on Nicaragua
Trade Note on Nicaragua
is yet another first ever attempt of this Embassy aimed
at diversification and increase in the bilateral trade
between India and Nicaragua. While giving outlines of
the agricultural, mineral, forestry, industrial, etc.,
sectors, old data are given in order to give an idea
of the growth of economy of Nicaragua. However, in the
Annexures to this Trade Note, the data are updated and
a serious reader is requested to look at these latest
data on the economy of Nicaragua. These annexures would
also provide a glimpse into latest economic scenario
of Nicaragua and at the same time, the major import
and export items of Nicaragua. The main Note would give
an idea to the interested parties to identify their
import/export items and in case they need further information,
they are welcome to write to this mission. This Note
would be updated periodically and sent to the concerned
officers in the Ministry of External Affairs, Ministry
of Commerce, major export promotion councils, etc.,
so that the information is disseminated for the benefit
of Indian business community to enable them to find
out business opportunities in Nicaragua.
I am grateful to the
officers in the Ministry of External Relations of Nicaragua
who have given us some useful information without which
this Note could not have been completed. Also I would
like to mention here the patience and dedication shown
by my P.A Mr. S. Ramakrishnan, who has devoted lot of
time for preparing this Note.
(Tara Singh)
Ambassador
11.04.01
Overview of Nicaraguan
Economy
Nicaragua’s economy is
based mainly on agricultural production, although there
is much untapped economic potential - minerals, land
and other resources - yet to be exploited. The country’s
principal export crops are coffee, sugar cane, sesame
seed, meat and bananas. A variety of grains, such as
corn, rice, beans and abundant varieties of tropical
fruits are grown for domestic consumption. Cattle production
has declined considerably in recent years. However,
the government has established new incentives for cattle
producers.
Following the 1979 revolution
the Sandinista government pursued ambitious policies,
attempting to meet broad social goals within the framework
of a mixed economy. The banking and insurance sectors
and many farms and companies were nationalized and the
government also took control of the traditional export
sector. Government investment averaged 20% of GDP in
1980-1984, much higher than the Central American average.
By 1988 Nicaragua was
in a desperate economic and financial crisis. In February
1990, the United States resumed trade with Nicaragua
and restored its financial aid. The previously nationalized
farms, using the revenue for the Nicaraguan government
began the privatization of repayment of debt and to
encourage foreign investment. The new government regained
fiscal discipline, stabilized the currency and restored
links with the international financial community. During
this period, inflation declined dramatically from 33,657%
in 1988 to 12% in 1993, 18.46% in 1998 and 7.19% in
1999; private investment increased to 10% of GDP and
exports increased significantly. The government also
unified the exchange rates and adjusted most import
tariffs to a range of 10% to 40%, reactivated the free
trade zone and reduced 90% of its debt owed to the Soviet
Union and some Latin American countries.
The present government
has promised that getting the economy moving is its
top priority. Fortunately, the economy that was inherited
was already expanding strongly. President Aleman has
emphasized the reform of the judicial system and measures
to improve the tax and investment laws in order to attract
foreign investment. Reports from the Inter-American
Development Bank (IADB) indicated that Nicaragua has
complied in general terms the commitments to enter the
Initiative of Highly Indebted Poor Countries (HIPC).
The HIPC would enable this Central American country
to reduce 80% of its foreign debt of US$ 5.5 billion.
It was reported that Nicaragua had advanced very much
in its commitments of the macro-economical indicators,
the Structural Adjustment Programme and the reforms
of the State in the financial system and the electrical
sector, among others.
A comparison of the relative
contribution by different economic sectors to the GDP,
for the period 1993 -1996, is presented below:
Comparison of Annual GDP
contributions, by sector
| Origins of GDP(%) |
1993 |
1994 |
1995 |
1996 |
1997 |
| Agriculture and Fishing |
31.1 |
33.1 |
33.3 |
34.2
|
33.8 |
| Mining |
0.6 |
0.6 |
0.6 |
0.9 |
0.9 |
| Manufacture |
17.0 |
16.4 |
16.2 |
16.0
|
15.6 |
| Construction |
2.9 |
3.2 |
3.6 |
3.8 |
3.9 |
| Electricity and Water |
1.2 |
1.2 |
1.1 |
1.2 |
1.2 |
| Transportation & |
3.9 |
3.7 |
3.8 |
3.4 |
3.4 |
Communications Commerce
|
23.9 |
23.4 |
23.5 |
24.1 |
24.1 |
| Financial Services |
5.5 |
5.3 |
5.3 |
5.3 |
5.3 |
| Government |
8.2 |
7.5 |
7.0 |
5.6 |
6.4 |
| Other |
5.7 |
5.6 |
5.6 |
5.5 |
5.5 |
| Total GDP |
100% |
100% |
100% |
100% |
100% |
| GDP¹ |
1.808 |
1.852 |
1.920 |
1.971 |
2.018 |
¹ In US billions
of Dollars.
Source for 1993-95
figures: Central Bank; Inter-American Development Bank,
Annual Report on Latin American Economic and Social
Progress, 1996.
Source for 1996-97
figures: Central Bank statistics released in January
1998.
| Origins
of Gross Domestic Product (1999 - actual) |
%
of total |
Agriculture |
27.8 |
Manufacturing |
18.5 |
Mining |
1.9 |
Construction |
7.1 |
Electricity, gas &
water supply |
3.0 |
Commerce |
17.8 |
Central Government
|
6.8 |
GDP at factor cost including
others |
100.0 |
| Components
of Gross Domestic Product – 1999 |
%
of total |
Private consumption
|
75.4 |
Government consumption
|
17.6 |
Fixed investment
|
30.1 |
Change in stocks
|
0.3 |
Exports of goods &
services |
36.5 |
Imports of goods &
services |
-59.9 |
GDP at market prices
|
100.0 |

Source: Central Bank of Nicaragua
According to a report
attributed to President Aleman, Nicaragua’s GDP registered
an increase of 5% in the year 2000 to US$ 2.27 billion
despite the increase in the prices of petroleum products
and fall in the prices of Nicaraguan exports in the
world.
Nicaragua's economy grew
by 4.0 percent in 1998, down from 5.0 percent in 1997,
and short of the 6.0 percent expected before Hurricane
Mitch took its toll in production, infrastructure, and
human lives. The primary sector (agriculture, livestock
and fishing) was the most affected, with the growth
rate falling from 8.3 in 1997 to 4.2 in 1998. The secondary
sector (manufacturing, construction and mining) also
saw its growth rate slow from 5.7 to 4.0 percent from
1997 to 1998. Private investment, from both domestic
and foreign sources, is rising. Nevertheless, GDP per
capita is only an estimated $441, the second lowest
in the hemisphere. The unemployment rate fell from 14.3
percent in 1997 to 12.3 percent in 1998. The combined
rate of unemployment and underemployment was 25.5 percent.
The administration of
President Arnoldo Aleman signed an ESAF (Enhanced Structural
Adjustment Facility) program with the International
Monetary Fund in January 1998 and continues its concerted
drive to modernize the economy and open it to foreign
trade and investment. Accomplishments over the past
year include passage of an austerity government budget,
streamlining the government, signing of a market-opening
free trade agreement with the Dominican Republic, and
passage of a modern copyright law.
Prospects look good for
sustained rapid economic growth beyond 1999. However,
success depends on the government's ability to stay
on track with its ESAF, make significant progress in
resolving property disputes, strengthen the rule of
law, and take other steps to remove obstacles to private
investment. The National Assembly passed in May 1999
a Tourism Incentives Law that may generate increased
interest on the part of potential investors, especially
Japanese, Taiwanese and Europeans.
It is expected that GDP
growth will slow in 2001 primarily owing to the uncertainty
surrounding the presidential election. A degree of crowding
out of the private sector is also likely to continue
to flatten growth. However, exports should continue
to perform well, which will help to offset sluggish
domestic demand. Once the presidential election is decided
there should be a rebound in 2002, fuelled by continued
export growth and an increase in domestic demand. The
budget for Nicaragua for 2001 has been approved at US$
2.11 billions – an increase of 5% over the 2000 budget
(US$ 2.01 billion) with a deficit of US$ 1.29 billion
that would need to be covered by internal and external
debt. The main priority areas of budget spending would
be health, education and public security. Inclusion
of Nicaragua in the HIPC would allow reduction of 80%
of the external debt of US$ 6.5 billion – whose interest
itself consumes more than 40% of the annual export earnings
of the country. IMF & IADB have set up a new list
of requirements for economic and social austerity measures
to be met by the government by end 2001 which include
combating government corruption and strengthening banking
and financial sectors.
MACRO ECONOMIC
DATA AND FORECASTS
| |
1999 |
2000(e) |
2000
- 2001
lastest period |
2001(f) |
2002(f) |
Population (mn)
|
4.57 |
4.69 |
- |
- |
4.80 |
4.91 |
Total GDP (US$ bn)
|
2.28 |
2.32 |
- |
- |
2.71 |
3.18 |
Real GDP growth (%)
|
7.6 |
5.5 |
5.5 |
Jan-Dec |
4.0 |
4.2 |
Annual inflation (end
period, %) |
7.2 |
9.4 |
9.4 |
Dec |
10.0 |
9.5 |
Lending rate (%, average
period) |
20.0 |
20.0 |
- |
19.5 |
- |
- |
FX rate (NIO/US $, end
period) |
12.3 |
13.3 |
12.9 |
20-Feb |
12.5 |
12.5 |
Exports (fob, US$ bn)
|
0.54 |
0.61 |
0.42 |
Jan-Jul |
0.69 |
- |
Imports (fob, US$ bn)
|
1.68 |
1.75 |
0.98 |
Jan-Jul |
1.72 |
- |
Trade balance (fob-fob,
US$ bn) |
-1.14 |
-1.14 |
-0.56 |
Jan-Jul |
-1.03 |
- |
Current account (US$
bn) |
-0.65 |
0.68 |
- |
- |
-0.79 |
- |
Current account (% of
GDP) |
-28.6 |
29.3 |
- |
- |
-29.1 |
- |
Foreign reserves (excluding
gold, US$ bn) |
0.51 |
0.40 |
0.42 |
Sept. |
0.45 |
- |
Import cover (months)
|
3.6 |
2.7 |
- |
- |
4.2 |
- |
Public foreign debt
(US$ bn) |
5.00 |
5.00 |
- |
- |
3.50 |
- |
(e) = estimate (f) =
forecast
Forecast summary
(% unless otherwise indicated)
| |
1999ª
|
2000 b |
2001 c |
2002 c |
 |
|
|
|
|
| Real GDP growth |
7.0 |
4.9 |
4.5 |
5.5 |
 |
|
|
|
|
| Oil exports (US$ bn) |
135.3 |
164.0 |
153.1 |
143.6 |
 |
|
|
|
|
| Unemployment rate (av) |
23.0 |
19.6 |
16.7 |
13.3 |
 |
|
|
|
|
Consumer price inflation |
|
|
|
|
| Average |
11.3 |
11.1 |
11.0 |
10.9 |
| Year-end |
7.2 |
11.1 |
11.0 |
10.9 |
 |
|
|
|
|
| Short-term interbank rate |
22.1 |
21.1 |
20.7 |
20.4 |
 |
|
|
|
|
Government balance
(% of GDP) |
-11.7 |
-9.2 |
-7.0 |
-3.8 |
 |
|
|
|
|
Exports of goods fob
(US$ bn) |
0.6 b |
0.6 |
0.7 |
0.8 |
 |
|
|
|
|
Imports of goods fob
(US$ bn) |
1.7 b |
1.9 |
1.8 |
1.9 |
 |
|
|
|
|
Current-account balance |
|
|
|
|
| (US$ bn) |
- 0.7 b |
-0.9 |
-0.9 |
-0.9 |
| % of GDP |
-28.8 b |
-29.7 |
-25.7 |
-24.5 |
 |
|
|
|
|
External debt
(year-end; US$ bn) |
6.2 b |
6.4 |
6.6 |
6.7 |
 |
|
|
|
|
Exchange rates |
|
|
|
|
| C:US$(av) |
11.81 |
12.69 |
13.45 |
14.26 |
| C:¥100(av) |
10.37 |
11.85 |
12.93 |
13.98 |
| C: (year-end) |
12.37 |
11.62 |
13.98 |
15.99 |
| C:SDR(year-end) |
16.91 |
16.38 |
18.43 |
20.21 |
 |
|
|
|
|
a:Actual. b: estimates. c: forecasts.
Comparative Indicators of the Regional
countries vis-à-vis Nicaragua
| |
1999 |
2000
e |
2001
f |
2002
f |
| Real GDP Growth,
% y-o-y |
|
|
|
|
Costa Rica |
8.0 |
1.4 |
2.5 |
2.8 |
El Salvador |
3.4 |
2.0 |
1.5 |
2.5 |
Guatemala |
3.6 |
3.3 |
3.5 |
2.8 |
Honduras |
-3.0 |
4.7 |
3.5 |
3.5 |
Nicaragua |
7.6 |
5.5 |
4.0 |
4.2 |
Panama |
3.2 |
2.8 |
3.0 |
3.8 |
| |
|
|
|
|
| Inflation,
% y-o-y |
|
|
|
|
Costa Rica |
10.1 |
10.3 |
10.0 |
10.5 |
El Salvador |
-1.0 |
4.3 |
3.5 |
2.8 |
Guatemala |
4.9 |
5.1 |
6.0 |
5.0 |
Honduras |
10.9 |
10.1 |
11.0 |
11.5 |
Nicaragua |
7.2 |
9.4 |
10.0 |
9.5 |
Panama |
1.4 |
2.0 |
1.8 |
1.5 |
| |
|
|
|
|
| Current Account
Balance, % GDP |
|
|
|
|
Costa Rica |
-3.3 |
-2.6 |
-2.3 |
- |
El Salvador |
-1.7 |
-2.3 |
-2.9 |
-1.7 |
Guatemala |
-6.1 |
-5.4 |
-4.7 |
- |
Honduras |
-9.9 |
-7.2 |
-7.9 |
- |
Nicaragua |
-28.6 |
29.3 |
-29.1 |
- |
Panama |
-9.3 |
-7.3 |
6.5 |
- |
e = estimates f = forecasts
Source: Latin America
Monitor – April 2001
Inflation and exchange
rates
Barring external shocks
or a recurrence of natural disaster, it is expected
that the rate of inflation to remain almost unchanged
in 2001-02. Inflation remained under control at a level
below 10% while devaluation of the currency was restricted
to 6% even though the State had to pay more than US$
100 million to guarantee refund of public deposits in
two failed private banks.
PRINCIPAL GROWTH SECTORS
OF NICARAGUAN ECONOMY
Agriculture, fishing,
manufacturing, mining, telecommunications, tourism and
construction are the principal sectors that promise
significant short term growth. The primary sector (agriculture,
fishing and forestry) represents 26.7% of GDP, 40% of
employment and two-thirds of the exports. The primary
sector grew 8.5% in real terms in 1997. The secondary
sector (manufacturing, construction and mining) comprising
20% of GDP, grew an estimated 4.8% during 1997. Each
category of the tertiary sector (commerce, transportation,
housing, government) grew at least 4% in 1997, except
for government, which contracted by 5%.
Agriculture: Nicaragua
is essentially an agricultural country with a land area
of 11.88 million hectares, of which 888.7 thousand are
dedicated to agriculture. The country’s principal export
is coffee, followed by sugar cane, cotton, meat, sesame
seed, peanuts, bananas, and tobacco. However, during
1996, lower world prices for coffee and meat led to
the decline of their contribution to the primary sector.
The principal agricultural products for national consumption
are rice, beans, corn, and fruits. In the early 1990s
efforts to diversify showed few results, although renewed
access to the U. S. market and USAID

Source: Central Bank of Nicaragua
funding encouraged melon
and citrus producers. Nicaragua’s efforts to diversify
started to pay off in 1996, when non-traditional exports
(such as tobacco, lobster and shrimp, peanuts, wood,
and powdered milk) exceeded traditional exports for
the first time. The agricultural production has shown
significant growth in the period 1990 - 2000 due to
commercial liberalization, deregulation and privatization
trends, expansion of the cultivated area, and rising
demand for non-traditional products.
Agricultural production
(including farming, livestock, fisheries and forestry)
accounts for 26.7 percent of Nicaragua's GDP and two-thirds
of exports. The sector grew 4.2 percent in 1998, down
from 8.3 percent in 1997, as a consequence of the passage
of Hurricane Mitch. The Nicaraguan government, as well
as the international donor community, is placing great
emphasis on agricultural reactivation. Farming grew
7.2 percent in 1998, down from 9.7 percent in 1998.
Fishing grew only 1.5 percent, down from 6.5 percent
in 1997. In 1998, the livestock industry shrunk 1.8
percent, due to factors such as international beef prices,
Hurricane Mitch damage, limited credit and other factors.
Over the long term, Nicaragua's low population density
and ample grazing land offer potential for further expansion
of the livestock sector.
Potential Use
of National Territory:
Source: Think quest Team 17749
Coffee growers in
difficulties
The Union Nicaraguense
de Cafetaleros (Unicafé, the coffee growers’
union) has reduced its forecast for 2000/01’s coffee
output in light of drought in the Pacific growing areas
of Managua and Carazo, and financing difficulties caused
by the collapse of the Banco Internacional (Interbank).
In mid-October 2000 Unicafé estimated that the
total harvest produced for the 2000/01 crop year was
about 1.5m quintales (one quintal = 46 kg), well below
the record crop of 2m quintales harvested in 1999/2000.
Fishing
The fishing industry
is one of the most promising areas for non-traditional
exports. Potential exists for continued growth of the
fishing industry; especially cultivated shrimp and lobster,
due to the extensive coastlines and excellent aquaculture
areas in the “Estero Real” near the Gulf of Fonseca.
Manufacturing:
Major manufacturing industries include agro-industry,
food processing, and textiles. Manufacturing growth
has been modest for the past four years. However, maquilas
have continued to boom. Las Mercedes free-trade zone
is expanding rapidly, and planned investment by Taiwan,
South Korean and U. S. firms further increased job opportunities
in 1998. The total amount invested in Las Mercedes zone
by the end of 1996 was 45 million dollars; an additional
$21 million of investment in maquila operations in1998
with 18 maquila plants in operation. The firms operating
in the free-trade zone are attracted by the low wages
and quota-free status for textiles and clothing exports
to the U. S., in addition to other export incentives.
It is believed that there is a potential for expansion
of traditionally manufactured products, subject to the
success of the basic economic changes being implemented.
Export-oriented manufacturing at Nicaragua's Free Trade
Zone in 1998 was $172.8 million.
Service Industries
Business services (advertising,
computer services, restaurants, management and consulting,
etc.) are efficient and have been developing over the
last few years. However, there is no significant foreign
participation in this area. Most business advertising
and trade promotion in Nicaragua is conducted through
the print media and radio. The most commonly utilized
publications are daily newspapers and business journals.
Television advertising is being used with greater frequency.
Direct marketing is not as heavily used because of the
unreliability of the postal service. The Nicaragua retail
market is relatively small, with no truly large-scale
department stores or other retail operations. In recent
years, shopping centers and supermarket chains have
developed in Managua. Most of these projects are financed
with foreign capital.
Minerals and Mining: The principal minerals are
gold and silver. Gypsum, calcium, antimony, bentonite,
rock and marble are also mined. All mines have been
under state control since 1979, but currently foreign
investors are very active in Nicaragua’s mines, as several
companies have been awarded concessions for new exploration.
Gold production rose 26% in 1996, whereas silver dropped
55%. Since 1994 the mining industry has grown by 66%,
led mainly by gold extraction. A minimum of one hundred
thousand ounces of gold was extracted by the end of
1997. Foreign investors are very active in Nicaragua's
mines. In addition, several companies have won concessions
for new exploration. Some 124,100 troy ounces of gold
were produced in 1998; a 54 percent increase over 1997
and 67,300 troy ounces of silver were produced in 1998,
which represents a 98 percent increase over 1997.
Energy Resources:
Nicaragua is heavily dependent on oil imports for its
energy needs, and the acute shortage of foreign exchange
has meant strict controls over domestic fuel supplies.
The new government has promised to introduce a new hydrocarbons
law to encourage foreign investment and exploration.
There have been ambitious attempts for alternative energy
production. In 1997, the Interamerican Development Bank
(1DB) offered to finance projects of up to 300 million
dollars for electric power generation by private investors.
Telecommunications: The government has failed
to privatize ENITEL for a second time. However, the
government plans to initiate a capitalization process,
which entails a re-engineering process, and the seeking
of additional capital through stock offerings. Cellular
telephone service, private leased-line services, paging
and trunked radio service are all presently offered
in Nicaragua by private companies under license from
ENITEL.
Tourism: For the
foreign visitor, Nicaragua’s reputation as a hospitable
country is well deserved. Nicaragua is not only blessed
with its friendly citizens but with sunny beaches on
both coasts and impressive natural attractions not very
far from Managua. The nation has lakes, attractive mountains
and volcanic scenery, extensive forests and long coastlines
with virgin tropical beaches. The Nicaraguan Tourism
Institute (Instituto Nicaraguense de Turismo - INTURISMO)
is the main official entity in the sector. Tourism represents
an area of attractive investment projects to foreigners
because the rapid growth in this industry generated
US$80 million in 1997. Foreign investors have begun
work on several large hotels, shopping, and recreational
complexes in Managua. Some local investors are expected
to open small hotels in Granada, Masachapa, and Ometepe
Island. 381,600 tourists visited Nicaragua in 1998,
up 13.2 percent over 1997. This industry offers good
opportunities for foreign investment (especially in
eco-tourism and beach-related projects). Several major
projects, including three first-class hotels in Managua,
are under construction. The Hotel Princess opened its
doors in late 1998. An expansion has also been completed
at Nicaragua's world-class Pacific Ocean beach resort
at Montelimar (including a recently upgraded airfield).
Even though a bright future for tourism is foreseen,
the inadequate infrastructure (roadways, electric network,
and recreational tourist facilities) presents an obstacle
to the expansion of the tourism sector.
Construction:
Construction saw strong growth (8.6 percent) in 1998
for the fifth year running. Business and residential
construction are expected to continue to rebound in
the coming years after two decades of relative stagnation.
INFRASTRUCTURE SITUATION:
Ports: Because
of poor infrastructure and high operating expenses,
most containerized sea cargo and fresh fruit are shipped
by highway to and from Puerto Limon in Costa Rica and
Puerto Cortes in Honduras. Nicaragua has six seaports,
all of which are operated by the Government-run Port
Authority (ENAP). The most suitable for commercial shipping
is the Port of Corinto located on the Pacific coast,
110 miles northwest of Managua. The Port Authority is
improving Corinto's facilities and hopes that the result
will sharply increase the port's competitiveness. The
government has reduced port tariffs in order to encourage
their use. The National Port Enterprise stated that
the fees have been reduced from $ 5,800/- in some ports
to $ 3,000/-, making the Nicaraguan ports the least
expensive in Central America. Authorities are also investing
in improvements at the ports, installing new machinery
and lighting to make navigation by night possible.
Airport: Managua International Airport (located
7 miles east of the city center) has separate cargo
facilities constructed in 1995. On average, there are
six scheduled all-cargo flights per week to and from
Managua, which primarily carry cargo to and from the
U.S. and Central America. The main cargo carriers are
Fine Airlines (based in Miami) and TACA Airlines. In
addition, most passenger airlines, including American
and Continental, maintain some cargo capacity. A 3,500
cubic foot cold storage facility at the airport opened
in 1996.
Highways: Nicaragua’s highway network of 10,655
miles, according to the Ministry of Construction and
Transportation, is made out as follows: 1,068 miles
of paved highways; 1,336 miles of paved roads; 3,108
miles of all-season roads; and 5,143 miles of dry-season
roads. Most of the better roads serve the heavily populated
Pacific coast regions. The 230 miles north-south Pan-American
Highway links Nicaragua with Honduras and Costa Rica.
IMPORTANT NATIONAL
PROJECTS:
There are some important
projects which the Government of Nicaragua would be
undertaking in the near future, that is to say the Saratoga
Free Trade Zone, the Humid Canal of Nicaragua as well
as many rehabilitation projects to be carried on by
the European Commission due to the destruction caused
by the Hurricane Mitch of 1998, which could provide
us valuable opportunities of entering into commercial
dealings with the bilateral as well as the multilateral
agencies in Nicaragua.
The Saratoga Free Trade
Zone comprises an open area of 70.6 hectares and a roofed
area of about 2 lakh sq. mts for industrial use. The
full development of this Free Trade Zone is expected
to be completed within a maximum of 5 years, i.e. by
end 2005. Taking into account the existing laws and
regulations that guarantee the normal operation of an
industrial free trade zone, the possibility of operating
in this free trade zone are highly favourable. Additionally,
there is a quota-free status for textiles and clothing
exports from Nicaragua to the United States market.
I will be sending more material on this project for
circulation among the interested parties for appropriate
action on their part.
The Ministry of External
Relations invited all the Heads of Missions in Managua
to see for themselves the opportunities of investments,
which this Humid Canal could offer to their respective
countries. The funds would be raised from the investments
by international community in this canal. During my
next visit, I would hold further discussions to know
the details for investments from India. However, it
may be pertinent to mention here that the Nicaraguan
National Assembly, on March 29, authorized a plan to
study the feasibility of construction of a “dry inter-oceanic
canal” which would compete with the Panama Canal. The
project, one of the aged dreams of the Central American
country, would join the roads and high-speed trains
of the Pacific coast and the Caribbean of Nicaragua.
According to the initial estimates, the construction
of the dry canal between the Caribbean community of
Monkey Point and the Port of Corinto or one that would
be equipped in the Department of Rivas, in the Pacific
Coast, would cost approximately US$ 3,000 million.
Source: Information given
by the Foreign Investment Division of the Ministry of
External Relations of
Nicaragua
GOVERNMENT’S ROLE
IN THE ECONOMY
Since 1990, all state
monopolies except for public utilities have been eliminated,
virtually all price controls have been phased out, and
more than 300 state enterprises have been privatized.
The Government retains a handful of state enterprises
in non-utility areas, such as banking, insurance, a
cement company, and others. Nicaragua's legal and regulatory
framework remains cumbersome and an impediment to investment.
BALANCE OF PAYMENTS
SITUATION
Nicaragua suffers from
a chronic external accounts deficit. Despite growing
export and tourism earnings and government progress
on structural adjustment measures and foreign debt reduction,
the country remains highly dependent upon donor assistance
to balance its accounts. This dependence will continue
for the foreseeable future. The current account deficit
in 1998 was $804 million (out of a GDP of $2.1 billion).
That deficit was covered by net official capital transfers
of $328 million and net private capital transfers of
$325.3 million.
Nicaragua has foreign
debt totaling US$6.4bn. Under the terms of debt relief
recently approved by the international financial community
more than US$ 4.5 mn in debt will be cancelled. The
IDB members alone will pardon US$ 360 mn, and the Australian
government announced that it would waive Nicaragua’s
repayments on an outstanding AUD 6.3 mn (US$3.5mn) debt,
in line with a decision by international agencies to
reduce the country’s debt burden. The interim debt relief
follows a two-year moratorium on debt repayments granted
to Nicaragua by Australia in 1999 in the aftermath of
Hurricane Mitch. The moratorium has already expired.
Foreign trade and
payments
FOREIGN TRADE (US$ m)
| |
1998
3 Qtr. |
4 Qtr. |
1999
1 Qtr. |
2 Qtr. |
3 Qtr. |
4 Qtr. |
2000
1 Qtr. |
2 Qtr. |
Exports fob |
117.6
|
97.9
|
160.0
|
153.4
|
105.0
|
125.5
|
207.6
|
157.1 |
Of which: coffee |
9.2
|
11.5
|
60.2
|
41.8
|
14.9
|
18.4
|
83.9
|
53.8 |
Imports cif |
-376.0
|
-373.7
|
-417.8
|
-453.3
|
-519.9
|
-454.5
|
-461.6
|
-455.5 |
Trade balance |
-258.4
|
-275.8
|
-257.8
|
-299.9
|
-414.9
|
-329.0
|
-254.0
|
-298.4 |
The trade balance improves
According to official figures for the
first nine months of 2000, the trade deficit has begun
to narrow. The deficit stood at US$877m compared with
US$967m in the year-earlier period. The figures also
confirm that the recovery in traditional exports earnings
has continued. They grew by 20%, led by coffee, lobster
and meat, while non-traditional exports grew by a more
modest 6% year on year.
Nicaragua: exports, Jan-Sep, 2000
(US$ m; fob)
| |
1999 |
2000 |
% change |
 |
|
|
|
| Traditional exports |
267.5 |
320.2 |
19.7 |
| Coffee |
116.8 |
152.5 |
30.6 |
| Cotton |
0.2 |
0.1 |
-50.0 |
| Sesame |
3.1 |
2.9 |
- 6.5 |
| Sugar & molasses |
26.3 |
24.0 |
-8.7 |
| Meat |
29.2 |
36.4 |
24.7 |
| Shrimp |
28.6 |
30.9 |
8.0 |
| Lobster |
26.6 |
44.4 |
66.9 |
| Bananas |
10.1 |
7.4 |
-26.7 |
| Gold & silver |
26.6 |
21.6 |
-18.8 |
 |
|
|
|
| Non-traditional exports |
156.0 |
165.3 |
6.0 |
| Agricultural |
68.6 |
63.6 |
- 7.3 |
| Fishing |
7.5 |
7.2 |
- 4.0 |
| Manufactures |
79.9 |
94.5 |
18.3 |
 |
|
|
|
| Total exports |
423.5 |
485.5 |
14.6 |
| Principal
Exports (1999) * |
US$
m |
Coffee |
135.3 |
Shrimp & lobster
|
84.1 |
Beef & live cattle
|
41.8 |
Sugar |
30.4 |
Bananas |
13.6 |
Total including others
|
573.1 |
* Excludes maquila (offshore assembly
for re-export)
| Main
destinations of exports – 1999 |
%
of total |
US |
37.7 |
El Salvador |
12.5 |
Germany |
9.8 |
Costa Rica |
5.1 |
Spain |
2.5 |
France |
2.1 |
Import spending continued
to fall in the third quarter of 2000, contracting by
2% in the first nine months of the year compared with
the year-earlier period. In addition to the stagnation
of consumer goods and intermediates imports, capital
goods have fallen sharply, depressing overall import
levels despite much higher spending on imported oil
and lubricants. However, a recorded decline in capital
imports for industry of 36.6% overstates the underlying
downturn, having been skewed in 1999 by a large energy
investment from a US oil company, Enron. A 8.9%
fall in spending on capital imports for agriculture
appears to correspond to lower growth expectations in
2001.
Nicaragua: imports,
Jan-Sep
(US$ m; cif)
| |
1999 |
2000 |
% change |
 |
|
|
|
| Consumer goods |
389.2 |
384.5 |
-1.2 |
 |
|
|
|
| Oil & derivatives |
119.5 |
204.9 |
71.5 |
 |
|
|
|
| Other intermediate goods |
410.6 |
411.1 |
0.1 |
 |
|
|
|
| Capital goods |
469.6 |
361.3 |
-23.1 |
 |
|
|
|
| Total Imports including others |
1,390.5 |
1,362.7 |
-2.0 |
 |
|
|
|
| Principal
Imports cif (1999) |
| |