Since the launch of its Belt and Road Initiative a decade ago, China has sought to expand its geopolitical and commercial influence in Latin America, a region rich in natural resources, Voice of America reported on October 17. Beijing’s reach expanded in the region through predatory loans, trade agreements, and advantageous investments in infrastructure, as well as mineral extraction, which prey on the flora and fauna of this hemisphere.
Now, China has set its sight on Nicaragua’s production, contributing to more unemployment, poverty, and migration, said Arturo McFields Yescas, former Nicaraguan ambassador to the Organization of American States. “China sells a lot and buys little. And it always offers poor quality products, which do not meet international standards.”
On October 16, China and Nicaragua signed an agreement to rebuild Managua’s Punta Huete International Airport, EFE reported. Six weeks earlier, the two countries had signed a free trade agreement.
“Nicaragua does not have the natural resources, productive capacity, technological resources, or logistical conditions to turn China into a destination for its exports,” Nicaraguan economist and lawyer Enrique Sáenz told Diálogo. “The limited export basket, distances, transportation, and insurance costs, together with the lack of commercial and financial logistics, leave little room for competitive exports. On the other hand, Nicaragua has neither the capacity nor the resources to control or inspect the thousands of toxic or poor quality products coming from China.”
Although pro-regime media El 19 Digital reported that Nicaragua recognizes that attempting to turn China into the main buyer of its agricultural and free trade zone products will require a colossal effort, even promoting partnerships between producers to comply with the commitments, reality is quite another.
The bad experience in the region in negotiating with China says otherwise. These agreements, forged in opacity, have not built a “win-win” relationship and have not unleashed an economic spillover. Costa Rica and El Salvador for instance closed 2022 with a trade deficit of more than $3.6 and $7 billion with China respectively, according to Nicaraguan news site Artículo 66.
“The possibility that economies such as Nicaragua or El Salvador could benefit from a free trade agreement with China are very small,” Ricardo Castaneda, senior economist at the Central American Institute for Fiscal Studies, told Nicaraguan media Confidencial. “Since the reestablishment of relations, the trade balance is negative and is rather greater. So the most logical thing is that Chinese companies will be the ones to benefit most from these agreements.”
Economists agree that China’s promises in the region are far from being fulfilled, since the main trading partner has been, is, and will continue to be the United States, due to its greater commercial, technological, and economic capacity. The U.S. Embassy in Nicaragua indicated that in 2022, 61 percent of Nicaraguan exports had the United States as their destination.
“The United States buys from Nicaragua up to two-thirds of its exportable supply within the framework of CAFTA, which is the free trade agreement between the United States, Central America, and the Dominican Republic,” Marco Aurelio Peña, an academic and specialist in economic development and researcher at the Center for Transdisciplinary Studies of Central America, told Diálogo. “And from that country also comes the largest amount of remittances from abroad. Eight out of every 10 dollars that enter the country come from there. In addition, it is the major recipient of Nicaraguan exiles for political reasons.”
According to U.S. Census Bureau data, Central America doubled its exports to the United States in 16 years, from more than $18 billion in 2006 to $35.6 billion in 2022.
Delusion of power
Despite the economic discourse that the Ortega-Murillo regime reiterates through official media, economists and specialists argue that the Nicaragua-China trade agreement is more of a lifeline attempt for the dictatorship.
“Ortega has always had delusions of being a world leader. It is clear that news where he appears together with the Iranian president, or with the Russian chancellor, or signing agreements with China, feed those delusions,” Sáenz said. “In the face of international isolation, even with Latin American leftist governments, he pretends to appear as a privileged partner of China, to boast of great alliances with adversary powers of the West.”
This relationship is also seen as a “counterweight” for the oppressive Nicaraguan regime, to face the sanctions that other countries impose on them, for human rights violations and crimes against humanity.
“Naturally, those who care that this relationship develops fast and does very well are the Ortega-Murillo family,” Peña added. “First, Nicaragua is one of the poorest economies on the continent. Second, it is in the regime’s interest to stay afloat for the perpetuation of its dictatorship.”