Wednesday, January 11, 2006

Does Nicaragua Benefit from Free Trade with the United States?

The Dominican Republic and Central American Free Trade Agreement (DR-CAFTA) with the United Status of America was approved by American Congress on July 2005 and by the Nicaraguan National Assembly in October of the same year. Within Nicaragua it has been a fiercely debate topic for close to two years. The proponents of DR-CAFTA in Nicaragua claim that access to the world’s largest market will attract more foreign investment, increase exportations, and in this way create more jobs and stimulate the economy. However, its opponents state that the cheap imports will destroy small national industries and the internal market, and in this way close jobs. In areas of Nicaragua dedicates to agriculture, people fear that it will be impossible to compete with highly subsidized agricultural products from the United States. According to the organization SIMAS in Nicaragua, farmers in the U.S. receive an average of twenty one thousand dollars each in subsidies each year, without including the benefits of good roads, communication systems, electricity and education. Although it is true that many Nicaraguan products will no longer face tax barriers to enter the American market, it is questionable how many will be able to compete there. With DR-CAFTA in Nicaragua, there will be winners and losers. The few large producers of products such as sugar and rum will benefit, as will consumers of import items. However, the size of the group to benefit is rather small, since according to Oxfam, half of the population lives in poverty and nearly one in five in extreme poverty. The small national industries will suffer as will small farmers or campesinos. They will be obliged face hunger or move from where they live to work in the newly opening maquila-style sweat shops that are the new face of foreign investment. It is most like that free trade with the United States will bring investment and new jobs, but it will do so at the cost of current jobs and increased hardships for much of the population of Nicaragua.

Works cited:

SIMAS (2005). El Tigre se los Comió, Managua, Nicaragua: Servicio de Información Mesoamericana sobre Agricultura Sostenible.

Abella, Tomás (2006). Nicaragua, Intermon Oxfam. Retrieved 10 January 2006, from


HV said...

And it's part of the overall pattern of U.S. imperialism, opening up peripheral economies while maintaining restrictions on domestic agro-industries. Smaller farmers in poor countries get driven under by cheap imports caused by those subsidies, and driven to the cities where they work for sub-par wages in sweatshop factories.

Free trade, as Marx wrote, always benefits the bigger, richer trading partners.

Great blog! (Great to know you're keeping a blog now!)

Sontín said...

The process reminds me of stories of the industrial revolution in England: peasants forced off their lands and driven by hunger to work under terrible conditions in factories. One of the differences now, is that it is a transnational process where workers in the north and south are pitted against each other in a race to the bottom, and southern governments compete to attract corporate attention.

I am glad you like my first attempt at a blog.