During his presidential re-election campaign, Nicaragua’s erstwhile revolutionary leader Daniel Ortega vowed, if he won, to renegotiate Cafta, the trade agreement that came into force last year between the United States, Dominican Republic and Central America.
His victory last November was disparaged by the United States as disastrous for the poverty-stricken Central American nation, warning that it would also give Hugo Chavez a foothold in the region.
Yet since coming to power, Ortega has been quick to distance himself from past Sandinista policies. He has instead embraced both Venezuela and the US in a bid to boost his country’s fortunes. Indeed, Nicaragua began trading under Cafta last April. Total trade with the US since then and the end of last year was up by more than 20% over the same period in 2005.
On the face of it, Cafta’s results so far are promising. Central Americans are importing more than ever from the US, and the region is also drawing in new capital. Both developments are helping countries become more competitive while, the hope is, improving the quality of life for consumers.
The US and El Salvador were the first two countries to begin trading under Cafta last March. In the months that followed, Guatemala and Honduras made it official, and Dominican Republic has also recently entered the accord, leaving Costa Rica as the only signatory country where the deal has not yet taken effect.
Yet critics of the deal say it only benefits large corporations and instead damages small businesses that can’t compete with US companies. Partly in response to this, Ortega has stressed he wants the US to set up compensation funds to offset the effects of free trade and globalization on poorer nations like Nicaragua.
Ortega says he has broached the idea with both US and European Union representatives (Nicaragua is also discussing a possible trade pact with the latter). If there is no compensation fund, the association (agreement) would have no future, Ortega told a business delegation recently.
“This is the crux of the matter,” Ortega said. “We want a globalization with opportunities, with fair trade, which takes the issue of social justice to heart.”
Ortega has not specified how such a fund would work, although the idea appears to resemble the efforts of the EU to give aid to poorer European countries, to bring them in line with the union’s richer nations.
If the developed countries do not take into account the asymmetries, the problem of poverty – which creates the security problems – cannot be combatted, Ortega said.