VZCZCXYZ0000
PP RUEHWEB

DE RUEHMU #1741/01 1982200
ZNR UUUUU ZZH
P 172200Z JUL 07
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC PRIORITY 0818
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS MANAGUA 001741 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN 
3134/ITA/USFCS/OIO/WH/MKESHISHIAN/BARTHUR 
 
E.O. 12958: N/A 
TAGS: ETRD ECON PREL NU
SUBJECT: U.S. Q NICARAGUA TRADE GROWING UNDER CAFTA-DR 
 
REF: MANAGUA 522 
 
Summary 
------- 

¶1. (SBU) Nicaraguan exports to the United States increased 
by 17.4 percent, up from $733 million to $910 million, 
during the first 12 months of CAFTA-DR.  Excluding maquila, 
data show Nicaragua exports were up 8.2 percent, from $541 
million to $585 million.  In addition to maquila, other 
sectors showing strong growth were sugar, coffee, cigars, 
cheese, and fresh fruits and vegetables.  President Ortega 
has muted his public criticism of the agreement, and he 
even acknowledged that CAFTA-DR brings some benefit to the 
country.  Attracting new investors to take advantage of the 
agreement, however, has become more difficult according to 
representatives of ProNicaragua.  End summary. 
 
U.S. Q Nicaragua Trade up 15.8 Percent 
-------------------------------------- 

¶2. (U) During the first 12 months of CAFTA-DR (04/01/06 - 
03/31/07), total trade between the United States and 
Nicaragua increased 15.8 percent, from $1.91 billion to 
$2.21 billion,  compared to the previous 12 month period 
(04/01/05 - 03/31/06), according to USITC trade data. 
Nicaraguan exports to the United States increased by 17.4 
percent, up from $733 million to $910 million.  Excluding 
maquila, data show exports were up 8.2 percent, from $541 
million to $585 million, contrary to a recent public claim 
made by a Ministry of Trade, Industry, and Development 
(MIFIC) official that nonmaquila trade fell 0.1 percent. 
Meanwhile, U.S. exports to Nicaragua increased by 12.7 
percent, from $634 million to $715 million.  The following 
table summarizes these trade flows: 
 
U.S. Q Nicaragua Trade 
U.S. Dollars 
 
             04/01/2005Q     04/01/2006-    Percentage 
        03/31/2006      03/31/2007       Change 
             -----------     -----------    ---------- 
U.S. Exports to Nicaragua 
 Maquila     58,226,534       55,830,635      -4.1% 
 Other      575,888,799      658,671,546      14.4% 
 Total      634,115,333      714,502,181      12.7% 
 
U.S. Imports from Nicaragua 
 Maquila    732,815,134      910,292,040      24.2% 
 Other      541,206,958      585,341,487       8.2% 
 Total    1,274,022,092    1,495,633,527      17.4% 
 
U.S. Trade Balance with Nicaragua 
 Maquila   -674,588,600     -854,461,405      26.7% 
 Other       34,681,841       73,330,059     111.4% 
 Total     -639,906,759     -781,131,346      22.1% 
 
Source: USITC DataWeb, 07/12/2007 
 
Maquila and Traditional Exports Show Strong Growth 
--------------------------------------------- ----- 

¶3. (U) Maquila (apparel) exports from Nicaragua to the 
United States showed strong growth during the first 12 
months of CAFTA-DR, increasing 24.2 percent, from $733 
million to $910 million.  These exports accounted for about 
61 percent of total Nicaraguan exports to the United 
States, up from just under 58 percent the previous year. 
 
¶4. (U) Growth outside the maquila sector was also robust, 
with traditional exports leading the charge.  Nicaraguans 
took advantage of a CAFTA-DR tariff-rate quota (TRQ) to 
increase sugar exports from $14 to $33.5 million, while 
coffee exports jumped from $58.5 to $81.7 million thanks to 
high world prices.  Shrimp exports fell slightly from $70.5 
million to $69.3 million, likely owing to increased exports 
from Asia and Ecuador.  Cigars, which before CAFTA-DR were 
subject to a specific tariff of 0.57/kilogram and an ad 
valorem tariff of 1.4 percent, now enter the United States 
duty free, and exports are up 15 percent from $28.9 to 
$33.3 million.  Gold exports remained stable at $27.1 
million, while exports of wire harnesses for automobiles 
fell slightly from $124.5 to $120 million.  These six 
goods, which together account for 24 percent of Nicaraguan 
exports to the United States, saw 12.8 percent growth under 
CAFTA-DR, up from $324 to $365 million. 
 
Modest Growth Elsewhere, but Some Bright Spots 
--------------------------------------------- - 

¶5. (U) Outside of maquila, sugar, coffee, shrimp, cigars, 
gold, and wire harnesses, which combined account for 85 
percent of Nicaraguan exports, growth under CAFTA-DR was a 
modest 1.3 percent.  However, several sectors showed much 
higher growth, including beef, which grew 38 percent from 
$55 to $61.7 million.  Cheese exports also increased 
dramatically, up 56.7 percent from $3.2 to $5 million. 
Nicaraguan producers quickly filled NicaraguaQs 625 metric 
ton TRQ for cheese under CAFTA-DR, and government officials 
have indicated that they may formally request additional 
TRQ access this year. 
 
¶6. (U) Several agricultural cooperatives have been 
particularly successful in taking advantage of enhanced 
market access under CAFTA-DR to reach niche markets in the 
United States for Latin cheeses.  Among them stands out the 
San Francisco de Asis cooperative, which before CAFTA-DR 
exported 30,000 pounds of cheese each month but now exports 
that amount in a week.  USDA and USAID assistance in food 
safety has been critical to growth in this sector as firms 
have improved their processing facilities to meet U.S. 
sanitary standards. 
 
¶7. (U) Also benefiting from USG technical assistance in the 
agricultural sector, Nicaragua has exported $3.3 million in 
fresh peppers to the United States during the first year of 
CAFTA-DR, up from $250,000 the previous 12 months.  Other 
fruits, vegetables, and roots and tubers have showed strong 
growth as well, with total exports for the sector 
increasing from $8.7 to $31.8 million.  Cosfrunic, a rural 
cooperative with 69 members, now regularly exports 
vegetables such as okra--which previously faced a 20 
percent tariff--to the United States.  Several other small 
cooperatives have seen similar success exporting vegetables 
that formerly faced specific tariffs of several cents per 
kilogram or ad valorem tariffs of 5 to 20 percent. 
 
¶8. (U) Rum exports increased from $1.7 to $2.5 million 
during CAFTA-DRQs first 12 months.  Handicrafts such as 
hammocks, on which importers previously paid 14 percent 
duty, have also shown growth, though total volume is still 
very low.  Although both had duty-free access to U.S. 
markets before CAFTA-DR, furniture exports increased from 
$463,000 to $1.8 million over the past year, while billiard 
table exports grew from almost nothing to $737,000. 
 
U.S. Exports Show Broad Growth 
------------------------------ 

¶9. (U) U.S. export growth--up 12.7 percent, from $634 
million to $715 million--was spread evenly across many 
sectors, with petroleum products, pharmaceutical products, 
fertilizer, vegetable oils, and basic grains among the most 
important sectors.  Corn exports grew by 61 percent, from 
$12.1 to $19.6 million, while for most dairy products, TRQs 
went unfilled and growth was modest.  U.S rice exports for 
the period fell from $44.9 to 36.8 percent, an 18 percent 
decrease. 
 
Comment 
------- 

¶10. (U) The one-year anniversary of CAFTA-DR passed quietly 
in Nicaragua despite strong evidence that the private 
sector is beginning to take advantage of preferential 
access to U.S. markets.  Small businesses and cooperatives, 
several of which are described above, have found niche 
markets in the United States for a variety of products.  On 
a larger scale, representatives of ProNicaragua (the 
government-run investment promotion agency) report that 
since CAFTA-DR went into effect, 17 companies have 
announced $318 million in new investment that will create 
13,880 new jobs. 
 
¶11. (SBU) ProNicaragua officials report, however, that the 
task of attracting new investment has become more difficult 
of late.  President OrtegaQs constant rhetoric, lambasting 
of big business and Qsavage capitalism,Q has no doubt 
played a role in that regard.  On the other hand, Ortega 
recently acknowledged in public that the agreement brings 
some benefits to Nicaragua, perhaps signaling a softening 
of his campaign position that CAFTA-DR must be 
renegotiated.  What is clear is that the Sandinistas will 
do little to publicize the positive impact the agreement 
has had and the potential it still holds.  That task will 
fall squarely on the U.S. government, with support from the 
private sector here.  End comment. 
 
TRIVELLI