VZCZCXYZ0000
PP RUEHWEB

DE RUEHMU #1748/01 1991524
ZNR UUUUU ZZH
P 181524Z JUL 07
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC PRIORITY 0829
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS MANAGUA 001748 
 
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. - 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. - 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. - Nicaragua Trade 
U.S. Dollars 
 
             04/01/2005-     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 Nicaragua's 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-DR's 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 Ortega's constant rhetoric, lambasting of big business and 
"savage capitalism," 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