VZCZCXRO9572
PP RUEHLMC
DE RUEHMU #0318/01 0841516
ZNR UUUUU ZZH
P 251516Z MAR 09
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC PRIORITY 3936
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEAUSA/DEPT OF HHS WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 02 MANAGUA 000318 
 
SENSITIVE 
SIPDIS 
 
STATE PASS USTR 
USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN 
HHS FOR FDA 
 
E.O.  12958: N/A 
TAGS: ETRD ECON EAGR NU
SUBJECT: NICARAGUAN EXPORTS DOWN 19% TO START 2009 
 
REF: A. MANAGUA 273, B. MANAGUA 242, C. MANAGUA 173; D. MANAGUA 168; E. 08 MANAGUA 763; F. 08 MANAGUA 254
 
Summary 
------- 

¶1. (U) Summary.  Nicaraguan exports demonstrated their vulnerability 
to the global economic crisis, falling 19% during the first two 
months of 2009 compared to the same period in 2008, according to 
data compiled by the Nicaraguan Government.  U.S. Department of 
Commerce data for January show declines of 22% and 43%, 
respectively, for apparel and automobile wiring, two goods produced 
in free trade zones and not included in Nicaraguan data.  In the 
face of declining demand for export products, the government 
continues to favor populist economic programs over those that would 
improve export competitiveness.  End summary. 
 
Exports Fall 19% First Two Months of 2009 
----------------------------------------- 

¶2. (U) Nicaraguan exports demonstrated their vulnerability to the 
global economic crisis, falling 19% during the first two months of 
2009 compared to the same period in 2008, according to data prepared 
by the Center for Export Transactions (CETREX).  The decline 
affected most major exports.   Live cattle and beef exports fell by 
16%, coffee by 23% (Ref D), beans by 13%, and peanuts by 29%. 
Lobster exports fell 54%, farmed shrimp by 14%, and fish by 12% (Ref 
B). 
 
¶3. (U) Sugar exports fell by 88% year-on-year, but this reflected 
shipping delays and additional ethanol production more than a fall 
in prices or sugarcane production.  The industry plans to export 80 
million liters of ethanol to Europe this year, up from 50 million 
liters in 2008.  One bright spot was exports of dairy products, 
which rose 8%.  Producers report that demand has remained strong for 
these products, especially in Central America. 
 
¶4. (SBU) Airline representatives told econoff that northbound cargo 
is down 22% so far this year, especially for apparel and lobsters. 
U.S. shipping company Crowley reported in January that it was 
shipping many fewer containers to the United States, mostly as a 
result of a fall in apparel and fresh produce sales.  Roberto 
Brenes, Executive Director of the Center for Exports and Investment 
(CEI, formerly NICAEXPORT, the government-affiliated export 
promotion agency), told econoff that exports declined 27% for the 
month of January -- the largest one-month decline in the past five 
years. 
 
¶5. (U) These declines come on the heels of what was steady export growth over the past few years. Executive Director of CETREX Jorge Molina told us that Nicaraguan exports had been growing at an average of 20% since 2004. From 2007 to 2008, exports increased 24% year-on-year. However, Molina estimates that this year Nicaragua will slip below 2008 export levels ($1,558 million), and perhaps to 2007 levels ($1,202 million).
 
 
 
Nicaraguan Export Data 
---------------------- 

¶6. (U) The following table summarizes Nicaraguan export data 
(figures in millions of dollars and percentage change, as noted): 
 
                              %       YTD     YTD     % 
Product       2007   2008  Chng      2008    2009  Chng 
-------       ----   ----  ----      ----    ----  ---- 
Coffee        $185   $278   50%     $44.7   $34.3  -23% 
Beef          $183   $215   17%     $33.9   $30.3  -10% 
Dairy          $96   $123   28%     $20.7   $22.3    8% 
Peanuts        $56    $91   61%     $17.8   $12.6  -29% 
Gold           $65    $84   29%     $14.3   $17.1   20% 
Beans          $40    $82  103%      $9.1    $7.9  -13% 
Shrimp, farmed $37    $63   68%      $2.2    $1.9  -14% 
Lobster        $49    $53    9%     $13.4    $6.1  -54% 
Sugar          $75    $51  -32%     $17.2    $2.1  -88% 
Cattle         $42    $27  -35%      $5.6    $2.7  -52% 
Other         $426   $493   16%     $89.2   $79.8  -10% 
TOTAL       $1,255 $1,558   24%    $268.1  $217.3  -19% 
 
¶7. (U) CETREX data do not reflect exports shipped from free trade zones (FTZs), which are primarily textiles and apparel, wiring harnesses for automobiles, and cigars. Nearly all of these exports are shipped to the United States. USITC data for January show a 22% decline in Nicaraguan apparel exports to the United States and 43% decline in wiring harnesses as compared to January 2007. Septel will provide additional information on these important industries.
 
 
Government Response 
------------------- 

¶8. (U) Minister of Trade, Industry, and Development Orlando Solorzano has expressed confidence that Nicaraguan exports will regain strength during the next few months. He announced that the government is implementing a short-term strategy to boost exports based upon "an analysis of market trends and a policy response to strengthen competitiveness and reduce export obstacles." Although Solorzano says Nicaragua should make the most of CAFTA-DR, he and other officials are increasingly emphasizing diversification to other markets, especially those belonging to the Bolivarian Alternative for the Americas (ALBA). CETREX data indicate that Nicaraguan exports to Venezuela increased by almost 40% during the first two months of 2009 in comparison to same period in 2008, but levels remain low, about 2% of total exports. Principal exports to Venezuela are beef/cattle, dairy products, and black beans.
 
¶9. (U) Roberto Brenes of CEI told econoff that he believes demand 
for many agricultural commodities will remain strong.  He noted that 
prices have remained stable for many commodities.  Nonetheless, 
Brenes recognizes that achieving 10% export growth for 2009, as the 
government had forecast, "will depend on efforts taken by the 
government to minimize the effects of the international crisis." 
 
Comment 
------- 

¶10. (SBU) The Ortega Administration has put little effort into policymaking that would improve competitiveness in the face of collapsing demand for many of their most important export products (Ref C). Officials have provided no substantive follow up to the Development Agenda championed by COSEP over the last two years (Refs E and F). Instead, they have introduced populist economic programs such as "Zero Hunger," whereby farmers are provided traditional agricultural inputs but no training to improve farming techniques (Ref A). As a result, Nicaragua has dropped in the World Economic Forum's Competitive Index Rankings from 95th place in 2006 to 120th in 2008 out of 134 countries ranked.
 
SANDERS