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Nicaragua Strengthens Economic Ties with Europe

Peter Tase, December 11, 2013

In the last three years the government of Nicaragua has established close cooperation with Europe, focusing special attention on sustainable development and attracting foreign investment. This strategy gained new impetus after Foreign Minister Samuel Santos visited Brussels and Strasbourg in December 2010 and made key diplomatic connections to further increase the number of sustainable development projects financed by the European Commission, such as the Support for Nicaragua’s Education Project (PROSEN) and Luxembourg’s support in funding campaigns against dengue and rural public health.  

On Oct. 6 and 7, E.U. Commissioner Andris Piebalgs visited Nicaragua to set the tone for the establishment of the new E.U.-Nicaragua cooperation program for the period 2014 to 2020. One of the objectives of the visit was to strengthen E.U.-Nicaragua bilateral relations and ascertain the country's socio-economic situation. Piebalgs' visit took place one week after the signing of a tripartite agreement between the European Union, the World Bank and the Nicaraguan government for the implementation of a Support Project in Nicaragua for Education Sector (PROSEN), which will benefit more than 551,000 students—part of the 2007-2013 cooperation program in which the European Union has invested over €32 million.

E.U.-Nicaragua cooperation is expected to improve education, economic policy and trade as well as help develop a strategy that will attract new business investors in Managua and other provinces. The European Union will allocate about €204 million, to improve public health and education in rural Nicaragua. This fund is awaiting approval from the European Parliament and European Council. The European Union has established a fund of €8 million in support of the development of small and medium-sized enterprises in Nicaragua. Luxembourg has also funded the development of two blood banks in Managua and donated over $100,000 in the fight against dengue.

Although Nicaragua ranked only 124th on the World Bank’s Doing Business 2014 list, the country has experienced modest economic growth of 5.2 percent in 2012 and 5.5 percent in 2011. Exports are expected to increase along with GDP. Nicaragua has reduced extreme poverty from 18 percent in 2005 to 9 percent today. UNESCO has acknowledged significant progress in Managua's aspirations to provide free access to education for all children.

However, Nicaragua has a long way to go in improving electoral transparency and democratic institutions, two components that affect foreign investment. And although poverty has been reduced, President Daniel Ortega’s administration needs to work to further improve conditions for the country’s poor.

British investments

In February 2013, a high-level delegation with British Business Executives visited Nicaragua to explore new areas of potential investment potential in the Nicaragua. According to the Central American Business Council, the delegation met with government officials and Nicaraguan business leaders. The most important goal on the table was to increase current levels of bilateral trade and increase British investment in Nicaragua. Great Britain is one of the world’s largest investors in energy, infrastructure, mining and telecommunications.

This visit has awakened the interest of British investors in Nicaragua, particularly regarding the construction of the Nicaraguan bi-oceanic channel that Ortega has strongly supported. The delegation of British businessmen was accompanied by U.K. Non-Resident Ambassador Chris Campbell, who stated, “Last year when I spoke with President Ortega, I was committed to deepen bilateral trade relations, and this is a concrete example of that commitment.” This was the first British trade mission to Nicaragua in the last five years.

In November, Nicaraguan Foreign Minister Samuel Santos Lopez visited London to promote his country’s stable economy, potential for growth, infrastructure development and friendly fiscal legislation to international investors. In a business meeting with leaders of The Latin American House in London, Santos Lopez underlined the political stability, attractive labor laws, tax incentives and comparative advantage that his country offers to British and European investors.

On Nov. 27, in his meeting with British Secretary of State William Hague, Santos Lopez emphasized that “Nicaragua was the first Central American Country to adopt the agreement between Central America and the European Union, which serves as the pillar of economic cooperation between the two countries.” Such an agreement is expected to be ratified by the British Parliament in the first quarter of 2014.

While British investments in Nicaragua have been minimal, both parties are showing that they are committed to strengthening bilateral economic ties and promoting British private investment, especially in the areas of infrastructure, energy and the inter-oceanic canal.

Peter Tase is a freelance journalist and research scholar on Latin American and Caribbean studies.

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