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Nicaragua: a new hot spot for trade and investment in Central America


Similar to the Regional Comprehensive Economic Partnership (RCEP), the signing of the new free trade agreement can pay attention to the characteristics and demands of the parties, reflect the new characteristics of the global economic and trade environment and technological progress, promote market integration, and reduce the impact of international development of enterprises. risk. Various factors such as the COVID-19 epidemic have caused complex and profound changes in international economic and trade relations, and the uncertainty has increased significantly. China is still actively expanding the network of free trade zones and seeking a coordinated recovery and development path for mutually beneficial cooperation.

On July 12, China and Nicaragua signed the arrangement on the early harvest of the free trade agreement between the two countries, jointly announced the launch of the China-Nicaragua comprehensive free trade agreement negotiation, and formally established a bilateral intergovernmental intergovernmental committee in the form of a mixed committee on economic, trade and investment cooperation. economic and trade cooperation mechanism. Considering that China and Nicaragua mutually recognized each other and resumed diplomatic relations at the ambassadorial level on December 9 last year, the first step of completing the FTA negotiation just six months after the resumption of diplomatic relations may have also set a record. This speed not only reflects the strong demand for restoring economic and trade exchanges between the two countries, but also a concrete manifestation of the long-term stability of the development of enterprises through the establishment of an intergovernmental agreement environment, which is conducive to the rapid development of bilateral economic and trade cooperation. China and Nicaragua have extensive complementarities in the fields of factor endowment, economic industry, market and infrastructure. The coordinated promotion between governments will help reduce the difficulty of enterprises' self-exploration, reduce trade and investment costs, and enhance protection of enterprises.

Trade in goods is not only an important part of international economic and trade relations, but also a relatively large part of free trade agreements. According to Chinese customs data from the United Nations Conference on Trade and Development (UNCTAD), in 2021, China's exports to Nicaragua totaled US$790 million, and the goods belonged to 72 categories of customs HS 2-digit codes; imports from Nicaragua were US$25.064 million, and the goods belonged to 23 A major category of customs HS2-digit code. From January to May this year, the bilateral trade volume between China and Nicaragua maintained growth. Among them, Nicaragua's exports to China increased by 128.9% year-on-year, showing that Nicaraguan enterprises have vigorously expanded the Chinese market with practical actions after the resumption of diplomatic relations between China and Nigeria.

The commodity category reflects the basic situation of resource endowment and industrial structure between the two countries. In 2021, knitted or crocheted fabrics (HS60) with the highest total value among China's exports to Nicaragua, with an export value of US$180 million, accounting for 22.8% of China's total exports to Nicaragua; followed by machinery worth US$69.34 million. Equipment (HS84), $65.379 million worth of transportation vehicles (HS87), and $55.633 million worth of electrical machinery (HS85). The above four categories of goods accounted for nearly half (46.8%) of China's total exports to Nepal that year. In that year, Nicaragua's exports to China ranked first with wood products (HS44), with an export value of US$6.002 million; followed by animal and vegetable fats (HS15), copper (HS74), ore sand (HS26), raw hides and leather (HS41), clothing and accessories (HS61), the export value is 5.501 million US dollars, 4.536 million US dollars, 3.675 million US dollars, 1.736 million US dollars and 1.495 million US dollars, accounting for 91.5% of the total exports.

Nicaragua is a Central American country and the only way to connect North and South America by land, between Costa Rica and Honduras. With a land area of 130,000 square kilometers, Nepal ranks 98th in the world, which is comparable to that of Anhui Province. The population structure of Nigeria is very young. The population aged 25 to 64 accounts for 42.4% of the total population, and the population under the age of 14 accounts for 25.6%. The relatively young population structure not only provides abundant human resources for economic and trade cooperation, but also facilitates the upgrading of market consumption structure and the development of innovative activities.

Nicaragua's economy ranks low in Central America, and its economic growth rate is not fast, but it may also obtain relatively obvious development due to the establishment of stable economic and trade ties with foreign countries. In April 2006, the Dominican Republic-Central America-United States Free Trade Agreement came into effect, facilitating the connection between Central American countries, including Nicaragua, and the US market. The United States is Nicaragua's largest export destination, accounting for nearly half, and China has not yet entered the forefront. The United States is also the main source of Nicaragua's imports, and China ranks second. Nicaragua's imports from China are about 70% of its imports from the United States. If the free trade agreement promoted by China can be completed, it will create another large market space for Nicaragua's production enterprises. In fact, the current industrial structure of Nicaragua is still dominated by primary raw materials or simple processing. The textile industry and agriculture are the two main industries in Nicaragua, and the export of textiles and agricultural products accounts for nearly 50% of its national export. The top three commodities Nicaragua exports are beef, coffee and gold, none of which are among its top export categories to China. If we compare the process of establishing free trade agreements between China and ASEAN and other economies, the early harvest arrangement is usually to give priority to preferential tariff concessions to support the economic activities of these economies exporting their advantageous products to China at lower tariffs. The signing of the Early Harvest Arrangement of the China-Nepal Free Trade Agreement will help Nigerian agricultural producers to explore business opportunities in the Chinese market.

In the field of infrastructure in Nicaragua, the two countries have great potential for cooperation. Despite its small size, Nicaragua has a large number of airports, reaching 147 in 2013, ranking 38th in the world. However, Nicaragua has only one airline, which also needs further improvement and optimization in areas including water transport and telecommunications. The issue of climate change has attracted more attention in recent years, and its impact on coastal countries or regions is particularly evident. Nicaragua's domestic population is more densely distributed along the coast. Due to the frequent occurrence of natural disasters in Nicaragua, which is bordered by the Caribbean Sea to the east and the North Pacific Ocean to the west, and is dominated by earthquakes, volcanic eruptions, hurricanes and landslides, there is a greater demand for natural disaster prevention and post-disaster infrastructure reconstruction. Enterprises have rich experience and strong design, construction and operation capabilities in promoting high-quality infrastructure renovation and upgrading in the whole chain and under various complex conditions. With the blessing of financial support, they are expected to participate in related projects and achieve a win-win situation for all parties. (The author is Zhou Mi, a researcher at the Research Institute of the Ministry of Commerce)

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