NICARAGUA: 'CAFTA will be a vaccine against instability'
Karin Palmquist

On May 27, the United States and the Central American nations of Nicaragua, El Salvador, Guatemala, Honduras and Costa Rica signed a trade pact called the Central America Free Trade Agreement (CAFTA). The agreement is now awaiting ratification in Congress, something US Trade Representative Robert Zoellick has said is "unlikely" before the November elections.

The trade agreement has been met with opposition by Democrats, but also by Republicans from sugar- and textile-producing districts. Democratic presidential candidate John Kerry has vowed to veto and renegotiate CAFTA if elected in November.

Given time constraints and opposition to the accord, the Bush administration will probably wait until after the elections to pursue a vote on the agreement, Zoellick said at a press conference in late May.

The Central American countries already have duty free access to the US market for 75% of their exports. CAFTA would increase the duty free access to cover more than 80% of the exports. It might not seem like a huge difference, but for these countries the agreement goes beyond trade. Nicaragua's ambassador to the United States, Salvador Stadthagen, sat down with DiplomaticTraffic.com to explain what the agreement would mean for his country.

"Picture a Central America without CAFTA," Ambassador Stadthagen said. "It would be a region of illegal immigrants, of drugs flowing through. We're not producers of drugs, but we are in the path of the trafficking."

 "The textile industry in the US will suffer, because… [CAFTA countries import] $4.1 billion worth of textiles every year. If CAFTA does not happen, the textile industry both in the United States and in Central America will lose money. Some 80,000 people will lose their jobs. That means 250,000 people will lose their supportive income. That means 250,000 more people with an incentive to immigrate to the United States illegally.

"CAFTA is good for both regions. We have a very balanced trade. More than 90% of the garments sold to the United States have [US-made] content, and 50-60% are made with only US materials."

The total trade between the CAFTA countries and the United States amounts to $32 billion a year, second in Central America only to Mexico.

"Some people don't realize it, but we are a very large market for US goods. For every dollar we sell, we buy a dollar. By some estimates, we buy 1.2 dollars," the ambassador said. "For every dollar China sells to the United States, it buys 17 cents." And unlike China, "we do have labor unions. We have generous labor standards."

The ambassador pointed out that the CAFTA area has labor costs that compete with northern Mexico, where the average worker earns $3 an hour. In Central America, the average is $1 an hour, and in Nicaragua only 67 cents an hour.  
 
"Investment goes hand in hand with trade," the ambassador continued. "We support CAFTA because of investments." He argued that investments in Central America are far more beneficial than investments in China, because "Nicaraguans turn around and buy US goods and services."

He said there are many reasons for American companies to invest in his country. 

"We have a very progressive foreign investment law. We impose no restrictions on investments or foreign ownership of land. The constitution doesn't make a difference between foreign and domestic ownership, except in mass media companies. We have Free Zones with a very generous 10-year tax holiday."

That is the economical side, but there are also political reasons to implement CAFTA, he said. "CAFTA will be good for preserving democracy," the ambassador said. "It will be a vaccine against instability."

The Central American countries are eager to win approval of CAFTA, but they are also working to remove all trade barriers among themselves, intending to form a customs union by the end of this year.  

"We're working together, the countries in what we call the northern corridor, the C4 - Nicaragua, Honduras, Guatemala and El Salvador - and now also Costa Rica. We're tearing down some customs barriers already. The customs between Guatemala and El Salvador have been removed. Eventually we will remove all barriers," the ambassador said.

CAFTA has great support among the four-to-five million Central American immigrants in the United States, about ten percent of the total Hispanic community.

There are around 500,000 Nicaraguans in the United States. The strongest community is in Florida, with 220,000 Nicaraguans or people of Nicaraguan descent. Many of these became US citizens in 1997, with the passing of the Nicaraguan Adjustment and Central American Relief Act. The Act provided amnesty for Nicaraguans and Cubans who had been living continuously in the United States since December 1, 1995. Some 150,000 Nicaraguans became eligible for naturalization under the new law.

The Nicaraguans in the United States play a significant role in Nicaragua's economy. Remittances are important to many Nicaraguan families, but even here there is a payback to the US.

"Remittance dollars buy US products," the ambassador said. "Sixty-two percent of remittances to Central America are spent on consumer goods, and a big part of that is spent on American goods. It's hard to picture a region where the US has more reason to integrate."

With the passing of former president Ronald Reagan, Nicaragua and the Contra rebel movement he supported, have been frequently mentioned in the media. When asked to comment on Ronald Reagan's legacy in Nicaragua, the ambassador said:

"The majority of the people in Nicaragua are anti-Sandinista. Proof of that is that the last three elections have been won by anti-Sandinistas with links to the resistance. The former Contras, or the Nicaraguan resistance, are part of the mainstream.

"It is my personal opinion that without Ronald Reagan, Nicaragua would have looked more like Cuba. We still have the vestiges of the Cold War in Nicaragua. In the middle of the jungle there is a huge airport, the biggest in the region, for landing MIGs. The number of T23 tanks was incredible. Then there were a lot of MI18 and MI21 gunships.

"At one point Nicaragua had 300,000 people under arms. It was totally out of bounds.
The left of course despises Ronald Reagan. They would have been in power if it weren't for him. But for people in enterprise, Reagan was essential in stopping the spread of communism. We did have a communist government in Nicaragua. That was reversed.

"The presence of Cuba is felt in all of Latin America. Nicaragua is no exception. Leftist groups in all Latin American countries look up to Cuba. Cuba gives out substantial scholarships, it trains doctors and sends AIDS drugs. It still has an important presence."

And, he said, the left still has popular support in Central America, even if it is declining.

"The center-right parties have reinvented themselves," the ambassador said. "Right has gone more center. All parties talk about the needs of the people." But all the while, "the left parties have moved very little."

Nicaragua is a very poor country, with a GDP per capita of only $790.

"We're still one of the poorest countries in Latin America. Only Haiti is poorer," the ambassador said. "We had a Marxist government in the 1980s that was disastrous for the economy. Only now is the country back to where it was in the 1950s. [Former President] Daniel Ortega borrowed some $20 billion. They consumed what they borrowed and used it for the military. There is nothing in the way of infrastructure to show for it."

Nicaragua is getting a good chunk of that debt reduced under the Highly Indebted Poor Countries Debt Initiative (HIPIC). The IMF and the World Bank have already approved a reduction of $4.5 billion, or 80% of Nicaragua's total foreign debt.

But putting the economy in order after the Ortega era ended has not come without some painful belt-tightening. 

"The Nicaraguan people have suffered," the ambassador said. "The government has had to make some unpopular decisions to lower the fiscal deficit and show responsible governance. Now they can spend more on education and health care."

The tight fiscal policy and responsible governance has paid off, and Nicaragua is one of 63 countries eligible for the Millennium Challenge.

"We see it as an endorsement of good policies. We might also be one of the G8 pilot projects for anti-corruption," the ambassador said. "Our current government has been in power for two years and they have had some clear goals: transparency of governance and the building of solid institutions."

Nicaragua supported the American-led military intervention in Iraq, a position the country is still sticking to as support in the region is crumbling, with neighboring Honduras following Spain and pulling out its troops.

"Nicaragua has long been dependent on international attention and assistance. We believed the people of Iraq deserved the same thing," the ambassador said. "We didn't send military personnel to Iraq, but we sent a team of de-miners and field doctors and nurses. The de-miners were not just land mine experts, but also experts on loose explosives."

A third country, not mentioned, paid for the Nicaraguan team to go to Iraq for a six-month stint.

"The people of Nicaragua were very proud and the team was welcomed back as heroes. Nicaragua has been a heavy recipient of aid. The people were very proud of being able to give something back to the international community," the ambassador concluded.
 

Biography of Ambassador Salvador E. Stadthagen

Salvador Stadthagen presented his Letters of Credence as Ambassador of Nicaragua in the United States of America to President George W. Bush on December 4, 2003.

The priorities of his mission include lobbying for ratification of the Central American Free Trade Agreement, CAFTA; the promotion of investment in Nicaragua and the protection and promotion of the Nicaraguan community in the United States, a community he considers a fundamental asset for the development of Nicaragua.

A career diplomat, Mr. Stadthagen attended Law School in Nicaragua from 1975 to 1979 and later obtained a Business Administration degree from American University (Washington, D.C., 1983) and a Masters in Public Administration from Harvard University (2002). 

His professional experience include appointments as Chargé d' Affairs a.i. and Minister Counselor of the Embassy of Nicaragua in Japan (1990-1992), Ambassador to the Republic of China on Taiwan (1995-1999), Secretary of Economics Relations and Cooperation at the Ministry of Foreign Affairs (1999-2000) and Deputy Minister of Foreign Affairs, position that he held from May 2002 until his appointment as Ambassador to the United States.

Before entering the Nicaraguan Foreign Service, Ambassador Stadthagen served as Official Liaison between the Nicaraguan Resistance (UNO) and the U.S. State Department (1985-1986).  From 1987 to 1990, he was involved in several international education programs with the Washington D.C.-based firm Creative Associates International, Inc. Between 1992 and 1995 he was Executive Director of the Education for Democracy National Program, implemented in Nicaragua by the Ministry of Education and The American Federation of Teachers with funding from USAID and The National Endowment for Democracy.  

Born on April 20, 1957 in the northern Nicaraguan city of Jinotega, Ambassador Stadthagen's first professional experiences took place in the private sector, mainly in coffee production, something that fostered a special bond with the Nicaraguan agricultural sector.

Married to Analía Vargas, he has four sons: Sebastian, Arturo, Federico and Francisco Javier.