EU Statement at the Trade Policy Review of Nicaragua, 27 January 2021

On behalf of the European Union, I would like to welcome the Nicaraguan Delegation led by Minister Solórzano Delgadillo, and to thank him and the WTO Secretariat for their reports, which form the basis for our discussion today. I also want to extend our appreciation to ambassador Villegas for giving us his views on the main economic and trade trends in Nicaragua, and on the opportunities and challenges ahead.

Mr Chair, the EU welcomes this opportunity to discuss developments in Nicaragua’s trade and economic policies and business environment since the previous Trade Policy Review in 2012.

During the period under review, Nicaragua has generally implemented a favourable trade policy and respected its WTO commitments, and those vis-à-vis it Central American neighbours and FTA partners, notably the EU. The Secretariat report shows that  favourable policies have been rolled out in a clear and transparent manner with a structured set of legislation and institutions promoting and regulating trade and investment.

The export free zones have been successful in terms of attracting companies and creating jobs. The introduction of standard clearance procedures and the efforts to participate in regional integration trade facilitation programmes have reduced the clearance time for goods. This policy has led to a certain level of economic diversification with a strong performance of the textiles and services sectors. Agriculture remains a key sector and has been affected negatively by the low international price of coffee.

Mr Chairman, Nicaragua’s trade has increased with its main partners (the US, Mexico, China, Central America and the EU) during the review period. The EU is and will remain a key partner for Nicaragua, even during this challenging time for the world economy and global trade. We took 7 % of Nicaragua’s exports in 2019 and are thus your second export destination. Let me add that there are a substantial number of EU companies doing business in Nicaragua across different sectors. They bring new talents, business ideas and economic perspectives to the country and help to solidify and diversify the economy further.

Trade and Investment relations between the EU and Nicaragua are governed by the EU-Central America Association Agreement that has been provisionally applied since 2013. Its coverage goes beyond trade in goods and services to include investment, intellectual property rights, sanitary and phytosanitary measures, public procurement, technical barriers to trade and regional cooperation. I am however obliged to draw attention to the fact that the political instability of the country since 2018 has led to a severe drop in foreign direct investment. This is jeopardising the good efforts achieved since the last review. Furthermore, although the institutions and trade policies are in place, the lack of institutional capacity and the limited development of the infrastructure to facilitate trade and investment, does not allow the country to reap the full benefits of openness.

As regards to trade and climate change policies, while good progress has been made with the development of the equitable and sustainable “café de sombra”, certain agricultural export value chains such as palm oil or cattle continue to exert pressure on deforestation and might affect the land rights of indigenous communities.

In conclusion, I wish to acknowledge Nicaragua’s efforts and progress since the last review. The EU warmly encourages Nicaragua to continue the on-going efforts to facilitate trade, increase investments, and grow its economy in a sustainable way.

The EU and Nicaragua also share a strong commitment to the WTO, and we look forward to further working together to strengthen the rule-based multilateral trading system. We also welcome Nicaragua’s engagement in the WTO on-going discussions on e-commerce and investment facilitation.

Regarding climate change policies, the EU invites Nicaragua to review the organisation of some of its export value chains, notably cattle and palm oil, in order to reduce their impact on deforestation.

However, the EU is also obliged to note that the deterioration of democracy and respect for human rights in Nicaragua is holding back the capacity of the country to project a fair and shared path to economic development and welfare. EU companies will hold back from investing in a country where fundamental values are not respected fully.

I thank you and the delegation of Nicaragua for your kind attention. On behalf of the EU, I would like to wish Nicaragua a successful fourth review.