After approximately 17 years of implementing the Free Trade Agreement, also known as DR-CAFTA, Nicaragua—like the rest of Central America—has structured its entire socioeconomic organization around this agreement. Therefore, a rupture would inevitably have a negative social and economic impact, further worsening the living conditions of the impoverished population and making life under a dictatorship more difficult. This would especially affect directly linked sectors, such as cheap labor in maquilas, slaughterhouses, and the agricultural sectors that supply multinational food companies, as well as the logistics corridors. Although these areas operate under precarious conditions, they are precisely what Ortega describes as «competitive advantages» and what the transnationals are looking for, so a breakup would hit them hard.

Nicaragua continues to depend significantly on its integration into the free trade area (NAFTA/FTA/ADA). According to SPIEX, the main destinations for its exports are the United States (49.1%), Central America (17.7%), Canada (5.7%), the European Union (EU-27) (5.0%), and the United Kingdom (0.8%). The main origins of its imports are Central America (27.5%), the United States (24.8%), China (12.7%), Mexico (9.4%), the EU-27 (4.8%), and India (3.4%).

According to SPIEX, Foreign Direct Investment (FDI) in 2023 was $2.534 billion. The Central Bank’s first half of 2024 report details the net flow of FDI, by country of origin, showing that flows from Panama totaled $179.3 million, representing 22.1% of the total, concentrated mainly in the financial, industrial, and energy sectors. Net FDI from the United States was $170.8 million, equivalent to 21.1% of the total, directed primarily to the industrial, energy, and trade and services sectors.

Spain contributed net inflows of $71.7 million (8.8% of the total), primarily directed toward the fishing sector. Mexico contributed $42.8 million (5.3% of the total), focused on the communications, trade, and industrial sectors. $39.2 million (4.8% of the total) came from Costa Rica, primarily directed toward trade, industrial, and mining sectors. FDI from Honduras totaled $33.6 million (4.1% of the total), concentrated in the fishing and industrial sectors. Barbados recorded net FDI of $32.0 million (3.9% of the total), primarily in the mining sector, among others.

These and other data indicate that Nicaragua is heavily dependent on its integration into the free trade area, especially with the United States and Central America. The majority of its exports are directed to these markets, suggesting that any change in trade relations with these countries could have a significant impact on the Nicaraguan economy.

In terms of imports, Nicaragua also relies heavily on Central America and the United States. Although China is beginning to gain a foothold in imports, the balance of exports and imports still falls short of the levels of the free trade area.

As we explained previously, we cannot analyze FTAs ​​in isolation, as they are part of a globalizing project that has defined, organized, and articulated a region spanning from North America to Central America. Furthermore, it is important to understand that, beyond the individual Central American countries, the FTA integrates us all into a single subregion to make it profitable. Given the degree of coordination and interconnectedness of production, distribution, and storage chains, as well as logistics corridors, which are carefully meshed and planned to satisfy the U.S. market, any alteration in this route is likely to unbalance the FTA subregion.

Therefore, the proposal to freeze the FTA with Nicaragua, to be effective, requires considering several aspects:

• Possible consequences that could destabilize neighboring economies and trade relations.
• The disruption of production chains for goods and services and logistics corridors, and the impact on the efficiency and profitability of operations throughout the subregion.
• The significant consequences for local economies, especially in sectors that depend heavily on trade with the United States.
• The type of coordination between other Central American countries and the United States to minimize impacts.
  
  

In this context, what is happening in Nicaragua destabilizes the geopolitical organization of the market. Ortega, aware of this, has continued to move pieces to maintain a negotiating margin, while perpetuating the current model with extractive policies of common goods and the management of foreign debt. Until now, the United States has sought a solution that stabilizes the model without damaging it. Therefore, they are reluctant to touch the ADA or the FTA.

The pressure has focused on bringing Ortega to negotiations and elections, even if that means granting impunity. So far, this has given the Ortega-Murillos a margin of opportunity, as they know they can’t be hit without affecting the entire model. As Arturo Cruz clearly stated, «CAFTA must be saved.» This reflects that, for the defenders of big capital, democracy, justice, and freedom are secondary issues. This isn’t a concern for the population, but rather for preserving the project of accumulation by dispossession in Central America, established and implemented through NAFTA and the ADA.

It is also true that, after multiple negotiations aimed at a “soft landing”, which included solutions that guaranteed impunity, Ortega has steadily broken his agreements, thus exhausting his scope for negotiation. Therefore, his reliance on repression has been absolute, seeking to demonstrate that he retains control of the territory. However, this strategy is not sustainable in the long term, not even for the regime itself.

The Nicaraguan dictatorship has been working on an alternative plan in case of a rupture or freeze. ALBA was ultimately privatized by the Ortega family and its business circle, depleting itself due to its neo-patrimonial practices. Russia has not provided the funding the regime had hoped for, limiting itself to offering political support and military advice, motivated primarily by its interest in using Nicaragua as a pawn in the inter-imperialist dispute with the United States. China, for its part, has not yet achieved the importance of Taiwan, which was a key funder until the height of repression. Ortega has attempted to attract China with a series of concessions for extractivism, but has failed to secure a decisive commitment to his regime.

Among these offers is the signing of a free trade agreement, along the same lines as the other treaties. After China showed little enthusiasm for projects with high-sounding names like «Early Harvest«, it made it clear that its main interest lies in an FTA that guarantees legal protection for its investments, as any capitalist country would.

This FTA, like previous ones, perpetuates an extractivist and neoliberal logic, leaving Nicaragua doubly subordinated to the needs of the imperial metropolises of both geopolitical blocs. China remains somewhat cautious, as it does not consider Ortega a stable ally, unlike others in the region with whom it has established more significant relations. As a result, Ortega is increasingly forced to improve his sellout offer to China.

In any case, Ortega has shown no intention of breaking with the FTA. Although he has found it necessary to seek alternatives, he has not been able to move forward at the pace he would like. In this context, the United States will likely seek to force Ortega to negotiate again, in the interest of achieving a degree of stability in the free trade area, seeking an agreement that brings elections and eliminates relations with China.