The modification to executive order 13851which was issued by the President of the United States, Joseph Biden, is a “creative” way of limiting that country’s trade relationship with Nicaragua, without the need to use the prerogatives granted by the Renacer Law to eventually expel us from the Free Trade Agreement. Trade with Central America and the Dominican Republic (DR-CAFTA).
The United States Government made changes to the aforementioned executive orderfor sanction the General Directorate of Mines of the Ministry of Energy and Mines, as well as Lenín Cerna; In addition to allowing the initial application of sanctions against the Nicaraguan mining industry, without ruling out the possibility of extending them to other sectors of the national economy.
“This is a very strong message, which should concern Nicaraguan private capital,” says Manuel Orozco, a researcher at the Inter-American Dialogue, in the program Tonight, who observes that, from the beginning, the Biden administration made public its intention to make a complete review of Cafta, but instead of taking that step, it opted to review the trade relationship with Nicaragua, to specify which economic sectors have link to the regime.
That decision “is consistent with the law reborn”, says Orozco, recalling that one of the provisions included in that legal text is the revision of Cafta, so Biden “adapts it to the context in the face of a specific aspect, which is the importation of gold”, but the modification to the executive order threatens to affect investment and trade, in a much broader scope, which goes beyond Cafta.
Given that the first industry mentioned so far is the one that extracts and exports gold, Orozco predicts that “the first step that trading and mining companies are going to take is to see what their options are; how they submit to the changes that are going to take place”, noting that a significant reduction in gold salesis a great challenge that would have great consequences for companies, because it is a business that works with economies of scale.
The accomplices will fall first
The expert explains that there are many sectors that are involved and that, more than the industries, what matters are the marketing entities and some producing entities that have a direct link with the regime, pointing out among them, actors in the mining sector, and that the States united stands aiming accurately against those marketers and exporters. They are sanctions aimed “at certain companies, rather than sectors,” he stressed.
Another reason for targeting mining in the first place – in addition to the alleged links of some actors in the sector with the regime – is that in this industry, a dozen companies export together almost 1 billion dollars, with a relatively small workforce of less than 20,000 workers. In contrast, some 125 companies that operate under the free zone regime have to employ 130,000 workers to export 3.5 billion, which makes a very important difference.
Orozco insisted on the importance for the United States to establish which companies are linked to the regime; who work in a clientelistic way with the system and who do not. “In the mining sector, the relationship was more evident than, for example, with the free zone sector. Another case has to do with the export of coffee, where there is less intermediation, but the main point is the marketers who are linked as clients of the regime.”
“For a long time, the role played by foreign investments in Nicaragua in complicity with the regime has been discussed, because that is incompatible with the position of the United States against the dictatorial regime that exists in Nicaragua. What is being done is reconcile standards on trade and democracy promotion”, he explained.
The case of gold is one of the most emblematic because that is where the Nicaraguan State has had a great source of economic oxygenation, since they control the licenses to produce gold and to distribute it, which guarantees a much greater source of income than in other areas of foreign trade.
Mining shares fall on stock markets
When analyzing how the actions of four of the mining companies that operate in the country they lost much of their stock market value After learning of President Biden’s decision, Orozco recalled that, first of all, “mining companies, and many of those that appear to be losing their profitability on the stock markets, are companies that have already been criticized for their activities in other countries, and Nicaragua is added to the list.”
“In the specific case of the export of gold from Nicaragua, the issue has to do with the fact that the commercialization of a product is taking place, in a quite conflictive context, which implies that the democratic standard at a global level has been introduced in the commercialization of this product and companies like these are going to have to see how to deal with this situation”, he warned.
Part of that process is reviewing who they operate with, and with whom they establish links. “Obviously, that the General Directorate of Mines receives this sanction implies many limitations to market the product”, and could lead them to choose to invest in other countries”, considering the situation in which their operations in Nicaragua find themselves.
Additionally, he recalled that Nicaragua is completely isolated at the international level. Its only allies are rogue states like Russia, Iran, North Korea, Venezuela and Cuba. “For the world, Nicaragua is another country with destructive, dictatorial and authoritarian aspirations, which does not conform to the international order. Nicaragua has already established an alliance and materialized its military interest with Russia, which increases the level of insecurity that exists in Central America and the Caribbean”, he added.
