Daniel S. Sullivan Remarks in Managua, Nicaragua

Remarks to the American Chamber of Commerce in Managua, Nicaragua

Daniel S. Sullivan, Assistant Secretary for Economic, Energy and Business Affairs
Remarks as Prepared for Delivery
Managua, Nicaragua
February 27, 2007

Thank you Margarita Sevilla for the introduction. I am delighted and honored to be here in this beautiful country. It is my first time here and I have greatly enjoyed it.

Perhaps the most important thing that I can say and convey to you is the following – the United States Government, President of the United States, Secretary Rice, and others are committed to working with the people of Nicaragua, its government and President Ortega. We are committed to work together to consolidate democracy, rule of law, property rights, and create economic opportunities for sustained economic growth and poverty reduction for Nicaragua.

It is important to note that these goals of economic growth, poverty reduction and anchoring democracy are all interrelated, as President Bush has stated, & ldquo;open trade and investment bring healthy, growing economies, and can serve the cause of democratic reform. With CAFTA, our purpose is to strengthen the economic ties we already have with the countries of Central America and to reinforce progress toward economic, political, and social reform.”

Ladies and gentlemen, I believe that we stand at a moment of great opportunity. At the signing of CAFTA in 2004—United States Trade Representative B.R. Zoellick, former Deputy Secretary, noted a tragic cycle that occurred throughout the 20th century. Conflict in Central America would draw in the United States. The intervention was frustrating for all sides. Problems were patched over, but not truly solved. Civil rights were lost, dictators tightened controls, rebels were radicalized, blood was shed, neighboring countries turned against one another, and the poor, hard-working citizens in Central America lost chance after chance to better their lives in freedom.

But that was the past – the future is much brighter for many reason, but perhaps the most important reason is because of the courage of the people of this region, the courage of the people of Nicaragua to embrace democracy and reject violence, and to negotiate and ratify a free trade agreement with its neighbors, including the US, with a much larger economy – this takes courage and I and my government applaud you for this.

CAFTA is the cornerstone of this brighter future and period of opportunity. It gives Nicaragua permanent duty free access to the largest economy in the world – approximately $13 trillion. Throughout my travels, wherever I go, when I meet with economic ministers and country leaders, I often hear “we want a free trade agreement with the US.” This is because of the size of the market, and Nicaragua, as well as the other Central American countries already have that, but I think what we should do is find better ways to take advantage of this. Bilateral trade is growing quickly: between 2005 and 2006, your total exports to the U.S., including free trade zone exports, jumped almost a third to over $1.5 billion, while U.S. exports to your country leapt over a fifth to $755 million. Nicaragua has already achieved a trade surplus with the United States.

I would like to make the following three points:

1. CAFTA is a vital element of our economic relationship with Nicaragua and with our other partners. Through it, we are working with your political and business leaders to support continued economic reforms which will help promote prosperity and buttress freedom and democracy. 2. CAFTA has brought concrete economic gains to Nicaragua. For example, during the first seven months of 2006 compared to 2005, watermelon sales to the U.S. almost quadrupled and cigar exports nearly doubled. U.S. supermarkets now import your agricultural goods, especially ethnic and organic foods, thereby benefiting small companies and farmers’ cooperatives in your country. Overall, exports are up 24% -- first 7 months-- huge tangible results. 3. In the wake of CAFTA, U.S. companies are pouring investment into Nicaragua. To cite just one example, ITG Cone Denim is building a $100 million factory. Other U.S. companies have also started investing in your country since CAFTA entered into force in 2006 and others are looking to invest in projects that will create thousands of new jobs. These trade and investment linkages are vital opportunities to relieve poverty through job creation.

But it is important to note that CAFTA is only one part of the story. What I am here to talk about is our strategy of total total economic engagement – a coordinated effort to integrate all our trade, assistance, development programs into one coordinated approach. So we have CAFTA-but we also have the MCC compact. MCC will benefit the country by further connecting Nicaragua to global trading system, promoting rural business development, helping grant the poor title to land, by emphasizing infrastructure development to help farmers and small businesses get their goods to market.

USAID is committed to trade capacity building and related programs totaling over $250 million over a 5 year period. I just visited “Nicaraguan Handicrafts for Export Alliance.” With the help and funding of USAID, this public-private partnership is providing assistance to artistans and farmers to connect to the global economy.

We have had significant efforts to provide additional debt relief to Nicaragua through the G8 and IDB. We will continue these important efforts. We are also working together on remittances – a powerful economic growth lever bringing tens of billions of dollars into the region.

We also have significant engagement with the Overseas Private Investment Corporation (OPIC). OPIC has invested $200 million for low-income housing, small businesses, and agriculture in the entire CAFTA region. We are also looking at biofuels.

Integrating all of these programs – most of which are macro- is an important part of our total economic engagement strategy.

But this strategy is more than just about cording U.S. programs – it is about partnerships and engagement with Nicaragua and the Nicaraguan people and its government officials.

So I am spending the day, talking to government ministers, American/Nicaraguan businessmen and women, business school students at INCAE – a very impressive group – about reforms here in Nicaragua that are needed to fit within and reinforce total economic engagement to address the very significant challenges that remain in this country such as poverty and inequality.

So what are some of these reforms that the Nicaraguan Government should undertake as part of the total economic engagement partnership?

First, Nicaragua must continue to implement the economic reforms under CAFTA and MCC. Though CAFTA provides incentives and protections for greater investment and trade, legal and regulatory reforms are needed in order for exports to continue growing.

Second, according to certain studies of economic freedom, Nicaragua especially needs to improve the process for registering property and starting businesses and paying taxes. Why? Because these kinds of hindrances make it difficult for entrepreneurs and investors to do business in your country. And without business people, it’s difficult to create jobs and prosperity.

Third, I believe a bit of friendly rivalry encourages positive competition and benefits us all. With regard to infrastructure – at $1020 per container, it costs twice as much to export from Nicaragua as it does from El Salvador ($515 per container). Better roads and ports to get products to market, and better processing facilities such as refrigeration units, will enable Nicaragua to develop a more dynamic role in the global economy beyond the maquila (textile and apparel) sector. We need to work on these reforms . . . together.

That is the ultimate goal of our strategy of total economic engagement here & ndash; to provide the resource flows that result in positive economic outcomes for nations that use these resources wisely for economic development and that encourage private sector-led economic growth. Far too few poor farmers and entrepreneurs are equipped to capture the gains of an increasingly global economy and an array of structural and supply side barriers limit small business access to markets, capital and expertise.

Advancing those microeconomic reforms that bring jobs, growth and economic opportunity will also be essential to building a civil society and a democratic model of development in Nicaragua. By promoting the development of commercial skills that empower small farmers and entrepreneurs to enter into national, regional and global supply chains, we will ensure that the gains from CAFTA, the MCC Compact, private sector investment and other programs, all critical element of our total economic engagement, are broadly shared.

Released on March 28, 2007

ENDS

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