Bookmark and Share Home   »  International Programs  »  Nicaragua

POLICY ANALYSIS: How CAFTA Creates Impoverished Wage Workers

January 10th, 2009

“Throughout history, the U.S. government has had two ways of relating to Nicaragua:  either through ignoring us or with an aggressive policy.  There needs to be a relation of equality.”
Cirilo Otero, Economist, Sociologist

In the fall of 2006, Miguel left his small farm in Estelí and started the long journey from Nicaragua to the United States.  He loved his farm but without credit he could barely produce enough to feed his family.  Without cash income he couldn’t send his children to high school because he couldn’t afford the cost of transport from the farm to school.  Miguel was determined to find a job in the U.S. that would pay him enough to send money back to Estelí.  He made it to Mexico where he was apprehended by Mexican authorities.  He returned to his community in January 2007. 

You could substitute Miguel’s name for Juan, Jorge, Alicia, Omar or for thousands of other Nicaraguans who are looking for options to make a living for their families.  Not finding solutions, many make the desperate decision to leave their homes and migrate to the next large city, to Costa Rica or to the U.S. 

The Failure of U.S. Trade Policies

In 2006, the U.S. Congress passed the Dominican Republic-Central America Free Trade Agreement (DR-CAFTA).  In theory, DR-CAFTA would increase foreign investment by breaking down barriers to trade and promoting exports, thus boosting the economy through new sources of income and more jobs, and eventually benefiting the entire populace. 

The Bush administration predicted that DR-CAFTA would boost Nicaragua’s economy and alleviate poverty.  In reality, this free trade agreement has made a bad situation worse.  While poverty, lack of infrastructure and technology, migration, and high unemployment rates all plagued the nation before DR-CAFTA, these problems have not been alleviated by the trade agreement, and have gotten worse.  In fact extreme poverty rates have more than doubled, soaring 140 percent from 1995 to 2007.1  Although exports have increased, this increase has not resulted in more jobs or increased wealth for the majority of the population.  

In 2007, President Bush declared, “The Dominican Republic-Central American Free trade Agreement (DR-CAFTA) can spread opportunity, provide jobs, and help lift people out of poverty.” 2   That certainly wasn’t the case for Miguel. In fact by 2007, his situation had deteriorated even more.  Still without credit he could not make a living.  He knew that he could never compete with subsidized corn farmers in the U.S.  So he made the fateful decision to sell his 18 acre farm and a few head of cattle for $6,000—enough to pay a guide to take him all the way to the U.S.  He felt that with a guide he would surely make it to the land that would provide him with a job. In this second attempt, Miguel did not even make it past the border of Guatemala and Mexico.  He was robbed and so he returned to Estelí, this time landless and unable to provide even food for his family.

A Vision for a New Policy

While two years might not be enough time to judge the outcome of DR-CAFTA in Nicaragua, it is enough time to note the continuation of worrisome trends:  more poverty, small and medium scale farmers still without credit, increasing unemployment, lack of infrastructure and technology.  Many Nicaraguans say it is time for a new policy.

Cirilo Otero, a respected Nicaraguan economist, told WFP that, “First of all, the U.S. government should consider Nicaragua as a neighbor, as an associate, as a friend, as an ally, as an equal.  Trade relations should be based in this context.” He went on to say, “Trade between two countries should not be merely for the sake of trade.  Commercial relations should promote development. Obviously Nicaragua needs a lot of help in development.  We cannot compete with the U.S. economy.  In order to level the playing field Nicaraguan products need more protection.  The U.S. should offer or sell us technical assistance so that our products can compete.”

Sinforiano Cáceres, a Nicaraguan agriculture cooperative leader, stresses that any external support and financial aid must respect the sovereignty of the people it is supposed to help. He emphasizes that U.S. aid programs should address the causes of problems, not the effects.  He asserts that this can be done by changing trade rules and the nature of the institutions that create, implement, and monitor free trade and neo-liberal policy. 

Cáceres stresses the importance of national and international institutions allying with small- and medium-scale farmers and recognizing the important role they play.  He promotes diversification of crops to avoid the trap of mono-cropping or renting land to large companies which leads to total dependency on wages.  “We see this as a very central and very essential task, because it can generate self-employment in a country in which unemployment is on the rise and allow farmers to continue being food producers rather than turning into unemployed people who conclude that the only solution is to emigrate.”3

Cáceres remains hopeful and motivated in his struggle to empower small and medium agricultural movements.  He is encouraged that the free trade system is being criticized by its very proponents.  He has found that even neo-liberal representatives are beginning to accept the idea that regulation—not liberalization—is necessary.  In reference to Nicaragua he says we can all agree that “free trade agreements are not the best approach and that new realities need to be reviewed, analyzed and adjusted.” 4

Too late for Miguel?

Will a change in policy come soon enough for Miguel?  Probably not.  After failing the second time to make it to the U.S., Miguel now works for a private company in Estelí as a security guard, earning less than $150 a month.  With a monthly basket of goods for a family of four costing almost three times his salary, he would like a better job and wage but there are so few jobs that he feels obligated to stick with this one i   n order to feed his family. He misses his farm and he still cannot afford to send his children to school.  His future depends on a new policy.

1 José Adán Silva, “Radiografía de la miseria de Nicaragua” El Nuevo Diario [Managua] 1 3 April  2008.
2 President George W. Bush, U.S. Dept. of State Fact Sheet, Central America: Embracing CAFTA-DR
3 Sinforiano Cáceres, “We Need More Action and Less Talk About the Food Crisis” Revista Envio #323 June 2008
4 ibid.
5 ibid.