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Latin America Investment News on Viva Tropical

Nicaragua: Region Recognizes Its Strong Economic Growth Plan

Article Summary:

Nicaragua is seeing good results from its economic growth plan. The country, in absolute amount, received $989 million in investments in 2011, and the growth of its economy was one of the best in the region at 4.7 percent. With all the good signs there still remains one nagging problem to overcome; a poor distribution of wealth.

Photo Credit: Prensa Nicaragua

Original Article Text From Prensa Nicaragua via Google Translate :

Nicaragua is Gaining Ground

Nicaragua and Haiti for decades occupied the last places in the measurement of international organizations for their low economic indicators. When it comes to small and poor economies are two countries as examples.

But recent years the gap between Haiti and Nicaragua begins to be noticeable, especially in poverty indicators and income per capita as the population gets, where Nicaraguans better results, which for businessmen, government officials and specialists from organizations international and national, is a sign that the country economic growth model is working.

Haiti Nicaragua slightly exceeded when measuring gross domestic product (GDP) in 2011, which reflects the size of economies. In its Economic Outlook report for the Americas, the International Monetary Fund (IMF) states that Nicaragua’s GDP grew at 7.3 billion dollars, while the GDP of Haiti was at 7.4 billion dollars.

Haiti was the most important economic recovery in Latin America in 2010 and 2011 and that after the earthquake of January 2010, foreign direct investment quadrupled, driven by large telecommunications projects. In the past two years, Haiti received 150 and 180 million respectively in respect of investments, if perceived regularly only about 35 million dollars on average.

And while Nicaragua in absolute amount received on investments (989 million) in 2011, and the growth of its economy was one of the best in the region (4.7 percent), Haiti’s economic growth was higher (5.6 per percent) and therefore the result was slightly exceeded its GDP to the GDP of Nicaragua.

But these new positions do not leave Nicaragua in the bottom of the ranking, hold Government, business leaders, economists and the IMF itself independent in their reports. All explain that it could be concluded by the level of GDP, Nicaragua remains one of the smaller economies of the continent, but not the first on the list, because you can not “eliminate comparisons” countries of the Caribbean, which have GDP smaller than Haiti, but more affluent.

Rene Vallecillo, economist, and Henry Alaniz, director of research at the International Foundation for Global Economic Challenge (FIDEG) explain that this reduction in the size of GDP, compared to Haiti, then the value of all goods and services produced by people living within Nicaragua is slightly less than the value of all goods and services produced by people living within the territory of Haiti.

Vallecillo said the IMF report only reflects how they are from Canada and the United States developed economies and larger-up to the Caribbean islands. But he says that if you compare countries by GDP, we note that Nicaragua is better than other countries such as Belize.

In turn, the economist says that it is right measure of how wealth is distributed among populations, to determine where progress is being made more economically.

He gave the example that while the GDP of Belize is smaller (1.5 billion dollars) “its population is less (300 thousand), but there is a better redistribution of wealth and therefore there are less poor.”

Nicaragua and Haiti with the persistent problem is the poor distribution of wealth. “He who has the worst distribution of wealth having the largest population is Haitian and follow us (Nicaragua),” said Vallecillo.

Alaniz said that from GDP “can not draw any conclusions about the incidence of poverty in a country,” and that “the most acceptable would be to compare GDP per capita of both countries.”

Nicaragua is quite remote here. Haiti has 10.2 million inhabitants in both Nicaragua 5.9 million people. But in 2011 the GDP per capita, adjusted for purchasing power parity of Nicaragua, rose to $ 1,239.2, exceeding that of Haiti, which was 737.88 dollars.

Is circumstantial
Aguerri Adam Joseph, president of the Superior Council of Private Enterprise (COSEP), analyzes the particular behavior in driving economic growth in Haiti is similar to that experienced Nicaragua after suffering a natural disaster.

Remember that Nicaragua after Hurricane Mitch in 1998, received a major injection of international cooperation that stimulated economic growth at rates of up to seven percent annually. Aguerri says the same thing is happening in Haiti, where the international community supports the country’s reconstruction after the earthquake of 2010 and systematized all that effort is resulting in the growth of GDP.

Aguerri argues that Nicaragua is separating from Haiti because it maintains a more stable economic growth, per capita income of the citizen is better and there is progress in reducing poverty.

The Minister of Finance, Ivan Acosta, is not convinced that the GDP of Nicaragua is reflecting the reality. So announced that the Central Bank of Nicaragua (BCN) is tasked to “initiate a review” of all “national accounts” “to see who is tapping, as we say in sports.”

For Acosta, “if we are in the last or penultimate place is not relevant,” but how progress can be made faster in the country’s economic growth.

Vallecillo necessary to update the GDP, which is pending since 2002. He says he “always believed that GDP is undervalued” due to the existing high level of informal economic activities, estimated to be 50 percent.

“It means that we are only quantifying our economy based on our formal sector and leaves out the great contribution of the informal sector, so GDP is undervalued,” said Vallecillo. Other indicators that status is doubtful.

According to official data, in the second quarter of 2011, 53.1 percent of the employed population of Nicaragua was in the Underemployment.

“So we can see the largest tax burden in Central America, because being undervalued GDP, the collection appears to have 21 percent and (other) Central goes from 15 to 17 percent. Here in Nicaragua we pay lots of taxes but paid formals, informals do not pay taxes, “said Vallecillo.

The update will serve to know if its true public spending to GDP is 23 percent, as the Economist points out that criticism “we spent a lot depending on the size of the economy.”

Henry Alaniz, FIDEG, agrees that we will know whether or not it undervalued the current measurement of GDP until all economic activities have been incorporated and there are recalculated. “For example, seven years ago the shuttle service was limited to buses and trucks, this service also now gives thousands of caponiers scattered throughout the country, districts, counties, whose service in the past is never calculated. Today it is necessary to incorporate, and as in transportation, we can mention many other activities not previously included in the measurement of value added, and therefore GDP, “he says.

The result will coincide specialists, to define better policies and strategies for economic growth, and therefore more progress in reducing poverty.

Link to Original Article:

From Prensa Nicaragua

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