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Latin America Investment News on Viva Tropical

Nicaragua’s Growth Lags Way Behind it Neighbors

Article Summary:

Despite the economic gains proclaimed by President Daniel Ortega’s government, the country lags behind its Central American neighbors. With a growth rate of only 2.68% the figure is insufficient to maximize this country’s growth potential and push it out of its state of underdevelopment.

Photo Credit: Revista Summa

Original Article Text From Revista Summa via Google Translate :

Nicaragua is Still Far From Developing
Although among the greatest achievements attributed to the administration of President Daniel Ortega is the ‘good management “of the economy, the average growth achieved during the five years 2007-2011 was only 2.68%.

Economists describe the figure as “insufficient” to maximize the growth potential of the country out of underdevelopment. It has also been the result of external factors outside the government’s handling, making it urgent implementation of “policies” to change the picture.

“We have a social debt accumulated since the eighties, there is much to pay for the millennium goals will not be met in education, health, drinking water and energy. So we have a very long way to go to solve the problems of the classes with lower economic capacity, “emphasizes the economist Rene Vallecillo.

The average growth of 2.68% during the five years, is located below the 3.42% achieved under the administration of Enrique Bolaños (2002-2006) and 4.36% by Arnoldo Alemán (1997-2001).

“The figure is closer to the 2.17% achieved during the administration of President Violeta Barrios de Chamorro, between 1990 and 1996, when the country experienced a period of transition, after passing through a decade in which a decrease in accumulated -3.10% “and inflation up to 33547.9% in 1988, says economist Jose Luis Medal.

To maintain this growth rate the country must condemned the backwardness and underdevelopment. Experts insist that to locate the level of the Central American economies in the medium term and address the poverty and underdevelopment problems in the long run, it takes an average annual growth of between six and eight%.

“Nicaragua is about half of the Honduran economy. Represents one quarter of the economies of other countries in the area and sixth in the Costa Rican economy, “said Vallecillo.

Medal Vallecillo and recognize that progress has been made in the fight against poverty.However, reaffirm that they are insufficient.

Uncontrolled factors are driving growth
Consider the lack of industrialization policies to steer the economy towards higher growth, causes the growth relies almost entirely on “external factors that can not be controlled by governments, such as increasing the price of export products registered in recent years and the strong aid flows that entered the country in 1999 after Hurricane Mitch, causing this year a growth of 7%, “said Medal.

Add also contributed to the current economic growth continuity in policy implementation “neoliberal export promotion and external opening to apply for twenty years.”

In the last two years, commodities like gold, coffee and beef prices reached record. That allowed mining in 2011 reached an average annual growth of 46% ranking as the industry’s fastest growing economy, according to the Central Bank of Nicaragua.

The president of the Chamber of Mines of Nicaragua (Caminic), Sergio Rios, indicates that in 2011 the gold price experienced an increase of 17%.

The increase was driven, among other things, the growing demand caused by the weakness of the currencies, low interest rates and inflation and uncertainty about financial stability.

Rivers noted that growth goes hand in hand with a substantial increase in production. “As gold is a commodity subject to price fluctuation, which is why for Nicaragua in the long run is very important to the growth in production. The increase in production over the last three years has been over 130%, “he explains
Second growth stood the construction sector, to 15.7%, driven mainly by private investment that is made with Venezuelan cooperation funds.

“It’s been a good year. Public investment increased by 8%, over 20% private. In 2011 construction began zones, energy and tourism projects. There was also a revival of the housing, which is key to the industry, “says Mario Zelaya, president of the Nicaraguan Chamber of Construction (NCC).

The factor Venezuela
According to Zelaya, the development of projects with Venezuelan cooperation funds through private enterprise was key to the growth of the sector.

“Projects such as Streets for the People, where resurfacing the main streets of Managua, many projects with hydraulic concrete, paving was all over the country. They also invested in power plants and road projects in the area of ​​Leon and Chinandega. Only in 2011 these road projects developed with Venezuelan cooperation funds were between $ 35 and $ 40 million, “explains Zelaya.

The service sector associated with the construction (hardware industry and manufacture of construction materials), also received a big boost through this route.

Increases in the international meat prices, opening new markets and entry into the country in the group are indicated by Rene Sukarne Brazier, president of the National Livestock Commission (CONAGO) as the factors that allowed the livestock sector located in the third place with an average growth of 11%. According to Blandon, in the absence of funding, good international prices have led to re-engineering in livestock, which have improved the broiler and productivity. “I never thought we put a steer at slaughter in plants was leaving us 400 kilos, more than U.S. $ 600,” said Blandon.

Growth could be higher
Economist José Luis Medal explains that the economic growth variables involved that the government can not control, such as increasing the price of export products or recession, but also other causes with their actions and decisions.

Estimated that growth in 2007-2011 period could be greater if he had lost the support of the Millennium Challenge Account (MCA) and the resources provided through the Budget Support Group (GAP), which were suspended following electoral fraud of 2008.

For his part, economist Rene Vallecillo view to securing further growth and situations of this kind is indispensable industrialization policies that include aspects of institutional and legal certainty.

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From Revista Summa

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