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As the influx of Nicaraguan migrants points to greater control and reduction at the United States borders, authorities in Nicaragua are beginning to reduce their expectations for growth in remittances this year, although they admit that they will remain essential the expansion is economical.
Central Bank of Nicaragua (BCN) President Ovidio Reyes said this week that they will stabilize between $420 million and $450 million per month because “we are not seeing the big growth that we have seen in the last three years.” “
The historic supercycle in remittances observed since 2021 resulted in shipments from abroad doubling and reaching record levels, now accounting for more than 30 percent of Nicaragua’s gross domestic product (GDP).
Even a World Bank study found that Nicaragua is among the ten economies in the world with the highest growth rate of these supplies. In 2022, Nicaragua ranked ninth among countries with the highest growth rate in remittances over the past year, largely surpassed by countries experiencing some type of social conflict. These countries are Mauritania (280 percent), Azerbaijan (159 percent), Ireland (142 percent), Tajikistan (83 percent), Uzbekistan (80 percent), Solomon Islands (59 percent), Kazakhstan (55 percent), Guinea (56 percent) . , Nicaragua (50 percent) and Georgia (46 percent).
The increase in remittances in Nicaragua this year has been so great that the growth rate has exceeded the world average. Last year, shipments to 214 countries rose 5 percent, exceeding the 50 percent reported domestically. In lower-middle-income countries alone, remittances increased by eight percent.
In 2023, remittances through November alone totaled $4,239.8 million, exceeding the $3,224.9 million for all of 2022 and the annual records published by the Central Bank of Nicaragua over the past 20 years.
Taking December inflows into account, the balance in 2023 will easily exceed $4.6 billion, accounting for nearly 30 percent of Nicaragua’s GDP in 2022, when it was $15.672 million.
In 2021, before the supercycle of remittances, they accounted for only 15.17 percent and in 2017, before the outbreak of the socio-political crisis in 2018, with only $ 1,391 million, they represented 10 percent of GDP (that year the size was of the economy amounted to 13,786 million dollars).
But beyond that, the truth is that the remittance supercycle of the last three years has revitalized the economy that supports Daniel Ortega’s regime to the tune of more than $9.612 million, according to the Central Bank of Nicaragua.
In 2021, these incomes increased by 15.96 percent; In 2022 the increase jumped to 50.21 percent, and in 2023 up to November an increase of 31.47 percent was reported.
“Remittances have their own dynamics, this year (actually relative to 2023) they have grown a lot, but we believe they will be moderate next year (2024). In fact, in the last four months of the year, in which we have a record in 2023, remittances have already stabilized at around $420 million per month, they are maintained,” Reyes said in an interview in a dictatorship propaganda media on March 9 . January.
Nevertheless, this year they expect “a very important amount, we are talking about around 4,500, 4,600 million dollars in foreign exchange earnings for the country, which will be sustained until 2024.”
The possible reason for the end of the cycle
Expectations of lower growth in remittances from the Ortega regime, which since 2018 has pursued a strategy of encouraging the departure of Nicaraguans abroad, which became particularly evident in 2022, coincide with the monthly decline in migration of Nicaraguans to the United States in the year 2023 together.
Although Customs and Border Protection (CBP) reported the arrest of 138,729 Nicaraguans in the fiscal year from October of one year to September of the following year, the truth was that in the months of October, November and December 2022 there were more than 90,000 arrests of compatriots.
More than 20,000 Nicaraguans entered the United States borders each month. However, since January 2023, the number has been declining at a rate of between 3,000 and 6,000 per month, reflecting the decline in Nicaraguan migration flow, which is impacting remittances.
Washington has taken action to halt migration by introducing a parole period that has benefited 44,000 nationals, in addition to slower mechanisms to make an appointment at the US border to seek asylum.
In response, the Ortega regime has now changed its strategy to continue profiting from migration and is now encouraging the passage of migrants from the Caribbean and various regions of Africa and other parts of the former Soviet Union to the United States through migration policy relaxes visa and arrival facilitation of charter flights, which has hit Augusto C. Sandino International Airport with record traffic of travelers.
The regime hopes that the free trade agreement with China will provide impetus
Given the slowing momentum in remittances, which would no longer register high growth, the regime now hopes that the free trade agreement with China, which came into force in January this year, will give impetus to the economy. She points out that they consider this factor in their growth prospects for 2024, which it states at 3.5 to 4.5 percent.
“We estimate that GDP will also grow between 4.0 and 4.5 percent. In fact, our punctuality is 3.5 to 4.5 percent. We are doing it this way because there were important driving factors in 2023 that are now being somewhat muted,” he said.
“The export sector is the sector that will continue to maintain the dynamism of the economy and that is where we have to take advantage of everything, we have to take advantage of prices, we have to take advantage of the cost reductions that have been observed, many of which are stabilizing after having had large increases. . Now these are stabilizing. This has even contributed to the inflation of international prices also gradually finding its way and the economy will take advantage of all these elements,” he explained.
And he added: “The new trade agreements, the free trade agreement that was just signed with China, represent a great opportunity because we are talking about almost or all of our export products being subject to a zero tariff rate, and there are other goods as well.” Yes. that they are deducted over time; That’s why the country will fit into these dynamics and these markets.”
“So the export sector is the first driving factor that will generate growth. Of course, if the free trade agreement with China is exploited, an additional driving factor for this element will arise,” he said. “That said, our estimate doesn’t take into account the free trade agreement with China, so anything that comes through that route will boost growth,” he added.
Reyes acknowledged that no other free trade agreement could replace China because exporters would not leave their traditional market (in this case the United States) to serve another market. “We must see the free trade agreement with China as a complement to what already exists. A free trade agreement will never be considered as a replacement because replacements are very difficult for the business world to cope with because if a market is already established and there is a buyer. If you sell your products, you will not leave it to go to another one “But you have to increase your production to offer your products to the new buyer,” he explained.
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