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US mulls booting Nicaragua from trade pact over crackdown

MIAMI (AP) – The Biden administration is considering trying to expel Nicaragua from a lucrative regional free trade pact – or allocate its valuable sugar quota to another country in Central America – to retaliate against President Daniel Ortega’s crackdown on his opponents, according to a United States (US) official.

The economic impact of the action is still under analysis and no decision has been made, according to a US official speaking on the condition of anonymity to discuss internal conversations.

But any action affecting billions in annual trade with the US could inflict serious economic pain on the country’s business elite, who have mostly stood by silently as Ortega’s repressive tactics have grown, said the official.

“The Nicaraguan private sector has a choice to make,” said son of Nicaraguan immigrants and chief of staff at the Woodrow Wilson Center in Washington Eddy Acevedo. “They either continue aiding and abetting this tyrannical regime with blood on its hands or stand alongside the people of Nicaragua who yearn for freedom and democracy.”

The Biden administration’s response to Ortega’s authoritarian tilt has so far consisted of targetting individuals in the president’s inner circle and family members with sanctions cutting off their access to the US.

Expulsion from the Central America Free Trade Agreement, which was signed in 2004, would be a major blow, depriving Ortega’s government of important export earnings and foreign investment. Nicaragua is the only nation in CAFTA to run a trade surplus with the US, about USD2.5 billion last year, or 20 per cent of its gross domestic product.

But booting Nicaragua from the trade pact is no easy feat.

CAFTA is an international treaty ratified by seven nations and suppliers from Nicaragua, especially in the textile sector and light electronics, are deeply woven into the supply chains of many US retailers.

The treaty has no expulsion mechanism, so any attempt to corral Ortega would require Nicaragua’s neighbours plus the Dominican Republic, also a signatory, to withdraw from the agreement and negotiate a new deal in which other grievances – everything from US agricultural subsidies to the impact on US businesses – could be back on the table.