New Markets, Suppliers Found : Nicaragua Easily Adjusts to Trade Embargo by U.S.

When the United States announced a trade embargo against Nicaragua at the beginning of May, some Sandinista officials were alarmed.

“It is as if the ’72 earthquake has happened again,” Defense Minister Humberto Ortega said at the time, referring to a disaster that destroyed most of Managua.

But now, two months later, the embargo is looked on as more of a light tremor.

Government officials, private businessmen and foreign diplomats agree that the embargo has caused no important new damage to the Nicaraguan economy, which was already in a state of deterioration. Actually, while the embargo has caused some inconveniences, it has also provided some benefits, officials of the leftist government say.

Alejandro Martinez Cuenca, minister of foreign trade, said in an interview that everything Nicaragua was selling in the United States before the embargo--mainly bananas, shellfish and beef--has been placed in other markets.

Bananas that were being sent to California, for example, now go to Western Europe in six chartered cargo ships. Martinez said the banana boats are also carrying avocados, mangoes and other products that were not exported before because of a lack of transport.

“The impact of the embargo on exports has been reduced to a minimum, to the point that Nicaragua today has opened a new market in Europe,” he said. The net result, he said, is more exports than before the embargo.

Also, the ships that carry Nicaraguan products to Europe make it possible to bring back European goods without excessive freight costs, Martinez said. And because of the embargo, he said, European countries are giving Nicaragua easier payment terms.

“Before, we bought from the United States, for cash,” he said, “and now we buy on credit.”

One of the worst consequences of the embargo was expected to be a shortage of replacement parts for American-made vehicles and machinery. But Martinez said the country is finding many sources for such parts outside the United States, including subsidiaries of American companies in Latin America.

No Notable Shortages

“I would say that all problems of replacement parts can be overcome in the medium term,” he said.

A foreign economist confirmed that there have been no notable shortages caused by the embargo.

“So far as we know, they’ve been able to get everything they want,” he said.

Even before the embargo, Nicaragua’s trade with the United States had been dwindling. The U.S. share of Nicaragua’s total trade had declined from 30% in 1980 to 17% in 1984. Martinez said that half of the 17% will be taken up by Communist countries and the other half by non-Communist countries.

About 20% of Nicaragua’s trade was with Communist countries in 1984, and the figure will rise to about 25% in 1985, Martinez said.

Nicaragua will have a trade deficit of about $400 million this year, more than its total income from exports, he said. The deficit will be balanced with credits, donations and renegotiation of the country’s $4-billion foreign debt.

Ortega Sought Aid

President Daniel Ortega was on a trip to the Soviet Bloc when the embargo was announced. He extended the trip to allow him to visit several Western European countries, seeking aid and support in the face of what he called U.S. “aggression.”

The government announced that Ortega brought back $200 million in aid and credits from the Soviet Bloc and $204 million from Western European countries.

But a Western diplomat here said “that was a barefaced lie, because they wanted it to look balanced between East and West.”

No other country has joined in the U.S. embargo, Martinez said, adding that many have criticized the Reagan Administration for “picking on” Nicaragua. He said the embargo is a “boomerang” and added:

“It hasn’t hurt us politically. On the contrary, it helps us, because it is clearly evident that the aggressor is the United States. And when I am talking about the United States, please interpret me to mean the Reagan Administration.”

U.S. diplomats in Managua have said privately from the outset that the Reagan Administration did not intend to harm the Nicaraguan economy. The main purpose, the diplomats say, was to make a dramatic gesture showing that the Administration would not conduct business as usual with the Sandinistas while requesting congressional funding for anti-Sandinista guerrillas.

Profitable Route Lost

One diplomat said that the worst damage done by the embargo may have been the cancellation of the Managua-Miami route of Aeronica, the government airline. “That was their only profit-making route,” he said.

Aron Guerrero, general manager of a Nabisco cracker-making subsidiary in Nicaragua, said that about 80% of the machinery in his plant was made in the United States. Getting replacement parts outside the United States will take more time and cost 10% to 15% more, he said.

But he said he has found a way to get the parts from Panama, and “we have already made arrangements.”

Worse problems, he said, have been caused by Nicaragua’s chronic shortage of foreign currency to pay for imports, and he added that these problems existed before the embargo.

Despite the embargo’s light impact, the pro-Sandinista press continues to describe the embargo as economic aggression against the Nicaraguan people. Opposition politicians say that it deflects attention from economic problems caused by Sandinista policies.

“The U.S. embargo is ridiculous,” said Erick Ramirez, acting president of the Social Christian Party. “It has not affected the economy at all, and it has helped the Sandinistas to hide their economic errors. It has been an advance Christmas present to the Sandinista Front from the American Administration.”