The Resumption of Diplomatic Relations Between China and Nicaragua Signals A Move Forward Side by Side

By Liu Xinwei

Nicaragua is located in Central America， bordering Honduras to the north， Costa Rica to the south， the Caribbean Sea to the east and the Pacific Ocean to the west， and has a land area of 130，400 square kilometers.

Although there is long-term trade between China and Nicaragua， the scale is not large. According to statistics compiled by China Customs， the trade volume between China and Nicaragua in 2020 was worth USD 506 million， of which China exported USD 487 million and imported USD 19 million. In 2021， the bilateral trade volume was USD 820 million， of which China exported USD 790 million and imported USD 30 million.

At the end of last year， there was great news for the two countries： the resumption of diplomatic relations. After their break-up and the on and off resumption of relations in the past， China and Nicaragua have come together again. What changes will happen to the two countries this time？

The resumption of diplomatic relations between China and Nicaragua creates new opportunities for cooperation

In 2016， after Tsai Ing-Wen took office， Nicaragua became the eighth country to “break off diplomatic relations” with Taiwan Province， and became the fourth Latin American country to break off diplomatic relations with Taiwan Province after Panama， Dominica and El Salvador.

On December 10， 2021， China and Nicaragua resumed diplomatic relations at the ambassadorial level. So far， of the 33 countries in Latin America and the Caribbean Region， the number of countries that have established diplomatic relations with China has increased to 25.

On the day of the resumption of diplomatic relations， Yu Jianhua， Vice Commerce Minister and China International Trade Representative， and Nicaraguan representative Laureano Ortega held a virtual meeting. Yu Jianhua went on record stating that it was a landmark date for relations between the two countries. China and Nicaragua resumed diplomatic ties， bringing new historic opportunities for bilateral trade and economic cooperation. China is ready to work with Nicaragua to plan and develop China-Nicaragua trade and economic cooperation that is mutually beneficial， stands at a high starting point and fulfils high standards， in order to create a new bilateral commercial landscape and more sound and dynamic bilateral relations.

Yu Jianhua also stressed that China welcomes Nicaragua to play an active role in the Global Development Initiative， and stands ready to strengthen plan coordination under the framework of the high-quality Belt and Road Initiative cooperation. The two countries are considering building an inter-authority cooperation mechanism to facilitate trade， expand investment and infrastructure cooperation， promote green and digital innovation， and enhance multilateral and regional cooperation to translate the complementary advantages between the two economies into all-round cooperation outcomes.

Resuming diplomatic ties with China is a historically significant decision for Nicaragua， and Nicaragua attaches great importance to developing its commercial ties with China. Ortega expects early establishment of a Nicaragua-China intergovernmental mixed committee on economy and trade to promote connectivity and commercial exchanges， expand imports and exports， participate in exhibitions and expos hosted by China， and broaden cooperation in fields such as infrastructure， agriculture and fisheries， mining， clean energy and the digital economy. Nicaragua will provide a favorable investment and business environment for Chinese enterprises and help them develop Central American markets by taking advantage of its geographical location.

The resumption of diplomatic relations between China and Nicaragua heralds a move forward side by side and a wish for common development. Ortega said： “The resumption of diplomatic relations with China fully conforms to the fundamental wishes and interests of the Nicaraguan people. China and Nicaragua will speed up all-round cooperation in various fields， promote mutual understanding and enhance the peoples well-being.”

Foreign Ministry Spokesperson Wang Wenbin said that the resumption of diplomatic relations between China and Nicaragua has opened up broad prospects for the development of bilateral relations. The next step for the two sides will be to strengthen exchanges at all levels， continuously enhance mutual trust， actively carry out anti-pandemic cooperation， give full play to complementary advantages， actively promote pragmatic cooperation and exchanges in various fields， and enhance the well-being of the two peoples. The two sides will also maintain close communication and coordination in international and regional affairs and safeguard the common interests of developing countries.

On New Years Day this year， the Chinese Embassy in Nicaragua held a reopening ceremony in Managua， the capital of Nicaragua. Yao Xing， a member of the reopening team， said： “The resumption of diplomatic relations between China and Nicaragua is the result of the joint efforts of all personnel from the two countries. It is an international sense of justice and a general trend. It is hoped that with the successful reopening of the Chinese Embassy in Nicaragua， the relations between the two countries will further develop.”

The trade volume between China and Nicaragua has grown against the trend， and negotiations on a free trade agreement have started

At the beginning of the year， China and Nicaragua signed a Memorandum of Understanding on jointly promoting the construction of the Silk Road Economic Belt and the 21st Century Maritime Silk Road， adding new members to the Belt and Road Initiative. So far， China has signed more than 200 cooperation documents on the Belt and Road Initiative with 146 countries and 32 international organizations.

In July， the Minister of Commerce Wang Wentao and the Nicaragua Foreign Minister Moncada signed the Early Harvest Arrangement for the Free Trade Agreement （the FTA for short） between the Government of the Peoples Republic of China and the Government of the Republic of Nicaragua （hereinafter referred to as the Early Harvest）， and jointly announced the beginning of FTA negotiations between China and Nicaragua. Minister Wang Wentao and Laureano Ortega， adviser to Nicaraguas President， signed the Memorandum of Understanding on the Establishment of a Mixed Commission on Economic， Trade and Investment Cooperation between the Government of the Peoples Republic of China and the Government of the Republic of Nicaragua， officially establishing a bilateral intergovernmental mechanism for economic cooperation and trade.

Since the resumption of diplomatic relations between China and Nicaragua， the two sides have made joint efforts to efficiently promote bilateral economic cooperation and trade in various fields and have already achieved fruitful and pragmatic outcomes. According to Wang Wentao， from January to May this year， trade between China and Nicaragua continued to grow against the trend， with Nicaraguas exports to China increasing by 128.9% year-on-year， fully demonstrating the dividends of the resumption of diplomatic relations. Signing the Early Harvest represents another important achievement in terms of bilateral economic cooperation and trade since the resumption of diplomatic relations between China and Nicaragua. The establishment of the China-Nicaragua Mixed Commission on Economic， Trade and Investment Cooperation has also provided a platform for the communication and coordination of economic and trade affairs between the two governments， and has helped the two countries further improve the quality and level of bilateral trade and strengthen investment and economic cooperation in various fields.

“The signing of the Early Harvest will further leverage the economic complementarity between the two sides and push the mutually beneficial economic and trade cooperation between the two sides to a new level. The establishment of the ChinaNicaragua Mixed Commission on Economic， Trade and Investment Cooperation will further promote investment and trade between the two countries， and will help both sides to cooperate on an equal and mutually beneficial basis，” Moncada said.

According to a spokesperson of the Ministry of Commerce， the Early Harvest arrangement mainly covers tariff concessions for trade in goods， among others. After the arrangement comes into effect， China and Nicaragua will offer zero tariffs on some products originating from the other side， which will benefit the people and companies of the two coun-tries from an early date.

“Finishing the first step in the negotiation of the FTA， after having only resumed diplomatic relations half a year ago， is a record. This speed not only reflects the strong demand for recovering economic and trade exchanges between the two countries， but is also a concrete manifestation of the long-term stable development of enterprises guaranteed by the establishment of intergovernmental agreements between the two sides，” explained Zhou Mi， a researcher at the Ministry of Commerce.

At present， the United States is Nicaraguas largest export destination， accounting for nearly half of the total. At the same time， the United States is also the most important source of Nicaraguas imports， followed by China， which accounts for about 70% of Nicaraguas imports from the United States. It is obvious that if the China-Nicaragua FTA can be reached as soon as possible， it will create another big market space for Nicaragua.

“The Early Harvest arrangement is for giving priority to the economic activities of exporting its superior products to China with lower tariffs through preferential tariff concessions. This signing will help Nicaraguan agricultural producers explore business opportunities in the Chinese market，” Zhou Mi pointed out.

Nicaragua has become a new hot spot for Chinas investment in China and America

China and Nicaragua have extensive complementarity in the fields of factor endowment， the economic industry， the market and infrastructure. At the same time， the collaborative promotion between the two governments will help reduce the difficulty of enterprises self-exploration， reduce the cost of trade and investment， and enhance the protection of enterprises.

Li Han， Deputy Secretary-general of the Central American and Caribbean Research Center of the Institute of Latin American Studies， Chinese Academy of Social Sciences， believes that： “China and Nicaragua have great potential for cooperation in the fields of anti-pandemic cooperation， infrastructure， climate change， new energy transportation， smart agriculture and the environmental protection industry.”

In the field of infrastructure， there is also great potential for cooperation between the two countries. According to Zhou Mi， Nicaragua has only one airline， and also needs further improvement and optimization in the areas of waterway transportation and telecommunications. At the same time， Nicaraguas domestic population is densely distributed in coastal areas， and natural disasters occur frequently， which creates a great demand for natural disaster prevention and post-disaster infrastructure reconstruction. Chinese engineering contracting enterprises have rich experience and strong design and construction operation abilities in terms of promoting high quality infrastructure transformation and upgrading across the whole chain and under complex conditions. With financial support， they are expected to participate in related projects and achieve a win-win situation for all parties.

At the beginning of the year， Southern America Regional Company Branch of China Communications Construction Company Limited signed a memorandum of understanding on in-depth cooperation on infrastructure and peoples livelihoods with Nicaraguas Ministry of Transport and Infrastructure. At the signing ceremony， Ortega expressed his hope that China Communications Construction Company Limited would set up a branch in Nicaragua as soon as possible to participate in infrastructure construction， and stressed that Nicaragua would also give them their full assistance.

In August， the China Foundation for Peace and Development and the Nicaragua Ministry of Education held a signing ceremony of friendship and cooperation agreement to renovate Angela Morales Avires Special School in Leon， hoping to provide a better teaching environment and learning conditions for both teachers and students at the school through the implementation of the project. Nicaraguas Minister of Education Herrera pointed out that the project will also further strengthen the friendship ties between the two countries， and wished the two countries great strides forward on the road of peace and prosperity.

Nicaragua is also one of the major gold producers in Latin America. According to the BNamericas website， it is estimated that Nicaraguas gold exports will increase to USD 1 billion in 2022.

“We will continue to invest in new exploration and development projects to provide income and high-paying jobs for the mining community，”Sergio Murilo， President of Nicaragua Mining Chamber of Commerce， revealed.

Since 2014， the Nicaraguan government has sold 274 mining rights， covering an area of 988，000 hectares. In addition， there are still 120 projects waiting to be approved， accounting for a total area of 1.93 million hectares. The Nicaraguan government said that 49% of the countrys land can be used for mining activities， and the mining rights will not be nationalized.

In addition， Nicaragua is a country with agriculture as its core pillar， and coffee is its most important export product. Murilo said that the high temperatures， rainy weather and fertile volcanic soil give Nicaraguan coffee its unique taste. One of the famous giant coffee beans produced here， which is also the largest coffee bean in the world， is called the elephant bean. Coffee made from this is light and sweet in taste， and is thus recognized as one of the best quality coffees. Chinese enterprises in related industries should also pay attention to this field.