As the flow of Nicaraguan migrants points toward greater controls and reductions at the United States borders, officials in Nicaragua have begun to lower their expectations for remittance growth for this year, although they acknowledge That they will remain fundamentally affordable.
The president of the Central Bank of Nicaragua (BCN), Ovidio Reyes, said this week that they would stabilize between $420 to $450 million per month, because “we are not seeing the great growth that we have seen during the last 3 years.”
The historic supercycle seen in remittances since 2021 has led to shipments from abroad doubling and reaching record levels, now representing more than 30 percent of Nicaragua’s gross domestic product (GDP).
Even a World Bank study showed that Nicaragua is one of the 10 economies in the world with the highest growth rates of these shipments. In 2022, Nicaragua ranked ninth among countries with the highest growth rate of remittances last year and was overtaken by most countries where there is some form 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).
That year, remittances to Nicaragua increased so much that its growth rate exceeded the world average. Last year, shipments to 214 countries grew by 5 percent, more than the 50 percent increase reported in the country. Remittances to lower-middle-income countries alone increased by eight percent.
In the case of 2023, remittances totaled $4,239.8 million through November alone, up from $3,224.9 million in all of 2022 and an annual record for the past 20 years, disclosed by the Central Bank of Nicaragua.
If the December inflows are included, the 2023 balance will easily exceed $4.6 billion, representing about 30 percent of Nicaragua’s GDP in 2022, when the amount was $15.672 million.
In 2021, before the supercycle of remittances, these represented only 15.17 percent and in 2017, before the outbreak of the socio-political crisis in 2018, these were equivalent to 10 percent of GDP with only $1,391 million (that The size of the economy for the year was $13,786 million).
But beyond that, the truth is that the remittance supercycle of the past three years has revitalized the economy, supporting Daniel Ortega’s regime with more than $9,612 million, according to data from the Central Bank of Nicaragua.
This income increased by 15.96 percent in 2021; The expansion increased to 50.21 percent in 2022 and an increase of 31.47 percent in 2023 till November.
“Remittances have their own dynamics, this year (actually referring to 2023) they increased a lot, but we believe that next year (2024) they will remain moderate. In fact, in the last 4 months of the year, of which we have records in 2023, remittances have already stabilized at about 420 million dollars per month, this will be maintained,” Reyes said in an interview in one of the dictatorship’s propaganda media. . On 9th January.
Nevertheless, this year he expects “a very significant amount, we are talking about 4,500, 4,600 million dollars of foreign exchange earnings for the country, which will last till 2024.”
Possible cause of end of cycle
Expectations of lower growth in remittances from the Ortega regime, which has promoted a strategy of encouraging Nicaraguans to go abroad since 2018, were particularly emphasized in 2022, with a monthly increase in migration of Nicaraguans to the United States. Coincides with decline. In 2023.
Although in the fiscal year from October of one year to September of the next year, the Office of Customs and Border Protection (CBP) reported the apprehension of 138,729 Nicaraguans, the truth is that in the months of October, November and December 2022, more than 90,000 Arrest of added compatriots.
More than 20,000 Nicaraguans per month were entering through the United States borders. However, since January 2023, this figure has been decreasing to between 3,000 and 6,000 per month, reflecting a decline in Nicaraguan migrant flows, which affects remittances.
Washington has adopted measures to curb migration by establishing parole, which has benefited 44,000 citizens, in addition to a slower mechanism for making an appointment at the United States border to request asylum.
In response, the Ortega regime has now changed its strategy to continue profiting from migration and now encourages the crossing of migrants to the United States from the Caribbean and various regions of Africa and other parts of the former Soviet Union. Facilitating the arrival of visas and charter flights, which has led to record passenger traffic at Augusto C. Sandino International Airport.
Government hopes that FTA with China will give it momentum
Given the loss of momentum in remittances, which will no longer see high growth rates, the regime’s hope now is that the free trade agreement with China, which came into force in January this year, will stimulate the economy. However, it points out that in the 2024 growth perspective, which sets it between 3.5 and 4.5 percent, they did not take this factor into account.
“We estimate that GDP will also grow between 4.0 per cent and 4.5 per cent. Actually, our punctuality is 3.5 percent-4.5 percent. We do it this way because there were important driving factors in 2023 that will be reduced a little bit now,” he said.
“The export sector is the sector that will continue to maintain the momentum of the economy, and there we should take advantage of everything, we should take advantage of the prices, we should take advantage of the reduction in costs that we have seen, many stabilizations, big increases. “After… these are now stabilising. This has also led to an increase in international prices and inflation has also started to find its way out and the economy is going to take advantage of all these elements,” he explained.
And he added: “The new trade agreement, the FTA that was just signed with China, represents a great opportunity, because we are talking about putting almost or all of our export products at a zero tariff rate , and there are other goods as well, they will be cut over time; so, the country will involve itself in that dynamic and those markets.
“So the export sector is the first driving factor that will generate growth, of course, if the FTA with China is leveraged, then an additional driving factor for that element is generated,” he said. “That is, our estimate does not take into account the FTA with China, so anything coming from that route will add to growth,” he said.
Reyes acknowledged that China would not be able to replace another FTA, because exporters are not going to give up their traditional market (in this case the United States) to serve another market. “We have to look at the FTA with China as a complement to the FTA that already exists, FTA is never seen as an alternative, because it is very difficult for the business world to face the alternative, because when you have There is already a market established and you have a buyer. In case of your products, you are not going to leave him and go to another one, rather you have to increase your production to offer your products to the new buyer,’ ‘ he explained.