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Nicaragua’s Overreliance on International Trade

The position on Nicaragua portrayed in the video is fairly accurate, as it appears that similar sentiments have been observed by other individuals who have studied LDC’s (Least Developed Countries). It has been observed that the main motivation behind LDC states about international financial obligations is the international trade ties that these states are accorded. In line with this, such countries rarely default on international financial obligations when in crisis but resort to renegotiation of the debt service obligations (Han, Lee and Suk 2). Whereas this position is easily understood from the position of a borrower the perspective of the creditor is an area that has raised a lot of interest.

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It is because it has been reported that a country’s overreliance on international trade can place it at a disadvantage while bargaining, especially due to the risk of bilateral trade sanctions concerned. Due to this position, such countries often see their debt restructured on unfavorable terms owing to the weak bargaining position of the LDC states such as Nicaragua.

An example of such trade agreements includes those made in 2005 in Doha, in which developed countries agreed to provide duty-free and quota-free restrictions for 97% of the imports purchased from developing countries such as Nicaragua (Vanzetti and Peters 2). This agreement mainly focuses on products such as textiles and clothing and agricultural products such as bananas, rice, and sugar. These agreements have seen a major increase in exports from the LDC states and significant increases in GDP.

This increased trade owing to trade agreements has been witnessed in the Nicaraguan coffee market through fair trade and organic trade agreements. Through these agreements, coffee farmers can access credit facilities and are cushioned from fluctuation in international coffee prices (Vakila and Nygren 22). As a result of the agreement, there has been an improvement in education and health facilities, transportation services, and institutional capacity building programs within coffee-growing areas in Nicaragua and other coffee growing nations (Vakila and Nygren 22).

However, these agreements often come with some requirements that are, at times, difficult to implement within most regions. The stringent labor conditions that are part of the agreements require unavailable mechanisms, making their implementation difficult in certain regions. These limitations have seen a reduction in the degree to which such agreements may be effective at improving the condition of small scale farmers in Nicaragua (Vakila and Nygren 23).

Some institutions, such as Cenipae of Nicaragua, have formed a network to assist small-scale farmers with difficult issues such as inspection and certification (Rice 59). It has been especially beneficial to the small scale growers who compose a significant percentage of the coffee producers in the Nicaraguan region.

It can be said that through the work of these trade agreements and partnerships new opportunities have been created for development in developing economies. It has been suggested that the growth within these resulting networks has been significant and is likely to be maintained over several years (Raynolds, Murray, and Taylor 1118). However, it has been observed that among the factors that influence performance within these partnerships is leadership.

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This suggests that if the people of Nicaragua intend to continue benefiting from these arrangements, then it is essential that the leadership is given serious consideration. It is because, even though these agreements have yielded minimal financial benefit in the short run, the potential for long term benefit through the capacity building infrastructure is much larger (Raynolds, Murray and Taylor 1118).

The leaders must make efforts to continue educating and empowering its citizens to improve the national financial position and bargaining capacity. It is crucial to note that among the main reasons mentioned in this report for the state of the LDCs is attributed to over-reliance on credit. These arrangements provide an opportunity for change in that they allow these countries access to greater income and thus improve their bargaining capacity and reduce reliance on credit from increased export-oriented income.

Works Cited

Han, Ki C, Sukhun Lee, David Y Suk. “Bargaining Game and LDCs’ Commercial Bank Debt Restructuring Outcomes.” Journal of Economic Literature 28 July 2009: 1-39. Print.

Raynolds, Laura T, Douglas Murray and Peter Leigh Taylor. “Fair Trade Coffee: Building Producer Capacity via Global Networks.” Journal of International Development 2004: 1109-1121. Print.

Rice, Robert A. “Noble Goals and Challenging Terrain: Organic and Fair Trade Coffee Movements in the Global Marketplace.” Journal of Agricultural and Environmental Ethics 2001: 39-66. Print.

Vakila, Joni and Anja Nygren. “Impacts of Fair Trade Certification on Coffee Farmers, Cooperatives and Laborers in Nicaragua.” Agriculture and Human Values 2009: 1-30. Print.

Vanzetti, David and Ralf Peters. “Duty Free and Quota Free Market Access for LDCs.” 53rd AARES Annual Conference, Cairns, Queensland. 11-13 February 2009: 1-18. Print.

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