This marked a milestone in the bilateral relationship and a confirmation of deepening economic and trade ties between Beijing and Managua. Other than facilitating high-level mutual opening-up, unleashing more potential in trade and investment cooperation, benefitting the two countries and their people, it would additionally provide an institutional guarantee for bilateral economic and trade relations.
Nicaragua, one of the poorest countries in Latin America, and China in July 2022 launched negotiations with consultations on a deal focusing on trade of goods, services and greater market access for investment. As both countries are now working to implement the agreement, covering a wide range of areas including customs, tariffs, financial services and multilateral environmental deals in addition to an agreement on electronic transaction network, online personal data protection and digital economy, the Beijing-Managua relationship is set to scale a new height.
Managua in December 2021 had switched its allegiance from Taipei to Beijing in defiance of Washington's calls to “expand engagement with Taiwan.” Nicaragua today breaks diplomatic relations with Taiwan and ceases to have any contact or official relationship," said Nicaragua's foreign ministry. It "recognizes that there is only one single China.” The US efforts to make Nicaragua an international pariah and denunciation of the presidential polls as a “pantomime election” accelerated the pace of a close China-Nicaragua relationship.
The event was followed by resumption of diplomatic ties between Beijing and Managua and reopening of the Chinese embassy in Nicaragua, bringing new opportunities to bilateral economic and trade relationship. The US accused Managua of making “self-serving” decisions; the reestablishment of diplomatic ties with China conformed to the will and fundamental interests of the Nicaraguan people.
Describing it as historically a significant moment, Ortega pledged to uphold the one-China principle, expressed hope to expand trade and promote connectivity and commercial exchanges with China, participate in exhibitions and expos hosted by China and broaden cooperation in agriculture and fisheries, infrastructure, mining, clean energy and digital economy.
With all eyes focused on Honduras and despite the US pressure to maintain its current relationship with Taiwan, Tegucigalpa in March cut diplomatic ties with an increasingly isolated Taiwan, saying it recognizes only one China in the world,” leaving five of the Parlacen countries breaking off diplomatic relations with Taipei in recent years. This also made it the ninth country to sever ties with Taiwan since a pro-independence President Tsai Ing-wen first took office in 2016. The US-backed Tsai visited the region in April in an effort to shore up the support of the remaining allies and head off further defections; further erosion of the Taiwan camp is likely to continue as others may join the course very soon.
In late August, the Central American Parliament including Nicaragua – known as Parlacen – moved further and stripped Taiwan of its permanent observer status and replaced it with China. In a statement, the six-nation assembly cited the United Nations’ 1971 expulsion of Taipei in favor of Beijing and said it deemed Taiwan a “province of mainland China,” which disqualifies the island nation from participating as an independent country.
Some US lawmakers accused China of undermining democracy and hindering regional growth, condemning the dismissal of Taiwan from the Parlacen that convened in Managua where local legislature proposed to add China; this was rather the Nicaraguan response to the US interference in its affairs as well as an act of frustration over Washington’s failed attempts to stem the tide of Taipei’s diplomatic losses.
Nicaragua’s inclination toward China is driven by shared values and common economic interests as exemplified by Ortega’s recurrent visits to Beijing to hold several rounds of negotiations on the FTA and sign a number of cooperation agreements. Factors such as investments and humanitarian assistance from China, construction of thousands of housing units in Nicaragua by the China State Construction Engineering Corporation and cooperation in health and pandemic prevention made the Nicaraguan people realize that Beijing was their true partner.
With the signing of the FTA, Nicaragua has become China’s 28th free trade partner globally and 5th in Latin America. Once the FTA is implemented, it will eliminate tariffs on 60% of the goods traded between the two countries, gradually reducing tariffs on 95% to zero. As the newly-signed treaty will allow Managua to export tariff-free fabrics, beef and seafood among other products to Beijing, it is a landmark achievement for its ability to deliver benefits to the Nicaraguan exporters, businesses and people.