Chapter 2 – Economy of Nicaragua
2.2. Demographic dividend
As a result, textiles and clothing grew from a share in exports of 0.3 percent in 2007 to a 22.37 percent in 2008 (see table 5). The exports of such goods plummeted in 2009 due to the global financial crisis, the Nicaraguan Association of Textile and Apparel Industry (ANITEC) calculated that approximately 19,000 jobs were lost in the textile clothing sector of the free zones.34 The sector later recovered in 2012, improving its percent of exports share to the world from 2012 to 2018 to an average of 27.97 percent due to expanding its exports to neighboring countries in Central America, such as Honduras and Mexico, effectively establishing it as one of the top exports among consumer goods and raw materials, despite having to cope with the absence of the Tariff Preference Level (TPL) extension that came with the CAFTA-DR from 2013 to 2024, which allowed certain clothing and apparels made and assembled in Nicaragua to enter the U.S. market duty free.35
2.2. Demographic dividend
In regards to the population of Nicaragua, according to the OECD Economic Surveys of Costa Rica published on April 2018, it indicated that the labor productivity of Central America
33 Exports made included in Free Trade Zones.
34 Portocarrero (2010). The Textile and Clothing Sector and Sustainable Development in Nicaragua, p.18.
35 ―CAFTA-DR: Nicaragua TPL.‖ USFIA - United States Fashion Industry Association, 18 June 2013, available at: https://usfashionindustry.com/policy/global-trade/cafta-dr-a-nicaragua-tpl
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was lower than the average level of the entire Latin America.36 The proportion of working age population from 15 to 65 in relation to the total population has risen. INIDE estimated that Nicaragua has about 42 percent of people under 20 years old, 19 percent from 20 to 29, 15 percent from 30 to 39, 10 percent from 40 to 49, 7 percent from 50 to 59, and finally, 7 percent of people over 60 years old in accordance with the total population (see figure 3).37
Figure 3. Population of Nicaragua by age group
Source: INIDE. Available at: http://www.codeni.org.ni/datos-socio-demograficos/demografia/
poblacion-por-sexo-grupos-de-edades-y-edades-simples/
The statistics indicated a demographic dividend, which means that there are shifts in the age of population structure where the working age population turned out to be larger than the non-working age population that may result in a potential increase of economic growth in
36 Costa Rica, Overview. April 2018. Retrieved May 2019.
http://www.oecd.org/economy/surveys/Costa-Rica-2018-OECD-economic-survey-overview.pdf
37 Population by sex and age groups. Federación Coordinadora Nicaragüense (CODENI). Retrieved March 2020.http://www.codeni.org.ni/datos-socio-demograficos/demografia/poblacion-por-sexo-grupos-de-edades-y-e dades-simples/
42%: 0 to 19 yr 19%: 20 to 29 yr
15%: 30 to 39 yr
10%: 40 to 49 yr 7%: 50 to 59 yr 7%: over 60 yr
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terms of productivity, as defined by the United Nations Population Fund. This signifies that the foreign investments in Nicaragua are able to utilize the young labor force, about 42 percent of workers under 20 years old plus 34 percent of workers from 20 to 39 years old, yielding about 4.97 million people under age of 39 eligible to work in the service sector and manufacturing sector if calculated from the total population of 6.546 million people38 in Nicaragua (see table in appendix A for more detailed numbers).
Juan Sebastian Chamorro, a representative of the private sector in the national dialogue for Nicaragua and chief executive of the Nicaraguan Foundation for Economic and Social Development (FUNIDES), a think tank related with the private sector, stated that political policies should make good use of the demographic dividend during the demographic transitional stages. It is necessary to draw on the relevant experience of other countries to formulate policies, such as improve the level of education, improve the professional occupations of the labor force, provide vocational and technical training, and make full use of the human resources in Nicaragua to accelerate economic growth.
In order to improve the economic well-being of the people of Nicaragua, the increase of total income and consumption capacity of the labor force, the establishment of pensions and health insurance should also be prepared immediately. The Nicaraguan government could refer to its neighboring countries facing similar demographic changes to adjust its social services, labor and national health insurance, and other needs, so as not to cause greater financial stress and social pressure that has been demonstrated throughout prolonged sociopolitical crisis that has started since 2018, where mostly students protest against the pension reform that reduced payments to retirees and increased social contributions of workers.
38 Estimates calculated in reference to the data from World Bank. Retrieved in June 2020.
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Nicaraguan coffee exports amounted to US$418 million in 2018 (see figure 4), which was reduced by about 18 percent from the previous year due to the decline of international coffee prices plus the effects of the domestic social and economic crisis, losing its top position in exports to the t-shirts exports. In 2019, the Nicaraguan coffee exports reached 340 million pounds, a slight reduction in comparison to the previous year, which was estimated to be more than US$400 million according to the Association of Coffee Exporters of Nicaragua (EXCAN), but pointed out that the international coffee prices have fallen.39
Figure 4. Coffee and T-shirts Exports to the world from 2015 to 2018
Source: World Bank. Available at: https://wits.worldbank.org/CountryProfile/en/Country/
NIC/Year/2015/Summary
The average export price of coffee was at 103 dollars per 100 pounds, and in 2019 dropped to 89 dollars per 100 pounds,40 while the production cost has risen to about 140
39 Coffee price drops below 98.53 dollars. El Nuevo Diario. Retrieved May 2020.
https://www.elnuevodiario.com.ni/economia/493880-cafetaleros-prcio-cafe-quintal/
40 Bolaños (2019). Nicaragua: Coffee Annual, p. 2.
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