How will free trade affect the development of Nicaragua?

HELENA OTTERDAHL, VÄXJÖ UNIVERSITY 2007

1

School of Social Science Department of Political Science POC 531; Bachelor Thesis, 41-60p

How will free trade affect the development of Nicaragua?

- An analysis of opinions surrounding a recently signed free trade agreement.

C-uppsats i statsvetenskap

VT 2007 Author: Helena Otterdahl Tutor: Lennart Bergfeldt


2

ABSTRACT

The centre of interest is the discussion concerning development and free trade in Nicaragua. This

thesis rests on theories of Wallerstein, Hammarskjöld, Dahl, and Heidenheimer, and its purpose is

to spell out opinions on free trade and predict the future development of Nicaragua.

With the title “How will free trade affect the development of Nicaragua?” and the starting point in

Hammarskjöld’s way of dealing with development, my questions at issue are:

• Is there a correlation between free trade and development?

• How will the DR-CAFTA (Dominican Republic – Central America Free Trade Agreement)

affect democracy and corruption in Nicaragua?

Opinions are found in articles on the Internet; chosen by a variant of strategic selection. They are

analyzed with Content analysis; quantifying words in a coding frame and highlighting key quotes.

The prediction of the future development is done according to Delphi Technique and intends to

speak only for the articles included in the investigation.

This Bachelor Thesis has come to the following conclusions:

• There is a correlation between free trade and development in Nicaragua.

• There is governmental belief that the DR-CAFTA will improve democracy and grass root

fear that the existing democracy will be out watered. About corruption, it is hard to tell.

• Nicaragua is likely to develop economically, as trade and foreign investment will increase.

People in general are likely to profit, though unjust. Democracy will probably be

strengthened, even though there are deep concerns about the way politics are done today.

Corruption and transparency has a 50% chance to improve.

Keywords:

Free Trade, Nicaragua, Hammarskjöld, Democracy, Development, Dependence.

School of Social Science Author: Helena Otterdahl Department of Political Science Tutor: Lennart Bergfeldt POC 531; Bachelor Thesis, 41-60p Title: How will free trade affect the development of Nicaragua? Spring 2006 - An analysis of opinions surrounding a recently signed free trade agreement.


3

Shortly after God had finished his work creating the world,

the five Central American angels met to compare who had

gotten what in terms of natural resources and other assets.

Quickly the four angels of Guatemala, Honduras, Belize and

Costa Rica realized that Nicaragua had had a good share of

everything, so they asked God: “God, why have you given

such a lot to Nicaragua; two shores, forests, mountains,

vulcanos, lakes and minerals and so little to us?”

And God answered: “You haven’t yet seen the people I will

place there to rule the country”.

Nicaraguan saying


4

TABLE OF CONTENTS

ABSTRACT ................................................................................................................. 2 PREFACE .................................................................................................................... 6 1 INTRODUCTION ................................................................................................ 7

1.1 PRESENTATION OF THE PROBLEM .............................................................................7 1.1.1 Background ..................................................................................................................7

1.2 PURPOSE & QUESTIONS AT ISSUE ..............................................................................8 1.2.1 Delimitations................................................................................................................8

1.3 DISPOSITION / MODEL OF SEQUENCE OF WORK ....................................................9 2 DEFINITIONS.................................................................................................... 10

2.1 DEFINITIONS ON FREE MARKET AND TRADE .......................................................10 2.1.1 IMF (International Monetary Fund) and The World Bank Group.............................11

2.1.2 GATT (General Agreement on Tariffs and Trade)....................................................11

2.1.3 WTO (World Trade Organization) and the Doha Round ..........................................11

2.1.4 NAFTA (North American Free Trade Agreement) ...................................................12

2.1.5 DR-CAFTA (Dominican Rebublic – Central America Free Trade Agreement) .......12

2.1.6 TI (Transparency International) .................................................................................13

3 THEORETICAL FRAME OF REFERENCE ................................................ 15 3.1 WORLD SYSTEMS THEORY.........................................................................................15

3.1.1 According to Wallerstein ...........................................................................................15

3.2 DEVELOPMENT ..............................................................................................................16 3.2.1 According to Hammarskjöld......................................................................................16

3.3 DEMOCRACY ..................................................................................................................17 3.3.1 According to Dahl......................................................................................................17

3.4 CORRUPTION ..................................................................................................................18 3.4.1 According to Heidenheimer .......................................................................................19

4 METHOD............................................................................................................ 20 4.1 CHOICE OF METHODS ..................................................................................................20

4.1.1 My task.......................................................................................................................21

4.1.2 Quantitative and Qualitative Research.......................................................................21

4.1.3 Describing and Explaining studies.............................................................................21

4.1.4 Content Analysis ........................................................................................................22

4.1.5 Delphi Technique.......................................................................................................23

4.2 PRESENTATION OF THE MATERIAL .........................................................................23 4.2.1 Selection of Articles...................................................................................................24

4.2.2 Explanation of the Coding Frame & Analysis ...........................................................25

5 FACTS AND ANALYSIS .................................................................................. 26 5.1 THE ARTICLES................................................................................................................26

5.1.1 Article Number One...................................................................................................26

5.1.2 Article Number Two ..................................................................................................26


5

5.1.3 Article Number Three ................................................................................................27

5.1.4 Article Number Four..................................................................................................27

5.1.5 Article Number Five ..................................................................................................28

5.1.6 Article Number Six ....................................................................................................28

5.1.7 Article Number Seven................................................................................................29

5.1.8 Article Number Eight.................................................................................................29

5.1.9 Article Number Nine..................................................................................................30

5.1.10 Article Number Ten ...................................................................................................30

5.1.11 Article Number Eleven ..............................................................................................31

5.1.12 Article Number Twelve .............................................................................................32

5.2 THE COMPLETE CODING FRAME ..............................................................................32 5.3 ANALYSIS OF THE FIGURES IN TABLES AND DIAGRAMS..................................33

5.3.1 The Most Frequently Discussed Themes ...................................................................33

5.3.2 Comparing Positive and Negative Opinions..............................................................34

6 FINAL ANALYSIS AND CONCLUSIONS .................................................... 35 6.1 ANSWERS TO THE QUESTIONS AT ISSUE................................................................35 6.2 HOW WILL FREE TRADE AFFECT THE DEVELOPMENT OF NICARAGUA?......36 6.3 FOR FURTHER INVESTIGATION.................................................................................37

7 REFERENCES ................................................................................................... 39 7.1 LITERATURE...................................................................................................................39 7.2 OTHER SOURCES ...........................................................................................................40 7.3 INTERNET ........................................................................................................................40 7.4 IMAGES ............................................................................................................................41

APPENDIX; Preamble of the DR-CAFTA............................................................. 42


6

PREFACE

With Nicaragua having recently signed the DR-CAFTA agreement in the name of development and

me having visited the country not long ago, I began pondering about the term.

In debates some argue free trade to be the rescue for many poor countries, others blame the very

same agreements to maintain old structures and push poor countries in even deeper poverty. The

one thing most actors have in common is the discussion on development. I think “development” is a

very interesting term. Especially since it is frequently used in development assistance policies,

without anyone reflecting on what development really is. To me, development is an ongoing

process everywhere in the world. Something that is in constant change and creates its own successes

and problems along the way. For most poor people I have met, development seems to be a state

which countries can reach if they manage to build a set amount of paved road, hospitals, schools

etc. I think that since development is so popular, at least someone ought to know what it really is,

and how we should do to get it.

At Växjö University I study International Administration with language (English), majoring in

Political Science; International Relations. This combination of interests; the use of language and

current international politics brought me to Nicaragua as an exchange student in 2004-05. I studied

political science and did an international internship in a European Development Project. The

intention was to return to Nicaragua to do a minor field study, but only master essays were accepted

for the scholarship. However this did not restrain my interest of the problem at issue. In Nicaragua

one of my bigger concerns was: If within a state, there is no confidence in neither family, friends,

politicians nor foreign aid, then how can you build a nation and a future? This, in combination with

my earlier studies on democracy, my scepticism toward many foreign aid projects and my

wonderings if maybe private investment would achieve more, was how I chose the subject of this

bachelor thesis.

Borås, Sweden 2006-12-08

Helena Otterdahl


7

1 INTRODUCTION

In order to guide the reader through the thesis I will start each chapter with a brief introduction,

along with additional explanations when necessary. In this first chapter I will open up the field of

study, present the questions at issue and make the reader familiar with the problem at stake.

1.1 PRESENTATION OF THE PROBLEM

Nicaragua is a small nation knowing little but armed struggles and political instability. Hopes and

believes for tomorrow are few, however now Nicaragua is taking a step to try to improve the future.

In October 2005 Nicaragua, as the 5th country out of seven ratified the DR-CAFTA (U.S.-

Dominican Republic-Central American Free Trade Agreement), a free trade agreement signed by

the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua and the United States, and

still waiting for Costa Rica to join.1

Among other things the preamble of the DR-CAFTA claims itself to “PROMOTE transparency

[…], eliminate bribery and corruption in international trade and […] CREATE new opportunities

for economic and social development in the region”.23 However, critics claim this to be nothing but

a show for the gallery and that the agreement instead will lead to secret negotiations, dumping of

U.S. products and unemployment among industrial workers in the U.S. and small-scale producers in

Central America.4

Thus, the centre of interest is the discussion concerning development and free trade in Nicaragua.

As a student of International Political Science I find this discussion utterly important, however it is

a difficult one to follow. On the international arena there is constant discussion on development,

democracy and free trade. Experts and analysts discuss the terms, their importance, relevance,

duties and responsibilities. Sometimes names on e.g. trade agreements, international banks,

governments are included; but do they do they really apply the rules they preach?5

1.1.1 Background Nicaragua is a country with a history including most ingredients one can think of. Before the

Spanish arrived in 1524 the continent had already been populated for 8,000 years. Later Spain and

1 Internet 1 2 Appendix 3 Internet 2 4 Internet 1 5 Göteborgsposten 2006-09-18, p 47


8

Great Britain shared Nicaragua, its people and natural resources. War came to be an almost constant

element in Nicaraguan everyday life; between the Spanish and British conquerors, liberals and

conservatives, nationalists and dictators, and in the 80´s between Sandinistas and Contras.

Sandinistas was the left-winged party who had taken power after the dictator Somoza was

overthrown in 1979, and Contras was the U.S. financed guerrilla. The war ceased in 1989, and since

1990 Nicaragua has had democratic elections, with mostly right-wing parties on the presidential

chair.6

As Nicaragua is a country of lakes and volcanoes, with access to great seas and deep forests the

forces of nature are strong. In 1972 the capital Managua was destroyed in an earthquake, and in

1995 hurricane Mitch took many lives, homes and roads. This along with an immense distrust and

severe corruption makes Nicaragua a weak and vulnerable nation. In 2004 Nicaragua managed to

meet up to the demands of the HIPC initiative (Heavily Indebted Poor Countries), and was relieved

from a great deal of its external debts. Today Nicaragua is still one of the most aid dependent states

in the world with 22% of its GNP (Gross National Product) coming from external donors leaving

the national government almost completely in the hands of international actors and the IMF

(International Monetary Fund 2.1.1).7

1.2 PURPOSE & QUESTIONS AT ISSUE With the title and main question “How will free trade affect the development of Nicaragua?” and

the starting point in Hammarskjöld’s way of dealing with development (0), the purpose of this

thesis is to analyze opinions on free trade and predict the future development of Nicaragua. To get

an answer I have chosen the following questions:


• How will the DR-CAFTA affect democracy and corruption in Nicaragua?

1.2.1 Delimitations

It would be too big a job investigating everything written on the matter. And I am on the wrong side

of the Atlantic Ocean to follow the debate printed, via radio and TV. Moreover, only fragments of

the internal debate leave the country and it is difficult doing overseas interviews in Nicaragua.

Instead, I will investigate the part of the discussion available to me; opinions on the Internet.

6 Berman 2003, p 25-44 7 Ibid


9

1.3 DISPOSITION / MODEL OF SEQUENCE OF WORK

This Bachelor Thesis is hoping to reach different kinds of readers; family and friends as well as

political scientists. A certain amount of basic knowledge of the subject is required, but I will try to

guide all readers through the thesis. In order to room my private opinions I have chosen to place

them in a preface. The chapters:

1. INTRODUCTION - where I present the problem and provide the readers with background information. 2. DEFINITIONS - where I give short definitions on WTO, CAFTA etc. 3. THEORETICAL FRAME OF REFERENCE - where I present the most important ideas on World Systems, Development, Democracy and Corruption. 4. METHOD - where I present social scientific work and the methods used in this Bachelor Thesis. 5. FACTS AND ANALYSIS - where I present facts from the area of investigation, the articles and an analysis of each article. 6. FINAL ANALYSIS AND CONCLUSIONS - where I lay out the complete analysis and the conclusions drawn from it.

Figure 1.1 Sequence of work

Purpose of the thesis and Questions at Issue

Centre of interest

Create a coding frame

Select articles

Present the articles

Present facts and theories

Analyse the articles in the coding frame

Substantiate if there is a

correlation between free trade and development.

Track down the causal

mechanisms of democracy and

corruption.

State how free trade will affect the

development of Nicaragua.

Final conclusions


10

2 DEFINITIONS

In this chapter I present facts on free market and trade, international trade agreements and

organizations of importance for this thesis. I do this in order to provide the reader with knowledge

of the subject at issue, to better understand the later investigation and analysis.

2.1 DEFINITIONS ON FREE MARKET AND TRADE

Market economy is the current economic system in which trade is the very spine. Production and

trade are based on voluntary agreements among free actors.8 In free trade there are no customs or

other impediments for trade, and the price is determined by supply and demand. However, there are

few, if any places where absolute free market and trade is implemented. Usually there are

restrictions and subsidies on certain goods.9

Those who advocate free trade claim that it leads to prosperity while every region can focus on

what it is doing best and then exchange products with others.10 They also argue that free trade:

• promotes democracy, partly because a higher level of standards makes it easier to

address the politicians and partly because the trade in itself spreads knowledge of

democratic norms.11

• is a starting point for greater development, growth, opportunity and openness.12

• undermines corruption an promotes transparency since everyone is trading on the

same conditions, and noone is in control of what or how much is being produced.13

Those arguing against free trade are traditionally called protectionists, meaning that they think it is

more important to protect their own products (with subsidies, taxes etc.) than letting the trade free.

Here are a few common complaints on free trade:

• Demands on “fair trade” (a kind of protectionism saying free trade is unfair where

rich industrial countries take advantage of developing countries).

• Worry that free trade damages the environment.

• Claims that free trade and WTO are not compatible with social and ethic programs.

• Fear that free trade will be damaging to workers wages and free trade creates poverty

in rich countries and accentuates poverty in the poor countries. 14

8 Statens kulturråd Thirteenth Volume 1994, p 92 9 Statens kulturråd Seventh Volume 1992, p 34 10 Ibid 11 Bhagwati 2001, p 50 12 Stiglitz & Charlton 2005, p 57 13 Internet 3, p 7


11

2.1.1 IMF (International Monetary Fund) and The World Bank Group

IMF (International Monetary Fund) was founded in 1944 to stabilize exchange rates and the World

Bank Group (including e.g. the IBRD International Bank for Reconstruction and Development) to

administrate long term financing (loans) of reconstruction- and development projects.15 Today, IMF

is still supervising the major currencies, but is also active in underdeveloped countries consulting,

organizing central banks, tax-systems etc.16

2.1.2 GATT (General Agreement on Tariffs and Trade)

GATT was signed 1947 in Geneva, Switzerland with the purpose to increase international trade

through reduced customs, quotas and other impediments of trade. The idea was to export what the

country did well, and import what others did better. However, these rules did not apply to goods

from agriculture or textile, the largest export goods from countries in the third world.17

2.1.3 WTO (World Trade Organization) and the Doha Round WTO, an organization for various international trade agreements was created in 1994 to replace

GATT and widen its fields of activity.18 In 2001 negotiations were initiated to change and improve

the agreements of WTO, called the Doha Development Agenda. The negotiations aimed to lower

trade barriers around the world and permit free trade between countries of varying prosperity, but

talks were hung up over disagreements between the EU, the U.S. and the major developing

countries. While politicians and media of Western society praised the Doha round, there was also

heavy criticism claiming the Doha round to fail in democracy and openness, that the developing

countries didn’t benefit enough and that the developed countries had to take a larger responsibility

availing of the opportunities of a more integrated global economy. 19

According to a website concerning free trade, the Doha negotiations have broken down, probably

not to be continued until the next president of the U.S. takes up his duties in 2009. Many would like

to see a different approach in the negotiations, a larger feeling for the need of free trade instead of

all countries guarding their own liberalisations. Some claim the crisis of the WTO to be a result of

an organization having lost its roadmap.20

14 Bhagwati 2001, p 55 15 Statens kulturråd Third Volume 1990, p 301 16 Statens kulturråd Ninth Volume 1992, p 513 17 Statens kulturråd Seventh Volume 1992, p 354-355 18 Statens kulturråd Twentieth Volume 1996, p 41 19 Stiglitz & Charlton 2005, p 1-9, 65 20 Internet 4


12

2.1.4 NAFTA (North American Free Trade Agreement) In 1994 Mexico joined the free trade agreement with Canada and the U.S. It was the first trade

agreement of its kind, with such economically uneven parts. After ten years of participation results

are mixed. There have been several benefits, as trade liberalizations have stimulated trade with an

export rate growing about ten percent a year. On the other hand the Mexican market was flooded by

U.S. subsidized agricultural products and recently many industrial jobs were lost to China.

According to Joseph E. Stiglitz,U.S. Economic Nobel Prize winner, Mexico has learnt three lessons:

1. Trade liberalization alone does not ensure growth. There are many factors involved. Mexico

suffered from its weak institutions, low level of innovations and high levels of corruption.

2. Mexico lost large parts of the market to China because Mexico had limited tax revenues and

therefore could not do the investments necessary.

3. NAFTA was not really a free trade agreement. The U.S. kept their agricultural subsidies.

Stiglitz concludes by stating that trade and investment are vitally important for economic growth,

but the real challenge is to pursue liberalization in a manner that promotes sustainable development

and raises incomes for low and middle class.21

2.1.5 DR-CAFTA (Dominican Rebublic – Central America Free Trade Agreement) To many, the DR-CAFTA is the natural continuation of NAFTA, and at the same time a

springboard towards FTAA (Free Trade Area of the Americas22), that if it one day becomes reality

would encompass 34 countries. The DR-CAFTA, including the U.S., Guatemala, El Salvador,

Honduras, Nicaragua, Haiti and still waiting for Costa Rica to join creates the second largest U.S.

export market in Latin America behind only Mexico.23

The idea of the agreement is to promote trade liberalization and by that bring further development

to all countries affected. The negotiations of the agreement proceeded very fast; NAFTA was

negotiated for seven years, FTAA for almost a decade without any progress, and the DR-CAFTA

negotiations started as late as 2003 and had come into force already in 2006. The DR-CAFTA

would require market liberalization for the majority of goods and services in Central America -

including agriculture, manufacturing, public services and government procurement. In return, the

U.S. has promised increased market access for certain sectors in Central America, including textiles

and a limited increase in sugar quotas.24

21 Stiglitz & Charlton 2005, p 22-24 22 A proposed agreement, an extension of NAFTA, to eliminate or reduce trade barriers among all nations on the American continents except Cuba, Venezuela and Bolivia. 23 Internet 5 24 Ibid


13

Figure 2.1 Representatives from the seven countries included in DR-CAFTA gathered in Washington with the

U.S. President Bush in the middle and the Nicaraguan President Bolaños on his left.25

Figure 2.2 Bush promotes CAFTA at a Figure 2.3 Global Exchange protests the FTAA on the US/Mexico Organization of a American States meeting.26 border.27

2.1.6 TI (Transparency International) TI, a non-politic global civil society organization leading the fight against corruption, agrees on the

definition that corruption is the abuse of entrusted power for private gains 3.4. TI is cooperating

with innumerable organizations all over the world with the mission to create change towards a

world free of corruption.28

In the case of Nicaragua corruption is high and transparency low. In the Global Corruption

Barometer (in cooperation with TI) it is stated that politics is the one field most corrupted, and even

if Nicaragua is badly affected by corruption, many countries are in even worse conditions. One

problem is that many are rather pessimistic about the future. In Nicaragua in 2005, 70% thought

corruption would increase in the next three years (sample average 44%).29

25 Image 1 26 Image 2 27 Image 3 28 Internet 6 29 Internet 7


14

The table presented below is ranking countries in terms of corruption where number one is best.

The figures comes from the Corruption Perceptions Index (CPI) (also in cooperation with TI), based

on the opinions of businessmen, academics and risk analysts. In the table are presented the year of

investigation, Nicaragua’s rank and the total amount of investigated countries, showing that

Nicaragua has a rather steady position on the lower half. 30

Figure 2.3 Ranking list of corruption

30 Internet 8

Year Rank Total 1998 61 85 1999 70 99 2000 - - 2001 77 91 2002 81 102 2003 88 133 2004 97 145 2005 107 158


15

3 THEORETICAL FRAME OF REFERENCE

Here I present fragments of the discussions surrounding world systems, development, democracy,

corruption as well as the sources of my theoretical frame of reference. The later analysis will

continuously be related to these theories.

3.1 WORLD SYSTEMS THEORY

Among theories aiming at describing the structure of our contemporary world I have chosen the

U.S. sociologist Immanuel Wallerstein´s World Systems Theory. I chose it partly

because many others use it as a base, but also because I believe it has many

good points. The World Systems Theory is one of many theories with the

joint idea that countries are grouped in “Centre” and “Periphery”,

where the countries in the centre exercise political control over and

exploit those in the periphery. See figure 3.1. These theories, in varying

degree, are based on the ideas of Marxism. To start with, the Imperialists argue

that concentration of production and capital has created an economic Figure 3.1 World Systems Theory

centre from where powers are shared, and consequently foreign affairs is of less importance. The

Dependency Theory further develops the imperialistic idea that economic growth in the centre

opposes development in the periphery, and claims that development and underdevelopment are two

inevitable sides of the same global process. The world is considered a system in which all countries

and regions are mutually depending on eachother - interdependence. Leaving the focus on

capitalism, Theories of Dominance brings up structural violence as a global system including

politics, economics, communication and culture, benefiting the countries in the centre and

damaging others. Dominance is maintained as almost all international contact is made via the

countries in the centre.31

3.1.1 According to Wallerstein Finally, the World Systems Theory returns to a capitalistic base and divides world systems into

world empires and world economies. Throughout history, world empires have come and gone,

whereas world economy has grown since the 16th century when trade first became international. The

dynamic in the World Systems Theory derives from the unequal share of the economic assets and

the passing of former colonial control into informal or indirect control. The World System aims to

cover the entire world, it tries to strangle all countries and allows noone to leave. The leading state,

maybe in cooperation with other leading states, sets the rules and makes sure they are followed. 31 Hettne 1996, p 27-45

Periphery

Centre


16

According to Wallerstein, the influence of the former hegemony the U.S. has decreased since the

70´s, and there is noone capable of mantling the role. Thus, his hypothesis is that the world faces a

more permanent regionalisation.32

3.2 DEVELOPMENT

Gilbert Rist is a French political scientist and a professor at the graduate institute of development

studies in Geneva. According to his book “The History of Development” the term

underdevelopment began on January the 20, 1949. On that day two million people became

underdeveloped. After WWII the U.S. wanted to manifest their hegemonic role in the world as

much they could. Production was not enough. On the very day President Truman took office, the

U.S. launched a new programme and a new era was born – the era of development.33 “We must embark on a bold new program for making the benefits of our scientific advances and industrial progress available for the improvement and growth of underdeveloped areas. The old imperialism – exploitation for foreign profit – has no place in our plans. What we envisage is a program of development based on the concepts of democratic fair dealing.”34

3.2.1 According to Hammarskjöld Dag Hammarskjöld was a Swedish diplomat and the second Secretary-General of the United

Nations. In 1975 the Dag Hammarskjöld Foundation report “What Now”, introduced a new way of

dealing with development; the definition and ideas of development I am using in this thesis:

• First, development is not only an economic matter, but a complex process in which culture

and history is included, and can therefore never be copied from one place to another.

• Second, development must always aim to satisfy the poorest population.

• Third, the present situation originates in a system of exploitation, where international aid

should be directed to states working on reducing internal inequalities, and withheld from

those who do not respect human rights.

• Fourth, development should be linked with ecology linked with social and technological

systems and thereby include all nations in the world.

According to the report, development is not a phenomenon kept for the developing states, but

including all states worldwide. In short, the Hammarskjöld report aimed towards “Another

Development” worldwide.35

32 Hettne 1996, p 27-45 33 Sachs 1992, p 6-7 34 Ibid 35 Rist 2002, p 154-156


17

3.3 DEMOCRACY I agree with Ball & Dagger, both holding PhD’s at U.S. universities, that democracy, rather than

being a specific kind of government that must take a definite form, is an ideal. An ideal towards

which people aspire. 36 The etymological meaning of the word “democracy” is “rule by the common

people”, which is up to every person, group of people and government to interpret. For instance in

Athens, the cradle of democracy, “the common people” was composed by the rich and influential

elite in society. In present-day western civilisations democracy is usually representative, that is

candidates are elected to take decisions on behalf of the people.37 Winston Churchill: “No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of Government except all those other forms that have been tried from time to time.” 38

3.3.1 According to Dahl Robert A. Dahl, Professor of Political Science at Yale University, a very influencial scientist of

democracy has written what I believe is the best definition of democracy.39 Dahl states the core of

democracy to contain:

• An extensive competition between individuals and organisations of the power.

• An including participation in the process of election.

• Civil and political rights such as freedom of speech and freedom to organize.40

Further, in Democracy and its critics Dahl states that democracy often causes confusion as there are

no agreed criterions on what democracy really is. According to Dahl democracy is only part of good

society, also democracies are not always democratic, but nevertheless he claims the democratic

ideal to be preferred above others. In his book, Dahl chooses to focus on the democratic process on

which he has a number of criterions. He claims that no society in the world lives up to them but that

they nevertheless still serve as a good benchmark.41

“The association must be able to state assumptions that motivate a democratic order

1. Only those subordinated the decisions (the members) are to make them. 2. Every member’s interest deserves equal respect. 3. No adult member is to prove their competence to safeguard its interests. 4. Everybody’s demands are equally valid. 5. Scarce resources are to be justly distributed.”42

36 Ball & Dagger 2004, p 37 37 Ibid, p 20-21 38 Ibid, p 19 39 Nationalencyklopedin Fourth Volume 1990, p 340 40 Rudebeck & Törnquist 1996, p 303-304 41 Dahl 1989, p 156 42 Ibid


18

Naturally, the size of the political entity is directly decisive for its theory and praxis, for instance in

the ancient Greece and Rome small democratic states were ruled by “direct democracy” where only

a fraction of the people were included in demos. In democratic contemporary nations Parliamentary

Democracy is applied where candidates are chosen to take decisions on behalf of the people. In a

world of ever closer communication, now democracy is changing all over again. The author of the

Swedish foreword in Dahl’s book asks himself how democracy can be applied on the international

arena, if democracy is possible or even desirable in the complicated networks of international

political and economic institutions.43

3.4 CORRUPTION Already Aristotle had his concerns, as he described tyranny as a corrupt form of monarchy: “There are three kinds of constitution, or an equal number of deviations, or, as it were, corruptions of these three kinds. . . The deviation or corruption of kingship is tyranny. Both kingship and tyranny are forms of government by a single person, but. . . the tyrant studies his own advantage. . . the king looks to that of his subjects.”44 There are a number of different thinkers with their own ideas of the meaning and applications of the

term in question. However, most social scientists follow the OED (Oxford English Dictionary)

definition of corruption as “Perversion or destruction of integrity in the discharge of public duties

by bribery or favour; the use or existence of corrupt practices, especially in a state, public

corporation, etc.” They relate their definitions of corruption essentially to concepts concerning the

duties of public office. In short that of private gain at public expense.45

Former U.S. Trade Representative and Commerce Secretary Michael Kantor defines corruption

as“a virus threatening the health of the international trading system” 46

Colin Leys, a former professor of political science at Queen's University in Canada, explains why

new states are likely to be involved in corrupt actions:

1. The idea of the national interest is weak because the nation is new. Often, institutions

and offices are in constant change and to many citizens “the state” equals someone

plundering and not helping. The loyalty of the people lies not in the state but in traditional

rules, tribes, friends etc.

43 Dahl, 1989, p 9-10 44 Heidenheimer 2005, p 3-14 45 Ibid 46 Ibid, p 925-931


19

2. Corruption is inseparable from great inequality. Holding an office is usually very

beneficiary, and the whole family wants its part of it. Many times the penalties for bribery

etc. are fairly modest.

3. In new states corruption is easily concealed. Partly because people don’t know the

official rules and partly because law is ineffectively enforced.47

According to Leys, a main problem in contemporary new states is the lack of independent

professionals and a middle class able to influence those in power. With this said, Leys states it is

incorrect to assume that the results of corruption are always bad and important, and continues by

bringing up the question about the non-existing scientific work on corruption saying:

“this seems to be a widespread feeling that the facts cannot be discovered, or if they can, they cannot be proved, or that if they can be proved, the proof cannot be published”.48

3.4.1 According to Heidenheimer Professor of Political Science Arnold J. Heidenheimer (1930-2001) at Washington University, St.

Louis explains that social science uses three different definitions of corruption, of which I have

chose to use the following one, the “Public-Interest-Centered Definition”, in combination with the

OED definition (3.4): “The pattern of corruption can be said to exist whenever a powerholder who is charged with doing certain things, i.e., who is a responsible functionary or officeholder, is by monetary or other rewards not legally provided for, induced to take actions which favour whoever provides the rewards and thereby does the damage to the public and its interests.”49

Of course definitions have changed in time and space, what was considered corruption in Britain

200 years ago might not be the same today. Also Western observers in non-Western developing

countries face different cultures concerning corruption. What is being considered corruption in the

West might just be part of an unofficial code or system in non-Western countries. Maybe then

corruption is simply defined by what is and what is not accepted in society?50

47 Heidenheimer 2005, p 59-71 48 Ibid 49 Ibid 50 Ibid


20

4 METHOD

In order to understand how I work, the methods I have chosen and how I finally will get the results,

I here discuss and present scientific methods, generally and specifically for this thesis. All the time,

keep the Model of Sequence of Work (1.3) in mind.

4.1 CHOICE OF METHODS In a perfect world scientific results would be facts, truths and reality. Unfortunately this is not the

case today. We all carry values that influence everything we do, personal values are impossible to

erase even from scientific work. It is therefore of greatest importance that we are aware of this and

try not to influence the work to much. However it is likely that personal values will occur

somewhere in the process; in the choice of field of studies, the design of the questions, the choice

and implementation of methods, the gathering of data, the analysis of the data, the interpretation of

the data or in the conclusions. There are also practical factors that matter. The choice of method

must be brought into line with the specific question at issue. It has to be well suited for the needs of

the research and also possible to carry out.51

In order to do my best to fulfil these criterions of good research I have chosen to use a combination

of Content analysis and Delphi technique. First I will compile the results according to the Content

analysis, and then do a future prediction according to the Delphi technique. As mentioned in the

preface, the original idea was to do a field study based on interviews in Nicaragua. However, my

project was not accepted for the scholarship, but I still thought the idea was too interesting not to be

investigated, so I did what I could. I have studied opinions. Content analysis made it possible to

combine qualitative and quantitative analysis. It can easily deal with a large quantity of material and

at the same time focus on small parts of it. The Delphi technique made it possible to use expert

opinions and formulate ideas on future events (they will both be further explained).

A scientific research must have reliability, that is be trustworthy. The results of a research should be

the same if the research was done all over again, and should not be influenced by any temporary

condition. Reliability is especially important in quantitative research. Another and maybe the most

important factor in scientific work is validity. How can one be sure that the question at issue is what

is being investigated? Is it correct to generalise? Is there coherence in the conclusions?52

51 Bryman 2002, p 37-39 52 Ibid, p 43


21

4.1.1 My task I want to find out whether or not the future development of Nicaragua will be affected by free trade,

and if so how. To do this, I will analyze opinions using a combination of quantitative and

qualitative Content analysis, combined with Delphi technique. As an explaining study, seeking

answers to questions and trying to develop new theories and hypothesis, the challenge is twofolded.

I must try to substantiate that something is affecting something else and find out whether there is a

correlation and/or effect between the two. Then I must try to track down the casual mechanisms

(what it is that is affecting) in order to explain how one variable is affecting another. Finally, my

task is to find possible future outcomes of this.53

The independent variable: The dependent variable:

Figure 4.1 Variables I will try to find out whether the dependent variable “The future development of Nicaragua” is

affected by the independent variable “free trade”, and if so, how.

4.1.2 Quantitative and Qualitative Research Quantitative research is usually focusing on quantifying when it comes to gathering and analysing

data. It often tries out different theories, uses natural scientific values assuming that there is an outer

and objective social reality. Qualitative research, on the other hand, is often focusing on words

instead of quantities. It emphasizes the generating of theories; it opposes natural scientific values

and instead stresses how individuals understand their social reality. This thesis is a cross-over, e.g.,

including both quantitative and qualitative characteristics.54

4.1.3 Describing and Explaining studies Social science is basically about searching for and trying to substantiate the occurrence of relations

and influence between different phenomenon. Investigations are either explaining or describing;

sometimes we are satisfied describing what is happening, sometimes we want to explain different

phenomenon; Is X really affecting Y? This is an explaining thesis following the third example:

1. To try theories and hypotheses on empiric material.

2. To explain something, for instance an occurrence with the help of different theories.

3. To develop new theories and hypothesis as to why something is the way it is.55

53 Esaiasson 2004, p 40-41, 71-73 54 Bryman 2002, p 34-35 55 Esaiasson 2004, p 40-41, 71

Free Trade The future

development of Nicaragua


22

4.1.4 Content Analysis

Content analysis is a flexible method that can be used for various types of media. The idea is to

systematically analyze documents and texts by quantifying the contents in categories. The probably

most famous definition of this method was made by Berelson in 1952: “Analysis of contents is a technique of research that involve an objective, systematic and quantitative description of the concrete or manifest contents in communication”56 The number one focus is to be objective and systematic. The categories must be presented in

advance and it is important to clearly specify how parts of the raw material are to be assigned to the

respective categories. Berelson´s definition shows the importance of the “quantitative description”,

but also of the “manifest content”.57 In order to get the most accurate analyse it is of vital

importance to select right material. There are four criterions:

1. Authenticity. Is the material genuine and of an unambiguous origin?

2. Credibility. Is the material without errors and distortions?

3. Representativity. Is the material typical when it comes to its category? If not, is it known to

what degree it is not typical?

4. Meaningfulness. Is the material clear and understandable?58

When analysing a text it is of vital importance to have a data matrix; a squared scheme containing

the units of analysis, the dimensions or characteristics of the units being studied, and the criterions

or classifications of the characteristics.59 In this thesis I will note the frequency of certain words,

what words that are being used and what words are not. I will choose keywords, and also note the

view or opinion of the writer, and whether the text is loaded with positive or negative arguments.60

In qualitative Content analysis not only the manifest content is investigated but also the latent or

hidden meaning of the text. Texts or part of texts are sorted into genres and sentences of special

importance are quoted.61

When investigating it is important to remember that no method is perfect. Content analysis is

considered an objective method of analysis. It is open and easy to explain how the investigation was

done. Content analysis can stretch over a long period of time, it is applicable in many fields and

enables to analyse groups that otherwise would be difficult to reach. One of the disadvantages of

The Content analysis is that it can only be as good as the selected material. Also, it is practically

56 Bryman 2002, p 190 57 Ibid, p 190-192 58 Bryman 2002, p 357 59 Esaiasson 2004, p 46-47 60 Bryman 2002, p 196 - 201 61 Esaiasson 2004, p 245 - 249


23

impossible creating an encode manual without including personal interpretations, and sometimes it

might be difficult to find balance between the quantitative and qualitative parts and therefore jump

into conclusions.62 However, I am confident that I have chosen the best method possible.

4.1.5 Delphi Technique

Delphi technique is a future study generally used when there is a desire to create a joint picture of

expert’s opinions about tomorrow. Delphi technique allows structured expert opinions to make

forecasts on the development in a certain field. The technique is used for various fields. It is

intuitive and serves three purposes:

- to formulate ideas and describe future events

- to assess when an idea will be put into effect or an event to occur

- to judge the desirability of a certain event

Usually these kinds of investigations are made on interviews, even though other ways are

possible.63 Sometimes Delphi technique is criticized because some argue that experts are no better

than others predicting the future.64 However, there are few methods dealing with the future and the

Delphi technique was the only one I found that was applicable on this thesis. I believe that experts

are no less qualified to analyse the future that anyone else. I also find it of great importance to study

the contemporary world trying to line out what might happen tomorrow, even thought no methods

can be trusted 100%.

4.2 PRESENTATION OF THE MATERIAL Choosing subject, authors and theories I have acted on my personal fascination of Nicaragua, my

interest of development and my experiences of Political science. Unfortunately I have not found any

previous research useful for my thesis. Also, I must confess that all authors are western men. I have

tried to find women, and authors from other cultures, but with no luck. I have chosen the authors

most acknowledged in their respective field.

Since I found only few theories on development, I concentrated on the French political scientist

Gilbert Rist´s work The History of Development. On democracy, on the other hand there are

countless theories and as I already have written about democracy, using Dahl’s definition, I again

chose his perspective, since that is one of the most acknowledged theories. On corruption I chose

62 Bryman 2002, p 203-205 63 Statskontoret 1971, p 12-17 64 Ibid, p 58


24

Heidenheimer simply because he had written the most comprehensive book I could find, and was

often referred to by others. Economic theories are not relevant to this thesis; however, economic

status is one of the most important factors when measuring development. The distinction National

and Personal Economy is an invention of mine interpreting Hammarskjöld’s criterion number one

and two (3.2.1).

The facts on free market and trade, free trade agreements and international economic

organizations derives from Nobel Prize Winner Stiglitz, other writers, encyclopedias, and when no

literature was available, from the Internet.

4.2.1 Selection of Articles

In the case of a scientific investigation a “population” is the group of phenomenon that the

investigation intends to speak for. In my case the population consists of all articles on the Internet

dealing with the DR-CAFTA. Having identified the population I have to choose which units to

investigate. There are three options:

1. Investigate them all.

2. Make a random selection of a large number of units of analysis.

3. Make a strategic selection of a minor number of units of analysis.

Investigating all articles on the Internet is impossible. Primarily because I cannot find them all and

secondly because that would be too big a job. In order to use random selection I would have to

create a frame of selection where all units of analysis have the same chance to be included. This too

is impossible. Hence, I have chosen a variant of strategic selection, searching for articles on a

search engine using keywords.65

The articles are found on the Internet, via Google, the most commonly used search engine, which

also is recommended by many tutors. I have used strategic selection when searching by the words

“DR-CAFTA”, “Nicaragua” and “Free Trade”. I have also searched for articles based on different

quotes, found in earlier articles. All articles are written in either Nicaragua or the U.S. and

everything written in Spanish is translated by me. I know that is it of risk having Internet as the

main source in an investigation, but in this case it was the best option.

65 Esaiasson 2004, p 175-176, 209-211


25

4.2.2 Explanation of the Coding Frame & Analysis

Hammarskjöld introduced a new way of dealing with development (3.2.1); here shortened by me:

• as not only an economic matter (but still economic as well)

• aiming to satisfy the poorest population

• working on reducing internal inequalities

Out of this and according to the Content analysis I worked out the categories to be included in the

coding frame:

• Development

• Democracy

• Corruption – including economic corruption as well as transparency

• National Economy – if and how the national economy will be affected.

• Personal Economy – if and how the personal economy for common people will be

affected.

The articles will be given a number and then be introduced one by one; by title, Web address,

author, origin and year of publish. When reading the article I will search for the words of interest

and mark them in the coding frame. If the article is discussing a subject in positive terms, there is a

plus (+) in the frame, and if the discussion is more negative there is a minus (–). Not only is the

manifest meaning noted, but also obvious latent meanings, that is: use of the word or obvious

discussion on the subject without using the actual word. In order to cover the quantitative I will also

quote and search for key sentences.

Figure 4.2 Coding frame

When this is done I will:

1. Compile the results from the coding frame

2. Analyse the coding frame according to the method of Content analysis.

3. Compile the results according to the Delphi technique.

No. Origin Year Development Democracy Corruption National Economy

Personal Economy


26

5 FACTS AND ANALYSIS

Here I begin with the articles included in the analysis one by one. After that I present the complete

coding frame along with further analysis of the figures.

5.1 THE ARTICLES

The articles are introduced and analysed one by one by title, Web address, author, origin, year of

publish, marks in the coding frame, quotes and key sentences.

5.1.1 Article Number One

Title: Importadores llegan atraídos por el Cafta (Importers arrive attracted by the Cafta)

Web: Oct 13 2005: http://www.laprensa.com.ni/nacionales/nacionales-20051013-13.html

Author: Mario José Moncada and Ricardo Guerrero N., journalists at La Prensa.

Origin: La Prensa, the largest daily in Nicaragua. Always revising the government.

www.laprensa.com.ni No. Origin Year Development Democracy Corruption National

Economy Personal Economy

1 La Prensa 2005 +

Moncada/Guerrero state that the DR-CAFTA has positive effects already in 2005, before it is

implemented. That Nicaraguan companies are communicating with U.S. companies and that more

inspectors of labours rights will be employed.

5.1.2 Article Number Two

Title: NOTAS DE PRENSA DEL PRESIDENTE (Press release from the President)

Web: Oct 13 2005: http://www.presidencia.gob.ni/Presidencia/Files_index/Secretaria/Notas

%20de%20Prensa/Presidente/2005/octubre/PRESIDENTE%20BOLAÑOS%20

FELICITA%20A%20LAS%20BANCADAS%20DEL%20PLC,%20AZUL%20Y%20

BLANCO%20Y%20CAMINO%20CRISTIANO%20POR%20RATIFICACION%20

DEL%20CAFTA-12oct.htm

Author: Unknown

Origin: The presidency of Nicaragua; Official homepage of the Nicaraguan Government

http://www.presidencia.gob.ni/ No. Origin Year Development Democracy Corruption National


2 Casa Precidencial 2005 + +


27

The liberal President Bolaños congratulates the parliament for ratifying the DR-CAFTA, stating

that it will highly increase the investments and ”generate the thousands of employments that is

lacking for those needing another source of income”.

5.1.3 Article Number Three

Title: TRATADOS DE LIBRE COMERCIO Significado de CAFTA para Nicaragua (FREE

TRADE AGREEMENTS Significance of CAFTA to Nicaragua)

Web: Oct 13 2005: http://www.femica.org/archivos/TratadosdeLibreComercio.pdf#search

=%22carlos%20guillermo%20sequeira%22

Author: Carlos Guillermo Sequeira, D.B.A. from Harvard and Professor emeritus, specializing

in marketing at INCAE; a Latin American higher-education organization. And a DR-

CAFTA negotiator on behalf of Nicaragua.66

Origin: CONPES; Consejo Nacional de Planificación Económica Social (National Council of

Social Economic Planning) http://www.conpes.org.ni/

Sequeira presents what impact the free trade agreement might have on Nicaragua and claims there

is a “Correlation between free trade and development” and that it will mean “Cross-pollination,

Attraction of investments, Opening of sources of employment, Increasing income for the

population” He asks himself “What can a free trade mean to a forthcoming country” and answers

”A useful instrument to mitigate the poverty […] The propeller of the economic development take-

off” As most debaters neither Sequeira says a lot about corruption, but claims that DR-CAFTA will

lead to increased transparency and work against corruption.

5.1.4 Article Number Four

Title: DR-Cafta contra el reloj (DR-Cafta versus the clock)

Web: March 24 2006: http://www.iniciativacid.org/noticias.asp?liste_id=1227

Author: Unknown

Origin: CID; Iniciativa Mesoamericana de Comercio Integración y Desarollo (Central

American Enterprise of Commerce Integration and Development). An

organization working on human rights, democracy and social involvement.

http://www.iniciativacid.org/

66 Internet 9


Personal Economy

3 Carlos G. Sequeira 2003 + + + + +


28

This article brings up the shortage of time in the negotiations on DR-CAFTA. It worries about the

economic results of the delay and predicts a prosperous future. “If the DR-Cafta goes into force in

the second quarter of 2006, between January and March Nicaragua will have lost at least 11

million dollars on not realized exportations […] according to official figures, in the first year of

validity of the DR-Cafta, Nicaragua´s exportations will increase with 44 million dollars only on the

quotas of meat, peanuts, sugar and milk”

5.1.5 Article Number Five

Title: FTAA…¿SIN CAFTA? (FTAA…WITHOUT CAFTA?)

Web: March 24 2006: http://www.consuladonicamiami.com/Comunicados/Mayo%20

2004/Alca%20sin%20Cafta.asp

Author: José Velázquez E., Nicaraguan Consul-general in Miami67

Origin: Consulado General de Nicaragua en Miami; The Nicaraguan consulate in Miami, U.S.

http://www.consuladonicamiami.com/ No. Origin Year Development Democracy Corruption National


5 Consulado General… 2003 + + + + The consul-general is worried that the DR-CAFTA will not be signed at all because of aversion

against it among American company owners, “Many would be losers of this scenario”, he says, and

continues: “the opportunity that Cafta will give Central America in terms of economic development

and democratic consolidation is something we neither can nor should let pass us by”. Velázquez

sees the DR-CAFTA as the major and maybe last opportunity to achieve the eagerly awaited

integration of the Central American countries in international trade. He believes that DR-CAFTA

will decrease the migration towards the U.S. and especially Florida, stating that “the creation of

hundreds of thousands of new employments has been one of the most visible results” of NAFTA.

5.1.6 Article Number Six

Title: El mensajes de Zoellick (Zoellick´s message)

Web: Mar 24 2006: http://www.confidencial.com.ni/2003-359/alcierre1-359.htm

Author: Iván Olivares, journalist at the CONFIDENCIAL68

67 Internet 10 68 Internet 11


Personal Economy

4 CID 2005 +


29

Origin: CONFIDENCIAL; A weekly with information and political analysis where the authors

themselves are responsible for their texts. http://www.confidencial.com.ni/

No. Origin Year Development Democracy Corruption National


6 CONFIDENCIAL 2004 – – + – Olivares is in defiance of DR-CAFTA bringing development and democracy to Nicaragua, claiming

that “for this agreement to be successful in this space of time, we need new public and private

authorities, reaching outside the elites.”, and continues “In their public campaign the government

states that CAFTA is a ´bridge towards progress´. But until now it seems like the bridge is too long,

that it only accomplishes to cross the most competent companies and economic groups that already

are globalized. To the vast majority, the benefits of CAFTA are simply unattainable.” Olivares is

sceptic and concludes ”the same story as always repeats itself: few winners and many losers”.

5.1.7 Article Number Seven

Title: How Can U.S. Companies Benefit / Why U.S.-CAFTA-DR?

Web: Jun 28 2006: http://www.export.gov/fta/complete/CAFTA/

Author: Unknown

Origin: Export.gov: The U.S. Government’s Export Portal, helping U.S. Companies Export

http://www.export.gov/ No. Origin Year Development Democracy Corruption National


7 Export.gov + + + + + The U.S. government argues that the agreement “provides benefits to small and medium-sized

exporters” and will “promote transparency and rule-of-law in the democratic systems that have

solidified in the region over the past decade. CAFTA-DR is an important instrument to support U.S.

national security interests”. It believes that DR-CAFTA will advance regional integration, fight

corruption and bring peace and stability to the region.

5.1.8 Article Number Eight

Title: How Can U.S. Companies Benefit / Why U.S.-CAFTA-DR?

Web: Jun 28 2006: http://www.whitehouse.gov/news/releases/2005/07/20050728.html

Author: Unknown

Origin: Office of the Press Secretary; The White House, President George W. Bush. Official

homepage of the conservative government. http://www.whitehouse.gov


30


Personal Economy

8 The White House 2005 + + + President Bush is positive about the agreement stating that “CAFTA helps ensure that free trade is

fair trade”, that “The agreement is more than a trade bill; it is a commitment of freedom-loving

nations to advance peace and prosperity throughout the Western hemisphere” and that “We have a

moral obligation and a vital national security interest in helping democracies […] succeed, and

CAFTA furthers that goal.”

5.1.9 Article Number Nine

Title: CAFTA: Free Trade vs. Democracy

Web: Oct 13 2005: http://americas.irc-online.org/commentary/2003/0301cafta-opp.html

Author: Mark Engler, a writer based in New York, who previously worked with the Arias

Foundation for Peace and Human Progress in San José, Costa Rica.

Origin: IRC; The International Relations Center. Working to make the U.S. a more responsible

member of the global community by promoting progressive strategic dialogues leading

to new citizen-based agendas. http://americas.irc-online.org/

Engler claims that “CAFTA provides a perfect example of a “free trade” agreement that actually

undermines democratic freedoms.” And continues: “The White House asserts that CAFTA will

commit Central American nations to ´even greater openness and transparency´. Ironically the

negotiations for the trade deal themselves are anything but transparent.” He also states that ”If

implemented, CAFTA will likely erode key democratic norms such as workers´ rights and the ability

to legislate environmental protections” Engler fears that CAFTA, like NAFTA will include a

chapter giving corporations the right to sue the government for environmental or other laws that

might reduce their profits, and wounds up:”The truth is, CAFTA won´t promote democracy. And

democracy might be the only hope left for sinking CAFTA”

5.1.10 Article Number Ten

Title: Why We Oppose we CAFTA-DR

Web: Jun 29 2006: http://www.oaklandinstitute.org/?q=printpage&nid=182


Personal Economy

9 IRC 2003 – –


31

Author: Shannon Laliberte and Ambika Chawla. Ambika Chawla is a Fellow at the Oakland

Institute, the Coordinator of Friends of the Earth and Via Campesina's "Central America

is Not for Sale" campaign.69

Origin: The Oakland Institute: A policy think tank with the mission to increase public

participation and promote fair debate on critical social, economic and environmental

issues. http://www.oaklandinstitute.org/ No. Origin Year Development Democracy Corruption National


10 The Oakland Institute 2005 – + –

Among those against the CAFTA-DR, the Oakland Institute have the strongest voice. With the

slogan “Central America Is Not For Sale” they claim that there is a massive resistance from social

movements that will complicate the implementation of the CAFTA-DR. They claim that as a result

of NAFTA there are “hundreds of thousands of Mexicans, Americans and Canadians losing their

jobs […] According to the 2002 World Food Program Report 1 in 4 Central Americans continue to

suffer from hunger or food security. With women as the primary providers of proper nutrition and

health for children, the sick and elderly, liberalization of agriculture will only further complicate

the lives of women.” “CAFTA-DR could lead to the migration of workers from rural areas to urban

centres due to loss of agricultural jobs.” “Who’s the winner here?...They are America´s producers”

5.1.11 Article Number Eleven

Title: CAFTA: The Latin America Perspective

Web: Jun 29 2006: http://www.wola.org/economic/cafta_congressional_briefing_

rural_sector_Jan04.htm

Author: Vicky Grass, Senior Associate for Economic Issues at WOLA

Origin: WOLA: Washington Office on Latin America. An independent organization promoting

Human Rights, Democracy, social and Economic Justice in Latin America. Often called

upon to present analysis for the Congress or other information to U.S. and Latin

American media. http://www.wola.org/ No. Origin Year Development Democracy Corruption National


11 WOLA 2004 – – – Grass firmly states that “CAFTA is not the development strategy that the region needs” arguing that

”trade liberalization does not automatically translate into benefits for the consumers […] Like their

Mexican counterparts, Central American farmers will be unable to compete against highly

69 Internet 12


32

subsidized production in the U.S. and elsewhere in the developed world. This will result in

increased poverty, greater levels of rural unemployment and more migration – further violating

Central Americans economic and social rights. Simply put, CAFTA is not the development strategy

that the region needs.”

5.1.12 Article Number Twelve

Title: What you need to know about the U.S. – Central American Free Trade Agreement

Web: Jun 29 2006: http://www.igtn.org/pdfs/59_CAFTAFacts.pdf

Author: Unknown

Origin: IGTN and Centre of Concern.

IGTN: International Gender and Trade Network is a network building cooperation with

the aim of developing more just and democratic trade policies. http://www.igtn.org/

Centre of Concern deals with the struggle to end hunger, poverty, environmental

decline, and injustice in the United States and around the world. http://www.coc.org/ No. Origin Year Development Democracy Corruption National


12 IGTN/Centre of… 2003 – – + – This article is trying to make clear what the DR-CAFTA really is, and is actually rather negative in

its critique. Especially on transparency “the timetable for the CAFTA negotiations makes it

extremely difficult for civil society to participate in the process” and personal economy “subsidized

US agricultural imports will overwhelm the Central American market devastating the local

agricultural sector”

5.2 THE COMPLETE CODING FRAME


Personal Economy

NICARAGUA:

1 La Prensa 2005 + 2 Casa Precidencial 2005 + + 3 Carlos G. Sequeira 2003 + + + + + 4 CID 2005 + 5 Consulado General… 2003 + + + + 6 CONFIDENCIAL 2005 – – + –

THE U.S.:

7 Export.gov + + + + + 8 The White House 2005 + + + 9 IRC 2003 – – 10 The Oakland Institute 2005 – + –- 11 WOLA 2004 – – – 12 IGTN/Centre of… – – + –


33

5.3 ANALYSIS OF THE FIGURES IN TABLES AND DIAGRAMS

The quantitative analysis is here presented in different tables and diagrams, both in actual numbers

and per cent.

5.3.1 The Most Frequently Discussed Themes

ALL OPINIONS Nicaragua The U.S. Number Per cent Number NumberNational Economy 11 92% National Economy 6 Development 5 Development 8 66% Personal Economy 4 National Economy 5 Personal Economy 8 66% Development 3 Personal Economy 4 Democracy 6 50% Democracy 3 Democracy 3 Corruption 4 33% Corruption 1 Corruption 3 TOTAL OPINIONS: 37 17 20 Figure 5.1 The most frequently discussed themes

The single most discussed theme was National Economy, dealt with by 11 writers or 92% of the

writers. Development and Personal Economy each had 66%, Democracy 50% and Corruption only

33%. By this table we can also tell that there were a few less Nicaraguan opinions than U.S., even

though the difference was small (17-20).

However, there were some differences in the theme most frequently discussed in the two countries.

In Nicaragua National Economy, was the most discussed theme, Personal Economy was ranked

number two, Development and Democracy number three and corruption was discussed only once.

In the U.S. National Economy and Development were equally discussed, and the difference

between them and Personal Economy, Democracy and Corruption was small.

By this I conclude that in Nicaragua the most important/popular themes to discuss in articles

concerning the DR-CAFTA were National and Personal Economy. In the U.S. the most important/

popular themes were National Economy and Development. In both countries Democracy was of

less importance and Corruption of almost no importance at all.


34

5.3.2 Comparing Positive and Negative Opinions

EXACT FIGURES: Positive NegativeDevelopment 4 4 Democracy 4 2 Corruption 2 2 National Economy 10 1 Personal Economy 4 4 TOTAL: 24 13 Figure 5.2 and 5.3 Comparing positive and negative opinions in exact figures and per cent

0

2

4

6

8

10

12

Developm

ent

Democracy

Corrupti

on

National

Econo

my

Person

al Eco

nomy

Artic

les

with

an

opin

ion

PositiveNegative

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Developm

ent

Democracy

Corrupti

on

National

Econo

my

Person

al Eco

nomy

Perc

enta

ge in

art

icle

s w

ith a

n op

inio

n

PositiveNegative

Figure 5.4 and 5.5 Comparing positive and negative opinions in tables The results on Development, Corruption and Personal Economy are even between positive and

negative arguments. On Democracy there is a slight preponderance (66%) on positive arguments

and on National Economy there is clear majority (91%) of positive arguments.

As mentioned in the previous section, 50% of the articles discussed Democracy, of which four

meant that free trade would boost democracy and two that the free trade agreement would damage

the democracy in Nicaragua. 33% of the articles discussed Corruption, of which two were positive

about the future development of corruption and transparency and two were negative.

NICARAGUA AND THE U.S. RESPECTIVELY Positive, of which: Nicaragua U.S. Negative, of which: Nicaragua U.S. Development 4 2 2 4 1 3 Democracy 4 2 2 2 1 1 Corruption 2 1 1 2 0 2 National Economy 10 6 4 1 0 1 Personal Economy 4 3 1 4 1 3 TOTAL: 24 14 10 13 3 10

Figure 5.6 Nicaragua and the U.S. respectively Comparing Nicaragua and the U.S. respectively shows that out of the 13 negative opinions 10 are

from the U.S. Of the positive opinions there are 14 from Nicaragua and 10 from the U.S. showing

that the Nicaraguan articles are a little more positive about the DR-CAFTA than those from the U.S.

PER CENT: Positive Negative Development 50% 50% Democracy 66% 33% Corruption 50% 50% National Economy 91% 9% Personal Economy 50% 50% TOTAL: 65% 35%


35

6 FINAL ANALYSIS AND CONCLUSIONS

Melting all together, sorting the results I here present the answers to the questions at issue, final

qualitative analysis and prediction of the future development of Nicaragua.

6.1 ANSWERS TO THE QUESTIONS AT ISSUE


Yes there is. In the investigation of twelve articles concerning free trade, there were eight

discussing development, and therefore I can conclude that there is a correlation between free trade

and development. According to Hammarskjöld (3.2.1), economic status is an important element of

development, but not the only one.

• How will the DR-CAFTA affect democracy…

What is interesting is that the results on democracy from Nicaragua and the U.S. are exactly the

same. From each country there are two positive opinions and one negative. The positive opinions

are all either directly or indirectly from the governments, while both negative opinions derive from

journalists or NGO:s (5.2). Maybe it is the traditional scene where the governments takes decisions

and the journalists reviews and complains, who knows. However, that discussion I will leave for

others to deal with. The results of this thesis show that there is a governmental belief that the DR-

CAFTA will improve democracy and a grassroot fear that the existing democracy will be out

watered.

Comparing the DR-CAFTA with Dahl´s (3.3.1) criterions on a democratic process with an

including demos, efficient participation and equal right to vote, the ratification of the DR-CAFTA is

far from democratic. And as the preamble of the DR-CAFTA (APPENDIX) uses concrete words as

create, establish and ensure concerning economic conditions and more vague words as promote

concerning corruption, not mentioning democracy, the future is hard to tell. The hope is that free

trade, as Stiglitz claims (2.1) is a starting point for greater development, growth and openness and

by that will bring stronger democracy to Nicaragua. And as 10 out of twelve articles believe in a

positive National Economy, it might come true.

Sequeira (5.1.3), the Nicaraguan Consul-general in Miami (5.1.5) and the U.S. president (5.1.8) are

giving pro-arguments believing that democracy will be further solidified in the region and that free

trade will also promote transparency. “We have a moral obligation and a vital national security

interest in helping democracies […] succeed, and CAFTA furthers that goal.”


36

Among the opponents are the journalist Olivares (5.1.6) and the writer Engler (5.1.9) claiming that

“CAFTA provides a perfect example of a “free trade” agreement that actually undermines

democratic freedoms” and further believing that since the negotiations for the DR-CAFTA were not

transparent, the agreement will probably not lead to more transparency.

• …and corruption in Nicaragua?

About the results on corruption it is even more difficult to tell. Unfortunately there were only four

articles discussing this theme of which two were positive and two negative. Of the positive opinions

there was one from each country and of the negative they were both from the U.S. Both positive

opinions were directly or indirectly from governments and both negative were from NGO:s (Non

Governmental Organizations). Based on these results I state that an improved future of corruption

and transparency has a 50-50 chance, where governments are positive and NGO:s negative.

As Leys (3.4) explains how new states are likely to be involved in corruption, there is no wonder

that Nicaragua has a low rank on TI:s lists (2.1.6). With corruption defined as private gain at public

expense, and according to Heidenheimer (3.4.1), the World Systems Theory (3.1) where a few

strong actors rule many small, makes perfect sense. Nicaragua is a typical example of a small

country in the “periphery” of the World Systems Theory, in the hands of the powerful countries and

organizations in the “centre”, and with little hope to escape dependency.

6.2 HOW WILL FREE TRADE AFFECT THE DEVELOPMENT OF NICARAGUA?

Based on the answers of the questions at issue and Hammarskjöld’s criterions of development

(3.2.1), here shortened by me;

• not only an economic matter (but still economic as well)

• aiming to satisfy the poorest population

• working on reducing internal inequalities

I state that:

The articles in this thesis show that the DR-CAFTA will affect the development of Nicaragua,

however there are mixed ideas whether the agreement will be positive or negative to the

development of Nicaragua. Four opinions believe in a positive development, while another four

believe in a negative development, and again the positive opinions derive from the governments,


37

direct or indirectly and the negative from journalists or NGO:s (5.2). Hence, the probable outcomes

of the agreement are that:

• National Economy will profit because trade and foreign investment will increase.

• Personal Economy in general is also likely to profit, though arbitrary and not as

much as National Economy.

• Democracy will probably be strengthened, even though there are deep concerns

about the way politics are done today.

• Corruption and transparency has a 50% chance to improve.

Apparently, the focus of the investigated articles is not on either development, democracy or

corruption. The topic most frequently discussed is National Economy followed by Personal

Economy and Development (see 4.4.1). It is not likely that the DR-CAFTA will bring development

according to Hammarskjöld´s definition to Nicaragua. The country will probably develop

economically, but without reaching those who need it most. Wallerstein´s World Systems Theory

(3.1.1) is as current as ever with its foundation in the unequal share of assets, trying to strangle all

countries worldwide in dependency. Now that the Doha Round broke down (2.1.3), and the DR-

CAFTA is already ratified, also Wallerstein´s idea that the world faces a regionalisation seems

correct.

I close this chapter with the two quotes I have found that best represent this investigation. The first

stated by Sequeira and agreed on by the Nicaraguan General-Consul in Miami and the U.S.

president, and the second stated by Laliberte & Chawla, The Oakland Institute and agreed on by

Olivares, and Grass, WOLA: Free trade is ”The propeller of the economic development take-off” “CAFTA is not the development strategy that the region needs […] trade liberalization does not automatically translate into benefits for the consumers

6.3 FOR FURTHER INVESTIGATION

My suggestions for further investigations are:

• Free trade as a substitute for aid assistance?

• Is democracy possible in a corrupt state?


38

ABOUT FREE TRADE & DEVELOPMENT

To me, this is a vastly interesting field of study; the complexity, opportunities and challenges in aid

assistance and free trade. Professor of Corporate Strategy at the University of Michigan C. K.

Prahalad once gave an interesteing speech. He said we ought to democratize commerce. That the

Millennium goals are not enough, what people need is access to the benefits of global economy.

That every person must be considered a consumer and a producer. What’s required is humility,

humanity and courage. And I agree. I believe in trade as aid. But of course in cooperation with the

state and traditional aid assistance.

Unfortunately, sometimes it seems like traditional aid assistance and commercial projects are in

opposition to eachother. Both in real life and the universities; situated in the twilight zone between

International Political Science and International Economics. Nonetheless, I believe in cross-over

pollination, and hope I am not the only student interested in this field of studies.

ABOUT DEMOCRACY, CORRUPTION & DEVELOPMENT

As my initial interest was in the term development, now my main interest lies in corruption. I do not

think that democracy is the solution to all problems, but I think it is possible even in large

organizations. I do believe that democracy is worth fighting for and trying to achieve, especially

since it allows other problems, such as corruption to catch the light.

I think it is sad that out of twelve articles only four mentioned corruption, especially as eight

discussed development. I believe that with high levels of corruption, development – reaching those

who really need it is impossible.

Lately many of the international economic organizations have been accused of having secret

negotiations, bribery and internal corruption. I don’t believe there will be neither free trade nor

development until at least some subsidies are removed, the international organizations have become

more democratic and transparent, and countries can truly start trading with each other.


39

7 REFERENCES

7.1 LITERATURE Ball, Terence and Dagger, Richard (2004) Political Ideologies and the Democratic Ideal. Fifth edition. The U.S., Arizona State University: Pearson Education

Berman, Joshua & Wood, Randy (2003) Moon Handbooks: Nicaragua. The U.S., Emeryville: Avalon Travel Publishing, Inc. Bhagwati, Jagdish (2001) Till frihandelns försvar. Stockholm: Författaren och SNS Förlag Bryman, Alan (2002) Samhällsvetenskapliga metoder. Trelleborg: Liber Ekonomi

Dahl, Robert A. (1989) Demokratin och dess antagonister. New Haven: Yale University Press Esaiasson, Peter & Gilljam, Mikael & Oscarsson, Henrik & Wängnerud Lena (2004) Metodpraktikan. Second edition. Stockholm: Författarna och Norstedts Juridik AB Hettne, Björn (1996) Internationella Relationer. Second Edition. Lund: Studentlitteratur Heidenheimer, Arnold J. & Johnston, Michael (2005) Political Corruption. Third Edition. The U.S., New Jersey, New Brunnswick: Transactions Publishers Kaufmann, Bruno (1996) Demokratins utmaningar. Second edition. Gothenburg: Författarna Martin, Hans-Peter & Schumann, Harald (1996) Globaliseringsfällan Angreppet på demokrati och välfärd. Stockholm/Stehag: Brutus Östlings Bokförlag Symposium

Rist, Gilbert (2002) The History of Development. London: Zed Books Ltd. Rudebeck, Lars & Törnquist, Olle (1996) Democratization in the third world. Uppsala: The

Seminar for Development Studies, Uppsala University Sachs, Wolfgang (1992) The Development Dictionary. Fourth impression. London: Zed books Ltd. Stiglitz, Joseph E. & Charlton, Andrew (2005) Fair Trade For All. New York: Oxford University Press Ibc. Statens kulturråd (1990) Nationalencyklopedin. Third Volume. Höganäs: Bokförlaget Bra Böcker AB Statens kulturråd (1990) Nationalencyklopedin. Fourth Volume. Höganäs: Bokförlaget Bra Böcker AB Statens kulturråd (1992) Nationalencyklopedin. Seventh Volume. Höganäs: Bokförlaget Bra Böcker AB Statens kulturråd (1992) Nationalencyklopedin. Ninth Volume. Höganäs: Bokförlaget Bra Böcker AB


40

Statens kulturråd (1994) Nationalencyklopedin. Thirteenth Volume. Höganäs: Bokförlaget Bra Böcker AB Statens kulturråd (1996) Nationalencyklopedin. Twentieth Volume. Höganäs: Bokförlaget Bra Böcker AB Statskontoret (1971) En framtidsbedömning med Delfi-teknik. Allmänna förlaget

7.2 OTHER SOURCES

Björk, Inger & Elander, Sven & Hermele, Kenneth (2006-09-18) Sverige kan göra IMF mer demokratiskt. Göteborgsposten

7.3 INTERNET

1. Sveriges regering och regeringskansli (2005) Landöversikt, Nicaragua 2005.

http://www.regeringen.se/content/1/c6/01/94/41/cc774776.pdf 2005-12-10

2. The preamble to DR-CAFTA Preamble. http://www.ustr.gov/assets/Trade_Agreements

/Bilateral/CAFTA/CAFTA-DR_Final_Texts/asset_upload_file308_3917.pdf 2005-12-09

3. Svenskt Näringsliv (2002) Globaliseringsdebatten: 1.2 Fri rörlighet för varor

http://www.svensktnaringsliv.se/multimedia/archive/00000/Globaliseringsdebatten_186a.pd

f 2006-12-17

4. Frihandel.nu (2006) Doharundan har kollapsat. 2006-08-20 http://www.frihandel.nu/

5. Washington Office on Latin America (2005) What is Cafta?

http://www.wola.org/economic/cafta.htm 2006-06-29

6. Transparency International (2006) About Transparency International.

http://www.transparency.org/about_us 2006-09-21

7. Transparency International (2006) Global Corruption Barometer

http://www.transparency.org/policy_research/surveys_indices/gcb

Further link to: Global_Corruption_Barometer_2005_(full_report).pdf 2006-09-21

8. Transparency International (2006) TI Corruption Perceptions Index.

http://www.transparency.org/policy_research/surveys_indices/cpi 2006-09-21

Further links to the corruption perceptions index of each year

9. INCAE BUSINESS SCHOOL (2006) Carlos Guillermo Sequeira.

http://www.incae.ac.cr/ES/facultad/c.g.sequeirav/ 2006-11-29 and

The Nicaraguan Government (2003) ACUERDO PRECIDENCIAL NO.125-2003.

http://www.presidencia.gob.ni/buscador_gaceta/BD/ACUERDOS/2003/Nombrar%20al%20


41

Dr%20Carlos%20Guillermo%20Sequeira%20Gonz%C3%A1lez%20Embajador%20Negoci

ador%20CAFTA-AP125-2003.pdf 2006-11-29

10. The Nicaraguan consulate in Miami (2006) BIENVENIDOS Estimados amigos:

http://www.consuladonicamiami.com/ 2006-11-29

11. Programa de las Naciones Unidas para el Desarollo (2006) Movida vídeoconferencia sobre

el papel del periodista en la comunicación empresarial.

http://www.undp.org.ni/noticiadetalle.php?id=268 2006-11-29

12. zoominfo People, Companies, Relationsships (2005) Ambika Chawla This is me.

http://www.zoominfo.com/people/Chawla_Ambika_814795831.aspx 2006-11-30

7.4 IMAGES

1. Portal de Información Comercial de Honduras (Gateway of business information, Honduras)

(2005) Bush firma el CAFTA (Bush signs CAFTA)

http://www.sic.gob.hn/portal/view/?id=67 2006-12-08

2. The Village Voice (2005) The Bush Beat.

http://www.villagevoice.com/blogs/bushbeat/archive/001114.php 2006-12-08

3. Global Exchange (2005) Free Trade Area of the Americas.

http://www.globalexchange.org/campaigns/ftaa/ 2006-09-20


42

APPENDIX; Preamble of the DR-CAFTA

PREAMBLE

The Government of the Republic of Costa Rica, the Government of the Dominican Republic, the Government of the Republic of El Salvador, the Government of the Republic of Guatemala, the Government of the Republic of Honduras, the Government of the Republic of Nicaragua, and the Government of the United States of America, resolved to: STRENGTHEN the special bonds of friendship and cooperation among their nations and promote regional economic integration; CONTRIBUTE to the harmonious development and expansion of world trade and provide a catalyst to broader international cooperation; CREATE an expanded and secure market for the goods and services produced in their territories while recognizing the differences in their levels of development and the size of their economies; AVOID distortions to their reciprocal trade; ESTABLISH clear and mutually advantageous rules governing their trade; ENSURE a predictable commercial framework for business planning and investment; BUILD on their respective rights and obligations under the Marrakesh Agreement Establishing the World Trade Organization and other multilateral and bilateral instruments of cooperation; SEEK to facilitate regional trade by promoting efficient and transparent customs procedures that reduce costs and ensure predictability for their importers and exporters; ENHANCE the competitiveness of their firms in global markets; FOSTER creativity and innovation, and promote trade in goods and services that are the subject of intellectual property rights; PROMOTE transparency and eliminate bribery and corruption in international trade and investment; CREATE new opportunities for economic and social development in the region; PROTECT, enhance, and enforce basic workers’ rights and strengthen their cooperation on labor matters; CREATE new employment opportunities and improve working conditions and living standards in their respective territories;


43

BUILD on their respective international commitments on labor matters; IMPLEMENT this Agreement in a manner consistent with environmental protection and conservation, promote sustainable development, and strengthen their cooperation on environmental matters; PROTECT and preserve the environment and enhance the means for doing so, including through the conservation of natural resources in their respective territories; PRESERVE their flexibility to safeguard the public welfare; RECOGNIZE the interest of the Central American Parties in strengthening and deepening their regional economic integration; and CONTRIBUTE to hemispheric integration and provide an impetus toward establishing the Free Trade Area of the Americas; HAVE AGREED as follows:70

70 Internet 2

How will free trade affect the development of Nicaragua?

Documents

Transcript of How will free trade affect the development of Nicaragua?