APRIL, 1985 - VOLUME 6 - NUMBER 4
U.S. Business In Nicaragua
MANAGUA, Nicaragua - Most American tourists here would have difficulty concluding that the United States and Nicaragua are at odds with one another. On one corner rests a Sandy's hamburger franchise and near-by, a branch of the Bank of America and an Avis Rent-A-Car outlet do business. Indeed, while the Reagan administration may have lost patience with the Sandinistas, many U.S.-based corporate interests have not.
Though their numbers have declined by 25 percent since the Somoza regime collapsed in 1979, many American multinationals are still operating in Nicaragua. Canada Dry and Mennen Company have gone home but United Fruit, Monsanto and over 30 other U.S. businesses either still base themselves here or do business with the Nicaraguans from neighboring Central American nations (see adjacent list).
U.S. companies also hold major interests in a dozen or more Nicaraguan firms; 50 percent interest in the Gemina flour mill, 75 percent interest in B.C.I. Chemicals and a 30 percent interest in the Polycasa plastics company.
In a random survey of American companies operating here, few U.S. business representatives advocated the overthrow of the Sandinista regime. To the contrary, a majority, though not all, offered a favorable opinion of their business relationship with the Sandinistas.
Monsanto, for example, has been operating a herbicide formulation plant here since 1967, developing chemical sprays that are used to protect cotton crops against pests and disease.
"The Sandinistas have been very friendly to us," said Richard Vance, director of the Latin American division of Monsanto. ''Essentially the government is our only major purchaser," Vance said in a telephone interview from St. Louis, Mo. "We couldn't have it any easier."
Representatives of IBM and Nabisco expressed similar sentiments. IBM has had a plant in Managua since 1953. Its operation consists of three facilities: a branch office, a data center and an educational center. From these facilities, the company's 50 employees sell processing systems and typewriters. According to a company spokesperson, the government and other multinational businesses are IBM's chief customers.
"We have no complaints about doing business in Nicaragua," added the spokesperson, who requested anonymity. "Unlike many companies operating in Nicaragua, we are permitted to repatriate a small percentage of our profits to the United States in order to purchase 'critical parts' for our machines."
Similarly Nabisco, which has operated a plant in Managua since 1965, has had favorable relations with the Sandinistas. The company employs more than 250 people to produce cookies and crackers. While Nabisco would like to take more of its earnings out of the country, it believes it will have that opportunity when the economy improves. After all, a shortage of foreign exchange is common in many developing nations.
Other U.S. concerns describe their relations with the Sandinistas as being "purely professional." Exxon, which has been operating a large refinery in Nicaragua since the 1930's, is the largest corporation here. It employs 200 workers and distributes all of the refined oil in the country. While Shell, Texaco and Chevron together operate some 100 service stations here, Exxon manages 60 of its own. Jeff Higgens, Exxon's Latin America chief in Coral Gables, Florida, doesn't forsee his company leaving Nicaragua.
"We're permitted to repatriate profits when there are dollars available in the national treasury," he said. "As you know, the Nicaraguan government is our principle customer."
Ironically. Exxon's most recent setback in Nicaragua was not at the hands of the Sandinistas, but at the hands of the U.S. backed Contras. Eighteen months ago, the Contras set an Exxon storage tank at the Port of Corinto on fire, forcing the evacuation of 20,000 citizens.
Though several U.S. companies have left Nicaragua, many still do business here by operating from neighboring Guatemala or Costa Rica. Stanley Works, for example, has salespeople who travel throughout Central America selling tools. Likewise, Union Carbide sends its salespeople into Nicaragua to corner the battery market through local retailers. Manhattan Industries is another company that produces its dress and sports shirts in Costa Rica, and then distributes them in Nicaragua. According to Ed Herman, Director of Licensing for Manhattan Industries in New York, "business is more or less the same now in Nicaragua as it was for us in the 1970's. The volume is as good as it has always been. There are dollars available."
Naturally, not all U.S. concerns are pleased with events in Nicaragua. A sluggish economy has forced Evans Products of Portland, Oregon to close its hardwood mill in Matagalpa. Similarly, Standard Fruit and Steam Shipping Company of San Francisco no longer market Nicaragua's bananas. And the Bank of America has recently asked the Sandanistas to deactivate their business license so they can close the branch office that they have operated here since 1964.
The director of one of the largest multinational subsidiaries here agreed to be interviewed on the condition that neither he nor his company be identified. The Nicaraguan operation has gross annual revenues of $85 million, including duties and taxes.
The only solution to the economic crises, the official insisted, was a change of government, but even if that doesn't happen, he said his company has no intention of leaving. "We are making money now," he said. And even though it's in cordobas, it's still a 15 percent profit, he said.
Since the company is financially self-sufficient, the parent company in the U.S. is determined it is in their best interests to keep the operation here. The hope is that sooner, not later, the company will be able to repatriate profits without limitations. But, he concluded, "We're doing all right in the meantime."
The United States remains Nicaragua's largest trading partner, purchasing 18 percent of the country's exports. The United States consumes dozens of different Nicaraguan products: bananas, meat, shrimp, coffee, tobacco, garments, sugar and furniture. And Nicaragua imports insecticides, paper goods, animal oils, fertilizer, and agricultural machinery here.
Ironically, some of Nicaraguan's best U.S. trading partners have included some unlikely candidates. Take the case of Pandol Brothers, Inc., a large agricultural conglomerate based in California's San Joaquin Valley. Sons of Yugoslavian immigrants, the Pandol's total corporate sales in 1983 exceeded $200 million. Jack Pandol, 61, a former member of the California Board of Food and Agriculture (appointed by then Governor Ronald Reagan), and his brother, Matt, 47, distribute all of Nicaragua's bananas in the United States.
Since December of 1982, a freighter from San Francisco has been picking up 2,000 tons of bananas from the Port of Corinto weekly and shipping them to Port Hueneme, California. There the Pandols distribute the produce to grocery stores in California, Oregon, Washington and Western Canada.
"We make about $10 million a year off Nicaragua's bananas," explained a Pandol Brothers spokesperson, who asked not to be identified. "The Nicaraguans come out of this deal with less than $5 million," he added. `But they're still ahead."
Indeed, the Nicaraguans speak fondly of this fruitful if not unusual partnership (the Pandol's ranch was the first to be struck by Cesar Chavez of the United Farm Workers in 1965 because of their notorious labor practices). The Pandols, who have assisted the Sandinistas in acquiring badly needed farm equipment, agricultural chemicals and other supplies, received token assistance from the Reagan administration. Bill Deaver, administrative assistant to Rep. Charles (Chip) Pashayan Jr. (R-Cal.) and younger brother of White House aide Michael Deaver, set up a National Security Council briefing for Jack Pandol on Nicaragua.
In spite of occasional assistance for a few American friends and the private sector in Nicaragua (a Reagan-inspired organization, the National Endowment for Democracy, contributed $150,000 to COSEP, an opposition private sector organization and $100,000 to La Prensa, Nicaragua's privately held opposition newspaper, among other groups), the Reagan administration prefers a policy of economic disengagement from Nicaragua. For example, in 1983, the U.S. reduced Nicaragua's sugar quota by 90 percent, forcing it to sell the bulk of its product at the lower world market price.
U.S. officials here contend there won't be an upsurge in American trade until greater confidence is felt from the private sector. This is despite the fact that only two major U.S. companies have been expropriated since the Nicaraguan revolution, according to Paul Reichler, a Washington lawyer who represents Nicaragua. The Neptune Mining Corporation and Rosario Mining Company were nationalized in 1980 as part of the government's efforts to control "critical" natural resources. The Nicaraguans are currently paying a settlement fee of $15.5 million to these mining companies. No other pending litigation or outstanding judgements exist between U.S. companies and the Sandinistas.
As former President Jimmy Carter pointed out in a recent interview, a greater percentage of industry is in private hands in Nicaragua than in Britain. Indeed, Nicaragua has a greater percentage of industry in private hands than either France or the Scandinavian countries.
Ever mindful that it must increase its trading base with the United States, the Nicaraguans are preparing to unveil a new foreign investment law that has been three years in the making. Its purpose is to attract U.S. and foreign trade. This new law, which was written in part by a group of New York lawyers, may bolster the financially pressed Nicaraguan economy.