Trade exchange between Nicaragua and Venezuela in the period 2002-2013, with an emphasis on pre and post ALBA

Abstract

The actual trade relationship, that is, the benefits of foreign trade, depend on each country's demand for the other's output and only those trade relationships will be stable in which the exports offered by each country are sufficient to pay for the imports needed (Mill, 1840). This study performs an analysis, from the point of view of trade dynamics, between Nicaragua and Venezuela in the period 2002-2013 with emphasis on the pre and post trade agreement between the nations in 2007. The theory behind this research is the one put forward by Mill (1840) on reciprocal demand. Foreign trade variables are described, and dynamism indices are calculated. The results demonstrate trade benefits for both nations, although asymmetry is evident in trade relations. Nicaragua is supported by a limited export basket of beef, cane sugar, coffee and cattle, which although competitive, the evidence for the period studied shows that it had a decreasing rate. For its part, approximately 99% of Venezuela's exports are based on oil and its derivatives. Finally, although the theory addressed is not evidenced in its fullness, Venezuela represents an important commercial destination for Nicaragua and by the size of nations could be a cause of the asymmetries in trade capabilities. This is not why relations should be restricted, on the contrary, seeking formal ways to achieve maximization and joint benefit between the two nations.