Better Work in Central America : Assessing the Opportunities for Upgrading in Nicaragua's Apparel Sector

What can Better Work offer producers in a country like Nicaragua to alleviate the burden caused by the heavily trade-dependent nature of the industry's development, and how do the relatively high-level institutional development and work-place protections in the country affect the willingness of manufacturers to cooperate with Better Work Nicaragua? Drawing on data collected by the authors during fieldwork in Nicaragua, as well as from secondary literature, this working paper explores the contemporary context of the Nicaraguan industry, outlining the opportunities and challenges confronting the country's apparel sector. Nicaragua is the first and only Central American country to participate in Better Work. The second poorest country in the hemisphere, its manufactured exports are heavily concentrated in apparel. While Latin America's share of the US apparel import market has declined in recent years, Nicaraguan export growth has remained robust. Nicaragua's strong performance relative to other regional exporters reflects the special benefits it has received under the Dominican Republic-Central American Free Trade Agreement (CAFTA-DR) with the US, namely the tariff preference levels (TPLs) that permit apparel exports from Nicaragua to enter the US market duty-free even when these garments do not meet CAFTA rules of origin (RoO). Although these preferences have enhanced Nicaragua's competitiveness vis-à-vis other regional exporters, the TPL programme is set to expire in 2014. Better Work Nicaragua is thus being implemented during a period of uncertainty, therefore it is critical to understand what local stakeholders in both the public and the private sectors believe will be the consequences of this change in the regulatory regime, and how they are trying to respond to it. This paper concludes that there is a crucial need to craft a programme that reflects the specific conditions that characterize Nicaragua and differentiate it from other Better Work countries