Chinese Superstores Mushroom in Nicaragua
strangling small businesses
Huge stores full of Chinese products have been flooding Esteli since December. Employees are not being offered normal benefits or a formal work contract.
HAVANA TIMES – Esteli, in the north of Nicaragua, has become fertile ground for the expansion of Asian-run stores. Both Chinese and Korean stores have opened their doors recently in the city center, offering a wide variety of articles at prices well below those of local businesses.
Cosmetics, clothing, shoes, knick-knacks, food, medications and small appliances or hardware are just some of the products offered in these stores. Thanks to the tax breaks they enjoy, they can offer prices nearly impossible to match.
The success of the Asian Superstores in Esteli rests mostly on their main attraction – low prices for both wholesale and retail. However, this “paradise” of low prices is shadowed by the fact that there are no guarantees on the products.
“They sell everything here,” assures Victoria, who began working two months ago at one of the new Asian stores that have proliferated in this city of 111,000. She’s been a witness to the irresistible magnetism these stores exert over Esteli’s consumers. “Customers come in looking for something specific, but when they see the variety of products at such affordable prices, they end up buying more than they were planning to,” she comments.
Guillermo is another employee of the Asian stores that are flourishing in Esteli. He’s been working there for four months but hasn’t yet signed a formal contract. The Nicaraguan Ministry of Labor turns a blind eye.
During a recent inspection, the administration was forced to make some changes, such as giving employees a lunch hour, establishing stable work schedules, and enrolling personnel in Nicaragua’s social security program.
Guillermo isn’t the only one in this situation. A number of employees of these stores still lack the labor security that comes from a contract and fear they could be fired at any time.
Free Trade Agreement with China
In August 2023, Nicaragua and China signed a Free Trade Agreements and in December the two countries took another step in their bilateral relations by announcing a “strategic partnership.” On January 1st, the Free Trade Agreement entered into effect. Former OAS ambassador Arturo McFields is skeptical that these agreements will prove economically beneficial to Nicaraguans. “China sells a lot, buys little and isn’t going to give Nicaragua anything for free,” he warned.
Unfair competition
Jorge Gonzalez, president of the Managua Business Association, is an omnipresent figure at the inaugurations of the Chinese stores. He’s sounded the alarm to the business sector. In declarations to the official media, Gonzalez predicted an accelerated growth of the Chinese presence in Managua’s sprawling Eastern Market in 2024, where 40 superstores are projected to open.
Gonzalez’ words leave no room for doubt: the “Asian tide” is far from ebbing. The forthcoming panorama is a market dominated by large Chinese commercial zones, with an uncertain impact on local business.
“The Chinese have invaded us,” a shop-owner in the Mercado Oriental [Eastern Market], the commercial heart of Managua, told 100% Noticias, with a note of frustration in his voice. “From Ciudad Jardin right up to our very noses,” he added, pointing with discouragement to the proliferation of Asian stores that have colonized the city’s commercial landscape.
To this businessman, the Chinese stores bring unfair competition. He noted that these stores don’t pay taxes like the others, they sell products under false labels, and offer artificially low prices, all of which is strangling traditional trade.
“We have to get them out of here before they strangle us,” he vowed vehemently. That’s the feeling of many local business owners, whose establishments are threatened by the expansion of the Asian stores. In the last few months, numerous of these establishments have opened their doors in the country, expanding their operations to cities such as Esteli, Somoto, Ocotal Leon, Matagalpa, Chinandega, and others.
Local businessmen face raw realities
Armando is another local business owner who admits that competition with the Asian stores has put him in a tight spot. He must compete not only with the low prices, but also with the consumers’ preference for Chinese products.
Armando used to sell Chinese shoes in Esteli but would travel to Managua to acquire them in the Eastern Market. Now, with the presence of the Asian superstores in the city, competition has become much tougher.
“We have to buy and offer shoes that they don’t have. People tell you they prefer to buy from the Chinese, who are offering the same product at lower prices, and they’re right,” he told us with resignation.
That’s no exaggeration. Armando recalled a concrete case: a style of shoe that he used to sell for 930 cordobas, a price that covered his expenses, plus a profit. Now, the Chinese stores are offering these shoes in 620 cordobas – even cheaper than they cost him wholesale.
Andres is a craftsman from a community in the rural zone outside Esteli. He’s worked carving marble stone for two decades, selling his products in the city. Now, he says, the “invasion” of Chinese products has hit his occupation hard, since the Asian stores offer similar pieces at bargain-basement prices.
Marble stone is a material that’s native to the municipality of San Juan de Limay, some 44 kilometers from Esteli. Andres, with his calloused hands and tired eyes, has dedicated his life to working with this material, creating beautiful pieces that reflect the tradition and local artistry. However, the competition with the Chinese imports has put his livelihood at risk. “The Chinese products have been a hard blow,” he confessed bitterly.
“We carry that rock down from the hill on our backs; we work with it for long hours and afterwards we sell it. However, lately people tell us that the ones the Chinese are selling look smoother, even though ours are of better quality and 100% Nicaraguan.”
The expansion of the Asian stores in Esteli has affected not only the small vendors, but also businesses that have been established for years.
At the spot where the iconic Super del Hogar [Home Supermarket] once stood, there’s now an Asian-owned superstore called Commercial Mi Gusto.” This business already has two branches and is planning to open a third at the end of the month. It’s become a symbol of the rise of the Chinese product stores in Esteli and the transformation of local business.
While the majority of the Chinese establishments in Esteli sell only Asian-brand products, the Chinese emporium Mundo Nica – with a presence in Managua, Rivas, Diriamba, Jinotepe, and Masaya -offers a different alternative. It includes a broad variety of well-known brands that can easily be found in any Nicaraguan supermarket, but at a lesser cost.
Price vs quality
One of the principal concerns regarding the Chinese products is the lack of a guarantee. Sometimes these stores won’t allow exchanges or returns once the merchandise leaves the store. This means that the consumer runs the risk of acquiring a defective product, or one that doesn’t meet their expectations.
Ana, a client we spoke with, was looking through a basket of 50 cordoba sandals, searching for one in her size. She summed up the main attraction of the Asian stores in Esteli: “compared to other places, It’s cheaper here.” Nonetheless, her experience also reflects the other side of the coin: the lack of durability of some products.
“I bought some shoes here for my kids to play soccer. They cost me 330 cordobas, but they didn’t last a month,” she says. “So, for those, it’s better to buy them in the stores that sell shoes from the US, or secondhand ones. They cost more, but they last.”
Camila, a young girl of 15, is a living example of the fascination the Asian “wave” has exerted on the youth of northern Nicaragua in the last months. Camila has become a frequent shopper in Esteli’s Asian stores, attracted by the variety of products, the affordable prices, and the latest fads. Her passion for beauty and technology products have her enthusiastically combing the aisles of these establishments. On a limited budget, Camila finds a large variety of choices in the Asian stores.
“With just 30 cordobas (under US 1.00), I can buy “fairy dust” for a magic shine to my face, or choose make-up removal towelettes for a soft clean. I can also find things for my hair, like bands, barrettes, or clips for under 20 cordobas,” the teen says with a smile.
Nicaragua hopes to export 200 million dollars of goods to China
In January of this year, Jesus Bermudez, Nicaragua’s Minister of Industry, Economic Development and Commerce, told the government-owned Channel 8 news that they expect to export US $200 million in products to China in 2024, and that in about five years the value of such exports could reach one billion dollars.
According to data from the Ministry he heads, between January and November of 2023, Nicaraguan exports to China totaled US $44.5 million, an increase of barely 7.5 million from the same period in 2022.
By comparison, exports to the US between January and November of 2023 were valued at 1.255 billion dollars.
In January, economist Enrique Saenz stated on his program “Vamos al Punto” [“Let’s get to the Point”], transmitted via the internet news-site 100% Noticias: “Nicaraguan production has very low competitiveness, compared with other countries that sell to China.”
Saenz predicted “a trade imbalance, because our capacity for export to China is minimal, but what we buy from them is going to increase. This is very different from trade relations with the United States – in the 15 years that CAFTA-DR has been in effect, it has generated a trade surplus for Nicaragua.”
“Time will tell, but at this moment, the best forecast we can make is the enlargement of the trade deficit. That is, more Chinese products will be bought; more dollars from the Nicaraguan economy will go to the Chinese economy, in exchange for fewer dollars coming in from the sale of Nicaraguan goods to China,” Saenz warned.