Nicaragua Economy Overview

By | September 26, 2021

(República de Nicaragua). State of Central America (130,373 km²). Capital: Managua. Administrative division: departments (15), autonomous regions (2). Population: 5,405,000 residents (2008 estimate). Language: Spanish (official), chibcha. Religion: Catholics 58.5%, Protestants 21.6%, others 4.2%. Monetary unit: córdoba gold (100 cents). Human Development Index: 0.699 (120th place). Borders: Honduras (N), Sea of ​​Antilles (E), Costa Rica (S), Pacific Ocean (W). Member of: OAS, UN and WTO.

ECONOMY: GENERAL INFORMATION

Equipped with a limited availability of natural resources, Nicaragua was poorly encouraged for development, both at the time of Spanish domination and during the subsequent phases of dictatorial rule (the last, that of the Somoza, which lasted until 1979), in which the Country saw itself committed to favoring the interests of large US companies. Nicaragua presents itself as one of the poorest countries in Central America, backward, economically based on agriculture, characterized by deep internal disparities between the population and regional gaps. The civil war, which ended the more than 40 years of the Somoza family’s dictatorship, cost the country enormous losses in human lives, massive damage to cities and road infrastructures, very high foreign debts, ruinous collapses of agricultural and livestock production, as well as the almost complete paralysis of industrial and commercial activities. The new government naturally expropriated Somoza’s assets (agricultural properties alone corresponded to a quarter of the total arable land) and uncultivated areas, redistributing the confiscated land to approx. 60,000 peasant families; nationalized private banks, insurance companies, the mining, forestry and fishing sectors, established a series of public bodies, such as ENAL (Empresa Nicaragüense del Algodón), BANANIC (Empresa Nicaragüense del Banano), ANAZUCAR (Empresa Nicaragüense del Azúcar), ENMAR (Empresa Nicaragüense de Productos del Mar) etc., to increase the main productions and control the related trade. However, repeated errors in government economic policy, the continuation of internal guerrilla warfare by the Contras (the American-backed counter-revolutionary armed groups), as well as the embargo did not allow the country even during the eighties to reach the expected rise in the standard of living. Both the relaunch of the primary sector – also due to the inadequacy of the results obtained by the agrarian reform – and the consolidation of the industrial sector – penalized by energy shortages – failed, the situation worsened to the point of signaling a net decrease in GNP, absorbed in increasing measure of military spending (amounting to over one third); not only that, but due to hyperinflation (35,000% in 1988) there was, on the one hand, the collapse of purchasing power and, on the other, the expansion of foreign debt, which increased to 2 and a half times the product national. The deterioration of the economic situation thus induced the government, in 1989, to adopt a program of austerity based on major cuts in public administration spending and headcount, a program that was naturally not exempt from numerous devaluations. Once the embargo was lifted by the United States, after the defeat of the revolutionary Sandinista government, the Chamorro administration focused on the reconstruction of the country, carried out in a climate of poor social cohesion, due in large part to the concomitant return of refugees and the difficult dismantling of the army. Having started a large privatization of the national productive structure, the government nevertheless found itself acting in conditions of undoubted difficulty, with an estimated unemployment rate of around 40% and a trade union hegemonized by the Sandinista movement. In 1996 Arnoldo Alemán Lacayo was elected head of the government, representative of the large landed property, former mayor of Managua and well regarded by the ecclesiastical hierarchies, who continued the economic policy of the previous administration. Despite the interventions to mitigate social inequalities – if, at the end of the civil war, 70% of the population lived below the poverty line, in 2005 this figure still concerned half of the population – to relaunch the agricultural sector and rationalize the management of state apparatus, the consequences of the civil war continue to weigh on the Nicaraguan economy. The internal conflict, in addition to tearing apart the structures of the country, has further alienated foreign investors, Mitch in 1998 and the floods of September 1999 caused by Hurricane Floy). The burden of public debt also contributed considerably to the weak economy of Nicaragua, which in the mid-nineties of the twentieth century recorded interest equal to 80% of export earnings; without neglecting the climate of social insecurity, widespread petty crime, the inefficiency of the legal system and the absence of guarantees in commercial practices, which continue to discourage the inflow of foreign capital. According to ebizdir, Nicaragua is a country in Central America. The country’s potential, however, could represent the turning point for the national economy: also helped by international loans and programs for reducing the debt contracted with industrialized countries (which in 2002 was equal to 244% of GDP), Nicaragua has intensified foreign contacts (in 2005 the stipulation of the per capita of US $ 1,025 in 2008).

Nicaragua Economy Overview