Nicaragua

Chapter 3. The Economy

[GIF]

Worker harvesting coffee beans

THE NICARAGUAN ECONOMY has seen no "business as usual" for almost twenty years. From the mid-1940s to the mid-1970s, high rates of growth and investment changed Nicaragua's economy from a traditional agrarian economy dependent on one crop to one with a diversified agricultural sector and a nascent manufacturing component. Beginning in the late 1970s, however, more than a decade and a half of civil war, coupled with a decade of populist economic policies, severely disrupted the Nicaraguan economy. Extraordinary expenses to support the constant fighting, with its incalculable burden upon the population, the environment, and the country's infrastructure, rendered most economic indicators largely meaningless. Add several catastrophic natural disasters-- an earthquake in 1972, a hurricane in 1988, and a drought in 1989--and five years of a total trade embargo by the United States to the effects of the fighting, and it becomes clear why Nicaragua in 1993 vied with Haiti and Guyana as the poorest country in the Western Hemisphere.

Finding solutions to address the human costs of Nicaragua's wars is the economic challenge facing the government of President Violeta Barrios de Chamorro (1990- ). Those human costs are numerous: the diversion of resources from social programs to the military, loss of agricultural and industrial production, increased misery and widespread hunger, destruction of natural resources and infrastructure, the uprooting of families and communities, and demands for land and resources from internal and returning external refugees. Getting Nicaragua's national economy in order may be the easier part of the challenge. Controlling inflation, adjusting exchange rates, and setting new agricultural and industrial prices and priorities are only first steps. The government faces the even larger problems of endemic poverty and widening environmental deterioration.

The relative optimism of 1990, stemming from the February 1990 election of a politically moderate president and the reconciliation of most armed conflict soon after, seemed to offer a rare opportunity for Nicaragua to build almost from scratch a better future. However, continued political problems and natural disasters in 1991 and 1992 dimmed that initial optimism. The goal of revitalizing Nicaragua's economy in an era of fragile democracy and increasingly scarce resources remained the country's greatest problem in 1993.

Data as of December 1993