Economy of Nicaragua

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Nicaragua's economy is focused primarily on the agricultural sector. However, the country is the least developed country in Central America and the second poorest in the Americas by nominal GDP. GDP fell by almost 3% in 2009, due to decreased export demand in the US and Central American markets, lower commodity prices for key agricultural exports, and low remittance growth. Remittances are a major source of income, they are equivalent to 15% of the country's GDP, close to one million Nicaraguans had emigrated. The US-Central America Free Trade Agreement has been in effect since April 2006 and has expanded export opportunities for many agricultural and manufactured goods. Textiles and apparel account for nearly 60% of Nicaragua's exports, but increases in the minimum wage during the Ortega administration will likely erode its comparative advantage in this industry. Nicaragua relies on international economic assistance to meet internal- and external-debt financing obligations, however, foreign donors have curtailed this funding in response to November 2008 electoral fraud. In early 2004, Nicaragua secured some $4.5 billion in foreign debt reduction under the Heavily Indebted Poor Countries initiative, and in October 2007, the IMF approved a new poverty reduction and growth facility program.

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Economy

Nicaragua's economy was ravaged in the 1980s by the Contra War, which saw the destruction of much of the country's infrastructure. At the same time, the US staged an economic blockade from 1985 onward.

Following the end of the war and the defeat of the Sandinistas in the 1990 general election, Nicaragua began free market reforms, privatizing more than 350 state companies. Since then, inflation has been reduced from 33,603% to 8%, and the government's foreign debt has been cut in half. The economy began expanding in 1991 and grew 2.5% in 2001. In 2001, the global recession, combined with a series of bank failures, low coffee prices, and a drought, caused the economy to retract.

Unemployment is officially 3.8% (2006 est.), and another 46.5% (2006 est.) are underemployed. Nicaragua suffers from persistent trade and budget deficits and a high debt-service burden, leaving it highly dependent on foreign assistance — as much as 25% of GDP in 2001.

One of the key engines of economic growth has been production for export. Exports were 640 million in 2001. Although traditional products such as coffee, meat, and sugar continued to lead the list of Nicaraguan exports, the fastest growth is now in nontraditional exports: maquila goods (apparel); gold; seafood; and new agricultural products such as peanuts, sesame, melons, and onions. In 2007 Daniel Ortega managed exports to top 1 billion dollars for the first time in Nicaraguan history during his first 100 days as president.[3] Nicaragua also depends heavily on remittances from Nicaraguans living abroad.

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