Pre-Columbian Nicaragua had a well-developed agrarian society. European diseases and forced work in gold mines decimated the native population. Most tilled land reverted to jungle. Beef, hides, and tallow were the colony's principal exports. Commercial coffee growing began in the 1840s, expanding to resemble a banana republic at the end of the 19th century. After World War II, the economy diversified, with new crops and industrialization. In the 1960s, the Central American Common Market and import substitution industrialization stimulated the economy. The 1972 earthquake destroyed much of Nicaragua's industrial infrastructure. Reconstruction led to high foreign indebtedness, with the benefits concentrated in a few hands, especially the Somoza family.
The Sandinista government was determined to make workers and peasants the prime beneficiaries. All land belonging to the Somozas was confiscated, though private property continued in a mixed economy. Restructuring and rebuilding caused initial growth, but GDP dropped from 1984 to 1990. Between decreasing revenues, mushrooming military expenditures, and printing large amounts of paper money, inflation peaked at 14,000% annually in 1987. In early 1988, the Daniel Ortega administration established austerity with price controls and a new currency. Then the government spent massively to repair Hurricane Joan damage. A US embargo also hindered economic development. In 1990, most Nicaraguans were considerably poorer than in the 1970s.
The Chamorro administration embraced International Monetary Fund and World Bank policy with the Mayoraga Plan. The plan aimed to halt spiraling inflation, lower the fiscal deficit, reduce the public sector and military work force, reduce social spending, attract foreign investment, and encourage exports. Loss of jobs and higher prices resulted in crippling public and private-sector strikes. By the end of 1990, most free market reforms were abandoned. A severe drought in 1992 decimated the principal export crops and a tsunami left thousands homeless. Foreign aid and investment had not returned in significant amounts.
Nicaraguan children working on a Coffee plantation in 2006
Pre-Columbian and colonial era
The first Spanish explorers of Nicaragua found a well-developed agrarian society in the central highlands and Pacific lowlands. The rich volcanic soils produced a wide array of products, including beans, peppers, corn, cocoa, and cassava (manioc).[1] Agricultural land was held communally, and each community had a central marketplace for trading and distributing food.[1]
The arrival of the Spanish in the early 16th century destroyed, for all intents and purposes, the indigenous agricultural system.[1] The early conquistadors were interested primarily in gold; European diseases and forced work in the gold mines decimated the native population.[1] Some small areas continued to be cultivated at the end of the 16th century, but most previously tilled land reverted to jungle.[1] By the early 17th century, cattle raising, along with small areas of corn and cocoa cultivation and forestry, had become the primary function of Nicaragua's land.[1] Beef, hides, and tallow were the colony's principal exports for the next two and a half centuries.[1]
The coffee boom, 1840s–1940s
Coffee was the product that would change Nicaragua's economy.[2] Coffee was first grown domestically as a curiosity in the early 19th century.[2] In the late 1840s, however, as coffee's popularity grew in North America and Europe, commercial coffee growing began in the area around Managua.[2] By the early 1850s, passengers crossing Nicaragua en route to California were served large quantities of Nicaraguan coffee.[2] The Central American coffee boom was in full swing in Nicaragua by the 1870s, and large areas in western Nicaragua were cleared and planted with coffee trees.[2]
Unlike traditional cattle raising or subsistence farming, coffee production required significant capital and large pools of labor. Laws were therefore passed to encourage foreign investment and allow easy acquisition of land.[2] The Subsidy Laws of 1879 and 1889 gave planters with large holdings a subsidy of US$0.05 per tree.[2]
By the end of the 19th century, the entire economy came to resemble what is often referred to as a "banana republic" economy—one controlled by foreign interests and a small domestic elite oriented toward the production of a single agriculture export.[2] Profits from coffee production flowed abroad or to the small number of landowners.[2] Taxes on coffee were virtually nonexistent.[2] The economy was also hostage to fluctuations in the price of coffee on the world markets—wide swings in coffee prices meant boom or bust years in Nicaragua.[2]
Diversification and growth, 1945–77
The period after World War II was a time of economic diversification.[3] The government brought in foreign technocrats to give advice on increasing production of new crops; hectarage in bananas and sugarcane increased, livestock herds grew, and cotton became a new export crop.[3] The demand for cotton during the Korean War (1950–53) caused a rapid increase in cotton production, and by the mid-1950s, cotton was the nation's second largest export earner, after coffee.[3]
The 1969 Football War between Honduras and El Salvador, two members of the CACM, effectively suspended attempts at regional integration until 1987, when the Esquipulas II agreement was signed.[3] By 1970 the industrial sector was undergoing little additional import substitution, and the collapse of the CACM meant that Nicaragua's economic growth, which had come from the expanding manufacturing sector, halted.[3] Furthermore, the manufacturing firms that had developed under the tariff protection of the CACM were generally high-cost and inefficient; consequently, they were at a disadvantage when exporting outside the region.[3]
Although statistics for the period 1970–77 seemed to show continued economic growth, they reflected fluctuations in demand rather than a continued diversification of the economy.[3] The gross domestic product rose 13% in 1974, the biggest boom in Nicaragua's economic history.[3] However, these figures largely represented the jump in construction as the country struggled to rebuild after the disastrous 1972 earthquake.[3] Likewise, the positive growth in 1976–77 was merely a reflection of the high world prices for coffee and cotton.[3]
Positive GDP growth rates in the 1970s masked growing structural problems in the economy.[3] The 1972 earthquake destroyed much of Nicaragua's industrial infrastructure, which had been located in Managua.[3] An estimated 10,000 people were killed and 30,000 injured, most of them in the capital area.[3] The earthquake destroyed most government offices, the financial district of Managua, and about 2,500 small shops engaged in manufacturing and commercial activities.[3] About 90% of city housing in Managua was left unstable.[3]
Government budget deficits and inflation were the legacies of the earthquake.[3] The government increased expenses to finance rebuilding, which primarily benefited the construction industry, in which the Somoza family had strong financial interests.[3] Because earthquake reconstruction generated few new revenues, except through borrowing, most of the resulting public deficits were covered by foreign loans.[3] In the late 1970s, Nicaragua had the highest level of foreign indebtedness in Central America.[3]
Most of the benefits of the three decades of growth after World War II were concentrated in a few hands.[3] Several groups of influential firms and families, most notably the Somoza family, controlled most of the nation's production.[3] The Banamérica Group, an offshoot of the conservative elite of Granada, had powerful interests in sugar, rum, cattle, coffee, and retailing.[3] The Banic Group, so-called because of its ties to the Nicaraguan Bank of Industry and Commerce (Banco Nicaragüense de Industria y Comercio-Banic), had its roots in the liberal families of León and had ties to the cotton, coffee, beer, lumber, construction, and fishing industries.[3]
The third interest controlling the nation's production was the Somoza family, which had wide holdings in almost every segment of Nicaraguan society.[3] Financial dealings for the Somozas were handled by the Central Bank of Nicaragua, which the Somozas treated as if it were a commercial bank.[3] The Central Bank made frequent personal loans to the Somozas, which often went unpaid.[3] Although the other financial groups used financial means primarily to further their interests, the Somozas protected their financial interests by controlling the government and its institutions.[3]
The Somoza family owned an estimated 10% to 20% of the country's arable land, was heavily involved in the food processing industry, and controlled import-export licenses.[3] The Somozas also controlled the transportation industry by owning outright, or at least having controlling interest in, the country's main seaports, the national airline, and Nicaragua's maritime fleet.[3] Much of the profit from these enterprises was then reinvested in real estate holdings throughout the United States and Latin America.[3] Some analysts estimated that by the mid-1970s, the Somozas owned or controlled 60% of the nation's economic activity.[3] When Anastasio Somoza Debayle (president, 1967–72, 1974–79) fled Nicaragua in 1979, the family's worth was estimated to be between US$500 million and US$1.5 billion.[3]
By the mid-1970s, the government's economic and dictatorial political policies had alienated nearly all sectors of society.[4] Armed opposition to the Somoza regimes, which had started as a small rural insurrection in the early 1960s, had grown by 1977 to a full-scale civil war.[4] The fighting caused foreign investment to drop sharply and the private sector to cut investment plans.[4]
Much of the government expenditure was shifted to the military budget.[4] As fighting in the cities increased, destruction and looting caused a large loss in inventories and operating stock.[4] Foreign investment, which before 1977 had been a significant factor in the economy's growth, almost stopped.[4] As the fighting intensified further, most liquid assets flowed out of the country.[4]
Although the anti-Somoza forces finally won their struggle in July 1979, the human and physical cost of the revolution was tremendous.[4] As many as 50,000 people lost their lives in the fighting, 100,000 were wounded, and 40,000 children were left orphans.[4] About US$500 million in physical plants, equipment, and materials was destroyed; housing, hospitals, transportation, and communications incurred damage of US$80 million.[4] The GDP shrank an estimated 25% in 1979 alone.[4]
The new government, formed in 1979 and dominated by the Sandinistas, resulted in a new model of economic development.[5] The new leadership was conscious of the social inequities produced during the previous thirty years of unrestricted economic growth and was determined to make the country's workers and peasants, the "economically underprivileged," the prime beneficiaries of the new society. Consequently, in 1980 and 1981, unbridled incentives to private investment gave way to institutions designed to redistribute wealth and income. Private property would continue to be allowed, but all land belonging to the Somozas was confiscated.
The ideology of the Sandinistas put the future of the private sector and of private ownership of the means of production in doubt.[5] Even though under the new government both public and private ownership were accepted, government spokespersons occasionally referred to a reconstruction phase in the country's development, in which property owners and the professional class would be tapped for their managerial and technical expertise.[5] After reconstruction and recovery, the private sector would give way to expanded public ownership in most areas of the economy.[5] Despite such ideas, which represented the point of view of a faction of the government, the Sandinista government remained officially committed to a mixed economy.[5]
Economic growth was uneven in the 1980s.[5] Restructuring of the economy and the rebuilding immediately following the end of the civil war caused the GDP to jump about 5% in 1980 and 1981.[5] Each year from 1984 to 1990, however, showed a drop in the GDP.[5]
After 1985 the government chose to fill the gap between decreasing revenues and mushrooming military expenditures by printing large amounts of paper money.[5]Inflation skyrocketed, peaking in 1987 at more than 14,000% annually.[5]
Measures taken by the government to lower inflation were largely wiped out by natural disaster.[5] In early 1988, the administration of Daniel Ortega (Sandinista junta coordinator 1979–85, president 1985–90) established an austerity program to lower inflation.[5]Price controls were tightened, and a new currency was introduced.[5] As a result, by August 1988, inflation had dropped to an annual rate of 240%.[5] The following month, however, Hurricane Joan cut a devastating path directly across the center of the country.[5] Damage was extensive, and the government's program of massive spending to repair the infrastructure destroyed its anti-inflation measures.[5]
In its eleven years in power, the Sandinista government never overcame most of the economic inequalities that it inherited from the Somoza era.[5] Years of war, policy missteps due to inexperience, natural disasters, and the effects of the United States trade embargo all hindered economic development.[5] The early economic gains of the Sandinistas were wiped out by seven years of sometimes precipitous economic decline, and in 1990, by most standards, Nicaragua and most Nicaraguans were considerably poorer than they were in the 1970s.[5]
Chamorro era, 1990–96
The economic policies of Violeta Barrios de Chamorro (president, 1990–1997) were a radical change from those of the previous administration.[6] The president proposed to revitalize the economy by reactivating the private sector and stimulating the export of agricultural products.[6] However, the administration's political base was shaky.[6] The president's political coalition, the National Opposition Union (Unión Nacional Oppositora-UNO), was a group of fourteen parties ranging from the far right to the far left.[6] Furthermore, 43% of the voting electorate had voted for the Sandinistas, reflecting support for the overall goals of the former administration although not necessarily the results.[6]
The Chamorro government's initial economic package embraced a standard International Monetary Fund and World Bank set of policy prescriptions.[6] The IMF demands included instituting measures aimed at halting spiraling inflation; lowering the fiscal deficit by downsizing the publicsector work force and the military, and reducing spending for social programs; stabilizing the national currency; attracting foreiunign investment; and encouraging exports.[6] This course was an economic path mostly untraveled by Nicaragua, still heavily dependent on traditional agro-industrial exports, exploitation of natural resources, and continued foreign assistance.[6]
Inspired by the IMF, Minister of Finance Francisco Mayoraga quickly put together an economic "Plan of 100 Days".[6] This plan, also called the "Mayoraga Plan", cut the deficit and helped to lower inflation.[6] Loss of jobs and higher prices under the plan, however, also resulted in crippling public and private-sector strikes throughout the country.[6] Mayoraga's tenure in office barely exceeded the 100 days of his economic plan.[6] By the end of 1990, the government was forced to abandon most of its freemarket reforms.[6]
A series of political problems and natural disasters continued to plague the economy in 1991 and 1992.[6] The need to accommodate left and right-wing views within its ruling coalition and attempts to work with the Sandinista opposition effectively prevented the implementation of unpopular economic measures.[6] The government was unable to lower government expenditures or to hold the value of the newly introduced gold córdoba stable against the United States dollar.[6] A severe drought in 1992 decimated the principal export crops.[6] In September 1992, a destructive tsunami struck western Nicaragua, leaving thousands homeless.[6] Furthermore, foreign aid and investment, on which the Nicaraguan economy had depended heavily for growth in the years preceding the Sandinista administration, never returned in significant amounts.[6]
The economy of Honduras is based mostly on agriculture, which accounts for 14% of its gross domestic product (GDP) in 2013. The country's leading export is coffee (US$340 million), which accounted for 22% of the total Honduran export revenues. Bananas, formerly the country's second-largest export until being virtually wiped out by 1998's Hurricane Mitch, recovered in 2000 to 57% of pre-Mitch levels. Cultivated shrimp is another important export sector. Since the late 1970s, towns in the north began industrial production through maquiladoras, especially in San Pedro Sula and Puerto Cortés.
Nicaragua, officially the Republic of Nicaragua, is the geographically largest country in Central America, comprising 130,370 km2 (50,340 sq mi). With a population of 6,850,540 as of 2021, it is the third-most populous country in Central America after Guatemala and Honduras. Nicaragua is bordered by Honduras to the north, the Caribbean Sea to the east, Costa Rica to the south, and the Pacific Ocean and shared maritime borders with El Salvador to the west and Colombia to the east. The country's largest city and national capital is Managua, the fourth-largest city in Central America with a population of 1,055,247 as of 2020. Nicaragua's multiethnic population includes people of mestizo, indigenous, European, and African heritage. The country's most spoken language is Spanish, though indigenous tribes on the Mosquito Coast speak their own languages and English.
Nicaragua is a nation in Central America. It is located about midway between Mexico and Colombia, bordered by Honduras to the north and Costa Rica to the south. Nicaragua ranges from the Caribbean Sea on the nation's east coast, and the Pacific Ocean bordering the west. Nicaragua also possesses a series of islands and cays located in the Caribbean Sea.
The economy of Nicaragua is focused primarily on the agricultural sector. Nicaragua itself is the least developed country in Central America, and the second poorest in the Americas by nominal GDP. In recent years, under the administrations of Daniel Ortega, the Nicaraguan economy has expanded somewhat, following the Great Recession, when the country's economy actually contracted by 1.5%, due to decreased export demand in the American and Central American markets, lower commodity prices for key agricultural exports, and low remittance growth. The economy saw 4.5% growth in 2010 thanks to a recovery in export demand and growth in its tourism industry. Nicaragua's economy continues to post growth, with preliminary indicators showing the Nicaraguan economy growing an additional 5% in 2011. Consumer Price inflation have also curtailed since 2008, when Nicaragua's inflation rate hovered at 19.82%. In 2009 and 2010, the country posted lower inflation rates, 3.68% and 5.45%, respectively. Remittances are a major source of income, equivalent to 15% of the country's GDP, which originate primarily from Costa Rica, the United States, and European Union member states. Approximately one million Nicaraguans contribute to the remittance sector of the economy.
The Sandinista National Liberation Front is a Christian socialist political party in Nicaragua. Its members are called Sandinistas in both English and Spanish. The party is named after Augusto César Sandino, who led the Nicaraguan resistance against the United States occupation of Nicaragua in the 1930s.
Anastasio "Tachito" Somoza Debayle was the 53rd President of Nicaragua from 1967 to 1972 and again from 1974 to 1979. As head of the National Guard, he was de facto ruler of the country between 1967 and 1979, even during the period when he was not the de jure ruler.
The Somoza family is a political family which ruled Nicaragua for forty-three years – from 1936 to 1979. Their family dictatorship, founded by Anastasio Somoza García, was continued by his two sons Luis Somoza Debayle and Anastasio Somoza Debayle. Anastasio Somoza García served as the President of Nicaragua from 1937 until 1956. He was succeeded by his elder son, Luis Somoza Debayle, who held the presidency from 1957 to 1963. The younger Somoza son, Anastasio Somoza Debayle, had two presidential terms: 1967–1972 and 1974–1979. Although the Somozas did not hold the presidency for the full forty-three years, they continued to rule through puppet presidents and via their control of the National Guard.
Violeta Barrios Torres de Chamorro is a Nicaraguan former politician who served as the 55th President of Nicaragua from 1990 to 1997. She was the first and, to date, only woman to hold the position of president of Nicaragua. Previously, she was a member of the Junta of National Reconstruction from 1979 to 1980.
José Arnoldo Alemán Lacayo is a Nicaraguan politician who served as the 81st president of Nicaragua from 10 January 1997 to 10 January 2002. In 2003, he was convicted of corruption and sentenced to a 20-year prison term; the conviction was overturned by the Supreme Court of Nicaragua in 2009.
The Nicaraguan Revolution began with rising opposition to the Somoza dictatorship in the 1960s and 1970s, the ouster of the dictatorship in 1978–79, and the Contra War, fought between the government and the Contras from 1981 to 1990. The revolution revealed the country as one of the major proxy war battlegrounds of the Cold War.
La Prensa is a Nicaraguan newspaper, with offices in the capital Managua. Its current daily circulation is placed at 42,000. Founded in 1926, in 1932 it was bought by Pedro Joaquín Chamorro Zelaya, who had become editor-in-chief. He promoted the Conservative Party of Nicaragua and became a voice of opposition to Juan Bautista Sacasa, for which the paper was censored. He continued to be critical of dictator Anastasio Somoza García, who came to power in a coup d'état.
The economic history of Brazil covers various economic events and traces the changes in the Brazilian economy over the course of the history of Brazil. Portugal, which first colonized the area in the 16th century, enforced a colonial pact with Brazil, an imperial mercantile policy, which drove development for the subsequent three centuries. Independence was achieved in 1822. Slavery was fully abolished in 1888. Important structural transformations began in the 1930s, when important steps were taken to change Brazil into a modern, industrialized economy.
The economic history of the Republic of Turkey had four eras or periods. The first era had the development policy emphasizing private accumulation between 1923 and 1929. The second era had the development policy emphasized state accumulation in a period of global crises between 1929 and 1945. The third era was state-guided industrialization based on import-substituting protectionism between 1950 and 1980. The final, era was the opening of the economy to liberal trade in goods, services and financial market transactions since 1981.
Nicaragua produces coffee, cotton, bananas, sugar and beef cattle.
Friendly bilateral relations now exist between Nicaragua and the United States. However, in the 19th and 20th centuries, tensions were high and American intervention was frequent. In the 1980s, due to Red Scare paranoia and an attempt to put down socialism in the region, the U.S proceeded to wage an undeclared war against the left-wing Sandinista movement by funding the Contra groups until it was defeated in the election in 1990.
The economic history of Ecuador covers the development of Ecuador's economy throughout its history, beginning with colonization by the Spanish Empire, through independence and up to the 21st century.
In 1979, the Sandinista National Liberation Front (FSLN) overthrew Anastasio Somoza Debayle, ending the Somoza dynasty, and established a revolutionary government in Nicaragua. Following their seizure of power, the Sandinistas ruled the country first as part of a Junta of National Reconstruction. Following the resignation of centrist members from this Junta, the FSLN took exclusive power in March 1981.
Colombia is now a country mostly in South America, and has been home to many indigenous peoples and cultures since at least 12,000 BCE.
Since precolonial times, Peasant agricultural production has been the predominant economic activity in the landlocked country of Uganda in East Africa. Despite an active trade in ivory and animal hides linking Uganda with the east coast of Africa long before the arrival of Europeans, most Ugandans were subsistence farmers.
Since becoming an independent country, Ivory Coast has transitioned from an economy dominated by agriculture—coffee and cocoa in particular—to a diversified economy with a large service sector. From 1960 to 1976, government policy focused on investing revenues from agricultural export into infrastructure. From 1976 to 1980, factors such as a boom-bust in coffee and cocoa prices, over-investment funded by foreign debt, and a devaluation of the US Dollar led Ivory Coast to the brink of financial crisis. Decreased revenues from coffee and cocoa exports continued into the 80's and early 90's, increasing the burden of foreign debt and eventually requiring lender negotiation. This resulted in the privatization of many state-owned enterprises with mixed levels of success. In 1994, the economy began a comeback due to devaluation of the CFA franc, increased export revenues, financial reforms, and debt rescheduling. Since then the economy has been impacted by and rebounded from political crises such as the 1999 coup d'état and the 2011 election crisis.
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