The economy of Nicaragua is focused primarily on the agricultural sector.
Nicaragua
Nicaragua (; ), officially the Republic of Nicaragua (), is the largest country in Central America, bordered by Honduras to the north, the Caribbean to the east, Costa Rica to the south, and the Pacific Ocean to the west. Managua is the countr ...
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
The Great Recession was a period of marked general decline, i.e. a recession, observed in national economies globally that occurred from late 2007 into 2009. The scale and timing of the recession varied from country to country (see map). At ...
, 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%.
[http://www.indexmundi.com/nicaragua/inflation_rate_(consumer_prices).html Nicaragua Inflation Rates via Consumer Price Index, IndexMundi] 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
The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been de ...
member states. Approximately one million Nicaraguans contribute to the remittance sector of the economy.
In early 2004, Nicaragua secured some $4.5 billion in foreign debt reduction under the
International Monetary Fund
The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster glo ...
and
World Bank
The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Inte ...
Heavily Indebted Poor Countries
The heavily indebted poor countries (HIPC) are a group of 39 developing countries with high levels of poverty and debt overhang which are eligible for special assistance from the International Monetary Fund (IMF) and the World Bank.
The HIPC ...
initiative. In April 2006, the
US-Central America Free Trade Agreement went into effect, expanding export opportunities for Nicaragua's agricultural and manufactured goods. Textiles and apparel account for nearly 60% of Nicaragua's exports. In October 2007, the IMF approved an additional poverty reduction and growth facility program in support of the government's economic plans. Nicaragua relies on international economic assistance to meet internal- and external-debt financing obligations, although foreign donors curtailed this funding in response to widespread allegations of electoral fraud in Nicaragua's November 2008 elections.
Economic history
![Nicaragua inflation rate 1980-1993](https://upload.wikimedia.org/wikipedia/commons/f/fe/Nicaragua_inflation_rate_1980-1993.webp)
Nicaragua's economy was devastated in the 1980s by the
Contra War
The Nicaraguan Revolution ( es, Revolución Nicaragüense or Revolución Popular Sandinista, link=no) encompassed the rising opposition to the Somoza dictatorship in the 1960s and 1970s, the campaign led by the Sandinista National Liberation Fr ...
, 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 civil war, Nicaragua began
free market
In economics, a free market is an economic system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of government or any ot ...
reforms,
privatizing
Privatization (also privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when ...
more than 350 state companies and commencing a general trend of economic growth. Inflation has been reduced from 33,603% during the later years of the Sandinista period and 55,000% during the first year of the Chamorro government to more normal levels, averaging an annual rate of 9.5% over the 2000-2010 decade (based on World Bank figures).
Growth was slow (3%) in 2001 due to a combination of factors (a
global recession
A global recession is recession that affects many countries around the world—that is, a period of global economic slowdown or declining economic output.
Definitions
The International Monetary Fund defines a global recession as "a decline i ...
, a series of bank failures, low coffee prices, and a
drought
A drought is defined as drier than normal conditions.Douville, H., K. Raghavan, J. Renwick, R.P. Allan, P.A. Arias, M. Barlow, R. Cerezo-Mota, A. Cherchi, T.Y. Gan, J. Gergis, D. Jiang, A. Khan, W. Pokam Mba, D. Rosenfeld, J. Tierney, an ...
), and in 2009 the economy actually contracted 1.5% in reaction to the
2008–2012 global recession). But even with the recessions, growth has averaged 3.4% between 2001 and 2011 (based on World Bank figures).
Economy
Unemployment is 6.4%. Nicaragua suffers from persistent trade and budget deficits and a high debt-service burden, leaving it highly dependent on foreign assistance—which represented almost 25% of GDP in 2001.
One of the key engines of economic growth has been production for export. 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: textile and apparel; gold; seafood; and new agricultural products such as peanuts, sesame, melons, and onions. In 2007, exports topped US$1 billion for the first time in Nicaraguan history.
Nicaragua is primarily an agricultural country, but construction, mining, fisheries, and general commerce also have been expanding during the last few years. Foreign private capital inflows topped $300 million in 1999 but, due to economic and political uncertainty, fell to less than $100 million in 2001. In the last 12 years, tourism has grown 394%,
[Rcalvet.com](_blank)
Government Gets Tough on Environmental Scofflaws the rapid growth has led it to become Nicaragua's second largest source of foreign capital. Less than three years ago, the nation's tourism budget was U.S. $400,000; today, it is over $2 million.
Nicaragua's economy has also produced a
construction
Construction is a general term meaning the art and science to form Physical object, objects, systems, or organizations,"Construction" def. 1.a. 1.b. and 1.c. ''Oxford English Dictionary'' Second Edition on CD-ROM (v. 4.0) Oxford University Pr ...
boom, the majority of which is in and around
Managua
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Nicaragua faces a number of challenges in stimulating rapid economic growth. An
International Monetary Fund
The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster glo ...
(IMF) program is currently being followed, with the aim of attracting investment, creating jobs, and reducing
poverty by opening the economy to foreign trade. This process was boosted in late 2000 when Nicaragua reached the decision point under the
Heavily Indebted Poor Countries
The heavily indebted poor countries (HIPC) are a group of 39 developing countries with high levels of poverty and debt overhang which are eligible for special assistance from the International Monetary Fund (IMF) and the World Bank.
The HIPC ...
(HIPC) debt relief initiative. However, HIPC benefits were delayed because Nicaragua subsequently fell "off track" from its IMF program. The country also has been grappling with a string of bank failures that began in August 2000. Moreover, Nicaragua continues to lose international reserves due to its growing fiscal deficits.
The country is still a recovering economy and it continues to implement further reforms, on which aid from the
IMF is conditional. In 2005, finance ministers of the leading eight industrialized nations (
G8) agreed to forgive some of Nicaragua's foreign debt, as part of the
HIPC program. According to the World Bank Nicaragua's
GDP
Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is ofte ...
was around $4.9 US billion dollars. Recently, in March 2007, Poland and Nicaragua signed an agreement to write off $30.6 million which was borrowed by the Nicaraguan government in the 1980s.
The U.S. is the country's largest trading partner, providing 25% of Nicaragua's
imports and receiving about 60% of its
export
An export in international trade is a good produced in one country that is sold into another country or a service provided in one country for a national or resident of another country. The seller of such goods or the service provider is an ...
s. About 25 wholly or partly owned
subsidiaries of U.S. companies operate in Nicaragua. The largest of those operations are in the energy, communications, manufacturing, fisheries, and shrimp farming sectors. Opportunities exist for expanded foreign investments in those sectors, as well as in tourism, mining, franchising, and the distribution of imported consumer, manufacturing, and agricultural goods. There also are
copper
Copper is a chemical element with the symbol Cu (from la, cuprum) and atomic number 29. It is a soft, malleable, and ductile metal with very high thermal and electrical conductivity. A freshly exposed surface of pure copper has a pinkis ...
mines in northeastern Nicaragua.
Gross Domestic Product (GDP) in
purchasing power parity (PPP) in 2012 was estimated at US$20.04 billion, and GDP per capita in PPP at US$3,300, making Nicaragua the second poorest country in the Western Hemisphere.
The service sector is the largest component of GDP at 56.7%, followed by the industrial sector at 25.8%(2012). Agriculture represents 17.5% of GDP and it's the largest percentage in a Central American country. Nicaraguan labor force is estimated at 2.961 million of which 28% is occupied in agriculture, 19% in the industry sector and 53% in the service sector (2012).
Agriculture and food production
Coffee
Coffee is a drink prepared from roasted coffee beans. Darkly colored, bitter, and slightly acidic, coffee has a stimulating effect on humans, primarily due to its caffeine content. It is the most popular hot drink in the world.
Seeds of ...
became Nicaragua's principal crop in the 1870s, a position it still held in 1992 despite the growing importance of other crops.
Cotton
Cotton is a soft, fluffy staple fiber that grows in a boll, or protective case, around the seeds of the cotton plants of the genus '' Gossypium'' in the mallow family Malvaceae. The fiber is almost pure cellulose, and can contain minor pe ...
gained importance in the late 1940s, and in 1992 was the second biggest export earner. In the early 20th century, Nicaraguan governments were reluctant to give concessions to the large United States banana companies, and
bananas never attained the level of prominence in Nicaragua that they reached in Nicaragua's Central American neighbors; bananas were grown in the country, however, and were generally the third largest export earner in the post-World War II period.
Beef
Beef is the culinary name for meat from cattle (''Bos taurus'').
In prehistoric times, humankind hunted aurochs and later domesticated them. Since that time, numerous breeds of cattle have been bred specifically for the quality or quantit ...
and animal byproducts, the most important agricultural export for the three centuries before the coffee boom of the late 19th century, were still important commodities in 1992.
From the end of World War II to the early 1960s, the growth and
diversification
Diversification may refer to:
Biology and agriculture
* Genetic divergence, emergence of subpopulations that have accumulated independent genetic changes
* Agricultural diversification involves the re-allocation of some of a farm's resources to ...
of the
agricultural sector drove the nation's
economic expansion
An economic expansion is an increase in the level of economic activity, and of the goods and services available. It is a period of economic growth as measured by a rise in real GDP. The explanation of fluctuations in aggregate economic activit ...
. From the early 1960s until the increased fighting in 1977 caused by the
Sandinista revolution
The Nicaraguan Revolution ( es, Revolución Nicaragüense or Revolución Popular Sandinista, link=no) encompassed the rising opposition to the Somoza dictatorship in the 1960s and 1970s, the campaign led by the Sandinista National Liberation F ...
, agriculture remained a robust and significant part of the
economy
An economy is an area of the production, distribution and trade, as well as consumption of goods and services. In general, it is defined as a social domain that emphasize the practices, discourses, and material expressions associated with the ...
, although its growth slowed somewhat in comparison with the previous postwar decades. Statistics for the next fifteen years, however, show stagnation and then a drop in agricultural production.
The agricultural sector declined precipitously in the 1980s. Until the late 1970s, Nicaragua's agricultural export system generated 40 percent of the country's GDP, 60 percent of national employment, and 80 percent of foreign exchange earnings. Throughout the 1980s, the Contras destroyed or disrupted coffee harvests as well as other key income-generating crops. Private industry stopped investing in agriculture because of uncertain returns. Land was taken out of production of export crops to expand plantings of basic grain. Many coffee plants succumbed to disease.
In 1989, the fifth successive year of decline, farm production declined by roughly 7 percent in comparison with the previous year. Production of basic grains fell as a result of
Hurricane Joan in 1988 and a drought in 1989. By 1990 agricultural exports had declined to less than half the level of 1978. The only bright spot was the production of nontraditional export crops such as
sesame,
tobacco
Tobacco is the common name of several plants in the genus '' Nicotiana'' of the family Solanaceae, and the general term for any product prepared from the cured leaves of these plants. More than 70 species of tobacco are known, but the ...
, and African palm oil.
Services
The service sector was estimated to account for 56.8% of the country's GDP, and employs 52% of the active population.
This section includes transportation, commerce, warehousing, restaurant and hotels, arts and entertainment, health, education, financial and banking services, telecommunications as well as public administration and defense.
Tourism in Nicaragua
Tourism in Nicaragua has grown considerably recently, and it is now the second largest industry in the nation. Nicaraguan President Daniel Ortega has stated his intention to use tourism to combat poverty throughout the country.
The growth in touri ...
is one of the most important industries in the country. It is the second largest source of foreign exchange for the country and is predicted to become the first largest industry in 2007. The growth in tourism has positively affected the agricultural, commercial, finance, and construction industries as well.
Current economic outlook
Nicaragua has ratified Free Trade Agreements with major markets such as the United States, the Dominican Republic (DR-CAFTA), Taiwan and Mexico, among others. As evidence of continuous efforts in improving the business climate, Nicaragua has been ranked favorably in a variety of independent evaluations.
The 2011 Doing Business Report, published by The World Bank Group, a report that benchmarks various indicators of the investment climate in 183 nations, ranked Nicaragua as the top location in Central America in starting a business, investor protection, and closing a business. Additionally, the country improved in the following categories: ease of doing business, registering property, paying taxes, trading across borders and enforcing contracts.
Data
The following table shows the main economic indicators in 1980–2020 (with IMF staff stimtates in 2021–2026). Inflation below 5% is in green.
Other statistics
![GDP per capita development in Nicaragua](https://upload.wikimedia.org/wikipedia/commons/7/78/GDP_per_capita_development_in_Nicaragua.svg)
Household income or consumption by percentage share:
''lowest 10%:'' 1.4%; ''highest 10%:'' 41.8 (2005)
Industrial production growth rate:
2.4% (2005)
Electricity - production:
2.778 billion kWh (2006)
Electricity - production by source:
''fossil fuel:'' 53.43%; ''hydro:'' 35.34%; ''nuclear:'' 0%; ''other:'' 11.23% (1998). A large number of wind turbines have been installed along the SW shore of
Lake Nicaragua
Lake Nicaragua or Cocibolca or Granada ( es, Lago de Nicaragua, , or ) is a freshwater lake in Nicaragua. Of tectonic origin and with an area of , it is the largest lake in Central America, the 19th largest lake in the world (by area) and the t ...
since, and some geothermal plants have been constructed as well.
As of 2013, the breakdown was: ''fossil fuel:'' 50%; ''wind power:'' 15%; ''geothermal:'' 16%, ''hydropower:'' 12%,
''biomass power:'' 7%.
Electricity - consumption:
2.929 billion kWh (2006)
Electricity - exports:
69.34 million kWh (2006)
Electricity - imports:
0 kWh (2006)
Agriculture - products:
coffee
Coffee is a drink prepared from roasted coffee beans. Darkly colored, bitter, and slightly acidic, coffee has a stimulating effect on humans, primarily due to its caffeine content. It is the most popular hot drink in the world.
Seeds of ...
,
bananas,
sugarcane,
cotton
Cotton is a soft, fluffy staple fiber that grows in a boll, or protective case, around the seeds of the cotton plants of the genus '' Gossypium'' in the mallow family Malvaceae. The fiber is almost pure cellulose, and can contain minor pe ...
,
rice
Rice is the seed of the grass species '' Oryza sativa'' (Asian rice) or less commonly ''Oryza glaberrima'' (African rice). The name wild rice is usually used for species of the genera '' Zizania'' and '' Porteresia'', both wild and domesticat ...
,
corn,
tobacco
Tobacco is the common name of several plants in the genus '' Nicotiana'' of the family Solanaceae, and the general term for any product prepared from the cured leaves of these plants. More than 70 species of tobacco are known, but the ...
,
sesame,
soya,
beans;
beef
Beef is the culinary name for meat from cattle (''Bos taurus'').
In prehistoric times, humankind hunted aurochs and later domesticated them. Since that time, numerous breeds of cattle have been bred specifically for the quality or quantit ...
,
veal,
pork
Pork is the culinary name for the meat of the domestic pig (''Sus domesticus''). It is the most commonly consumed meat worldwide, with evidence of pig husbandry dating back to 5000 BCE.
Pork is eaten both freshly cooked and preserved; ...
,
poultry
Poultry () are domesticated birds kept by humans for their eggs, their meat or their feathers. These birds are most typically members of the superorder Galloanserae (fowl), especially the order Galliformes (which includes chickens, quails, ...
,
dairy products;
shrimp,
lobsters
Exports - commodities:
coffee
Coffee is a drink prepared from roasted coffee beans. Darkly colored, bitter, and slightly acidic, coffee has a stimulating effect on humans, primarily due to its caffeine content. It is the most popular hot drink in the world.
Seeds of ...
,
beef
Beef is the culinary name for meat from cattle (''Bos taurus'').
In prehistoric times, humankind hunted aurochs and later domesticated them. Since that time, numerous breeds of cattle have been bred specifically for the quality or quantit ...
,
shrimp and
lobster,
cotton
Cotton is a soft, fluffy staple fiber that grows in a boll, or protective case, around the seeds of the cotton plants of the genus '' Gossypium'' in the mallow family Malvaceae. The fiber is almost pure cellulose, and can contain minor pe ...
,
tobacco
Tobacco is the common name of several plants in the genus '' Nicotiana'' of the family Solanaceae, and the general term for any product prepared from the cured leaves of these plants. More than 70 species of tobacco are known, but the ...
,
peanut
The peanut (''Arachis hypogaea''), also known as the groundnut, goober (US), pindar (US) or monkey nut (UK), is a legume crop grown mainly for its edible seeds. It is widely grown in the tropics and subtropics, important to both small and ...
s,
sugar,
bananas;
gold
Gold is a chemical element with the symbol Au (from la, aurum) and atomic number 79. This makes it one of the higher atomic number elements that occur naturally. It is a bright, slightly orange-yellow, dense, soft, malleable, and ductile me ...
Imports - commodities:
consumer goods, machinery and equipment, raw materials,
petroleum
Petroleum, also known as crude oil, or simply oil, is a naturally occurring yellowish-black liquid mixture of mainly hydrocarbons, and is found in geological formations. The name ''petroleum'' covers both naturally occurring unprocessed crud ...
products
Currency:
1 gold Cordoba (C$) = 100 centavos
Exchange rates:
gold Córdoba (C$) per US$1 – 17.582 (2006), 16.733 (2005), 15.937 (2004), 15.105 (2003), 14.251 (2002)
Price inflation:
* 2007: 16.88%
* 2008: 13.37%
See also
*
Healthcare in Nicaragua
Healthcare in Nicaragua involves the collaboration of private and public institutions. Although Nicaragua's health outcomes have improved over the past few decades with the efficient utilization of resources relative to other Central American natio ...
*
Banking in Nicaragua
*
Tourism in Nicaragua
Tourism in Nicaragua has grown considerably recently, and it is now the second largest industry in the nation. Nicaraguan President Daniel Ortega has stated his intention to use tourism to combat poverty throughout the country.
The growth in touri ...
*
Agriculture in Nicaragua
Nicaragua produces coffee, cotton, bananas, sugar and beef cattle.
Production
In 2018, Nicaragua produced 7.2 million tons of sugarcane, being heavily dependent on this product. In addition to sugarcane, the country produced 395 thousand tons of ...
*
Nicaragua and the World Bank
Notes
References
External links
U.S./Nicaraguan embassy economic reportsLabor Conditions in the Nicaraguan Sugar IndustryA 2005 study by PASE and the
International Labor Rights Fund
The International Labor Rights Forum (ILRF) is a nonprofit advocacy organization headquartered in Washington, D.C., U.S., that describes itself as "an advocate for and with the working poor around the world." ILRF, formerly the "International L ...
cia.govfactbook on Nicaragua
{{DEFAULTSORT:Economy of Nicaragua