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Economy of Nicaragua

With a gross domestic product (GDP) of $6.2 billion and a per capita income of $1,071 in 2009, Nicaragua is the second-poorest country in the Western Hemisphere. The economy contracted by 1.5% in 2009, largely as a result of falling demand for Nicaraguan exports and decreased domestic investment. Official sources estimate GDP growth of 3%-4% for 2010, mainly due to an increase in commodity prices and Venezuelan-funded stimulus spending. Official unemployment in 2009 was 8%, but 65% of all workers earn a living in the informal sector, where underemployment is high. In 2009, Nicaraguans received $768 million in remittances from abroad, the majority from the United States. Total exports are equivalent to 39% of GDP. Because Nicaragua has abundant arable land and water resources, agriculture will always be an important component of the economy. About a third of GDP is derived from agriculture, timber, and fishing. Opportunities exist in food and timber processing and preparation for export. Currently, most agriculture is small-scale and labor intensive. Livestock and dairy production have seen steady growth over the past decade and have taken the greatest advantage of free trade agreements. Many export products, especially coffee, have benefited from the recent rise in international commodity prices. Social indicators for Nicaragua have improved since 1991. The current population of Nicaragua is 5.9 million; life expectancy at birth is 71.5 years. Prenatal care coverage has steadily improved and infant mortality has dropped from 52 deaths per 1,000 live births in 1991 to 25 per 1,000. The country has achieved 85% vaccination coverage, and since 2004, infectious disease has fallen from fourth to fifth place among the leading causes of death, with the number of such deaths down nearly 50% since 1996. In 2007, the Minister of Education reported school enrollment as 86.5%. Nicaragua's score on the United Nations Human Development Index rose by 25% from 1990 to 2010 (from 0.454 to 0.565). Despite these statistical gains, the benefits of economic development have been uneven. Blackouts, water shortages, and high energy prices disproportionately affect the poorest in the population. About 46% of the population lives on less than $1.15 a day. President Ortega’s stated objective is to implement socialism in Nicaragua, which he further defines as a mixed economy, guided by Christian and socialist ideals. He has used funds provided by Venezuela through the Bolivarian Alliance for the Americas (ALBA) to increase the role of the FSLN party in the economy, including the purchase of a hotel, cattle ranch, television station, gasoline filling stations, construction equipment, and electricity generators. At the same time, President Ortega has maintained many of the legal and regulatory underpinnings of the market-based economic model of his predecessors, despite rhetoric decrying the "neo-liberal economic model," and along with it capitalism and the United States, which he refers to as the imperial power. Nicaragua signed a 3-year Poverty Reduction and Growth Facility (PRGF) with the International Monetary Fund (IMF) in October 2007. As part of the IMF program, the Government of Nicaragua agreed to implement free market policies linked to targets on fiscal discipline, poverty spending, and energy regulation. The lack of transparency surrounding ALBA funds, channeled through state-run enterprises rather than the official budget, has become a serious issue for the IMF and international donors. In November 2010, the IMF approved a 1-year extension of the arrangement. The extension allows for the disbursement of the remaining $36 million dollars in 2011, but the program is contingent on the publication of additional information about off-budget expenditures. Nicaragua has stayed current with the U.S.-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR), which entered into force for Nicaragua on April 1, 2006. Nicaraguan exports to the United States, which account for two-thirds of Nicaragua’s total exports, were $1.6 billion in 2009, up 37% since 2005. Textiles and apparel account for about half of all exports to the United States, while automobile wiring harnesses add another 10%. Other leading export products are coffee, meat, cigars, sugar, ethanol, and fresh fruit and vegetables, all of which have seen remarkable growth since CAFTA-DR went into effect. U.S. exports to Nicaragua, meanwhile, were $680 million in 2009, up 15% from 2005. Despite important protections for investment included in CAFTA-DR, the investment climate has steadily worsened since Ortega took office. President Ortega's decision to support radical regimes such as Iran and Cuba, his harsh rhetoric against the United States and capitalism, and his use of government institutions to persecute political enemies and their businesses have had a negative effect on perceptions of country risk. The government reported foreign investment inflows of $432 million in 2009, mostly in energy and telecommunications. There are over 100 companies operating in Nicaragua with some relation to a U.S. company, either as wholly or partly-owned subsidiaries, franchisees, or exclusive distributors of U.S. products. The largest are in energy, financial services, textiles/apparel, manufacturing, and fisheries. Poor enforcement of property rights deters both foreign and domestic investment, especially in real estate development and tourism. Conflicting claims and weak enforcement of property rights has invited property disputes and litigation. The court system is widely believed to be corrupt and subject to political influence. Establishing verifiable title history is often entangled in legalities relating to the expropriation of 28,000 properties by the revolutionary government that Ortega led in the 1980s. Authorities seldom challenge illegal property seizures by private parties, occasionally undertaken in collaboration with corrupt municipal officials. The U.S. Embassy's Economic and Commercial Section advances U.S. economic and business interests by briefing U.S. firms on opportunities and challenges to trade and investment in Nicaragua, encouraging key Nicaraguan decision makers to work with U.S. firms, helping to resolve problems that affect U.S. commercial interests, and working to change local economic and trade ground rules in order to afford U.S. firms a level playing field on which to compete. U.S. businesses may access key Embassy economic reports at http://nicaragua.usembassy.gov/econ.html . GDP (2009): $6.2 billion. GDP real growth rate (2009): -1.5%. Per capita GDP (2009): $1,071. Components of GDP (2009): Manufacturing-- 17.7% of GDP; agriculture, cattle, forestry and fishing-- 16.8% of GDP; retail, hotels, and restaurants --14.2% of GDP; government --12.6% of GDP; real estate --7.5% of GDP; personal services --6.6% of GDP; telecommunications and transportation --5.5% of GDP; financial services --5.1% of GDP; construction-- 4.7% of GDP; utilities-- 2.6% of GDP; mining-- 1.1% of GDP. Inflation rate (2009): 0.93%. Natural resources: arable land, fresh water, fisheries, gold, timber, hydro and geothermal power potential. Trade (2009): National exports --$2.363 billion (f.o.b.): coffee, shrimp and lobster, beef, sugar, industrial goods, gold, bananas. Free trade zone exports --$972.2 million: mostly textiles and apparel, automobile wiring harnesses, cigars. Markets --United States, Central American Common Market, European Union (EU), Mexico, Japan. Imports --$3.47 billion (2009), primarily consumer goods, machinery and equipment, raw materials, and petroleum products. Free trade zone imports --$830.6 million. Suppliers --United States, Mexico, Costa Rica, Venezuela, Guatemala, El Salvador.

Geography of Nicaragua

Location: Middle America, bordering both the Caribbean Sea and the North Pacific Ocean, between Costa Rica and Honduras Map references: Central America and the Caribbean Area: total area: 129,494 sq km land area: 120,254 sq km comparative area: slightly larger than New York State Land boundaries: total 1,231 km, Costa Rica 309 km, Honduras 922 km Coastline: 910 km Maritime claims: contiguous zone: 25-nm security zone continental shelf: natural prolongation territorial sea: 200 nm International disputes: territorial disputes with Colombia over the Archipelago de San Andres y Providencia and Quita Sueno Bank; with respect to the maritime boundary question in the Golfo de Fonseca, the International Court of Justice (ICJ) referred the disputants to an earlier agreement in this century and advised that some tripartite resolution among El Salvador, Honduras, and Nicaragua likely would be required Climate: tropical in lowlands, cooler in highlands Terrain: extensive Atlantic coastal plains rising to central interior mountains; narrow Pacific coastal plain interrupted by volcanoes Natural resources: gold, silver, copper, tungsten, lead, zinc, timber, fish Land use: arable land: 9% permanent crops: 1% meadows and pastures: 43% forest and woodland: 35% other: 12% Irrigated land: 850 sq km (1989 est.) Environment: current issues: deforestation; soil erosion; water pollution natural hazards: destructive earthquakes, volcanoes, landslides, and occasionally severe hurricanes international agreements: party to - Endangered Species, Nuclear Test Ban, Ozone Layer Protection; signed, but not ratified - Biodiversity, Climate Change, Environmental Modification, Law of the Sea

Government of Nicaragua

Nicaragua is a constitutional democracy with executive, legislative, judicial, and electoral branches of government. In 1995, the executive and legislative branches negotiated a reform of the 1987 Sandinista constitution, which gave extensive new powers and independence to the legislature--the National Assembly--including permitting the Assembly to override a presidential veto with a simple majority vote and eliminating the president's ability to pocket-veto a bill. Nicaragua's constitution guarantees freedom of speech, peaceful assembly and association, religion, and movement within the country, as well as foreign travel, emigration, and repatriation. In the run-up to the November 2008 municipal elections the government made attempts to limit some of these rights, including limiting free and open discussion in the media and academia, and peaceful assembly. The constitution prohibits discrimination based on birth, nationality, political belief, race, gender, language, religion, opinion, national origin, and economic or social condition. All public and private sector workers, except the military, public safety workers, and police, are entitled to form and join unions of their own choosing. Most of Nicaragua’s labor force is involved in the informal service and agricultural sectors and is not unionized. However, the formal manufacturing and government/public sectors are heavily unionized. About 65% of unions are affiliated with the Sandinistas. Workers have the right to strike. Collective bargaining is becoming more common in the private sector. The president and the members of the unicameral National Assembly are elected to concurrent 5-year terms. The National Assembly consists of 92 total deputies (90 elected from party lists drawn at the regional and national levels, plus the outgoing president and the second place finisher in the most recent presidential election). The Supreme Court supervises the functioning of the still largely ineffective, often partisan, and overburdened judicial system. In 2000, the Ortega-Aleman pact orchestrated expansion of the Supreme Court from 12 to 16 justices. The National Assembly elects Supreme Court justices to staggered 5-year terms. Led by a council of seven magistrates, the Supreme Electoral Council (CSE) is the co-equal branch of government responsible for organizing and conducting elections, plebiscites, and referendums. The National Assembly elects the CSE magistrates and their alternates to 5-year terms. A 2000 constitutional amendment expanded the number of CSE magistrates from five to seven and gave the PLC and the FSLN a freer hand to name party activists to the Council, prompting allegations that both parties were politicizing electoral institutions and processes and excluding smaller political parties. The constitution provides the Assembly with sole power to elect Supreme Court judges, CSE magistrates, and other national level public officials. However, in January 2010 President Ortega issued a decree that indefinitely extended the terms of these incumbent officials. As a result, as of May 2010 about two dozen of these officials remained in their positions despite the fact that their terms had expired, including several Supreme Court judges. After Liberal judges boycotted the Supreme Court for several months, Ortega replaced them in August 2010 with five Sandinista and two Liberal justices. Political Parties The 2006 national elections resulted in the following distribution of the 92 seats in the National Assembly (installed January 9, 2007): FSLN--38; PLC--25; ALN--24; MRS--5. The political parties have since reorganized and the makeup of the Assembly is now FSLN--37; PLC--20; BDN--13; ALN--7; MRS--4; BUN--5; and Independent--6. Principal Government Officials President--Jose Daniel Ortega Saavedra Vice President--Jaime Morales Carazo Minister of Foreign Affairs--Samuel Santos Minister of Finance--Alberto Jose Guevara Obregon Minister of Industry and Commerce--Orlando Solorzano Delgadillo Minister of Government--Ana Isabel Morales Secretary General of the Ministry of Defense--Ruth Tapia Roa Chief of the Armed Forces--General Julio Cesar Aviles Castillo Chief of Naval Forces--Captain Roger Antonio Gonzalez Diaz Ambassador to the United States--Francisco Obadiah Campbell Hooker Ambassador to the United Nations--Maria Eugenia Rubiales de Chamorro Ambassador to the Organization of American States--Denis Ronaldo Moncada Colindres Nicaragua maintains an embassy in the United States at 1627 New Hampshire Avenue, NW, Washington, DC 20009 (tel. 202-387-4371). Type: Republic. Independence: 1821. Constitution: The 1987 Sandinista-era constitution was changed in 1995 to provide for a more even distribution of power among the four branches of government and again in 2000 to increase the Supreme Court and the Controller General's Office and to make changes to the electoral laws. The changes in 2000 allowed for the president to be elected with 35% of the popular vote so long as there was at least a five percentage point difference between the first and second place candidates. Branches: Executive--president and vice president. Legislative--National Assembly (unicameral). Judicial--Supreme Court; subordinate appeals, district, and local courts; separate labor and administrative tribunals. Electoral--Supreme Electoral Council, responsible for organizing and holding elections. Administrative subdivisions: 15 departments and two autonomous regions on the Atlantic coast; 153 municipalities. National political parties: Sandinista National Liberation Front (FSLN); Nicaraguan Democratic Block (BDN); Nicaraguan Liberal Alliance (ALN); Liberal Constitutionalist Party (PLC); Sandinista Renewal Movement (MRS). Suffrage: Universal at 16.

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History of Nicaragua

Nicaragua takes its name from Nicarao, chief of the indigenous tribe then living around present-day Lake Nicaragua. In 1524, Hernandez de Cordoba founded the first Spanish permanent settlements in the region, including two of Nicaragua's two principal towns: Granada on Lake Nicaragua and Leon east of Lake Managua. Nicaragua gained independence from Spain in 1821, briefly becoming a part of the Mexican Empire and then a member of a federation of independent Central American provinces. In 1838, Nicaragua became an independent republic. Much of Nicaragua's politics since independence has been characterized by the rivalry between the Liberal elite of Leon and the Conservative elite of Granada, which often led to civil war. Initially invited by the Liberals in 1855 to join their struggle against the Conservatives, an American named William Walker and his "filibusters" seized the presidency in 1856. The Liberals and Conservatives united to drive him out of office in 1857. Three decades of Conservative rule followed. Taking advantage of divisions within the Conservative ranks, Jose Santos Zelaya led a Liberal revolt that brought him to power in 1893. Zelaya ended a longstanding dispute with Britain over the Atlantic Coast in 1894, and reincorporated that region into Nicaragua. By 1909, differences had developed over a trans-isthmian canal and concessions to Americans in Nicaragua; there also was concern about what was perceived as Nicaragua's destabilizing influence in the region. In 1909 the United States provided political support to Conservative-led forces rebelling against President Zelaya and intervened militarily to protect American lives and property. With the exception of a 9-month period in 1925-26, the United States maintained troops in Nicaragua from 1912 until 1933. From 1927 until 1933, U.S. Marines stationed in Nicaragua engaged in a running battle with rebel forces led by renegade Liberal Gen. Augusto Sandino, who rejected a 1927 negotiated agreement brokered by the United States to end the latest round of fighting between Liberals and Conservatives. After the departure of U.S. troops, National Guard Commander Anastasio Somoza Garcia outmaneuvered his political opponents--including Sandino, who was assassinated by National Guard officers--and took over the presidency in 1936. Somoza and two sons who succeeded him maintained close ties with the United States. The Somoza dynasty ended in 1979 with a massive uprising led by the Sandinista National Liberation Front (FSLN), which had conducted a low scale guerrilla war against the Somoza regime since the early 1960s. The FSLN established an authoritarian dictatorship soon after taking power. U.S.-Nicaraguan relations deteriorated rapidly as the regime nationalized many private industries, confiscated private property, supported Central American guerrilla movements, and maintained links to international terrorists. The United States suspended aid to Nicaragua in 1981. The Reagan administration provided assistance to the Nicaraguan Resistance and in 1985 imposed an embargo on U.S.-Nicaraguan trade. In response to both domestic and international pressure, the Sandinista regime entered into negotiations with the Nicaraguan Resistance and agreed to nationwide elections in February 1990. In these elections, which were proclaimed free and fair by international observers, Nicaraguan voters elected as their president the candidate of the National Opposition Union, Violeta Barrios de Chamorro. During President Chamorro's nearly 7 years in office, her government achieved major progress toward consolidating democratic institutions, advancing national reconciliation, stabilizing the economy, privatizing state-owned enterprises, and reducing human rights violations. Despite a number of irregularities--which were due largely to logistical difficulties and a baroquely complicated electoral law--the October 20, 1996 presidential, legislative, and mayoral elections were judged free and fair by international observers and by the groundbreaking national electoral observer group Etica y Transparencia (Ethics and Transparency). This time Nicaraguans elected former Managua Mayor Arnoldo Alemán, leader of the center-right Liberal Alliance. The first transfer of power in recent Nicaraguan history from one democratically elected president to another took place on January 10, 1997, when the Alemán government was inaugurated. Presidential and legislative elections were held in November 2001. Enrique Bolaños of the Liberal Constitutional Party was elected to the Nicaraguan presidency on November 4, 2001, defeating FSLN candidate Daniel Ortega by 14 percentage points. The elections, characterized by international observers as free, fair and peaceful, reflected the maturing of Nicaragua's democratic institutions. During his campaign, President-elect Bolaños promised to reinvigorate the economy, create jobs, fight corruption, and support the war against terrorism. Bolaños was inaugurated on January 10, 2002. FSLN candidate Daniel Ortega won the presidential elections of November 5, 2006 with 38% of the vote, defeating a divided opposition. ALN candidate Eduardo Montealegre garnered 29%; Jose Rizo of the PLC received 26%; and MRS' Edmundo Jarquin polled fourth with 6%. Ortega was inaugurated on January 10, 2007. In early 2008 Eduardo Montealegre left the ALN and formed his own movement, Vamos con Eduardo (VCE), and ran for mayor of Managua. The VCE and PLC formed an alliance and will compete under the same banner in the November 2008 municipal elections.

People of Nicaragua

Most Nicaraguans are of both European and indigenous ancestry, and the culture of the country reflects the mixed Ibero-European and indigenous heritage of its people. Only the indigenous of the eastern half of the country remain ethnically distinct and retain their tribal customs and languages. A large black minority, of Afro-Caribbean origin, is concentrated along the Caribbean coast. In the mid-1980s, the central government divided the eastern half of the country--the former department of Zelaya--into two autonomous regions and granted the people of the region limited self-rule under an elected regional council of 45 deputies and an indirectly-elected governor. Roman Catholicism is the dominant religion, but Evangelical Protestantism has experienced rapid growth over the past 10 years. There are strong Anglican and Moravian communities on the Caribbean coast, and a small Muslim population exists in Managua and in the larger cities along the Pacific coast. Buddhist and Jewish communities are small. Most Nicaraguans live in the Pacific lowlands and the adjacent interior highlands. The population is 58% urban. Nationality: Noun and adjective --Nicaraguan(s). Population (July 2010 est.): 5,955,928; density --42 per sq. km. Annual population growth rate (2009 est.): 1.784%. Ethnic groups: Mestizo (mixed Amerindian and white) 69%, white 17%, black 9%, and Amerindian 5%. Religion: Predominantly Roman Catholic, with rapidly growing Protestant congregations. Languages: Spanish (official), English and indigenous languages on Caribbean coast. Education: Years compulsory --none enforced (28% of first graders eventually finish sixth grade). Literacy --81%. Health: Life expectancy --71.5 yrs. Infant mortality rate (2009 est.)--25 deaths/1,000 live births. Work force (2010 est.): 2.3 million.