|Nicaragua began free market reforms in 1991 after 12 years of economic
free-fall under the Sandinista regime. Despite some setbacks, it has made
dramatic progress: privatizing more than 350 state enterprises, reducing
inflation from 13,500% to 8%, and cutting the foreign debt in half. The
economy began expanding in 1994 and grew 2.5% in 2001, with overall GDP
reaching $2.44 million 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.
Nicaragua remains the second-poorest nation in the hemisphere with a per capita GDP of less than $500--below where it stood before the Sandinista takeover in 1979. Unemployment is officially around 11%, and another 36% 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. Nicaragua also depends heavily on remittances from Nicaraguans living abroad.
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. Rapid expansion of the tourist industry has made it the nation's third-largest source of foreign exchange. Some 60,000 Americans visit Nicaragua yearly--primarily business people, tourists, and those visiting relatives. An estimated 5,300 U.S. citizens reside in the country. The U.S. embassy's consular section provides a full range of consular services--from passport replacement and veteran's assistance to prison visitation and repatriation assistance.
Nicaragua faces a number of challenges in stimulating rapid economic growth. Long-term success at attracting investment, creating jobs, and reducing poverty depend on its ability to comply with an International Monetary Fund (IMF) program, resolve the thousands of Sandinista-era property confiscation cases, and open its economy to foreign trade. This process was boosted in late 2000 when Nicaragua reached the decision point under the Heavily Indebted Poor Countries (HIPC) debt relief initiative. However, HIPC benefits will be 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.
purchasing power parity - $13.1 billion (2000 est.)
SOURCES: The World Factbook, U.S. Department of State
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