Nicaragua derives its name from that of the Amerindian chief Nicarao who once ruled the region. The first European contact came with Columbus in 1502. At that time the northern part of the country was inhabited by the Sumo Amerindians, the eastern region by the Miskitos, and the region around Lakes Nicaragua and Managua by agricultural tribes.
The first Spanish settlements in Nicaragua were founded by the conquistador Gil González de Ávila in 1522. The cities of Granada and León were founded in 1524 by Francisco Hernández de Córdoba. During the next 300 years—most of the colonial period—Nicaragua was ruled as part of the captaincy-general of Guatemala. The independence of the five provinces of Central America, including Nicaragua, was proclaimed on 15 September 1821. After a brief period under the Mexican empire of Augustín de Iturbide (1822–23), Nicaragua joined the United Provinces of Central America. Nicaragua declared its independence from the United Provinces on 30 April 1838, and a new constitution was adopted.
Nicaragua did not immediately consolidate as a nation. The Spanish had never entirely subdued Nicaragua, and the Mosquito Coast at the time of independence was an Amerindian and British enclave, especially around the Bluefields area. Britain occupied the Mosquito Coast during the 1820s and 1830s, and maintained a significant presence thereafter. Beyond that, Nicaragua was torn apart by a bitter struggle between liberals, based in León, and conservatives, based in Granada.
Yet another factor impeding Nicaragua's development was constant foreign intervention focusing on the trade route through the country. Commodore Cornelius Vanderbilt competed with the British for control of the transisthmian traffic, a rivalry settled by the Clayton-Bulwer Treaty of 1850. In 1853, liberals led by Máximo Jérez and Francisco Castellón revolted and invited the US military adventurer William Walker to help their rebellion. Walker invaded Nicaragua in 1855, capturing Granada and suppressing Jérez, and had himself elected president in 1856. He lasted only one year, and was captured and executed in Honduras in 1860. Conservatives seized control in 1863 and ruled until 1893.
The 30-year conservative reign brought increases in coffee and banana production. Liberals successfully revolted in 1893, and José Santos Zelaya became president. Zelaya's dictatorship lasted 16 years, during which he incorporated most of the Mosquito territory into Nicaragua, developed railroads and lake transportation, enlarged the coffee plantations, and stirred up revolts among his Central American neighbors. In 1901, by the Hay-Pauncefote Treaty, Great Britain gave the United States the undisputed right to build a Central American canal. Zelaya was finally deposed in 1909, after a conservative revolt.
From 1909 until 1933, the United States grew in influence in Nicaragua. Conservatives immediately asked for help from Washington. The United States placed an American agent in the customhouse in 1911, and US banks extended considerable credit to the bankrupt Treasury. US marines and warships arrived in 1912 in support of president Adolfo Díaz. US forces remained active in Nicaraguan politics and administered the country directly or through handpicked rulers until August 1925. During this period, the Bryan-Chamorro Treaty of 1914 allowed the United States to build a canal across Nicaragua. After the marines withdrew, the liberals revolted against the US-backed conservative government of Diego Manuel Chamorro and established a government on the Mosquito Coast. The marines returned in 1926 to reimpose Díaz.
In November 1928, the marines supervised the electoral victory of the liberal José María Moncada, with whom the conservatives had made peace. The guerrilla hero Gen. Augusto César Sandino began organizing resistance to the marine occupation force in 1927, and fought the US troops to a standstill. With the inauguration of US president Franklin D. Roosevelt's "good neighbor" policy in 1933, the marines were pulled out for the last time. But the marines left a legacy, having built the Nicaraguan National Guard, headed by Anastasio ("Tacho") Somoza García.
In the following year, the liberal Juan B. Sacasa was elected to office. Also during 1934, officers of the National Guard shot Sandino after offering to negotiate a settlement with his forces. The National Guard was now unchallenged in Nicaragua, and three years later, Somoza unseated Sacasa and assumed the presidency. Somoza and his family were to rule Nicaragua directly or indirectly for the next 42 years.
Somoza was president until 1947, making constitutional changes as necessary to prolong his term. Although he retired in 1947, he returned in 1950, and was assassinated in 1956. "Tacho's" son, Luis Somoza Debayle, was president of Congress, and immediately became president under the constitution. The next year, he was elected by a rather suspicious 89% of the vote.
In 1962, a law was passed prohibiting relatives within four generations from immediately succeeding Luis Somoza as president. Accordingly, in February 1963, René Schick Gutiérrez of the National Liberal Party was elected president for a four-year term. Schick died in office in August 1966 and was succeeded by his first vice president, Lorenzo Guerrero. The presidential election of February 1967 returned the Somozas to power with an overwhelming victory for Anastasio Somoza Debayle, the younger brother of Luis.
According to Nicaraguan law, Anastasio's term in office was due to end in May 1972. But by March 1971, Somoza had worked out an agreement allowing him to stand for reelection in 1974, ruling in the interim with a three-man coalition government. Anastasio and his triumvirate drew up a new constitution, signed by the triumvirate and the cabinet on 3 April 1971. Then, after declaring nine opposition parties illegal, Somoza easily won the September 1974 elections.
While Somoza consolidated his hold on Nicaragua, an insurgent organization, the Sandinista National Liberation Front (Frente Sandinista de Liberación Nacional—FSLN), began to agitate against his rule. At first, the group was small and confined to the foothill and mountain regions of Nicaragua. But domestic opposition to Somoza mounted, driven by the family's monopolistic and corrupt economic practices. One powerful example of the corruption was the disappearance of half the US relief aid extended to Nicaragua after a devastating 1972 earthquake. Most of the rebuilding of Managua was done by Somoza-controlled firms on Somoza's land. Throughout the 1970s, Somoza's opposition grew, and US support began to dissipate.
In December 1974, guerrillas kidnapped 13 prominent political personalities, including several members of the Somoza family. The group secured a ransom of US $1 million and the release of 14 political prisoners. Somoza responded by declaring a martial law and unleashed the National Guard. The Guard's repressive tactics created even more enemies of the Somoza regime. Repression continued throughout the 1970s, and climaxed in January 1978 with the assassination of Pedro Joaquín Chamorro, editor and publisher of the opposition newspaper La Prensa. The assassins were never found, but most felt that Somoza and the National Guard were behind the killing of this moderate leader from a prominent family.
Nicaragua was now ruled by a coalition Government of National Reconstruction, made up of various religious and political leaders, but dominated by the Sandinista leadership. That coalition had unraveled by mid-1980, when Alfonso Robelo and Violeta Barrios de Chamorro, widow of Pedro Chamorro, resigned from the government. Chamorro continued publishing La Prensa and preserved the paper's reputation for independence, while Robelo went into exile and supported the resistance. The Sandinistas dissolved the National Guard, and in 1982 a number of anti-Sandinista guerrilla groups (broadly referred to as the "contras") began operating from Honduras and Costa Rica. These groups consisted of former Guard members and Somoza supporters ("Somocistas") who engaged in guerrilla-style offensives, aimed at disrupting Nicaragua's agriculture and oil supplies. By 1979, loss of support from the Church and the business community left Somoza without domestic allies. He had become isolated diplomatically, and after the Carter administration cut off military aid, his ability to remain in power further weakened. In May 1979, the Sandinistas launched a final offensive. By July, Somoza had fled the country (he was assassinated on 17 September 1980 in Asunción, Paraguay). By this time, an estimated 30,000–50,000 people had died during the fighting.
The Sandinistas engaged in an ambitious program to develop Nicaragua under leftist ideals. They nationalized Somoza's land and commercial interests. They also initiated agrarian reform, and announced a series of social programs, including literacy and public health campaigns. Politically, they professed democratic ideals, but delivered only sporadically. A Statute on Rights and Guarantees was adopted, but elections were postponed. As antigovernment activity increased, the government became increasingly authoritarian. A state of emergency, proclaimed in March 1982 and extended into 1987, introduced prior censorship, particularly felt by La Prensa. Daniel Ortega emerged as the leader of the Sandinistas, and became president when elections were finally held in 1984. However, in that election, the major opposition groups withdrew from the election, making it a rather hollow victory.
In April 1981, the Reagan administration cut off aid to Nicaragua and, citing the Sandinistas' support for leftist guerrillas in El Salvador, began aiding the contras with funds channeled through the CIA. The Reagan administration sent military aid to Honduras and Costa Rica and sought increases in funding for the contras. Despite some overtures from the Sandinistas, including the expulsion of 2,200 Cuban advisors, the United States continued to support the contras.
Internationally, the Sandinistas made some gains. In 1986, the World Court ruled that the United States had violated international law by mining the harbors in Nicaragua. The rulings made little difference because the United States refused to recognize the decision. In the United States, Congress proved reluctant to fund the Nicaraguan resistance. In 1986, it was revealed that US government funds derived from covert arms sales to Iran had been secretly diverted to provide aid to the contras in violation of a US congressional ban on such aid.
On the domestic scene, the Sandinistas were less successful. Their economic policies had not produced impressive results. The inflation rate reached 33,000% in 1988 and reserves dwindled. Price controls had led to serious shortages in basic foodstuffs. Lacking any capital for investment, the situation was becoming hopeless. Attempts to pin the economic woes on the civil war fell on deaf ears as the economic situation worsened.
The Sandinistas continued to seek negotiated settlements for their internal strife. In 1986, they signed an accord with leaders of the Miskito Amerindians, granting autonomy to their region. In August 1987 Nicaragua signed the Arias peace plan for Central America. Nicaragua promised guarantees of democratic rights, and a reduction of hostilities with the contras, including a cease-fire, a reduction in the armed forces, repatriation or resettlement of refugees, and amnesty for the rebels. In exchange, the Nicaraguans were to receive guarantees of nonintervention by outside powers. Implementation was sporadic, but elections were held in 1990. The United States, for its part, pledged $9 million in support of free elections, and urged all other outside donors to tie aid to the holding of elections.
The 1990 elections had a surprise winner—Violeta Chamorro. Heading a 10-party alliance called the National Opposition Union (UNO), Chamorro received 54% of the vote to Daniel Ortega's 41%. UNO also took a majority in the National Assembly. Chamorro moved to liberalize the Nicaraguan economy, but found it sluggish. Austerity measures led to dislocations and political disquiet. The United States delivered miniscule amounts of economic aid, to the disappointment of hopeful Nicaraguans. Nevertheless, Chamorro's government succeeded in driving down hyperinflation that had reached 13,500% to an acceptable single-digit level, and obtaining relief of much of the country's $10 billion foreign debt, as well as achieving stable economic growth of around 4% from 1994 to 1996.
Politically, Chamorro's situation was tenuous. With the Sandinistas still in control of the military, Chamorro had a difficult time achieving a reduction in force. Sandinista organizations and syndicates remained, often striking against the Chamorro government. Meanwhile, the resettlement and repatriation of the contras moved slowly. Some former contras took to the field again, resuming their previous attacks on civilian installations. Chamorro's own coalition, UNO, proved shaky, withdrawing support from her government in 1993 after she attempted to call for new elections. The beleaguered government persisted, but by 1994 the outlook for further progress in unifying the country and implementing democratic and free-market reforms was bleak.
The prospect of a peaceful political transition in the politically polarized country were considered so shaky that international observers were called in for the October 1996 elections, as they had been in 1990. Although the results were later contested, and some irregularities found, the elections proceeded peacefully and without incident. With 80% of the electorate voting, Arnoldo Alemán, the conservative former mayor of Managua, and leader of the Liberal Constitutionalist Party (PLC) defeated Sandinista leader Daniel Ortega in Nicaragua's first peaceful transition of power in 100 years. The Liberal Party took 41 of the 93 seats in the Chamber of Deputies, while the Sandinistas took 38; the remaining seats were won by leftist and conservative groups.
President Arnoldo Alemán Lacayo and Vice President Enrique Bolanos Geyer were inaugurated into office on 10 January 1997. Though the elections were plagued with allegations of corruption, Alemán began his term in office positively. His close ties with right-wing groups and American entrepreneurs helped establish Nicaragua's market economy, and he worked hard to instill strict economic reforms focused on economic growth. Throughout Alemán's term, the GDP steadily increased. Until 1998, Alemán's efforts paid off—reforms were reaping some success, even amidst the muddied waters the legacy of civil war and years of financial mismanagement had left behind. Then came Hurricane Mitch in 1998, devastating Nicaragua and neighboring Honduras and leaving Nicaragua, already the poorest country in Central America, with $1 billion worth of damage. Worst hit was the agricultural sector, which the country depends on for the majority of its exports. By 1999, Alemán was forced to deal with a trade deficit approaching $900 million. However, despite the destruction caused by Hurricane Mitch, Nicaragua's economy continued to grow slightly. Aid and debt relief contributed to this and thus helped stabilize the economy, but the hand of President Alemán and his commitment to free market reforms and economic growth no doubt played a role as well.
Alemán increased talks with the Sandinistas during his term and the two parties indeed found common ground in one area: scandal allegations. In 1998, Daniel Ortega, the Sandinista former president, faced accusations from his stepdaughter of sexual abuse dating back to her childhood. Meanwhile, Alemán faced charges that the presidential plane he had been using was actually reported stolen in the United States and that it had been used throughout Central America and Colombia to carry cocaine. Both Ortega and Alemán denied all charges against them. Alemán also faced border disputes during his term: in March 2000, Nicaragua coupled with Costa Rica to continue an ongoing battle over its border with Honduras, each claiming sovereignty over the Gulf of Fonseca. Other challenges during Alemán's presidency were land reform and the land distribution process (favoring Sandinistas and their supporters), as well as growing poverty and migration issues.
In the 2001 presidential election, Enrique Bolaños easily won with 56.3% of the vote. Daniel Ortega, the Sandinista leader, came second with 42.3%. Surprising supporters and observers, Bolaños quickly moved to support a judicial corruption investigation against Bolaños. Although the investigation, which has also involved an inquiry by the National Assembly, has progressed slowly, Bolaños's move has signaled his commitment to put an end to the widespread corruption that has characterized Nicaraguan politics for decades. Although the economy has expanded slowly, at no more than 3% annual growth since Bolaños took office, and one out of every two Nicaraguans live in poverty, democratic institutions have consolidated. President Bolaños will leave office in 2006 with a country with stronger democratic institutions than when he was inaugurated in 2001.