Nicaragua - Overview of economy

Nicaragua is one of the poorest countries in the Western Hemisphere. It has a low gross domestic product (GDP) per capita of US$460 per year, a very large external debt , and high inflation . In 1999, it was estimated that almost one-half of the country's population lived below the poverty line. Inflation, while still high at 12 percent, has decreased from 16 percent in 1998. In addition, the country has qualified for debt relief under a program known as Highly Indebted Poor Countries (HIPC), a program developed by the World Bank and supported by the world's most highly developed nations, including the United States and Japan.

To a large degree, the country's economy is still based on agriculture. Nicaragua's manufacturing base is small and the country is dependent on imports of foreign goods,

especially consumer products. The fastest growing segment of Nicaraguan industry is clothing manufacturing. The service sector is also increasing in Nicaragua. Financial services, transport, telecommunications, and tourism are growing in size and as percentages of GDP. Tourism now ranks as the third largest source of foreign capital.

Nicaragua began a period of economic reform and restructuring in 1991, and this restructuring continues. From 1979 through 1991, Nicaragua was under the control of the Sandinistas, a Marxist -based political regime, and the nation underwent a significant period of economic decline.

The United States is Nicaragua's main trading partner. Since 1990 the United States has provided US$1 billion in aid and assistance to Nicaragua. In 1996, foreign aid accounted for 22 percent of GDP. In 1999, Nicaragua received pledges of US$1.4 billion in new aid.