Nicaragua - Economic development

The Somoza government's 1975–79 National Reconstruction and Development Plan had as its major objective the improvement in living conditions through increased employment, continuing reconstruction of Managua, reduction in the economy's dependence on the external sector, acceleration of regional development, and strengthening of the country's role in CACM. The plan was disrupted by the civil strife in the late 1970s.

After the 1979 revolution, the government nationalized banking, insurance, mining, fishing, forestry, and a number of industrial plans. Although the government officially favored a mixed economy, in practice the private sector took second place in a development strategy that focused on public investment and control.

In response to the macroeconomic problems that arose in 1992, a series of measures were adopted by the Chamorro administration aimed at consolidating the stabilization process, increasing the competitiveness of exports and establishing a base for the promotion of growth.

Nicaragua now appears poised for rapid economic growth. However, long-term success at attracting investment, creating jobs, and reducing poverty depend on its ability to comply with International Monetary Fund (IMF) programs, resolve the thousands of Sandinista-era property confiscation cases, and open its economy to foreign trade.

The Alemán government was faced with poverty (over 70%), unemployment and underemployment (over 50%), one of the highest per capita debt ratios in the world ($6 billion) and one of the highest population growth rates of the hemisphere (2.8%) in 1999. The new president signed an IMF Structural Adjustment Program for Nicaragua in 1998 that aimed at cutting the fiscal deficit, continuing liberalization, and maintaining monetary stability. Nicaragua received at least $2.5 billion for reconstruction in the aftermath of Hurricane Mitch, debt deferral until 2001, and debt forgiveness through the Highly Indebted Poor Countries (HIPC) Initiative.

In December 2002, the IMF approved a three-year $129 million Poverty Reduction and Growth Facility (PRGF) Arrangement for Nicaragua. In 2003, the IMF threatened to sever financial assistance to the country in the midst of a budget dispute between President Enrique Bolaños and the National Assembly. Bolaños had submitted his 2003 budget—in accordance with IMF criteria—to the National Assembly, which revised it, violating terms of the agreement with the IMF. The IMF also stipulated the government would have to sell off state-owned hydroelectric dams and the hydroelectric company, and 51% of the shares in the national telephone company, ENITEL. In 2002, the government began privatizing management of water systems.

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