Having suffered for so many years as a proxy battleground for the two superpowers of the cold war, Nicaragua has maintained a neutralist foreign policy to the best of its ability. It relies heavily on aid from Western nations, primarily the United States, and so it tends to formulate foreign policies in line with those of the developed world. It has, for instance, proclaimed its support for the U.S.-led international war on terrorism. Nicaragua also has an interest in the pacification of its Central American neighbors, nearly all of whom are only just emerging from long years of civil wars and the effects of often brutal military regimes. Nicaragua has border disputes with Honduras and Costa Rica, its neighbors to the north and south, respectively, and with Columbia over an island chain claimed by both countries; it has submitted all three disputes to the World Court. Nicaragua belongs to most of the major international agencies, including the United Nations, the World Bank, the International Monetary Fund and the World Trade Organization. Regionally, it is a member of the Organization of American States, the Central American Common Market, and the Central American Bank for Economic Integration.
Nicaragua's relations with the United States have been steadily improving since the ouster of the Sandinista governments and the implementation of multi-party democracy. Issues of major concern between the two countries include the status of property expropriated by the Sandinistas from U.S. businesses and citizens. Technically, the United States is prohibited by law from supporting governments which have expropriated U.S. property, but the United States routinely waives this restriction since Nicaragua is taking steps to address the issue. Since 1990, the United States has provided over US $1.2 billion in financial assistance to Nicaragua and is its largest international investor. In January 2003 negotiations were opened for the creation of a free-trade agreement between the United States and the five countries of Central America. It is hoped that such an agreement will increase investment in Nicaragua and its neighbors and strengthen regional cooperation.