Nicaragua - Politics, government, and taxation

The country is now a democratic republic. The nation's president is both the head of state and the leader of the government. The president is elected for a 5-year term and chooses the cabinet ministers. The legislature is a single-chamber body that has 93 members who are also elected for 5-year terms. The legislature is known as the National Assembly. The Supreme Court is composed of 16 magistrates who are elected to 7-year terms by the National Assembly.

Nicaragua has 35 registered political parties and factions, but the country is dominated by just 2: the Liberal Alliance, and the Sandinista National Liberation Front (FSLN). The Liberal Alliance is a coalition of 5 moderate to conservative parties that support economic reforms. The FSLN controlled Nicaragua from 1979 to 1990 under a dictatorial government.

Since 1990, the government has undertaken a variety of reforms to restructure the economy and liberalize the nation's political system. From 1995-96, there were broad reforms of the army and the national police force, including reductions in military spending. The country now spends about 1.2 percent of its GDP on defense (US$26 million in 1998). Programs have resulted in the privatization of 351 state-owned companies. Foreign investment in the country has increased dramatically to US$446 million in 2000.

Nicaragua's national debt is US$6.5 billion, making it one of the most highly-indebted nations in the world on a per capita basis. The country's debtors have pledged US$1.2 billion in debt relief under the HIPC and other aid programs. In 2000, government spending accounted for 33.7 percent of GDP. In 1998, the government's revenues were US$527 million while its expenditures were US$617 million. The main sources of government revenue are an income tax of 25 percent, a general sales tax of 15 percent, a luxury tax on certain products, corporate taxes, and tariffs on imported goods.