Economy

Nicaragua's economy has historically been based on the export of cash crops such as bananas, coffee and tobacco. Nicaragua's Flor De Cana rum is renowned as among the best in Latin America, and its tobacco and beef are also well regarded.

During the war between the Contras and the Sandinistas in the 1980s, much of the country's infrastructure was damaged or destroyed. Inflation averaged 30% throughout the 1980s. After the United States imposed a trade embargo in 1985, Nicaragua's inflation rate rose dramatically. The 1985 annual rate of 220% tripled the following year and skyrocketed to more than 14,000% in 1988, the highest rate for any country in the Western Hemisphere in that year. According to the CIA Fact Book, inflation averaged of 8.1% from 2000 through 2006. Nicaragua ranks 39% highest for inflation in the world.

Since the end of the war almost two decades ago, many state-owned industries have been privatised. The World Bank indicates moderate economic growth at and average of 3.6% from 1995 through 2005.

The country has made significant progress toward macro-economic stabilisation over the past few years - even with the damage caused by Hurricane Mitch in 1998. International aid, debt relief and continued foreign investment have contributed to the stabilisation process. GDP grew 6.3% in 1999, while inflation remained about 12%, and unemployment dropped. In 2005, finance ministers of the leading eight industrialized nations (G-8) agreed to forgive Nicaragua's foreign debt, as part of the HIPC program. Aid is conditioned on improving governability, the openness of government financial operations, poverty alleviation and human rights.

The country however, remains the second poorest nation in the western hemisphere after Haiti. 70% of the population in Nicaragua live below poverty and the other 30% are underemployed, Nicaraguans live with less than 1 US Dollar a day.

Exports

One of the key engines of economic growth has been production for export. Exports were 640 million in 2001. Although traditional products such as coffee, meat and sugar continued to lead the list of Nicaraguan exports, the fastest growth is now in non-traditional exports: maquila goods (apparel); gold; seafood; and new agricultural products such as peanuts, sesame, melons, and onions.

Nicaragua is primarily an agricultural country, but construction, mining, fisheries, and general commerce also have been expanding during the last few years. Foreign private capital inflows topped $300 million in 1999 but, due to economic and political uncertainty, fell to less than $100 million in 2001. In recent years, tourism has grown rapidly to become Nicaragua's third largest source of foreign capital.

The US is the country's largest trading partner, providing 25% of Nicaragua's imports and receiving about 60% of its exports. About 25 wholly or partly owned subsidiaries of US companies operate in Nicaragua. The largest of those investments are in the energy, communications, manufacturing, fisheries, and shrimp farming sectors. Good opportunities exist for further investments in those same sectors, as well as in tourism, mining, franchising and the distribution of imported consumer, manufacturing, and agricultural goods.