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See also: U.S. intelligence activities in Nicaragua

A former British colony, Nicaragua is a country of Latin America, which was involved in both anticolonial and Cold War proxy fighting in the 1970s and 1980s. The CIA World Factbook describes a gradual ceding of British colonial rule, leading to violent opposition to governmental manipulation and corruption spread to all classes by 1978 and resulted in a civil war that brought the Marxist Sandinistas insurgency to power in 1979.


From 1937 to the revolution in 1979, Nicaragua was ruled by the Somoza family, which took much of the benefits of the agricultural economy. Sandinistas redistributed wealth, although the rich-to-poor disparity remains great. On winning a 1984 election, the Sandanistas affiliated with the Soviet Union and Cuba. [1]

Nicaraguan aid to leftist rebels in El Salvador caused the US to sponsor anti-Sandinista Contra insurgents through much of the 1980s, some of which, in the Iran-Contra Affair, was done after Congress explicitly barred the use of funds for the purpose. Free elections in 1990, 1996, and 2001, saw the Sandinistas defeated, but voting in 2006 announced the return of former Sandinista President Daniel Ortega. [2]

Ortega, who was voted back to office in 2006, is increasingly seen as a leader of a South American anti-US bloc. He said he would make no major economic changes and "backs a regional free trade deal with the US." [1] Slate, however, reported from the 2009 Summit of the Americas that he was clashing with the Obama Administration even more than was Hugo Chavez of Venezuela. [3]


Nicaragua has widespread underemployment, one of the highest degrees of income inequality in the world, and the third lowest per capita income in the Western Hemisphere. While the country has progressed toward macroeconomic stability in the past few years, annual GDP growth has been far too low to meet the country's needs, forcing the country to rely on international economic assistance to meet fiscal and debt financing obligations.

To achieve the Millennium Development Goals (MDG), the World Bank observed that Nicaragua has five main challenges:[4]

  • Maintain macroeconomic stability
  • Seek public sector efficiency
  • Construct a competitive investments climate
  • Maximize its human potential
  • Expand economic opportunities for the poor, particularly in rural areas.

In early 2004, Nicaragua secured some $4.5 billion in foreign debt reduction under the Highly Indebted Poor Countries (HIPC) initiative, and in October 2007, the International Monetary Fund (IMF) approved a new poverty reduction and growth facility (PRGF) program that should create fiscal space for social spending and investment. The continuity of a relationship with the IMF reinforces donor confidence, despite private sector concerns surrounding Ortega, which has dampened investment.

The U.S.-Central America Free Trade Agreement (CAFTA) has been in effect since April 2006 and has expanded export opportunities for many agricultural and manufactured goods. Energy shortages fueled by high oil prices, however, are a serious bottleneck to growth.

PRONicaragua, the country's foreign investment promotion service, was rated, by the World Bank, in 2009, the 11th best in the world and the 2nd best in Latin America. It has concentrated recently on business process outsourcing and contact center investment, as labor costs rise in Costa Rica and El Salvador. The 14 foreign BPO firms in the country include Sitel, PatentVest, Stream Global Services and Concentrix. [5]

International concerns

Nicaragua filed 1999 and 2001 proceedings against Honduras and Colombia at the International Court of Justice]] (ICJ) over the maritime boundary and territorial claims in the western Caribbean Sea, final public hearings are scheduled for 2007; the 1992 ICJ ruling for El Salvador and Honduras advised a tripartite resolution to establish a maritime boundary in the Gulf of Fonseca, which considers Honduran access to the Pacific; there is another legal dispute over navigational rights of San Juan River on border with Costa Rica.

Illicit drugs

Nicaragua is a transshipment point for cocaine destined for the US and transshipment point for arms-for-drugs dealing.