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#CARD:Nicaragua:Background Notes
BACKGROUND NOTES:  NICARAGUA
PUBLISHED BY THE BUREAU OF PUBLIC AFFAIRS
US DEPARTMENT OF STATE
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JULY 1993
Official Name:  Republic of Nicaragua
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PROFILE
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Geography
Area:  130,000 sq. km. (50,000 sq. mi.), slightly larger than New York
State.
Principal Cities:  Capital--Managua (est.) 989,000 inhabitants; Leon,
Granada, Jinotega, Matagalpa, Chinandega, Masaya.
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People
Nationality: Noun and adjective--Nicaraguan(s).
Population (1992): 4 million.
Annual growth rate (1992): 3.4%.   Density: 32 per sq. km.
Ethnic groups: Mestizo (mixed) 69%, white 17%, black 9%,  Indian
5%.
Religion:  Roman Catholic 85%.
Education:  Years compulsory--11 yrs. of school or 16 yrs. old.
Literacy--30-40%.  Primary school completion rate is 20%.
Health (1992): Average life expectancy--63 yrs.  Infant mortality--
62/1,000.
Work force (1992 est.):  1.4 million:  Service--45%.  Agriculture--33%.
Industry--19%.  Open unemployment--21%.
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Government
Type:  Republic.  Independence:  1821.
Constitution:  Passed by the Sandinista-controlled National Assembly
and signed January 9, 1987.
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Branches:  Executive--President and Vice President.  Legislative--
National Assembly (unicameral).  Judicial--Supreme Court; subordinate
appeals, district and local courts, separate labor and administrative
tribunals.  Electoral-- Supreme Electoral Council; nine Regional
Electoral Councils; local Ballot Receiving Boards.
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Political parties:  National Opposition Union (UNO)--Coalition of 14
parties, now reduced to 10 through consolidation and expulsion
(Conservative Popular Alliance, National Conservative, National
Action, Nicaraguan Democratic Movement, Independent Liberal, Liberal
Constitutionalist, Neo-Liberal, Christian Democratic Union, Social
Democratic, Communist).  Sandinista National Liberation Front
(FSLN); 10 others, including the Nicaraguan Resistance Party (PRN),
which was awarded legal status in May 1993.
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Administrative subdivisions: 16 departments, 137 municipalities, and 1
national capital district.  The military has divided the country into six
regions and three special zones for administrative purposes.
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Flag:  Two blue horizontal bands separated by a central white band with
encircled triangle.
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Economy
GDP  (1992 est.):  $1.7 billion.   Annual growth rate:  (1992) 0.8%.
Per capita income:  (1992) $413  (per capita income growth rate:
-2.8%..)  Foreign debt  (1992 est.): $10.8 billion.
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Trade:  Exports (1992)--$218 million:  coffee, cotton, sugar, bananas,
beef, gold, shellfish.  Exports to U.S. (1992)--$52 million or 24%:
sugar, coffee, cotton, and seafood.  Other markets:  ACM 19%, Europe
25%, Japan 13%, Canada 12%.  Imports (1992 est.)--$831 million:
petroleum, agricultural supplies, manufactured goods.  Major suppliers
(1992 est.)--U.S. $205 million or 25%, mostly consumer goods.
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Agriculture (22% of GDP and 33% of work force):  Cash crops--coffee,
cotton, sugar cane, bananas.  Maize, beans, and rice are also principal
food crops.  Production crops--tobacco, timber, meat, and shellfish.
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Industry (26% of GDP and 19% of work force):  Types--
processed food, beverages, textiles, chemicals, petroleum, and metal
products.
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Service (50% of GDP and 45-47% of work force): commerce,
government, transportation, banking, energy and water.
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Natural Resources: gold, silver, copper, tungsten, lead, zinc, timber,
fish.  Land use:  pastures and meadows 43%, forest and woodland
35%, arable land 9%.
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Exchange rates (January 1993): Official--6 Cordoba Oro=U.S.$1.
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Economic aid received, multilateral and U.S.:  U.S. (FY 1992)--$185
million.  Multilateral (1992 )--$642 million.  (###)
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PEOPLE
Most Nicaraguans have both European and Indian ancestry.  Only the
Indians of the Caribbean coast remain ethnically distinct and retain tribal
customs and dialects.  A large black minority (of Jamaican origin) is
concentrated on the Caribbean coast, although migration to Managua is
increasing.  Nicaraguan culture follows the lines of its Ibero-European
heritage.  Roman Catholicism is the major religion, but evangelical
Protestant sects have grown recently, and there are strong Anglican and
Moravian communities on the Caribbean coast.  Spanish is the official
language; English and indigenous languages are spoken on the
Caribbean coast.
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Most Nicaraguans live in the Pacific lowlands and the adjacent interior
highlands region.  The population is 57% urban.  The principal cities of
Managua, Leon, and Granada are on the Pacific side.  The largest town
on the Caribbean coast is Bluefields.
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HISTORY
Columbus sailed along the Nicaraguan coast on his last voyage in 1502.
The colonial period in Nicaragua began 20 years later with the arrival
from Panama of Spanish conquistadors under Gil Gonzalez Davila.  The
Indian tribe living around present-day Lake Nicaragua received them
peacefully; the country takes its name from their chief, Nicarao.
Colonial Nicaragua's two principal towns were founded in 1524:
Granada on Lake Nicaragua and Leon near Lake Managua.  The region
was part of the Captaincy-General of Guatemala.  Wars between the
Spanish on the Pacific and Indians and British on the Caribbean (the
British presence did not end until 1905) marked the colonial period.
The Captaincy-General of Guatemala declared its independence from
Spain in 1821, but Nicaragua did not become an independent republic
until 1838.
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Rivalry between the Liberals of Leon and the Conservatives of Granada
characterized 19th-century politics.  Governments were unstable and
politicians were prone to violence.  This allowed an American, William
Walker, and a group of about 100 "filibusters" to seize the presidency in
1856.  The advent of a foreigner as president led the two parties to
suspend their internecine conflict long enough to drive Walker out in
1867.
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Walker had been invited by the Liberals; his defeat discredited them and
led to 30 years of Conservative rule.  But by the start of the 20th
century, the rivalry between Liberals and Conservatives had resumed.
Hostility between President Jose Santos Zelaya and the United States
over an isthmian canal led to intervention in Nicaragua in 1909; U.S.
troops stayed in Nicaragua until 1933.  U.S. intervention in Nicaragua
ended with Franklin Roosevelt's "Good Neighbor" policy.
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Despite U.S. efforts to create an apolitical constabulary prior to
departing Nicaragua, National Guard commander Anastasio Somoza
Garcia took over the Presidency in 1936, initiating 43 years of Somoza
family rule.  Somoza Garcia was assassinated in 1956, and control
passed to his elder son, Luis Somoza Debayle.
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From 1963 to 1967, hand-picked successor to Luis Somoza, former
Foreign Minister Rene Schick, was President.  The Somoza family
regained control of the presidency in 1967 when the younger son,
Anastasio Somoza Debayle, took office.  The Somozas used their
political power to dominate Nicaragua's economy and government,
despite occasional challenges, armed or otherwise, from their
opponents.
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On December 23, 1972, an earthquake devastated Managua, killing or
injuring an estimated 10,000 people and leaving 300,000 homeless.
Many key businesses and government offices were destroyed, along
with most of the downtown area.  The government proved unable to
cope with the emergency, and Somoza's  control began to erode.
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The Sandinista National Liberation Front (FSLN) had been fighting a
sporadic guerrilla war since 1961 to overthrow the Somoza regime.  The
FSLN took its name from Augusto Sandino, a Liberal Party general
who opposed both U.S. intervention and Somoza Garcia, and who was
assassinated on Somoza Garcia's order in 1934.  Indications that
Somoza Debayle had embezzled aid donated after the 1972 disaster
raised popular discontent with his government.  By 1977, increasing
reports of the government's torture and murder of opponents led to
organized resistance by businesses, professional groups, and the
church.  The assassination of La Prensa editor and publisher Pedro
Joaquin Chamorro in January 1978 ignited massive protests and gave
fresh impetus to the anti-Somoza opposition, which grew to encompass
all sectors of Nicaraguan society.  The Marxist FSLN, however, was
the opposition's only organized military force.
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After heavy fighting, which lasted only several months, pressure from
the Organization of American States (OAS), U.S. withdrawal of all
support for Somoza, and the collapse of Somoza's domestic political
support, Somoza fled the country on July 17, 1979.
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After the Sandinistas gained control of the capital on July 20, the junta
and its Provisional Governing Council took power as the Government
of National Reconstruction.  The Junta had three Sandinista members--
Daniel Ortega Saavedra, Sergio Ramirez Mercado, and Moises Hassan
Morales--and two moderates, Violeta Barrios de Chamorro and Alfonso
Robelo Callejas.  In August, the junta issued a "Statute on Rights and
Guarantees for the Citizens of Nicaragua" providing for basic personal
freedoms in accordance with the both the UN and OAS declarations on
human rights.  However, by mid-1980, Violeta Chamorro and Alfonso
Robelo had resigned from the junta, believing that the Sandinistas were
abandoning democratic revolutionary goals.  Chamorro continued to
publish the main independent Nicaraguan newspaper, La Prensa.
Robelo also attempted to participate actively in politics, but after several
years of Sandinista harassment, he went into exile and eventually
became a leader of the armed Nicaraguan resistance.
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By 1981, the political hegemony of the FSLN was beginning to become
apparent, and anti-Sandinista protests began among the Caribbean
peoples of Nicaragua's Atlantic coast.  The Sandinistas declared the first
of a series of states of emergency limiting civil and economic liberties,
which were extended repeatedly during their years in power.  The
government nationalized 40% of the country's industrial capacity and
40% of the country's agricultural capacity, introduced agrarian reforms,
and introduced Marxist ideology into both public school curricula and a
nationwide literacy campaign.
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During the decade, Central America evolved into an arena for one of the
Cold War's many regional conflicts.  In 1981, the United States began
to assist counter-revolutionary forces, termed "Contras" by the
Sandinistas, and suspended economic aid to Nicaragua indefinitely
because of the Sandinista regime's support of violent attempts to
overthrow the Government of El Salvador.  The Sandinistas justified the
states of emergency as a response to conflicts with the Contras, while
the new armed opposition began to attract support, even among some
former Sandinistas.
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The junta continued to govern until the FSLN won the 1984 national
elections.  The principal opposition group--the Democratic Coordinating
Board (Coordinadora)--withdrew from the campaign, citing Sandinista
intimidation and interference.  On January 10, 1985, Daniel Ortega
became president and the FSLN assumed control of the National
Assembly, holding 61 of 96 seats.
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In May 1987, the United Nicaraguan Opposition (UNO) and a separate
Contra faction, the Southern Opposition Bloc (BOS), agreed to form a
new armed coalition, to be known as the Nicaraguan Resistance.
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Diplomatic Activity
Throughout the 1980s, a number of unsuccessful regional and bilateral
U.S.-Nicaraguan diplomatic initiatives were undertaken to address
concerns over Nicaragua's military buildup, support for insurgencies,
and absence of democratic procedures, as well as Sandinista concern
over U.S. support for the Nicaraguan Resistance.
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In 1983, other Latin American countries outside of Central America,
known as the Contadora Group, began a series of diplomatic initiatives.
The Contadora objectives were to negotiate an end to Central America's
military conflicts, bring full democratization to the region, and negotiate
the reduction in regional military forces.  The Contadora Group
consisted of Colombia, Mexico, Venezuela, and Panama.  An expanded
Contadora Support Group of other countries developed later; the
European Community also became involved.  In 1984, a series of U.S.-
Nicaraguan talks at Manzanillo, Mexico, began, but after 9 rounds of
discussions over 18 months,  they proved unsuccessful.
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In mid-1986, the Central American presidents renewed their
negotiations in Esquipulas, Guatemala, and for the next year, conducted
multilateral talks to bring peace to the region.  Carrying forward the
Contadora agenda, they addressed issues such as full democratization,
respect for human rights, limits on arms levels and troops, support for
irregular forces in other countries, and verification of reduction in
military activity.  The talks became known as the Esquipulas process
and led to the peace plan authored by Costa Rican President Oscar
Arias, which he and the Presidents of Nicaragua, El Salvador,
Guatemala, and Honduras signed in August 1987.  The peace plan
became the basis for future agreements among the region's leaders.
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The Sandinistas and the Nicaraguan Resistance each adopted periodic
unilateral cease-fires during the 1980s, most notably in 1988.
However, because they were not linked to comprehensive peace
agreements, these efforts were never completely fulfilled.
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In February 1989, at a summit of Central American presidents in Tesoro
Beach, El Salvador, Daniel Ortega agreed to advance the date of
Nicaragua's elections to February 25, 1990, and invited international
observers to verify their fairness.  He also pledged to stop aiding
guerrilla forces in El Salvador.  The Central American presidents agreed
to develop a joint plan within 90 days to demobilize the Resistance so
they could return to Nicaragua or resettle elsewhere.  In August 1989,
the five Central American presidents signed an agreement at Tela,
Honduras, to create a new organization, the International Support and
Verification Commission (CIAV), led by the UN and OAS, to negotiate
the voluntary demobilization, repatriation, or relocation of the Contra
forces within a 90-day period.  Key to the Tela agreement was that
Resistance members be able to return to Nicaragua "under safe and
democratic conditions."  CIAV brokered talks between the Sandinista
Government and the Nicaraguan Resistance in the fall of 1989, but the
two sides did not reach agreement.
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In the meantime, 14 Nicaraguan opposition parties, ranging from
traditional Conservatives to Communists, banded together as the
National Opposition Union (UNO) to contest FSLN rule.  UNO chose
Violeta Chamorro as its presidential candidate and Liberal party leader
Virgilio Godoy as her vice presidential running mate.
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These events occurred in a context of changing U.S. policy.  The U.S.
Congress had ended lethal assistance to the Nicaraguan Resistance in
March 1988, but allowed humanitarian aid to continue.  In March 1989,
the incoming Bush Administration and the U.S. Congress reached a
bipartisan accord which put the focus on elections in Nicaragua.  The
accord allowed humanitarian aid to the Resistance to continue through
February 1990.  To encourage the Sandinistas to proceed with free and
fair elections, the U.S. worked actively to persuade its European allies
to base their economic assistance to Nicaragua upon the conduct of free
and fair elections.  The U.S. gave renewed support to the regional peace
process and worked with Central and Latin American leaders to support
the Esquipulas Agreement and successor agreements.
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As the conflict with Nicaragua reflected Cold War tensions, diplomatic
activity between the two superpowers in 1989 provided new hope for
peaceful change in Nicaragua.  U.S. policy stressed to the Soviet Union
that Soviet military aid to Nicaragua, as well as its use of Cuba to aid
Nicaragua and guerrilla forces in El Salvador, would be a fundamental
issue in U.S.-Soviet bilateral relations.  The U.S. and Soviet Union
agreed to support the Esquipulas process, including an end to conflict
and establishment of democratic governments throughout the region.
The U.S.-Soviet dimension proved crucial to the evolution of the peace
process and democratization in Nicaragua.
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The United States joined international support for the elections process.
In October 1989, the U.S. Congress passed and President Bush signed
legislation making up to $9 million available to support free, fair, and
open elections in Nicaragua.  Of this, the U.S. Agency for International
Development (USAID) provided $7.4 million to the National
Endowment for Democracy (NED), an organization chartered by
Congress to promote democracy around the world.  Some $1.5 million
of these funds were provided to the National Democratic Institute for
International Affairs (NDI) and the National Republican Institute for
International Affairs (subsequently renamed as the International
Republican Institute--IRI) to support various Nicaraguan internal groups
for activities such as civic education programs that provided information
on the benefits of pluralism and self-government, secrecy of the ballot,
and the electoral process; verification of voter registration lists; and
training of poll watchers to observe the casting and counting of ballots.
NDI and NRI also helped a broad-based alliance of Nicaraguan parties,
known as the National Opposition Union (UNO) to perform normal
party functions, such as obtaining office space, equipment, and
supplies; vehicles; and support staff through $1.8 million in assistance.
Similar assistance was provided to a free trade union organization and a
civic group.  Nicaragua's Supreme Electoral Council received $2.1
million in a "tax" required on foreign contributions to political parties.
The remainder of NED's funding covered administrative and reserve
needs.
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Four electoral observer groups received a total of $1.3 million from the
U.S. to support the electoral process and observer activities in
Nicaragua.  These groups were the Council of Freely Elected Heads of
Government (headed by former President Jimmy Carter), the Center for
Democracy, Freedom House, and the Center for Electoral Promotion
and Training (CAPEL, a Costa Rican organization).
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Despite difficulties during the campaign period such as intimidation by
Sandinista supporters and FSLN use of government resources for
campaign purposes, the February 25, 1990, elections were peaceful.  In
elections that nearly 1,000 international observers from more than 50
countries, the UN, and the OAS deemed largely free and fair,
Nicaraguan voters elected the UNO candidate, Violeta Barrios de
Chamorro, over the FSLN's Daniel Ortega by a margin of 54% to 41%.
UNO won a clear majority in the National Assembly and in most local
races.
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GOVERNMENT AND POLITICAL CONDITIONS
Nicaragua is a constitutional democracy with executive, legislative,
judicial, and electoral branches of government.  The constitution was
adopted in 1987 by the Sandinista Government.  The National
Assembly is unicameral.  Elections for the 92 Deputies were last held in
1990.  The next national elections for the presidency and the National
Assembly are scheduled to take place in 1996.  In the judicial branch,
FSLN justices outnumber Chamorro appointees five to four on the
Supreme Court, with neither group having the six-vote majority
necessary to decide cases.  In practice, the Supreme Court functions by
consensus.
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The constitution provides for freedom of speech and the press, although
there are some constitutional provisions pertaining to the right to
accurate information.  Diverse viewpoints are freely and openly
discussed in the media and in academia.  There is no official state
censorship in Nicaragua.
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Radio is the most important medium for news distribution, and listeners
can receive a wide variety of viewpoints, particular in Managua.  There
are six television stations, the two largest operated by the government.
There are three national daily newspapers: Barricada, El Nuevo Diario,
and the independent La Prensa.  A fourth newspaper, the independent
La Tribuna, began publication July 1.  The first two reflect rival
Sandinista policy lines.  There are also several weeklies.
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Other constitutional freedoms include peaceful assembly and
association, freedom of religion, freedom of movement within the
country, as well as foreign travel, emigration and repatriation.  The
government also permits domestic and international human rights
monitors to operate freely in Nicaragua.  The constitution prohibits
discrimination based on birth, nationality, political belief, race, gender,
language, religion, opinion, national origin, economic condition, or
social condition.  All public and private sector workers, except the
military and the police, are entitled to form and join unions of their own
choosing, and they exercise this right extensively.  Nearly half of
Nicaragua's work force, including agricultural workers, is unionized.
Workers have the right to strike.  Collective bargaining is becoming
more common in the private sector.
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The Chamorro Government's first priority was peace and national
reconciliation.  Chamorro's triumph also marked a major step forward
for the Central American peace process; all countries in Central America
are now committed to good relations with their neighbors.
Democratization in Nicaragua immediately improved the climate for
demobilization and reintegration of the Nicaraguan Resistance forces,
human rights and freedom of expression in Nicaragua, and Central
American talks on regional security and force reduction.  In Chamorro's
first year in office, some 20,000 former Resistance fighters disarmed,
and an additional 50,000 family members and other refugees began
reintegrating into Nicaraguan society.  In May 1993, the Nicaraguan
Resistance Party achieved legal status as a new political party, a positive
step in the evolution of democracy in Nicaragua.  President Chamorro's
Government has overseen a reduction of the size of the Sandinista
People's Army (EPS) from a high of more than 80,000 in 1990 to under
16,000 active duty forces.
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With Nicaragua at peace, the government faces additional challenges.
Foremost among these are the need to reform and exert civilian control
over security forces inherited from the Sandinista Government; to revive
economic production; to curb human rights abuses and bring to justice
the perpetrators of high profile cases; and to resolve thousands of claims
involving properties confiscated by the Sandinistas.  The government
must also forge a workable relationship with the UNO coalition which
brought the Chamorro Government to power, but which proclaimed
itself in opposition in January 1993.
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Principal Government Officials
President and Minister of Defense--Violeta Barrios de Chamorro
Vice President--Virgilio Godoy de Reyes
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Ministers
Presidency--Antonio Lacayo
Foreign Affairs--Ernesto Leal  Sanchez
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Ambassador-designate to the U.S.--Roberto Mayorga
Ambassador to the OAS--Jose Antonio Tijerino
Ambassador to the UN--Vacant
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Nicaragua maintains an embassy in the United States at 1627 New
Hampshire Avenue NW., Washington, DC  20009 (tel. [phone]).
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ECONOMY
Nicaragua's economy was once one of Central America's most
advanced:  the country boasted a strong agro-export sector, well
developed financial institutions, and a growing domestic industrial base.
Nicaragua grew rapidly throughout the mid-1970s, averaging 6.5%
GDP growth each year from 1974 through 1977, higher than its
Spanish-speaking Central American neighbors.  In 1978, the economy
began to decline.  GDP fell 7.2% in 1978, and dropped dramatically in
1979 by almost 25%.  Average per capita income during the mid-1970s
remained in the $440 range, but fell by l0% in 1978 and by 27% in
1979, adding economic discontent to increasing tension over Somoza's
human rights practices.  Growth stopped as political instability increased
during the anti-Somoza revolt, and as the Sandinistas carried out
confiscations and socialist economic and political policies during the
next decade.  Nicaragua's per capita income, less than $400 in 1989,
was among the lowest in the Western Hemisphere when Chamorro took
office in 1990.  Production was well below the 1980 level, exports were
running at about half the pre-1980 level, hyperinflation had peaked at
33,000% in 1988, international reserves were depleted, and external
debt had reached $10 billion, 27 times annual exports and 7 times GDP.
The financial system, much of the productive structure, and external
marketing of the principal products were in the hands of the oversized
public sector.  The country's infrastructure was damaged due to the war
and poor economic conditions.
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The future of Nicaragua's economic growth and ability to attract needed
foreign and domestic investment are dependent upon the Chamorro
Government's ability to establish the rule of law, protect human and
property rights, and establish true civilian authority over the state
security apparatus.  Unemployment remains high: some 21% of the
work force is openly unemployed and 31% are underemployed.
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Reforming the Economy
During her first year in office, President Chamorro espoused a policy of
national reconciliation to address the nation's political and economic
needs.  While her government negotiated the disarmament of the
Nicaraguan Resistance and ended compulsory military service, there
were few immediate improvements in the economy.  Through a process
known as "Concertacion," President Chamorro attempted to forge a
national dialogue between business and Sandinista labor groups to
achieve peace and bring an end to disruptive strikes in return for reform
of government programs.  Workers were given the option of purchasing
up to 25% of companies to be privatized, and many workers have
exercised this option in several cases, including slaughterhouses, mines,
sugar mills, and the national airline.
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On March 3, 1991, the government announced its economic stabilization
program in conjunction with the International Monetary Fund, the
World Bank, the Inter-American Development Bank, and certain
bilateral donors.  The government devalued the gold Cordoba (Cordoba
Oro) from one to five to the U.S. dollar,  reduced government
spending, and restricted central bank credit to the central government
and to the state financial system.  The stabilization program was highly
successful.  Despite widespread labor agitation in 1991, the government
successfully held the line on wages throughout the year.  Inflation fell
from 13,500% in 1990 to 775% in 1991 and to 3.5% in 1992.
Economic activity remained sluggish during 1991 as GDP fell for the
eighth consecutive year, by  0.2 %, before picking up in 1992 by 0.8%.
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The Chamorro Administration also made strides toward managing a
crushing foreign debt burden of some $9.4 billion inherited from the
Sandinistas.  In September 1991, encouraged by the Chamorro
Government's program, the donor community helped Nicaragua clear
$315 million in arrears with the World Bank and the Inter-American
Development Bank.  The United States, the largest individual country
donor, contributed $75 million to the effort.  In December 1991, the
Paris Club of government lenders rescheduled Nicaragua's official debt
under "Trinidad Terms," the most favorable terms available to the
poorest and most indebted countries.  Despite these efforts, Nicaragua's
foreign debt in 1993 totals 7 times its GDP and about 40 times its
exports.
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In 1991, import/export licensing requirements were greatly relaxed, and
Nicaragua, with the rest of Central America, began reducing tariffs.  As
of March 1993, the minimum tariff on most goods was 5%, with a
maximum of 20%.  The Government of Nicaragua also levies a stamp
tax and a selective consumption tax on imports.  A new foreign
investment law passed in late 1991 allows foreign investors to repatriate
profits generated since 1990.
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In 1992, budgetary difficulties, tight monetary policy, low international
prices for major export crops (coffee and cotton), internal strife
revolving around labor disputes, rural violence, and continued conflict
over property rights continued to thwart government plans to stimulate
growth.  The economy expanded by only 0.8%.  With one of the
Western Hemisphere's highest population growth rates--3.4%--
Nicaragua's per capita gross domestic product during 1992 actually
declined.
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As it addressed its serious problems, the Chamorro Administration
undertook a radical program to dismantle its centrally planned economy.
In May 1991, the government created CORNAP, the Nicaraguan State
Holdings Corporation and charged it with privatizing and otherwise
divesting 351 state enterprises.  As of April 1993, CORNAP had
privatized about 240 of the companies it inherited from the Sandinistas,
either through sales to private investors or labor union consortia.
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The agriculture, livestock, and fisheries sectors were restructured in
1991.  Early in the year, several large government agricultural holding
companies (Hatonic, Cafenic, Agroexco) were broken up and their
lands distributed among former members of the Resistance, retired army
soldiers, and property claimants.  A number of the farms distributed to
former members of the Resistance and the army had been confiscated
from U.S. citizens during the Sandinista era.
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In August 1991, the government granted a license to operate
Nicaragua's first private bank in 12 years.  There are now seven private
banks in operation, and several others have applied for licenses.
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As many as 18,000 pieces of property were confiscated by the
Sandinista Government between 1979 and 1990.  These include
properties which were distributed by Decree 85 (La Pinata) to FSLN
loyalists between the time Chamorro was elected and her inauguration.
This created the basis for thousands of claims by Nicaraguan and
foreign claimants since April 1990.  During the fall of 1992, the
Government of Nicaragua put in place a new property claims resolution
system.  The government's resolution system includes three
components:
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--  The provision of land titles to those who legally obtained property
during the Sandinista period;
--  The review of all property transfers during the Pinata; and
--  The creation of a compensation mechanism, including the
establishment of new offices in the Attorney General's office and the
Ministry of Finance.  Claimants will be compensated with 20-year
bonds backed by the assets of properties to be privatized.
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In January 1993, the government announced a new economic package
designed to spur growth.  The plan was designed to reduce
consumption, especially of imported goods; increase government credit
for the private sector; and create 20,000 emergency temporary jobs for
the poorest sectors of the population.  The plan devalued the Cordoba
by 20% to improve Nicaragua's international competitiveness, and
limited government spending for government ministries and state-owned
enterprises.
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Agriculture
Agriculture is the cornerstone of Nicaragua's economy.  Food
production--agriculture, livestock, and fisheries--employs about one-
third of Nicaragua's labor force, accounts for slightly less than a quarter
of gross domestic product (GDP), and generates about three-quarters of
Nicaragua's export earnings.  About 70% of the nation's territory is
suitable for agriculture or livestock.
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Industry
Nicaragua's industrial sector grew rapidly following the formation of
the Central American Common Market (CACM) in 1960.  During the
Sandinista era, government mismanagement, depressed markets in its
neighboring countries, and a shortage of foreign exchange for raw
materials and capital equipment caused Nicaragua's industrial
production to decline to one-third of its former value.
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Manufacturing recovered somewhat in 1991, growing by 6.3% for the
year.  Minerals production fell by 3.5% during 1991.  Production of
consumer goods soared, led by soft drink output which doubled.  About
one-fifth of Nicaragua's work force is employed in manufacturing
alone.  That, in addition to construction and mining, contribute about
26% to GDP.
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Trade and Investment
Nicaragua's imports (CIF) in 1991 were valued at $751 million and
increased to $831 million in 1992.  Consumer goods and machinery
accounted for most of the increases.  The government continues to
require import licenses, although the licensing process is now little more
than a formality.  Foreign exchange for goods and services is freely
available.  In 1992, the U.S. was the source of nearly 25% of
Nicaragua's total imports and purchased 24% of Nicaragua's exports.
Europe and Japan enjoy significant market shares.
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Nicaragua has joined its Central American neighbors in pursuing a
common maximum duty on imported goods (except for certain
commodities) of 20% by December 1993, down from 40%.
Collectively, they are negotiating a free trade agreement with Mexico,
Colombia, and Venezuela.  Imports from the Commonwealth of
Independent States, the republics of the former Soviet Union, have
fallen to about 20% of their 1990 level.
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Nicaragua's export earnings fell by 18% in 1991, primarily reflecting
cyclical factors in coffee production, a continuing decline in beef
production, a drought which adversely affected agriculture production,
and lower U.S. quotas for Nicaraguan sugar.
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Imports, for which demand is likely to grow, include machinery,
electrical appliances and transport vehicles, animal and vegetable oil,
fruits and vegetables, fertilizers, prepared foods, and clothing and other
textile products.
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In January 1991, the government issued a decree authorizing the
Minister of Economy to issue private export licenses for all major
commodities.  Previously, only the government was allowed to export
commodities.  Export earnings of $272 million in 1991 dropped to $218
million in 1992, due to the decline in international prices for cotton and
coffee and the January 1993 devaluation. Following Chamorro's
election victory, the U.S. lifted its 5-year trade embargo.  Total U.S.
exports to Nicaragua between 1990 and the end of 1992 increased from
about $68 million to nearly $205 million, mostly in consumer goods and
machinery.  U.S. imports from Nicaragua for the same period increased
from $15 million to $52 million, principally in cotton, coffee, and
seafood.
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U.S. investment in Nicaragua, estimated at less than $100 million, is
concentrated in the petroleum and agro-processing sectors.  Most of the
companies produce exclusively for the Nicaraguan market, although
there are shipments of goods to Central America and Puerto Rico.  For
the most part, these companies have been operating in Nicaragua for
nearly four decades.  Estimates are that U.S. investments represent
between one-half and two-thirds of all foreign investment, although
investors from Spain, the United Kingdom, and Taiwan are active.
Total foreign investment is estimated to be under $200 million.
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The best opportunities for investment appear to be in fishing, mining,
timber, processing of non-traditional agricultural exports, hotels, and
power generation.  The privatization of the telephone utility is also a
promising area for investors.
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U.S. Assistance
The United States provided $725 million in economic assistance to
Nicaragua in the first 3 years of the Chamorro Government: $5 million
in emergency economic assistance in the spring of 1990 using fiscal
year 1989 funds; $266 million in FY 1990; $269 million in FY 1991
and $185 million in FY 1992.  In June 1992, Congress put a hold on
$104 million from FY 92 funds due to concerns over rule of law issues,
civilian control over the armed forces and police, human rights, and the
return of property confiscated from American citizens by the Sandinista
Government.  With Nicaragua facing its debt obligations to international
financial institutions (IFIs) in December 1992, the U.S. released $54
million to help Nicaragua normalize its relations with the IFIs, sustain
its stabilization program, and preserve gains in controlling inflation.
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On April 2, 1993, the U.S. announced the release of the remaining $50
million from FY 1992 assistance.  This decision was made after an
exhaustive policy review and after extensive and useful consultations
with Members of Congress.  The Administration examined the broad
range of issues vis-a-vis Nicaragua and concluded that the Nicaraguan
Government was making progress on issues of priority concern.
Significant steps Nicaragua took to justify release of the aid included
suspension of police officers and action against civilians named by the
commission for wrongdoing, and a request for a 2-year extension of the
OAS civilian mission (CIAV) with a broadened mandate to monitor
human rights throughout the country until June 30, 1995.  Finally, the
Government of Nicaragua established procedures for resolving
outstanding property claims of U.S. citizens and others; this included an
arbitration system which met international standards and a new
compensation mechanism funded by some of the proceeds of the
privatization program.
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U.S. assistance provides balance-of-payments support while the
Nicaraguan Government pursues its economic reform program; assists
the private sector and farmers; funds basic health care and education,
development projects, and natural resource management.  It also
supports initiatives to strengthen democracy, including helping the
Nicaraguan Government establish civic education programs, strengthen
grass roots and independent labor organizations, improve public
administration and financial management, and develop respect for
human rights in the police, military, judiciary.
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Nicaragua is a beneficiary of the U.S. Caribbean Basin Initiative, and
has signed a bilateral framework agreement with the U.S. to promote
trade and investment.
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FOREIGN RELATIONS
The 1990 election victory of President Violeta Chamorro placed
Nicaragua in the ranks of democratizing countries in Latin America and
Eastern Europe.  The government has stated it seeks good relations with
all countries and a policy of "true" nonalignment.  The Chamorro
Government participates in the Central American Security Commission
(CASC), which promotes regional demilitarization, arms reduction, and
confidence building.  A major objective of President Chamorro's
diplomacy has been to reach new terms with Nicaragua's international
creditors.
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Though ex-Soviet-bloc aid to Nicaragua has declined to near zero from
its previous level of almost $1 billion per year, other donors have picked
up some of the slack and increased aid flows to Nicaragua's democratic
government.  The international donor community remains crucial to
Nicaragua's economic life.
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Nicaragua belongs to the UN and several of its specialized and related
agencies, including the World Bank, the International Monetary Fund
(IMF), UN Educational, Scientific and Cultural Organization
(UNESCO), World Health Organization (WHO), Food and Agriculture
Organization (FAO), International Labor Organization (ILO), General
Agreement on Tariffs and Trade, Inter-American Development Bank,
Central American Common Market (CACM), and the Central American
Bank for Economic Integration (CABEI).
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DEFENSE
The Chamorro Government has reduced the Sandinista Army from more
than 80,000 upon entering office to under 16,000 and has ended the
military draft.  Under the previous regime, the army had grown from a
loosely organized force of a few thousand guerrillas to a professional,
conventionally trained, and well equipped army that numbered 134,000
active duty personnel in 1987.  It was augmented by reserve and militia
units.  The security apparatus remains under the same Sandinista
leadership as before the 1990 election.
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In 1993 the Nicaraguan Government began working with the OAS and
the Inter-American Defense Board in a project to remove land mines left
in place following the end of hostilities in 1989.  In the initial phase, this
program included training for 15 military officers from other Latin
American countries who trained their Nicaraguan counterparts in de-
mining techniques.
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U.S.-NICARAGUAN RELATIONS
The U.S. strongly supports the Chamorro Government in its efforts to
strengthen democracy, promote national reconciliation, and achieve
economic reform.  U.S. objectives are to:
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-- Support national reconciliation and help create a stable democracy;
-- Help Nicaragua de-politicize the army, police, judiciary, and
regulatory bodies;
-- Build respect for human and property rights and apply the rule of law
justly;
-- Promote resolution of outstanding human rights cases, including
those committed against former members of the Nicaraguan Resistance;
-- Obtain Nicaraguan Government resolution of all U.S. property claims
in an expeditious manner;
-- Support macro-economic reforms; and
-- Provide improved health care and basic education.
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U.S. citizens' claims over confiscated property in Nicaragua remains a
top bilateral issue.  After many months and much U.S. technical
assistance, Nicaragua has introduced procedures for settling claims to
more than 1,000 properties on behalf of more than 370 U.S. citizens.
The claims are valued by the claimants at over $417 million.  The claims
resolution mechanism includes an arbitration system which meets
international standards and a new compensation mechanism funded by
some of the proceeds of privatization of Nicaraguan state enterprises.
Compensation bonds denominated in Nicaraguan currency that will
maintain their value in relationship to the U.S. dollar are now being
issued.
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Relations During the Sandinista Era
The United States and the Sandinista Governments initially enjoyed
satisfactory relations based on a mutual desire to facilitate Nicaragua's
reconstruction.  Between July 1979 and April 1981, the United States
contributed $117 million in direct bilateral economic aid to Nicaragua.
Despite this, FSLN rhetoric was marked by an intense anti-Americanism
based on ideological hostility to the United States.  Sandinista support
for El Salvador's Farabundo Marti National Liberation Front guerrillas
ultimately resulted in the suspension of U.S. aid to Nicaragua.
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Two significant developments in U.S. policy toward the Sandinista
Government of Nicaragua were President Reagan's decision to provide
assistance to the Nicaraguan resistance in 1981 and the decision in 1985
to impose a trade embargo.  The steps were meant to encourage FSLN
compliance with previous promises to open and democratize Nicaraguan
society.
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In April 1984, the Sandinistas filed suit against the United States in the
International Court of Justice, a UN body, to challenge alleged U.S.
actions directed against the Sandinista Government.  The United States
did not recognize the Court's "compulsory" jurisdiction for two reasons:
Nicaragua had never accepted the compulsory jurisdiction of the Court
since the United Nations created the court in 1946, and the U.S.
believed that the dispute was more a matter of politics than international
law and should be dealt with bilaterally.  The court heard Nicaragua's
arguments without U.S. participation in the proceedings, and ruled
against the U.S. in June 1986.
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The U.S. rejected the decision and did not comply with the ruling.  In
April 1991, the Chamorro Government withdrew its claim against the
United States.  From 1982 until 1990, the U.S. provided more than
$300 million in military and non-military assistance to the Nicaraguan
Resistance with the objective of bringing democracy and political
pluralism to Nicaragua.  From 1988 until 1990, U.S. assistance was
completely non-lethal.  It was used to support the Resistance after the
1988 cease-fire period, through the 1990 elections and their
reintegration into Nicaraguan life.  The former Soviet Union and its
allies provided about $3.3 billion in military assistance to the
Nicaraguan Government from 1980-1990, at times exceeding $500
million a year.
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Principal U.S. Officials
Chief of Mission--Vacant
Charge d'Affaires--Ronald D. Godard
Economic/Commercial Officer--Paul Trivelli
Political Counselor--Robert Millspaugh
Public Affairs Officer--Steven Monblatt
Administrative Officer--Roger E. Burgess
Consul General--Kathleen Daly
Chief, USAID Mission--Janet Ballentyne
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The U.S. Embassy in Nicaragua is located at Kilometer 4.5, Carretera
Sur, Managua (tel. (505) (2) 666010).  (###)
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Travel Notes
Climate and clothing--Nicaragua's tropical climate calls for lightweight,
washable clothing.
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Customs--Passports are required for land or sea entry and for
naturalized U.S. citizens.
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Health--Medicines are usually available in Managua, though shortages
occur.  Public sanitation is lower than the U.S. standard.  The Managua
water supply is generally safe.  Food served in the better restaurants is
also generally safe.  Travelers should check latest information.  (###)
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Published by the United States Department of State -- Bureau of Public
Affairs -- Office of Public Communication -- Washington, DC -- July --
Editor:  Pete Knecht
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Department of State Publication 7772
Background Notes Series -- This material is in the public domain and
may be reprinted without permission; citation of this source is
appreciated.
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For sale by the Superindendent of Documents, US Government Printing
Office, Washington , DC 20402. (###)
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