Wayzata World Factbook 1995/World Factbook - 1995 Edition - Wayzata Technology (1995).iso/mac/text/Build/orig BACKGR/BNOT0079.TXT

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National Trade Data Bank
ITEM ID     : ST BNOTES NICARAGU
DATE        : Oct 28, 1994

AGENCY      : U.S. DEPARTMENT OF STATE
PROGRAM     : BACKGROUND NOTES
TITLE       : Background Notes - NICARAGUA

Source key      : ST
Program key     : ST BNOTES
Update sched.   : Occasionally
Data type       : TEXT
End year        : 1993
Date of record  : 19941018
Keywords 3      :
Keywords 3      : | NICARAGUA

BACKGROUND NOTES:  NICARAGUA
PUBLISHED BY THE BUREAU OF PUBLIC AFFAIRS
US DEPARTMENT OF STATE

JULY 1993
Official Name:  Republic of Nicaragua

PROFILE

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.

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%.

Government
Type:  Republic.  Independence:  1821.
Constitution:  Passed by the Sandinista-controlled National
Assembly and signed January 9, 1987.

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.

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.

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.

Flag:  Two blue horizontal bands separated by a central white
band with encircled triangle.

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.

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.

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.

Industry (26% of GDP and 19% of work force):  Types--
processed food, beverages, textiles, chemicals, petroleum, and
metal products.

Service (50% of GDP and 45-47% of work force): commerce,
government, transportation, banking, energy and water.

Natural Resources: gold, silver, copper, tungsten, lead, zinc,
timber, fish.  Land use:  pastures and meadows 43%, forest and
woodland 35%, arable land 9%.

Exchange rates (January 1993): Official--6 Cordoba Oro=U.S.$1.

Economic aid received, multilateral and U.S.:  U.S. (FY
1992)--$185 million.  Multilateral (1992 )--$642 million.


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.

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.


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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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).

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.


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.

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.

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.

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.

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.

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.

Principal Government Officials
President and Minister of Defense--Violeta Barrios de Chamorro
Vice President--Virgilio Godoy de Reyes

Ministers
Presidency--Antonio Lacayo
Foreign Affairs--Ernesto Leal  Sanchez

Ambassador-designate to the U.S.--Roberto Mayorga
Ambassador to the OAS--Jose Antonio Tijerino
Ambassador to the UN--Vacant

Nicaragua maintains an embassy in the United States at 1627 New
Hampshire Avenue NW., Washington, DC  20009 (tel. [phone]).


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.

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.

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.

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%.

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.

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.

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.

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.

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.

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.

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:

--  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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.


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.

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.

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).


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.

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.


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:

-- 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.

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.

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.

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.

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.

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.

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

The U.S. Embassy in Nicaragua is located at Kilometer 4.5,
Carretera Sur, Managua (tel. (505) (2) 666010).


Travel Notes
Climate and clothing--Nicaragua's tropical climate calls for
lightweight, washable clothing.

Customs--Passports are required for land or sea entry and for
naturalized U.S. citizens.

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.


Published by the United States Department of State -- Bureau of
Public Affairs -- Office of Public Communication -- Washington,
DC -- July -- Editor:  Pete Knecht

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.

For sale by the Superindendent of Documents, US Government
Printing Office, Washington , DC 20402.