Economy of Nicaragua
| Economy of Nicaragua | |
|---|---|
| Currency | Nicaraguan córdoba |
| Fiscal year | Calendar year |
| Trade organisations | DR-CAFTA |
| Statistics | |
| GDP |  $17.03 billion (2010)[1] |
| GDP growth | 2.80% (2010)[2] |
| GDP per capita | US$ 1,126 (2010) |
| GDP by sector | agriculture: 29.0% industry: 19.0% services: 52.0% (2008) |
| Inflation (CPI) |  3.70%[3] (2010) |
| Population below poverty line |
44.7%[4] |
| Gini index |  52.3 (1992-2007) |
| Labour force | 2.383 million (2009) |
| Unemployment | 5.9% underemployment of 46.5% (2009) |
| Main industries | chemicals, machinery and metal products, textiles, clothing, petroleum refining and distribution, beverages, footwear, wood (2009) |
| Ease of Doing Business Rank | 117th[5] |
| External | |
| Exports | $2.344 billion f.o.b. including free-trade zones (2009) |
| Export goods | coffee, beef, shrimp and lobster, tobacco, sugar, gold, peanuts (2009) |
| Main export partners | US 31.7%, El Salvador 14%, Honduras 9.3%, Costa Rica 7.2%, Canada 5.8%, Guatemala 5.5%, Mexico 4.8% (2007) |
| Imports | US$ 3.968 billion f.o.b (2009) |
| Import goods | consumer goods, machinery and equipment, raw materials, petroleum products (2008) |
| Main import partners | US 22.5%, Mexico 13.5%, Costa Rica 8.4%, Venezuela 6.4%, Guatemala 6.2%, El Salvador 4.8% (2007) |
| Public finances | |
| Public debt | 63% of GDP (2010)[6] |
| Revenues | US$1.206 billion (2009) |
| Expenses | US$1.483 billion (2009) |
| Foreign reserves | US$1.761 billion (April 2011)[7] |
| All values, unless otherwise stated, are in US dollars |
Nicaragua's economy is focused primarily on the agricultural sector. However, the country is the least developed country in Central America and the second poorest in the Americas by nominal GDP. GDP fell by almost 3% in 2009, due to decreased export demand in the US and Central American markets, lower commodity prices for key agricultural exports, and low remittance growth. Remittances are a major source of income, they are equivalent to 15% of the country's GDP, close to one million Nicaraguans had emigrated. The US-Central America Free Trade Agreement has been in effect since April 2006 and has expanded export opportunities for many agricultural and manufactured goods. Textiles and apparel account for nearly 60% of Nicaragua's exports, but increases in the minimum wage during the Ortega administration will likely erode its comparative advantage in this industry. Nicaragua relies on international economic assistance to meet internal- and external-debt financing obligations, however, foreign donors have curtailed this funding in response to November 2008 electoral fraud. In early 2004, Nicaragua secured some $4.5 billion in foreign debt reduction under the Heavily Indebted Poor Countries initiative, and in October 2007, the IMF approved a new poverty reduction and growth facility program.
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[edit] Economy
Nicaragua's economy was ravaged in the 1980s by the Contra War, which saw the destruction of much of the country's infrastructure. At the same time, the US staged an economic blockade from 1985 onward.
Following the end of the war and the defeat of the Sandinistas in the 1990 general election, Nicaragua began free market reforms, privatizing more than 350 state companies. Since then, inflation has been reduced from 33,603% to 8%, and the government's foreign debt has been cut in half. The economy began expanding in 1991 and grew 2.5% in 2001. In 2001, the global recession, combined with a series of bank failures, low coffee prices, and a drought, caused the economy to retract.
Unemployment is officially 3.8% (2006 est.), and another 46.5% (2006 est.) are underemployed. Nicaragua suffers from persistent trade and budget deficits and a high debt-service burden, leaving it highly dependent on foreign assistance — as much as 25% of GDP in 2001.
One of the key engines of economic growth has been production for export. Exports were 640 million in 2001. Although traditional products such as coffee, meat, and sugar continued to lead the list of Nicaraguan exports, the fastest growth is now in nontraditional exports: maquila goods (apparel); gold; seafood; and new agricultural products such as peanuts, sesame, melons, and onions. In 2007, exports topped 1 billion dollars for the first time in Nicaraguan history.[8] Nicaragua also depends heavily on remittances from Nicaraguans living abroad.
Nicaragua is primarily an agricultural country, but construction, mining, fisheries, and general commerce also have been expanding during the last few years. Foreign private capital inflows topped $300 million in 1999 but, due to economic and political uncertainty, fell to less than $100 million in 2001. In the last 12 years, tourism has grown 394%,[9] the rapid growth has led it to become Nicaragua's second largest source of foreign capital. Less than three years ago, the nation’s tourism budget was U.S. $400,000; today, it is over $2 million.[9] Nicaragua's economy has also produced a construction boom,[10] the majority of which is in and around Managua.
Nicaragua faces a number of challenges in stimulating rapid economic growth. An International Monetary Fund (IMF) program is currently being followed, with the aim of attracting investment, creating jobs, and reducing poverty by opening the economy to foreign trade. This process was boosted in late 2000 when Nicaragua reached the decision point under the Heavily Indebted Poor Countries (HIPC) debt relief initiative. However, HIPC benefits were delayed because Nicaragua subsequently fell "off track" from its IMF program. The country also has been grappling with a string of bank failures that began in August 2000. Moreover, Nicaragua continues to lose international reserves due to its growing fiscal deficits.
The country is still a recovering economy and it continues to implement further reforms, on which aid from the IMF is conditional. In 2005, finance ministers of the leading eight industrialized nations (G8) agreed to forgive some of Nicaragua's foreign debt, as part of the HIPC program. According to the World Bank Nicaragua's GDP was around $4.9 US billion dollars. Recently, in March 2007, Poland and Nicaragua signed an agreement to write off $30.6 million which was borrowed by the Nicaraguan government in the 1980s.[11]
The U.S. is the country's largest trading partner, providing 25% of Nicaragua's imports and receiving about 60% of its exports. About 25 wholly or partly owned subsidiaries of U.S. companies operate in Nicaragua. The largest of those investments are in the energy, communications, manufacturing, fisheries, and shrimp farming sectors. Good opportunities exist for further investments in those same sectors, as well as in tourism, mining, franchising, and the distribution of imported consumer, manufacturing, and agricultural goods. There also are copper mines in northeastern Nicaragua.
Gross Domestic Product (GDP) in purchasing power parity (PPP) in 2008 was estimated at $16.83 billion USD, and GDP per capita in PPP at $2,600 USD, making Nicaragua the second poorest country in the Western Hemisphere.[12] The service sector is the largest component of GDP at 56.9%, followed by the industrial sector at 26.1%(2008). Agriculture represents 17% of GDP and it's the largest percentage in a Central American country. Nicaraguan labor force is estimated at 2.261 million of which 29% is occupied in agriculture, 19% in the industry sector and 52% in the service sector (2008).
[edit] Agriculture and food production
| Food and agriculture | |
|---|---|
| Agricultural workers in Nicaragua | |
| Product | World Rank1 |
| Coffee, Green | 4 |
| Beans, Dry | 17 |
| Groundnuts in Shell | 30 |
| Indigenous Horse Meat | 30 |
| Plantains | 32 |
| Sesame Seed | 32 |
| Sugar Cane | 32 |
| Pineapples | 33 |
| Castor Beans | 37 |
| Cocoa Beans | 41 |
| Cassava | 48 |
| Oranges | 49 |
| Soybeans | 50 |
| 1Source: FAO (2005) Major Food and Agricultural Commodities and Producers |
Coffee became Nicaragua's principal crop in the 1870s, a position it still held in 1992 despite the growing importance of other crops. Cotton gained importance in the late 1940s, and in 1992 was the second biggest export earner. In the early 20th century, Nicaraguan governments were reluctant to give concessions to the large United States banana companies, and bananas never attained the level of prominence in Nicaragua that they reached in Nicaragua's Central American neighbors; bananas were grown in the country, however, and were generally the third largest export earner in the post-World War II period. Beef and animal byproducts , the most important agricultural export for the three centuries before the coffee boom of the late 19th century, were still important commodities in 1992.
From the end of World War II to the early 1960s, the growth and diversification of the agricultural sector drove the nation's economic expansion. From the early 1960s until the increased fighting in 1977 caused by the Sandinista revolution, agriculture remained a robust and significant part of the economy, although its growth slowed somewhat in comparison with the previous postwar decades. Statistics for the next fifteen years, however, show stagnation and then a drop in agricultural production.
The agricultural sector declined precipitously in the 1980s. Until the late 1970s, Nicaragua's agricultural export system generated 40 percent of the country's GDP, 60 percent of national employment, and 80 percent of foreign exchange earnings. Throughout the 1980s, the Contras destroyed or disrupted coffee harvests as well as other key income-generating crops. Private industry stopped investing in agriculture because of uncertain returns. Land was taken out of production of export crops to expand plantings of basic grain. Many coffee plants succumbed to disease.
In 1989, the fifth successive year of decline, farm production declined by roughly 7 percent in comparison with the previous year. Production of basic grains fell as a result of Hurricane Joan in 1988 and a drought in 1989. By 1990 agricultural exports had declined to less than half the level of 1978. The only bright spot was the production of nontraditional export crops such as sesame, tobacco, and African palm oil.
[edit] Services
The service sector was estimated to account for 56.8% of the country's GDP, and employs 52% of the active population.[12] This section includes transportation, commerce, warehousing, restaurant and hotels, arts and entertainment, health, education, financial and banking services, telecommunications as well as public administration and defense.
Tourism in Nicaragua is one of the most important industries in the country. It is the second largest source of foreign exchange for the country and is predicted to become the first largest industry in 2007.[13] The growth in tourism has positively affected the agricultural, commercial, finance, and construction industries as well.
[edit] Current Economic Outlook
Nicaragua has transformed itself into one of the safest and fastest-growing countries in Latin America. A stable, multi-party democracy, Nicaragua has ratified Free Trade Agreements with major markets such as the United States, the Dominican Republic (DR-CAFTA), Taiwan and Mexico, among others. As evidence of continuous efforts in improving the business climate, Nicaragua has been ranked favorably in a variety of independent evaluations. The 2011 Doing Business Report, published by The World Bank Group, a report that benchmarks various indicators of the investment climate in 183 nations, ranked Nicaragua as the top location in Central America in starting a business, investor protection, and closing a business. Additionally, the country improved in the following categories: ease of doing business, registering property, paying taxes, trading across borders and enforcing contracts.
[edit] Other statistics
Household income or consumption by percentage share: lowest 10%: 1.6%; highest 10%: 39.8 (1993)
Industrial production growth rate: 2.4% (2005)
Electricity - production: 2.778 billion kWh (2006)
Electricity - production by source: fossil fuel: 53.43%; hydro: 35.34%; nuclear: 0%; other: 11.23% (1998)
Electricity - consumption: 2.929 billion kWh (2006)
Electricity - exports: 69.34 million kWh (2006)
Electricity - imports: 0 kWh (2006)
Agriculture - products: coffee, bananas, sugarcane, cotton, rice, corn, tobacco, sesame, soya, beans; beef, veal, pork, poultry, dairy products; shrimp, lobsters
Exports - commodities: coffee, beef, shrimp and lobster, cotton, tobacco, beef, peanuts, sugar, bananas; gold
Imports - commodities: consumer goods, machinery and equipment, raw materials, petroleum products
Currency: 1 gold Cordoba (C$) = 100 centavos
Exchange rates: gold Cordoba (C$) per US$1 - 17.582 (2006), 16.733 (2005), 15.937 (2004), 15.105 (2003), 14.251 (2002)
Price Inflation:
[edit] See also
- Nicaragua
- Banking in Nicaragua
- Tourism in Nicaragua
- Agriculture in Nicaragua
- Economy of North America
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[edit] References
- ^ http://www.imf.org/external/pubs/ft/weo/2010/01/weodata/weorept.aspx?sy=2007&ey=2010&scsm=1&ssd=1&sort=country&ds=.&br=1&c=278&s=NGDPD,NGDPDPC,PPPGDP,PPPPC,LP&grp=0&a=&pr.x=42&pr.y=13 International Monetary Fund
- ^ https://www.cia.gov/library/publications/the-world-factbook/rankorder/2003rank.html?countryName=Nicaragua&countryCode=nu®ionCode=ca&rank=130#nu CIA: The World Factbook COUNTRY COMPARISON :: GDP - REAL GROWTH RATE
- ^ [1]
- ^ http://translate.google.com/translate?js=n&prev=_t&hl=en&ie=UTF-8&layout=2&eotf=1&sl=auto&tl=en&u=http%3A%2F%2Fwww.kaosenlared.net%2Fnoticia%2Fpobreza-extrema-desigualdad-social-disminuyeron-nicaragua&act=url
- ^ "Doing Business in Nicaragua 2010". World Bank. http://www.doingbusiness.org/ExploreEconomies/?economyid=141. Retrieved 2010-08-20.
- ^ http://www.indexmundi.com/nicaragua/public_debt.html Nicaragua Public Debt, IndexMundi
- ^ "International Reserves and Foreign Currency Liquidity - NICARAGUA". International Monetary Fund. 16 May 2011. http://www.imf.org/external/np/sta/ir/IRProcessWeb/data/nic/eng/curnic.htm. Retrieved 31 May 2011.
- ^ Monstersandcritics.com Close scrutiny after President Ortega's first 100 days
- ^ a b Rcalvet.com Government Gets Tough on Environmental Scofflaws
- ^ CostaRicaPages.com Nicaragua Information
- ^ english.people.com.cn Poland forgives nearly 31 million dollars of debt owed by Nicaragua
- ^ a b CIA - The World Factbook - Nicaragua
- ^ Canal2tv.com Turismo en Nicaragua: aportes y desafios parte I
- ^ a b http://www.reuters.com/article/economicNews/idUSN0930941520090110
[edit] External links
- U.S./Nicaraguan embassy economic reports
- Labor Conditions in the Nicaraguan Sugar Industry A 2005 study by PASE and the International Labor Rights Fund
- cia.gov factbook on Nicaragua
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