Economy of Nicaragua, Currency

Nicaragua's economy is very active and has experienced great changes during the past decade or so. As the country is under-developed, it is perfect for investment - particularly in the tourism and industrial sector. Nicaragua's government has been exerting itself to improve the economic situation and remove growth barriers.

Nicaragua’s economy was truly a phoenix emerging from the ashes. Inflation at one stage was at over 10,000%, but then it slowly evened out to 10%. Foreign investment has increased from nil to greater than US$ 10 million. The cause behind Nicaragua’s past economic problems stemmed from the earthquake of 1972 as well as the rule of the Sandinista regime. Nicaragua’s economic situation improved dramatically with the 1990 election of Violeta Chamorro and the establishment of a democracy. GDP (Gross Domestic Product) rates reached peak and foreign investment returned to make use of the country’s commercial potential. The majority of potential growth lies in the agricultural sector. However, great potential also exists in the following sectors: energy generation, tourism, export manufacturing, mining and construction, as well as the sale of consumer goods (e.g. Cars and computers). Due to this, Nicaragua was set to become the Americas’ fastest growing country from an economic standpoint.

Nicaragua’s economy was also boosted by the fact that it became a member of the CACM (Central American Common Market). As of 1999, a free-market has been set up in Central America. This means that the country no longer has tariff restrictions, borders or barriers. Nicaragua is in a great geographic location to be extensively used.

Despite the expansive growth in Nicaragua’s economy that took place after the new form of government came in, Nicaragua remains one of the poorest countries in the region and faces issues such as unemployment, low per capita income and great foreign debt. In recent years the annual growth on Nicaragua’s GDP has been very low. As of 2005 the GDP growth rate was at 4% and the inflation rate on consumer prices was at 9.6%. At the beginning of 2004 Nicaragua received a US$ 4 billion reduction in foreign debt through the assistance of the Heavily Indebted Poor Countries program. Nicaragua’s debt, however, still remains high. By putting certain agreements into action, Nicaragua’s economy is working towards improvement in the future.