This is an excerpt from my PolySci paper this past semester. I’ll fix it later, but here’s some basic details about the debt, poverty and role of the USA in the land of lakes and volcanoes. Copyright is all mine!
Nicaragua has a long history with the United States, dating back to the 1830s when, along with the UK, the U.S. became interested in building a transoceanic pathway through the country (Booth, 69). Globalization in the 1870s then influenced Nicaragua’s economic structure by focusing on coffee as a main export (Booth, 70).
However, America felt the need to specifically handle the course of progress in Latin America, especially during the Cold War years when they were concerned about the spread of Communism. The late 1940s and early 1950s saw the US continue to invest economic aid into the country as well as enforce their power upon Nicaragua. The Organization of American States (OAS) was created during this time to make sure certain countries complied with US standards, which was equivalent to the US having economic and military supremacy over the entire country (Vanderlaan, 10).
The imperialism and dabbling of the US into Nicaraguan affairs continued into the twentieth century, with their influence and involvement in the Sandinista War and its roots with Sandino and Somoza. Augusto Sandino, a revolutionist and “local guerilla-patriot,” became resistant to US military authority and led the struggle against them (Booth, 71). Sandino rebelled during the years from 1927 to 1933 in order to improve the lives of the poor living in rural areas and to put an end to interventions from the US and other foreign countries (Andrews). Sandino was opposed by the US, and the government’s creation of the National Guard in conjuncture with the appointment of Anastasio Somoza García, resulted in the assassination of Sandino and the beginning of the Somoza family dictatorship (Booth, 71).
This dictatorship lasted through three generations and over forty years, in which the Somoza family relied on the help of the United States and the Nicaraguan National Guard. This reliance was based on aid, which was sent from the US to Nicaragua in order to help with economic and social projects by programs like the OAS. However, it was clear that Somoza was pocketing the money for himself and his followers, leaving the Nicaraguan people helplessly poor and setting up the country for years of debt (Booth, 72).
This reign of Somoza’s absolute power resulted in the Sandinista war. The Sandinista National Liberation Front (FSLN), among others, opposed the characteristics that Somoza employed and set on the country, retaliating against the dynasty with kidnappings and guerilla warfare. This revolution lasted 18 years through the “revolutionary triumph of 1979” (Gobat, 274). The Sandinistas tried to make major changes to the Nicaraguan landscape in the following years, including an increase in wages, more health benefits, and subsidies on food prices, even as Reagan openly sought the dismissal of the Sandinistas from Nicaraguan government and supported its opposition, the Contras (Booth, Solaun). The Sandinista war, and the embargo placed upon Nicaragua in 1985 also added to the debt Nicaragua faced, as exports and infrastructure were being destroyed and not bought (Vanderlaan). Although they fought for change, the Sandinistas fell short, and relied heavily on foreign aid from countries such as the Soviet Union to help in revitalizing their economy, however the impact resulted in the government having to cut subsidies on food and devalue its currency to remain in good standing with foreign donors (Booth, 85).
Debt. This war and its rippling affects resulted in the drastic amount of debt Nicaragua currently has. From its history and the devastating aftermath of the Sandinista war, Nicaragua was ransacked with thousands upon thousands of deaths and an economy shattered by revolution. These, along with the withdrawal of Soviet aid and declining investments, pushed an increase in inflation of consumer prices (which rose to a striking 33,602 percent in 1987), resulting in item shortages and a lack of social services (Booth, 83).
Not only were previous historical engagements to blame for widespread poverty, but also natural disasters such as Hurricane Mitch and the earthquake of 1973, which put strain on Nicaragua’s economy and social livability. Debt also accumulated due to increases in petroleum and the world’s more recent economic downturn, as well as the implementation of free trade agreements through the likes of the US-Central American Free Trade Agreement (CAFTA).
By 2007, the public’s debt was 87 percent of total GDP, a strikingly high number for a country where almost half are living on less than a dollar a day (WFact). The IMF and World Bank decided to try and help Nicaragua and other indebted countries with the Highly Indebted Poor Countries Initiative (HIPC) and their Poverty Reduction Strategy Papers (PRSP). HIPC started in 1996 in order to “ensure deep, broad and fast debt relief and thereby contribute to toward growth, poverty reduction, and debt sustainability in the poorest, most heavily indebted countries” (World Bank). The PRSPs are a set of economic, social and political amendments to help foster economic growth and alleviate poverty and were used to help support the HIPC initiative. These two recent programs have contributed to trying to relieve Nicaragua of its exceptional debt yet it is still a country deep with need and poverty.
Update: Nicaragua’s history is lengthy and complex. After taking a class in Spanish in Nicaragua on the subject, I’ve come to realize how detailed and interesting it is. Please, if you are at all interested, let me know and I can give you some great references to check out, as this excerpt does not even begin to touch on anything.