Nicaragua has an agricultural based economy, with recent importance placed on textiles, the service sector and other small industry.
In 2004, Nicaragua’s exports reached a new high of $755.6 million in apparel, bananas, coffee, gold, lobster, meats, peanuts, sesame seeds, shrimp and sugar.
But tourism has become the country’s number-one source of foreign income in recent years, generating $170 million in 2004.
Nicaragua’s Gross Domestic Product in terms of purchasing power parity last year was $11.6 billion, with a 4.2% economic growth rate in 2004, the highest in Central America. The GDP is composed of three sectors: agriculture (29%), industry (25%) and services (48%).
The inflation rate has dropped in recent years from double digits in the late ‘90s, to 53% in 2004.
Nicaragua was also helped enormously last year when it was granted $4.5 billion in debt relief (approximately 73% of the country’s total external debt) by the International Monetary Fund (IMF) and the World Bank as part of the Heavily Indebted Poor Countries (HIPC) Initiative. Several other countries have also pardoned Nicaragua’s bilateral debts in the last year.
Nicaragua’s currency, the Córdoba, is set at a fixed depreciation rate of 6% a year against the Dollar. At this book goes to press, the exchange rate is 16.9 Córdobas to 1 U.S. dollar. Unemployment in Nicaragua is over 40%, and the workforce is 1.5 million strong. Demographically, Nicaragua is a very young country. Some 63% of the population is 25 years old or younger.
The Nicaraguan workweek is 48 hours, and Nicaragua has the lowest labor costs in all of Central America, with a $.42 hour mimum wage and an average market wage of $.67 hour.
The Nicaraguan economy has also opened up to privatization in recent years, privatizing its electric utilities, telecommunications and insurance sector.
Overall, Nicaragua’s economy is on the mend. And it only promises to get stronger with its generous incentives for investing in tourism or free trade zones, and the Central American Free Trade Agreement (CAFTA) and Central American Customs Union.
At press time, The Nicaraguan Tourism Institute (INTUR) was in the process of redrafting its tourism incentive law (Law 306), with the intention of making it the most aggressive incentive law in all of Latin America.
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