A Brief History of Nicaragua 

Nicaragua has always been an agricultural economy. Before the 1979 revolution, most of the productive farmland was owned by a handful of very wealthy landholders.

That said, Nicaragua’s GDP (gross domestic product, the total of goods and services produced) was among the highest in Central America.

After Somoza fled in 1979, the Sandinistas implemented the promise of confiscating these large farms and redistributing them among their supporters. Almost immediately, the GDP crashed. This was partly because private capital available to the large farmers dried up. But it was also due to the inefficiency of breaking the farms into smaller ones, and the disappearance of tens of thousands of managers and professionals that fled the country and resettled in the US, Costa Rica, and other Central American countries.

On the positive side, the ascendency of the Sandinistas was a welcome event for Russia and Cuba, which began sending foreign aid to the tune of half a billion dollars a year to buck up the declining economy.

Things were bad and getting better when, three years later, the US-supported counterrevolution began. Although the Contras (as they were called) were more interested in trafficking cocaine than fighting Sandinistas, the fighting that was done was an expense the Sandinista government could not afford.

Between 1977 (the year the Sandinista insurrection began) and 1989, when free elections returned the country to a democracy, the GDP declined by 33% and exports fell by half while the population increased by 30%. The purchasing power of agricultural wages – the most common form of income in this agrarian land – dwindled to one-fifth of its former level.

As for inflation: At the beginning of the Sandinistas’ rule in 1979, the córdoba was pegged at 10 to the dollar. By February 14, 1987, inflation was in the triple digits and there were five discrepant official rates of exchange. On the black market, córdobas were 40,000 to the dollar. To “fix” that, the government instituted new bills with familiar faces but different colors, exchanging them for old ones at a rate of 1 to 1,000.