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This article is part of the Tobacco portal on Sourcewatch funded from 2006 - 2009 by the American Legacy Foundation.

Nicaragua is a Central American country located between Costa Rica and Honduras. [1]

Ambassador Robert Callahan arrived to Managua, Nicaragua, at the beginning of August 2008.


Nicaragua, one of the Western Hemisphere's poorest countries, has low per capita income, widespread underemployment, and a heavy external debt burden. Distribution of income is one of the most unequal on the globe. While the country has progressed toward macroeconomic stability in the past few years, GDP annual growth has been far too low to meet the country's needs, forcing the country to rely on international economic assistance to meet fiscal and debt financing obligations. Nicaragua qualified in early 2004 for some $45 billion in foreign debt reduction under the Heavily Indebted Poor Countries (HIPC) initiative because of its earlier successful performances under its International Monetary Fund policy program and other efforts. In October 2005, Nicaragua ratified the U.S.-Central America Free Trade Agreement (CAFTA), which will provide an opportunity for Nicaragua to attract investment, create jobs, and deepen economic development. High oil prices helped drive inflation to 9.6% in 2005, leading to a fall in real GDP growth to 4% from over 5% in 2004."
–CIA The World Factbook, updated April 20, 2006.

For up to date official economic indicators go to [http// Banco Central de Nicaragua] Official inflation figures have little credibility at grass roots where people have seen food costs double over the last two years along with costs of basic building materials prices. The main problem ordinary people face is the exorbitant rise in energy costs. Prices of liquid gas for cooking and fuel for vehicles have more than doubled in price over the last two years. Inflated electricity bills from the private distribution monopoly of Union Fenosa make the current electricity cuts even harder to bear. Public transport costs in Managua are susbsidised thanks to preferential fuel supplies from Venezuela under the Bolivarian Alternative for the Americas (ALBA) agreement between Nicaragua and Venezuela.

The failure of the neoliberal model imposed on Nicaragua through the 1990s and into the current century is nowhere more apparent than in the energy sector. Generating capacity was sold off cheap to foreign energy companies who failed to invest in plant. Now Nicaragua is unable to generate sufficient energy because about one third of generating capacity is out of action for maintenance or repairs any any given time. Only Venezuela's aid - in the form of 60Mw of generating capacity prevents the current situation from being even worse than it is. The current FSLN-led government has scheduled increased capacity for later in the year. But it will not be until 2008 that the programmed capacity increase will make any impact.

The other vital economic sector in need of investment is that of the small and medium agricultural producers. The government is trying to activate that sector this year with credits worth around US$10m for small and medium producers grouped into cooperatives. This measure is made possible by support from Venezuela's Banco de Desarrollo Social. In addition the government is implementing a programme called Hambre Cero aimed at providing 75,000 low income families with milch cows, pigs, chickens, seeds and technical support. Much attention is focused on whether Nicaragua can successfully integrate its membership of the Bolivarian Alternative for the Americas (ALBA) with the commitments implied by the Central American Free Trade Agreement inherited from the previous government of Ing. Enrique Bolanos.

Nicaragua's oil industry


Before the Spanish Conquest Nicaragua was settled by Chibcha-speaking indigenous peoples and later by peoples speaking Nahuatl. Colombus sailed to the Nicaraguan Atlantic Coast in 1502. The Conquistador Gil Gonzalez led an expedition of conquest to Nicaragua from Panama in 1522 but was defeated by a coalition of the indigenous tribes. Hernandez de Cordoba established Granada on the great Lake Nicaragua (Cocibolca) in 1523 and Leon on the Pacific Coast in 1524. In 1568 Nicaragua was absorbed into the Captaincy-General of Guatemala.

Over on the Atlantic Coast, indigenous peoples resisted the Spanish more effectively with support from the British who assisted the dominant Miskito peoples to establish an independent "kingdom" of the Mosquitia in the !7th Century. Nicaragua's history was characterised by sporadic indigenous uprisings against Spanish rule throughout the Colonial period. From 1811 onwards the local colonial elite itself took up arms against Spain. Nicaragua declared independence in 1821, joining the United Central American Provinces from which it seceded in 1838.

The CIA The World Factbook, (updated April 20, 2006) puts subsequent history thus:

"The Pacific coast of Nicaragua was settled as a Spanish colony from Panama in the early 16th century. Independence from Spain was declared in 1821 and the country became an independent republic in 1838. Britain occupied the Caribbean Coast in the first half of the 19th century, but gradually ceded control of the region in subsequent decades. Violent opposition to governmental manipulation and corruption spread to all classes by 1978 and resulted in a short-lived civil war that brought the Marxist Sandinista guerrillas to power in 1979. Nicaraguan aid to leftist rebels in El Salvador caused the US to sponsor anti-Sandinista contra guerrillas through much of the 1980s. Free elections in 1990, 1996, and again in 2001, saw the Sandinistas defeated. The country has slowly rebuilt its economy during the 1990s, but was hard hit by Hurricane Mitch in 1998."

The CIA Factbook history conveniently excludes the history of US intervention in Nicaragua. Beginning shortly after the failure of the Central American Federation in 1838 US attention focused on Nicaragua's strategic position between the Pacific and the Atlantic. Nicaragua has been a victim of its geography ever since. In 1848 to protect its interests on the Atlantic Coast Britain occupied San Juan de Nicaragua, declaring it Greytown after the governor of Jamaica. Britain and the United States divvied up their interests in Nicaragua in the Bulwer-Clayton treaty of 1850. In 1851 Cornelius Vanderbilt won a transit deal from the Nicaraguan government allowing him to ship around 1000 passengers a month from the US Atlantic seaboard to California.

In 1855 William Walker, filibuster and soldier of fortune from Tennessee, entered Nicaragua employed as a mercenary by local caudillos (chieftains), and in 1856, he tried to establish a slave state there. In the same year his forces were decisively defeated at the battle of San Jacinto where one of Nicaragua's national heroes, Andres Castro, is said to have killed a filibustero leader with a stone thrown at the pistol wielding Yankee's head. Walker was finally routed at the battle of Rivas in 1857.

Subsequently the country was run by Conservative politicians representing the landed oligarchy until 1893. The period saw Nicaragua's decisive integration into the world economy as a major coffee producer. The 1880s witnessed rapid but grossly unequal economic progress in the country. In 1881 a major indigenous uprising took place in Matagalpa in a revolt over the imposition of forced labour on indigenous peoples by the land owning elite. This period also saw the emergence of Ruben Dario, Nicaragua's national poet who was later, as one of its great modernists, to transform Spanish literature.

In 1893, an internal Conservative conflict turned into open armed conflict in which the Liberal José Santos Zelaya seized power. Zelaya quickly moved to promulgate the separation of Church and State, divorce, free education and the abolition of church tithes. Zelaya ruled as a dictator. In 1894 he finally recovered the Atlantic Coast from British influence bringing it under control of the central government in Managua. He survived in power through a civil war in 1906 until 1909, when he resigned faced with an ultimatum from the United States government, exasperated at Zelaya's refusal to abandon plans for a canal to rival the one in Panama.

The US government intervened in Nicaragua in order both to guarantee the power of its Conservative proxies there and to enforce the outrageously favourable - for the US - terms of a US$1.5m loan from New York banks. Two On September 1912, 2,500 US Marines disembarked in Nicaragua's Pacific port Corinto. They faced fierce but ultimately futile resistance from Nicaraguan patriots, and General Benjamin Zeledon fought to the death at Masaya. The Marines would enforce US interests in Nicaragua for over 20 years.

It was not until 1924 that the Nicaraguan government was able to recover the country's National Bank from the hands of New York shareholders who had bled local producers dry with high interest rates. The early 1920s were years of intractable political crisis finally exploding in 1926 into a civil war between the forces of the legitimate President Juan Bautista Sacasa and a Conservative imposed usurper. Since Sacasa's forces had been supplied from Mexico the US government declared US interests in Panama and Nicaragua to be at risk from the "Bolshevism" of Mexico's President Plutarco Calles.

In January 1927, 3,000 marines returned to Corinto. US Defence Secretary Henry Stimson negotiated a deal with Sacasa's General Moncada, known as the "Pacto Espino Negro", in effect yielding to all the US government's demands. In response Augusto Cesar Sandino declared his decision to fight on against the US forces, saying "I am not prepared to hand over my weapons just because others do so. I'd rather die with the few who accompany me because it is preferable to die as rebels than to live as slaves." So began Sandino's guerrilla war against the United States which ended in his assassination by the traitor Anastasio Somoza.

Sandino formed the Army in Defence of National Sovereignty from hundreds of unarmed impoverished rural workers in the Segovias area of northern Nicaragua. At its peak his army had around 2,000 fighters facing as many as 10,000 US marines and troops of that Nicaraguan government's army and a dozen airplanes of the US army's air force. The US marines were notorious for their savagery, inherited from the US army's campaigns of colonial conquest against Mexico and native North American indigenous peoples and from campaign experience in the wars in Cuba and the Philippines. Even so, by 1933 Sandino's forces had fought the US occupation to a standstill. The Marines left Nicaragua in January of that year leaving behind them a well armed Nicaraguan National Guard under the sinister figure of Anastasio Somoza.

Sandino laid down his arms as part of a negotiated settlement but was assassinated during negotiations in Managua by Anastasio Somoza, quite certainly acting on the orders of US ambassador Arthur Bliss Lane. Somoza quickly installed himself as a dictator, sustaining himself in power through a mixture of terror, bribery and intimidation until his own assassination in 1956 by national hero Rigoberto Lopez Perez. Somoza was notoriously referred to by Franklin D. Roosevelt as "a son-of-a-bitch, but our son-of-a-bitch". In that role he assisted in the the CIA overthrow of President Arbenz in Guatemala in 1954. He was succeeded by his sons Luis and Anastasio, Jr.

The Somoza gangster dynasty continued to rule Nicaragua either directly or through presidential proxies through the 1960s and into the 1970s - always with the unconditional support of the United States government. In 1961 Carlos Fonseca Amador founded, with a few other comrades, the Sandinista Front for National Liberation. Resistance to the Somoza dictatorship increased dramatically in the early 1970s following the horrific earthquake of 1972 and the economic problems caused by the oil price shock of the time. In 1974 an FSLN commando trook over the national legislature forcing the dictatorship to release numerous political prisoners. From then on armed resistance grew steadily until insurrections throughout the country in 1978 lead to the final offensive in 1979. Anastasio Somoza fled the country in July and on the 19th of that month the FSLN entered Nicaragua's capital Managua in triumph.

The FSLN consolidated its power after a short lived attempt at working with right wing and centre politicians in a government of National Reconstruction. In response, the US government under President Reagan organized a terror war and economic blockade against Nicaragua that began in 1981. With the US funding the so-called Contra terrorist war, the FSLN government was forced to rely on support principally from the Warsaw Pact countries, although European and other countries also assisted with substantial aid. Elections regarded as free and fair by most observers returned the FSLN to power with over 60% of the vote.

In 1986 the International Court of Justice, ruling in Nicaragua's favour, condemned the US government for organizing and funding the terror war against Nicaragua. The court ordered the US government to pay an indemnity of US$17bn, something the US government has never complied with. The US government used its veto in the UN to defeat moves to try and enforce the ICJ's ruling. Despite the war the FSLN government pushed through important political initiatives. In 1987, after extensive national grass roots consultations a new constitution was promulgated. In the same year the Atlantic Coast Autonomy project was ratified, the first of its kind in Latin America.

Internationally, the FSLN worked with regional governments - the Contadora group - to promote the Esquipulas peace process. This culminated in the Sapoa accords of 1988 which finally led to peaceful elections in 1990 with support from the United Nations and Organization of American States. The FSLN lost those elections to Violeta Barrios de Chamorro, the widow of a leading journalist assassinated by the Somoza dictatorship. Violeta Chamorro was merely a figurehead for a government run by the local oligarchy who greedily implemented the standard neo-liberal economic policy programme, privatization of State resources, cuts in government spending on health, education and other services, and deregulation of local markets.

The 1990 election marked the beginning of a notoriously corrupt decade from whose effects Nicaragua is still struggling to emerge. The FSLN lost the chaotic 1996 elections to Arnoldo Aleman. In 1998 the country was devastated by Hurricane Mitch at a cost put at over US$3bn to the regional economy. Politically, the period was characterised by division and instability but also an impressive effort at national recononcilitation after the war of the 1980s which cost 50,000 dead and many more wounded and left with disability.

In 2001, the Liberal Alliance again won the presidential elections, characterised by blatant intervention from the US government, under Ing. Enrique Bolaños. Bolaños quickly turned on his former ally Arnoldo Aleman forcing him to give up his parliamentary immunity and face charges of corruption. Aleman was convicted and sentenced but remained a powerful national political figure running the Constitutional Liberal Party from his hacienda where he served his sentence under house arrest on medical grounds.

Bolaños administration was paralysed for its last three years because he had insufficient support in the National Assembly to push through a legislative programme designed to deepen the effects of neo-liberal ideology on Nicaragua's political economy. The main event of note during the Bolaños administration was the ratification in 2005 against much opposition of the Central American Free Trade Agreement and the criminalization of therapeutic abortion in the run up to the election in 2006.

By 2006 the FSLN had reorganized itself once more around the candidacy of Daniel Ortega as part of the Convergencia Nacional coalition with former Contra leader Jaime Morales as his Vice-Presidential candidate. With a divided right-wing the FSLN won the election returning to power in January 2007 after 17 years. Among the first measures taken by the new government was to abolish all charges for education and to make health services more accessible to people on low incomes. In foreign policy the new administration immediately signed cooperation agreements as part of the Bolivarian Alternative for the Americas (ALBA) with Venezuela, Bolivia and Cuba.

The main challenges facing the country now are to overcome the legacy of 17 years of desperate poverty resulting from Washington Consensus economic policies, to completely overhaul its energy infrastructure and to integrate its relations with Venezuela, Cuba and other anti-imperialist countries into those it enjoys with regional allies of the United States government such as Mexico and its Central American neighbours.

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