Nicaragua’s tumultuous political history reflects the dramatic impacts that differing perspectives on property rights and resource governance can have on the structure and performance of societies and economies. The Somoza regimes that governed Nicaragua from 1936 to 1979 emphasized the primacy of private property rights and the pursuit of an export market-oriented, large-scale commercial agriculture. These policies resulted in an economy in which rural land ownership was concentrated in the hands of relatively few Nicaraguans who operated farms producing coffee, cotton, sugar, tobacco, and beef for export, largely to the United States. This success, however, was accompanied by high rates of rural landlessness, low productivity in the small-farm food sector, and the emergence of stark inequalities of income and opportunity within the Nicaraguan population. The Sandinista government (1979–1990) reversed these policies, expropriating large landowners’ property for redistribution to cooperatives and smallholders and for use as state farms oriented toward food production for domestic markets. This move toward national self-sufficiency – combined with a reorientation of trade patterns toward Eastern Europe, Cuba, and other socialist countries – was more inclusive but did not provide a path to more equitable prosperity. Incomes declined and poverty levels climbed throughout the 1980s. During its seven- year tenure (1990–1997), the democratically elected government of Violeta Chamorro attempted to chart a middle path by adopting policies that protected the rights of land reform beneficiaries while also recognizing the rights of the landowners dispossessed by the reforms. These competing policies resulted in a plethora of competing claims, undermined land tenure security, and limited much-needed investment in the agriculture sector.
Successive Nicaraguan governments have made efforts to strike the appropriate balance between (1) promoting greater investment in economic growth through private ownership and management of property, especially agricultural lands; and (2) realizing greater social justice, including provision of more equitable and secure access to land by the poor and vulnerable. Some progress has been made. However, Nicaragua remains a highly inequitable lower middle-income economy, with the lowest 20% of the population holding less than 4% of national income and 39% of rural households estimated to be landless. Poverty is largely a rural phenomenon, with two-thirds of the rural population living below the poverty line.
External support is critical to both the Government of Nicaragua (GON) and to the prospects of poor, rural Nicaraguans, especially those indigenous groups living in the thinly settled and remote areas of the Atlantic coastal region. Donors provided an average of 18% of Nicaragua’s Gross Domestic Product (GDP) as official development assistance from 2000–2008, down from a high of 72% in 1991. This official development assistance constitutes a significant share of the government’s budgets in key sectors, including water, environmental protection, and health. External support also comes through private channels. Remittances from Nicaraguans living abroad, largely in Costa Rice and the US, are estimated to supplement the incomes of 40% of Nicaraguan households, with over US $1 billion flowing into the country in 2008. In addition, the US-Central American Free Trade Agreement (CAFTA-DR) provides expanded opportunities for Nicaragua to export agricultural, fisheries, and manufactured products to the United States.
Donor governments and international financial institutions have explicitly supported continued strengthening of the property rights systems in Nicaragua, funding several projects for land administration, titling, and the regularization of documents regarding land rights over the last two decades. The process is slow, however, and most Nicaraguans still lack clear tenure rights. Donors and international environmental organizations have also contributed to conservation of the forest and biodiversity resources of Nicaragua with substantial funding and have worked to ensure the rights of indigenous groups in the Atlantic coastal region. Disaster recovery assistance has also been provided, particularly after Hurricanes Mitch and Felix.
With such support, Nicaragua’s economy has made slow but fairly steady progress since the late 1990s. Analysts point out, though, that Nicaragua can only increase its economic competitiveness – and jobs and incomes for the poor – if the government directs greater attention to agricultural modernization and the resolution of continued uncertainties regarding land. And others note that the unique and extensive environmental resources of Nicaragua – its forest resources, in particular – may be irreversibly threatened by illegal logging and unsustainable uses for agriculture and ranching. Mining operations in some areas have also resulted in deforestation and in water contamination.
National and local leadership face the challenge of developing a vision for Nicaragua’s future that is shared by the majority of the population, provides for their inclusion in the economy, and also generates a path of economic progress sufficient to pull them out of poverty. There is broad consensus that more secure rights to land and water, sustainable approaches to utilization of Nicaragua’s abundant natural resources, and a structure of democratic governance that ensures fair and equitable outcomes for the population as a whole are all needed to realize this vision. Donors and international organizations can help to support this vision, but only the political leaders of Nicaragua can develop the policies and institutions that will make its achievement possible.