Nicaragua was one of the poorest countries in the Western Hemisphere in 1992, with a per-capita gross domestic product (GDP) estimated at approximately US$425. In real terms, per-capita income was almost half of what it had been in 1981. The country's low living standards are reflected in nutrition and housing data. In 1989 each Nicaraguan consumed 1,524 calories and 44 grams of protein a day--well below minimum recommended allowances. Fewer than one in five urban households had sufficient income to purchase a minimum "market basket," as defined by the government. In the mid-1980s, 55 percent of urban houses and 67 percent of rural houses consisted of a single room; nearly half lacked drinking water and plumbing. The national housing deficit, according to a 1990 estimate, was 420,600 units.
A 1985 government study classified 69.4 percent of the population as poor because they were unable to satisfy one or more of their basic needs in housing, sanitary services (water, sewage, and garbage collection), education, and employment. The defining standards for this study were set quite low. For example, housing was considered substandard if it was constructed of discarded materials with dirt floors or if it was occupied by more than four persons per room. Predictably, the poverty rate was higher in rural areas (85.9 percent) than in urban areas (54.8 percent). Regionally, the highest rate was recorded in the two eastern autonomous regions on the Caribbean coast (94.5 percent) and the lowest in urban Managua (49.6 percent).
Conditions in Nicaragua have fluctuated widely with the economic and political upheavals of recent decades. In the years from 1950 to 1975, real GDP per capita more than doubled, driven by the rapid growth in exports of coffee, cotton, and beef. Capital generated by agro-exports contributed to the development of a thriving industrial sector. In the three decades ending in 1980, the urban population expanded from 35 percent to 53 percent of the total population.
The benefits of this remarkable period of economic expansion have been unevenly distributed, however. Precise data are not available, but local observers have noted that the middle class blossomed and many new fortunes emerged during these growth years. Some benefits did flow to the lower class. For example, in the 1950s and 1960s, primary school enrollment grew 400 percent. Infant mortality, a significant indicator of social well-being, declined from 167 deaths per 1,000 live births in the period from 1950 to 1955 to 100 per 1,000 in the years from 1970 to 1975. Despite these gains, however, Nicaragua's school enrollment and infant mortality statistics remain poor by regional standards. The distribution of income in the 1970s was highly skewed, probably more so than it had been in the past: 30 percent of personal income went to the richest 5 percent of households, but only 15 percent went to the poorest 50 percent. Furthermore, some of the poorest Nicaraguans were the direct victims of economic development. As agro-export production expanded in the Pacific lowlands and the central highlands, thousands of peasants were pushed off their land, many of them to be converted into lowwage , seasonally employed agricultural laborers. Between 1965 and 1975, the GNP and the number of children under five years of age suffering from malnutrition both doubled. Clearly, many Nicaraguans were getting poorer as their country grew richer.
The Sandinista revolution brought a new cycle of upheaval to Nicaraguan society. The 1978-79 insurrection that toppled the Somoza regime left 30,000 to 50,000 people dead, a large population homeless, several cities devastated by government bombing, and extensive damage to the economy, including the destruction of much of Managua's modern industrial district. After they assumed power, the Sandinistas reversed the national priorities established under the Somozas. Their prime policy objective in the early years was to promote the welfare of the poor majority; national economic growth was a secondary concern. Government policy in areas from land reform and nutrition to health and education was strongly redistributive. In the early 1980s, generous spending on social programs was sustained by a relatively healthy economy and high levels of foreign aid from both Western and Soviet bloc countries.
In the late 1980s, however, the resources available for social programs declined as foreign aid dried up, the economy floundered, and war with the Contras (short for contrarevolucionares) compelled the government to redirect spending toward national defense. Living standards sank abruptly during this period. By the end of the decade, the average real wage had dropped to less than 10 percent of its 1985 value, nearly half the labor force was unemployed or underemployed, and the poverty rate was rising. Infant mortality, which had declined sharply in the early years of Sandinista rule, began to rise again. The death rate per 1,000 live births was 97 in 1978, the last full year of the Somoza regime; 63 in 1985; and 72 in 1989. For several years, the Contra war disrupted social and economic life across the country, but especially in contested zones like northeastern Nicaragua and the northern central highlands. In such areas, Contra forces targeted both economic and social infrastructure, including agrarian reform farms, schools, and health facilities. More than 20,000 Nicaraguans died in the fighting, and thousands of others were left maimed or crippled.
Conditions improved after fighting largely stopped in 1988. Democratic elections, followed by peaceful transition to a new government in 1990, resulted in the lifting of the United States trade embargo imposed in 1982, renewal of United States aid, and the removal of informal barriers to international credits. The Nicaraguan economy was, however, slow to respond to these changes. GDP continued to decline in 1990, and no growth was recorded in 1991. Despite making deep cuts in military forces, the new government did not have the resources to restore spending on social programs to prewar levels.
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