Diversification and Growth, 1945-77
The period after World War II was a time of economic
diversification. The government brought in foreign
give advice on increasing production of new crops;
bananas and sugarcane increased, livestock herds grew, and
became a new export crop. The demand for cotton during the
War (1950-53) caused a rapid increase in cotton
by the mid-1950s, cotton was the nation's second largest
exportearner , after coffee.
Economic growth continued in the 1960s, largely as a
of industrialization. Under the stimulus of the newly
Central American Common Market (CACM; see Appendix B),
achieved a certain degree of specialization in processed
chemicals, and metal manufacturing. By the end of the
however, import-substitution industrialization
as a stimulus for economic growth had been
The 1969 Soccer War between Honduras and El Salvador, two
of the CACM, effectively suspended attempts at regional
integration until 1987, when the Esquipulas II agreement
signed. By 1970 the industrial sector was undergoing
additional import substitution, and the collapse of the
meant that Nicaragua's economic growth, which had come
expanding manufacturing sector, halted. Furthermore, the
manufacturing firms that had developed under the tariff
protection of the CACM were generally high-cost and
consequently, they were at a disadvantage when exporting
Although statistics for the period 1970-77 seemed to
continued economic growth, they reflected fluctuations in
rather than a continued diversification of the economy.
rose 13 percent in
biggest boom in Nicaragua's economic history. However,
figures largely represented the jump in construction as
country struggled to rebuild after the disastrous 1972
earthquake. Likewise, the positive growth in 1976-77 was
reflection of the high world prices for coffee and cotton.
Positive GDP growth rates in the 1970s masked growing
structural problems in the economy. The 1972 earthquake
much of Nicaragua's industrial infrastructure, which had
located in Managua. An estimated 10,000 people were killed
30,000 injured, most of them in the capital area. The
destroyed most government offices, the financial district
Managua, and about 2,500 small shops engaged in
commercial activities. About 4 percent of city housing in
was left unstable.
Government budget deficits and inflation were the
the earthquake. The government increased expenses to
rebuilding, which primarily benefited the construction
in which the Somoza family had strong financial interests.
Because earthquake reconstruction generated few new
except through borrowing, most of the resulting public
were covered by foreign loans. In the late 1970s,
the highest level of foreign indebtedness in
Central America (see Glossary).
Most of the benefits of the three decades of growth
World War II were concentrated in a few hands. Several
influential firms and families, most notably the Somoza
controlled most of the nation's production. The Banamérica
an offshoot of the conservative elite of Granada, had
interests in sugar, rum, cattle, coffee, and retailing.
Group, so-called because of its ties to the Nicaraguan
Industry and Commerce (Banco Nicaragüense de Industria y
Comercio--Banic), had its roots in the liberal families of
and had ties to the cotton, coffee, beer, lumber,
and fishing industries.
The third interest controlling the nation's production
the Somoza family, which had wide holdings in almost every
segment of Nicaraguan society. Financial dealings for the
were handled by the Central Bank of Nicaragua (Banco
Nicaragua), which the Somozas treated as if it were a
bank. The Central Bank made frequent personal loans to the
Somozas, which often went unpaid. Although the other
groups used financial means primarily to further their
the Somozas protected their financial interests by
the government and its institutions. The Somoza family
estimated 10 percent to 20 percent of the country's arable
was heavily involved in the food processing industry, and
controlled import-export licenses. The Somozas also
the transportation industry by owning outright, or at
having controlling interest in, the country's main
national airline, and Nicaragua's maritime fleet. Much of
profit from these enterprises was then reinvested in real
holdings throughout the United States and Latin America.
analysts estimated that by the mid-1970s, the Somozas
controlled 60 percent of the nation's economic activity.
Anastasio Somoza Debayle (president, 1967-72, 1974-79)
Nicaragua in 1979, the family's worth was estimated to be
US$500 million and US$1.5 billion
The End of the Anastasio Debayle Somoza Era
, ch. 1).
Data as of December 1993