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Nicaragua EXTERNAL SECTOR
Foreign Trade and the Balance of Payments
In 1992 Nicaragua's foreign trade consisted almost
entirely
of agricultural exports (mostly coffee, cotton, bananas,
sugar,
and beef) and imports of petroleum, consumer goods, and
machinery. Although the country's major trading partners
have
changed in response to the political orientation of the
administration in power and the trade balance has
fluctuated with
the world price for agricultural products, Nicaragua's
basic
pattern of imports and exports has remained unchanged
throughout
the twentieth century.
The late 1970s and 1980s saw the country's trading
partners
shift dramatically (see
table 6, Appendix A). Prior to the
outbreak of large-scale fighting in 1977, the country's
main
trading partner was the United States. The period of
widespread
hostilities from 1977 to 1979, along with dwindling
worldwide
support for the Somoza administration, halted almost all
foreign
trade. When peace returned in 1979, the new Sandinista
government
encouraged trade with the Soviet Union, Cuba, and Eastern
Europe.
This shift in trading partners gathered momentum in the
1980s
when the United States trade embargo forced the Sandinista
administration to strengthen ties with socialist
countries.
Nicaraguan exports to Soviet bloc countries went from nil
in 1979
to 31 percent in 1987; in the same time period, imports
from
socialist nations rose from less than 1 percent to more
than 44
percent.
As trade with the socialist countries increased, trade
with
the United States and neighboring Central American
countries
decreased. The growth of the Contra insurgency in border
areas
made overland trade to Nicaragua's neighbors difficult.
The
disruption of trade routes, along with political
opposition to
the Sandinista government by the other Central American
republics, caused trade between Nicaragua and the rest of
Central
America to decline 75 percent from 1982 to 1985. Trade
with the
United States in the 1980s also fell. In 1983 the United
States
lowered the sugar import quota from Nicaragua, and sugar
exports
from Nicaragua to the United States declined 90 percent.
The 1985
United States embargo on trade with Nicaragua ended what
exchange
was left between the two nations; the United States
accounted for
23 percent of Nicaraguan exports and 31 percent of
Nicaraguan
imports in 1980; trade between the two was practically
nonexistent after 1985.
The change of administrations in Nicaragua in 1990,
along
with the overthrow of communism in Eastern Europe and the
Soviet
Union and the collapse of the Cuban economy, caused
Nicaraguan
trade patterns to shift yet again. Trade with Cuba,
Russia, and
Eastern Europe plummeted. The end of the United States
trade
embargo in 1990 resulted in 16.4 percent of Nicaragua's
exports
going to the United States and 21.3 percent of Nicaragua's
total
foreign purchases coming from the United States in the
following
year.
Nicaragua's balance of trade has shown a sizable
deficit
every year since 1980. Export income declined in the 1980s
because of poor harvests, low prices for agriculture
exports,
difficulty in obtaining foreign credits and foreign
exchange, the
decline of the Central American Common Market (CACM) as a
trading
bloc, and the loss of United States markets. Despite a
decrease
in export earnings, imports of petroleum and consumer
goods
continued at roughly the same pace throughout the 1980s.
The
yearly trade balance for that decade ranged from US$230
million
to US$562 million (in constant 1980 United States
dollars), and
the negative trade balances were paid for by a rapid
increase in
the country's external debt. Ironically, resumption of
trade with
the United States exacerbated the balance of payments
situation
because imports of consumer goods and machinery from the
United
States increased much faster than exports of agricultural
products.
Data as of December 1993
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