Nicaragua

An image of the country's flag.

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. As USAID expands its partnership with Nicaragua in the context of the Feed the Future initiative, there will be new opportunities to address these critical governance dimensions of poverty, agriculture, and food security as well as the technology and resource-related issues.

KEY ISSUES AND OPPORTUNITIES FOR INTERVENTIONS

  • Clarify rural land tenure issues related to food insecurity and recommend appropriate interventions to resolve them. Increasing access of poor rural households to arable land may be the most direct way to improve their food security status, but there is some evidence that providing access to land should be accompanied by the provision of a bundle of complementary inputs and training and access to markets if it is to have the desired impact. Further, the legacy of appropriate documentation for land rights – whether individual or collective – must also be addressed. Perceived tenure security reportedly varies by individual or group based on a variety of social, economic, and political factors, as well as the specific historic context. There is wide agreement, however, that insecurity inhibits productivity-enhancing investments. USAID and other donors seeking to increase food security and reduce poverty in rural Nicaragua might consider focusing on particular regions of the country, where integrated approaches to increasing smallholder and landless rural households’ access to land and water, improving tenure security, and agricultural development offer the greatest potential for impact.
  • Support efforts to enhance rural women’s tenure security. Within such integrated initiatives providing access to land and complementary inputs, specific attention should be directed to improving tenure security for rural women. Assigning land rights to women enhances the impact of land access on household wellbeing, yet women continue to experience greater tenure insecurity and more restricted access to land than is experienced by men. Donors could support initiatives to ensure that women do not face discrimination in terms of the amount or quality of land they receive, and could improve tenure security for rural women by reducing costs associated with obtaining legal title.
  • Continue to pursue the regularization of land ownership through documentation and titling processes. Many low-income families in Nicaragua have acquired land through informal markets. In some cases, multiple claims to this land threaten investments (housing, land development) that have already been made. Processes to regularize the ownership of municipal land have been launched in major towns, such as the Millennium Challenge Corporation and World Bank projects in Leon, but are not complete. Moreover, governance issues have arisen to call into question the will of the Government of Nicaragua to respond to the needs of low-income residents. Donors may also wish to consider ways to link expansion of property rights with the development of credit markets and other financial mechanisms, land banks, and community participation mechanisms – all of which should be integrated with ongoing cadastral and titling initiatives.
  • Support implementation of the 2007 Water Law by supporting the development of effective institutions to provide leadership and regulation. The 2007 Water Law attempts to clarify and reorganize the roles of the government branches, independent agencies, users’ organizations, and territorial administrative agencies in the water sector but delays in creating the National Water Authority (ANA) are impeding its effective implementation. Disputes persist between the state-owned water company (ENACAL) and the Emergency Social Investment Fund (FISE) over who is in charge of providing water and sanitation services in rural areas. This uncertainty affects the sector’s ability to move forward in a strategic manner, constraining donors from pursuing a sector-wide approach. Staffs recommend the development of a national unified strategy for water and sanitation with particular focus on establishing a clear institutional and legal framework, with special attention to rural areas. In the case of the Atlantic Coast regions, where construction costs are high, raising access to water and sanitation also will require investment in local capacity building. USAID and other donors play a very large role in the provision of funding for the water sector in Nicaragua. Efforts need to be initiated to build the capacity of the Government of Nicaragua, including the ANA, to prioritize, sequence, and finance needed actions to implement the law in a realistic timeframe, focusing on institutional development, enforcement, budgeting, and cost recovery.
  • Support responsible, transparent, and decentralized forest resource management. Deforestation in Nicaragua is occurring at an alarming rate, with widespread illegal logging driving the decline. Although the GON has decentralized management of the forestry sector and progress has been made, decentralization has faced many obstacles, including budget problems, lack of local authority over logging and the use of forest resources; centralist and bureaucratic GON tendencies, corruption, and the lack of skills and experience of many local governments. USAID and other donors could support efforts to resolve legal contradictions and ambiguities that hinder good governance of forestland and forest resources; help the GON clarify the rights and jurisdiction of municipal authorities through refinement and revision of legislation; promote grassroots organization and mobilization around local and sustainable forest management; and provide all stakeholders with incentives and rewards for good local management.
  • Support the continuation and extension of project activities in the Atlantic region. In the Atlantic region, indigenous rights to land and forests face pressure from interests seeking to exploit forestland and products. In partnership with other donors and implementing organizations, USAID has helped indigenous communities demarcate territory, conduct forest inventories, and create management plans that include identification of forests for conservation and for sustainable harvesting and marketing of certified wood and other forest products. Experience from countries such as Mozambique has taught that such efforts can bring significant benefits to local communities and governments but they require substantial and continuing commitments of effort, time, and resources at local levels. USAID and other donors could support the extension of project activities throughout the Atlantic region. Donors could also help the GON draft legislation providing further clarity regarding indigenous rights to land and natural resources and establishing processes and procedural safeguards to ensure that local communities are able to negotiate meaningfully and effectively with commercial interests for exploitation of those natural resources.

SUMMARY

Different perspectives on property rights and resource governance have driven conflicts and political change in Nicaragua over the last 40 or 50 years. Successive governments have introduced radical changes of direction in economic policy, although in recent years a pragmatic combination of approaches seems to be in play. The Somoza regime that ruled the country from the 1930s to 1979 emphasized private property rights and relatively capital-intensive agricultural development, the result of which was a highly inequitable distribution of rural land. Large landowners built a relatively productive, export-oriented farming sector based on coffee, livestock, sugar, cotton, and tobacco in the most fertile lands in the western Pacific region of the country, drawing in a large pool of rural landless labor. The productivity of the smallholder food sector lagged as these farmers were displaced on to more marginal lands more distant from markets and services. When the Sandinistas took power in 1979, they initiated land reforms and the agricultural system reoriented toward food production. The government expropriated large agricultural properties and distributed them to the landless, especially through the mechanism of farmer associations or cooperatives, or established state farms. Agricultural productivity declined, however, as newly established state farms, cooperatives, and independent farmers struggled to establish operations while anti-government factions pursued aggressive and destructive attacks in the rural areas. The ouster of the Sandinista government in 1990 by the political alliance headed by Violeta Chamorro resulted in the reversal of some aspects of the land reforms: expropriated landowners were permitted to claim restitution for their properties and the rights of poor and landless farmers to land distributions was affirmed. These competing principles resulted in a significant number of land disputes and high tenure insecurity. Subsequent governments have been faced with persistent confusion and uncertainty over property rights, and have made little progress in finding sustainable solutions to reducing inequities of land access and ownership, increasing tenure security, or managing Nicaragua’s abundant land, water, and forest resources effectively. Agricultural productivity has, however, been rising after 1990, in spite of periodic hurricanes that wreaked havoc on rural areas (Hurricane Mitch in 1998 and Hurricane Felix in 2007).

Still, Nicaragua is one of the poorest countries in Latin America, with an economy dominated by service industries and almost 60% of its six million people resident in cities. Urbanization has been occurring at an average annual rate of 1.8% (2005–2010), and over 25% of the population lives in the capital, Managua. Overall, however, Nicaragua, Central America’s largest country, is not densely settled. The Central region is an ecologically active area with mountains and ranges, with massive cloud forests as well as coffee plantations. The Atlantic lowlands, a tropical region in which many indigenous ethnic groups maintain ancestral lands, is the largest and least densely populated area, with poor soil and few roads and other services to connect it to the urban centers of the Pacific region.

Forty-six percent of the population lives below the poverty line and 15% live in extreme poverty. These rates are higher in rural areas where, at 68%, the incidence of poverty is more than double that of urban areas (29%). Rural poverty is associated with access to land. Nine percent of landowners control 56% of the farmland, while 61% of the smallest farmers hold only 9% of the land area. In addition, 38% of the rural population are landless. Twenty- nine percent of the urban population live in poverty and many rural-urban migrants live in informal settlements on the urban periphery. These settlements lack infrastructure and basic services, but have continued to grow because low-income households lack access to other land. Residents of such settlements are sometimes subject to eviction. Women-headed households are more likely to be poor than are male-headed households.

Roughly 20% of agricultural land in Nicaragua is owned by women – a result of proactive efforts to improve women’s land rights through land distribution and titling programs. The formal law supports the equal rights of women and men to inherit, own, and manage economic assets, and researchers have found some gains in women’s decision-making authority over land and its production. Overall, however, custom and practice continue to support the dominance of men in accessing and controlling land and its production. Those women who do own land are often unable to protect their rights against challenge and face barriers to obtaining credit for investment. The rate of Nicaraguan women living in poverty is increasing.
Nicaragua has abundant water resources from both rainfall and groundwater. However, Nicaragua’s water supply suffers from extensive pollution and almost all rivers and lakes are contaminated. Untreated domestic and industrial waste is frequently disposed into water sources and while overall about 79% of the population has access to improved water sources, only 35% of the rural population has such access. Few regulations or legal mechanisms exist to stem the disposal of wastewater into water sources.

Nicaragua’s extensive forests cover 43% of the land area, but are threatened by legal and illegal logging, fuelwood collection, and clearing for agriculture. Deforestation is occurring at a rate of 1.3% per year. The forestry sector accounts for less than 1% of GDP, but tourism, which provided about 3% of GDP in 2006, relies heavily on Nicaragua’s forests and is expected to grow to 5% in the 2007–2016 period. However, despite the potential for growth, the sector has historically not received the attention of policymakers. Other challenges to the forestry sector include lack of coordination among government authorities, ill-defined institutional responsibilities, and lack of interest in sustaining forest resources within local communities.

The mining sector contributes about only 1% of Nicaragua’s GDP, most of which is attributed to gold mining. The sector is expanding through expansion and upgrading of existing operations and exploration for additional mineral deposits. Despite its relatively small economic contribution, gold mining has had significant negative consequences in terms of deforestation, water pollution, and damage to health, and has created conflict between mining interests and local communities. Nicaragua has unproven petroleum reserves currently under exploration off the Atlantic coast.

Published / Updated: May 2011