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USAID Information:
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Nicaragua
Please note: All linked documents are in PDF format
| Objective |
SO Number |
FY 2004 |
FY 2005 |
FY 2006 |
| Ruling Justly |
524-021 |
6,393 |
8,755 |
6,994 |
| Economic Freedom |
524-022 |
15,168 |
14,721 |
14,192 |
| Investing in People |
524-023 |
13,100 |
14,598 |
7,976 |
| PL 480 Title II |
|
7,046 |
8,994 |
12,228 |
| Total (in thousands of dollars) |
41,707 |
47,068 |
41,390 |
|
The Development Challenge: Over the last several years, Nicaragua has made strides in establishing and strengthening democratic institutions, improving the education and health status of the population, and, in the last two to three years, turning around its sluggish economy. Nicaragua's improved situation is both remarkable and fragile. Its advances are remarkable in that Nicaragua has been plagued with formidable setbacks in recent years, including devastating natural disasters and political corruption at the highest levels in past administrations. The fact that measurable progress has occurred, however, signals the dedication of many Nicaraguans to improving the country's living standards.
The executive branch of the current Government of Nicaragua has a strong political will to implement economic reforms and invest in social development; however the country is still beleaguered by serious problems that hold back the country's economic growth and social development. Despite its rich natural resources and substantial donor support, Nicaragua remains the second poorest country in Latin America, just above Haiti. Real per capita gross domestic product and income levels are lower than those of the 1960s. Nicaragua's high external debt ($6.5 billion before recent debt forgiveness) and internal debt ($1.5 billion) have inhibited growth. Around 75% of the population lives on less than $2 a day, unemployment and underemployment are close to 50%, and income inequality is very pronounced. However, there have been some recent improvements. Real economic growth declined from 7.4% in 1999 to 1% in 2002, then turned around to grow back to 2.3% in 2003, and about 4% in 2004. Foreign investments have increased by about 35% since 2001 and remain at about $200 million per year. In January 2004, Nicaragua reached the completion point of the Heavily Indebted Poor Country (HIPC) Initiative and, as a result, will have approximately 80% of its external debt forgiven.
Considerable improvements in health and education have been made over the past decade, although significant problems remain. USAID programs have contributed to a steady decline in infant mortality, reduced malnutrition among children under two from 13.0% in 2000 to 9.6% in 2003, and increased infant DPT (diphtheria, pertussis, and tetanus) immunization coverage from 47% to 67%. Despite these improvements, however, maternal and child mortality, chronic malnutrition, and population growth rates remain among the highest in the hemisphere. On average, Nicaraguans complete fewer than five years of schooling, and nearly 500,000 children, aged three to 12, remain outside the formal education system. However, key advances in the education system have resulted from USAID assistance such as the model schools program, which has increased fifth grade completion rates in Nicaragua.
By far the most serious obstacle to progress in Nicaragua, affecting the economy and the welfare of the people, is the extremely politicized and weak judicial system. The country has seen three technically satisfactory presidential elections since 1990, but it suffers from continuous manipulation of the institutions by political bosses for personal benefits and power for the elites. The justice system, in general, is inefficient and politicized. Establishing the legal and institutional framework to promote the transparency and rule of law necessary to protect citizens' rights and encourage business and investor confidence requires dramatic reforms. The situation reached a crisis level in November 2003, and the U.S. Government responded by suspending direct assistance to the Nicaraguan judicial system, based on a series of events that placed the efficacy of that assistance in question. Work continued, however, with civil society groups and on public oversight activities. In May 2004, USAID restarted assistance for selected activities related to the judicial system but maintained a freeze on most activities with the courts and those with the National Assembly that are not directly relevant to U.S. interests.
A key U.S. national interest in Nicaragua is to promote economic growth through integration in regional and global markets, since Nicaragua's poverty and high unemployment can threaten the long-term sustainability of democracy and rule of law. Increased stability in Nicaragua's democratic institutions and growth in its impoverished economy contribute to a more secure, democratic and prosperous region. In addition, U.S. national security can be affected by Nicaragua's poorly controlled borders and weak governmental institutions that cannot adequately defend against international terrorism and transit of illegal aliens, drugs and arms.
Despite political weaknesses, Nicaragua is a relatively stable country that is slowly moving along the right path, consistent with the development precepts outlined in President Bush's Millennium Challenge Account (MCA): ruling justly, economic freedom, and investing in people. Nicaragua is one of 16 countries eligible for MCA assistance and has submitted a proposal to the Millennium Challenge Corporation for consideration. The current administration has imposed discipline and demonstrated that fiscal and monetary stability can be achieved. Inflation has been kept at bay, and the internal debt is being addressed. The current government's fight against corruption, focus on restarting the economy, and advances in health and education, if sustained, can help pave the way for achieving long-term development goals. But recent political manipulations show how fragile these gains are.
The USAID Program: USAID is requesting FY 2005 and FY 2006 funds for three strategic objectives that concentrate on: promoting justice sector reform and implementing an aggressive anticorruption program; fostering trade-led economic growth and rural diversification; and increasing access to quality health services and basic education. USAID will use FY 2005 and FY 2006 funds to continue or start programs to reform the justice sector, promote transparency and accountability, and strengthen public oversight; to help implement free trade agreements and improve the competitiveness and market linkages of Nicaraguan businesses, including green markets, tourism, and other enterprises that seek to conserve and sustainably use natural resources; and to provide technical assistance to the government of Nicaragua's key social sector ministries to support improved management, transparency and accountability to ensure more accessible and better quality of public services. USAID will provide limited support for general elections, which are scheduled for 2006. Activities under the P.L. 480 Title II program are integrated into economic growth and human investment programs. In implementing its programs, USAID plans to expand public-private alliances to leverage resources and extend the reach of its assistance.
Other Program Elements: In addition to its bilateral program, USAID funds activities in Nicaragua which are managed regionally by the Bureau for Latin America and the Caribbean, including programs to strengthen regional mechanisms that fortify civil society and local government and promote human rights and rule of law, improve management of national parks, improve agricultural and dairy production, and promote education reform. USAID's Bureau for Global Health funds child survival programs and provides loans for private sector family health clinics. The Central America Regional Program carries out activities in Nicaragua in trade capacity building, agricultural diversification, linkages to green markets, protected area management, specialty coffee development, clean production, energy sector reform, natural resources management, teacher training, HIV/AIDS prevention, and addressing trafficking in people. USAID's Office of Foreign Disaster Assistance funds activities in Nicaragua that reduce the impact of natural disasters. USAID Washington also supports a successful Global Development Alliance in the education sector.
Other Donors: The Government of Nicaragua continues to strengthen donor coordination through the sector coordination roundtables (USAID leads the economic growth roundtable), which provide a forum to prioritize development needs and harmonize donor activities. Nicaragua also participates as one of the few pilot countries for a Joint Country Learning Assessment under the auspices of the Organization for Economic Cooperation and Development. Overall donor assistance averages about $500 million per year in grants and loans. The United States and Sweden were the principal bilateral sources of assistance in 2003, followed by Denmark, Germany, Japan, Spain, the Netherlands and Switzerland. The activities of these countries complement USAID's programs in democracy, economic growth, education and health. Multilateral assistance and loans come primarily from the Inter-American Development Bank (competitiveness, tax reform, and social sector adjustment), the European Union (rural development, agricultural policy, and education), the World Bank (support for implementation of Nicaragua's Poverty Reduction Strategy), the World Food Program (food security), and the Central American Bank for Economic Integration. As an MCA eligible country, if Nicaragua's proposal is selected and a compact with the U.S. Government is signed, the country is poised to receive additional U.S. Government funding.
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