Agriculture, forestry, and fishing engage as much as one-third of the labour force and produce about one-fifth of the total national income. The valleys of the western central mountains yield about one-fourth of the national agricultural production. Major crops for domestic consumption include corn (maize), beans, rice, sorghum, plantains, and cassava (manioc). Various fruits and vegetables also are produced for local consumption.

Cattle are significant as a source of hides, meat, and dairy products in the west and of meat in the east. The cattle industry grew rapidly after World War II until the late 1970s, when internal conflicts and government policy prompted many ranchers to reduce their herds or move them to neighbouring countries. Other livestock include goats, hogs, horses, and sheep.

Much of Nicaragua’s forests have been cleared for ranching and farming, and income from the sale of timber has helped repay outstanding international loans. Since 2000 reforestation programs have attempted to replace the forest cover that had been exploited through illegal logging operations.

Shrimping is the most important marine activity. Almost all of the shrimp, caught in both the Pacific and the Caribbean, are exported; lobsters also are exported in moderate quantities. Nicaragua’s fish resources, however, are relatively unexploited because of lack of investment, and marine fishing remains largely a subsistence activity.

Resources and power

Nicaragua is rich in natural resources, most of which have not been exploited on a large scale because of lack of financing. Mineral resources include known deposits of gold, silver, zinc, copper, iron ore, lead, and gypsum. Of these minerals, only gold has been mined intensively. Nicaragua has traditionally used petroleum sources (mostly imported) for its energy production needs. Since 2000 the government has passed various energy laws requiring the participation of the private sector in the generation and distribution of electricity and promoting the development of hydroelectric and geothermal plants, which together accounted for about one-fifth of energy generation in the early 21st century. In fact, because of its many volcanoes, Nicaragua has the largest geothermal potential in Central America. In addition, some of the country’s largest sugar mills have contracts with the government to supply bioelectricity year-round using bagasse during sugarcane season and fuelwood derived from eucalyptus during the off-season. Eucalyptus plantations have been established for this purpose.

Britannica Quiz

The Country Quiz

Manufacturing

Nicaragua’s manufacturing sector is in an incipient stage of development and is based on the production of consumer products, many of which require the importation of raw materials. Beginning in the late 20th century, the government actively supported the diversification of production and the use of domestic raw materials by establishing maquiladoras (manufacturing plants that import and assemble duty-free components for export) in free-trade zones and by adopting free-trade agreements. Manufactures include refined petroleum, matches, footwear, soap and vegetable oils, cement, alcoholic beverages, and textiles.

Finance

The Central Bank of Nicaragua, established in 1961, has the sole right of issue of the national currency, the córdoba. The financial system had been dominated by the government-owned Finance Corporation of Nicaragua, an amalgamation of the country’s banks established in 1980, but by the early 21st century, several private banks and microfinance institutions had been established.

Trade

Traditionally dependent on U.S. markets and products, Nicaragua began trading with a wider group of countries—including Cuba and those of eastern Europe—during the Sandinista period. At no point, however, did commerce with those countries predominate. Indeed, when Nicaragua’s major trading partner, the United States, declared an embargo on trade with Nicaragua in 1985, several Western countries sharply increased their imports from Nicaragua. From the 1970s through the mid-1990s, the value of Nicaragua’s imports (most notably petroleum, nonferrous minerals, and industrial products) greatly exceeded that of its exports. After 1990 trade with the United States was resumed. At the beginning of the 21st century, Nicaragua’s main export products were coffee, beef, sugar, and seafood. In the late 2010s more than two-fifths of Nicaraguan exports went to the United States.

Other principal trading partners were El Salvador, Mexico, Costa Rica, Guatemala, Venezuela, and Honduras. Imports included nondurable consumer goods, mineral fuels, capital goods for industry, and transport equipment. In 2006 Nicaragua formally entered into the Central America–Dominican Republic Free Trade Agreement (CAFTA-DR) with the United States.

Services

Nicaragua’s service sector has grown considerably since the 1990s and employs about one-half of the active labour force. Tourism has become one of the country’s leading industries. Tourists are drawn to the country’s Atlantic and Pacific beaches, as well as to its volcanoes, lakes, and cultural life. Especially of note are the hundreds of islands in Lake Nicaragua; the largest and most visited is Ometepe, which was formed by two volcanoes. The second largest island, Zapatera, has many archaeological sites and petroglyphs from pre-Columbian cultures. León, one of Nicaragua’s oldest cities, retains its colonial architecture, and nearby León Viejo, one of the oldest Spanish colonial settlements in the Americas, was designated a UNESCO World Heritage site in 2000.

Labour and taxation

There are various active labour unions in Nicaragua, which have been generally divided under Sandinista and anti-Sandinista umbrella groups. The Nicaraguan Workers’ Central is an independent labour union.

Most Nicaraguan women work in the informal sector, which includes domestic labour and subsistence farming. Women are the most affected by and least protected from poverty. Many of them are the sole breadwinners for their families and cannot provide adequate food or meet other fundamental material needs. Indeed, at the beginning of the 21st century, the gap between Nicaragua’s national minimum wage and the cost of living increased, making life more difficult for families from lower-income communities. Government income is largely generated through both corporate and individual income taxes, a value-added tax (VAT), and a capital gains tax.