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Nicaragua

Tobacco field in Nicaragua. Copyright: Fotolia, Adrián Kurzen.

Content

Development potential
Priority areas of bilateral cooperation
Decentralisation and strengthening of rule of law and democracy
Environmental policy, conservation and sustainable use of natural resources
Drinking water supply and sanitation
Debt relief

Situation and Cooperation

A Nicaraguan woman and her daughter in their house on the Corn Islands, Nicaragua. Copyright: Fotolia, Robert Lerich.After decades of dictatorship, civil war and natural disasters, but also poor governance, Nicaragua is the sec­ond poorest coun­try in Latin America and the Carib­bean. With an annual gross na­tion­al income of just 1,000 US dollars per capita (2009), Nicaragua is trailing far behind the Latin American average.

Around 46 per cent of the population lives below the poverty line, with around 15 per cent of them  living – according to international criteria – in extreme poverty. Rural com­mu­ni­ties, ethnic minorities and, above all, women are affected by poverty.

The government is attempting to improve the situation with various anti-poverty programmes such as "Hambre Cero" (which means "Zero Hunger") and reported a 10 per cent reduction in extreme poverty for the period 2005-2009. However, the international donor community questions the accuracy of this figure.

In health and education, Nicaragua lags well behind the other Cen­tral American countries' performance in these sectors. According to World Bank projections, Nicaragua is unlikely to achieve the Mil­len­ni­um Development Goals by 2015.

Many Nicaraguans of working age are jobless or under­em­ployed. The moderate economic growth achieved in recent years is largely negated by rapid population growth. According to the World Bank, Nicaragua's economic output decreased by almost 6 per cent in 2009.

Nicaragua used to be in the category of the most highly indebted countries. The state is dependent upon external funding: in 2008, various donor countries and institutions financed around 11 per cent of Nicaragua's GDP. By far the majority of state investments – 33 per cent – is also financed from foreign aid.

The remittances sent by Nicaraguans working abroad are an im­por­tant source of in­come for the country, but these have decreased con­siderably in recent years. Many migrants who were working in the US and Costa Rica have lost their jobs and have returned home to Nicaragua.

Nicaragua was a dictatorship for a long time, but this ended with the overthrow of the Somoza dynasty in 1979. The ensuing civil war between the Contras and the leftist Sandinista government further destabilised the country. Following free elections in 1990 and the establishment of a democratically elected government, armed hos­til­i­ties have ceased. Since then, with significant support from the in­ter­na­tional donor com­munity, Nicaragua has made pro­gress on de­vel­op­ment and reconstruction.

However, the weakness and politicisation of government institutions, corruption and a lack of legal certainty are abiding problems. Since the Sandinistas' electoral victory in autumn 2006, tendencies to un­der­mine rule-of-law principles have become ap­parent. In Nica­ra­gua and abroad, Presi­dent Ortega's gov­ern­ment is held responsible for, among other things, openly manipulating the municipal elections in late 2008, banning political parties, seeking to exert control over civil society organisations, and a failure to make real efforts to tackle corruption. Some donor countries such as Denmark, Austria and Norway have reacted by announcing their intention to cease their development policy engagement in Nicaragua altogether. In light of the situation, potential investors are hesitant to enter into commitments in Nicaragua as well.

Repeated natural disasters have hit Nicaragua very hard. In 1972, an earthquake destroyed the capital Managua, and in 1998 Hur­ri­cane Mitch caused massive mud­slides and flooding. In September 2007, Hur­ri­cane Felix caused devastation in the coun­try's North Atlantic region. Drastic human inter­ven­tions in nature add to the burden on the en­vi­ron­ment and ex­acerbate the impacts of natural disasters.

Development potential

Countryside in Nicaragua. Copyright: BPA, SchambeckThe country cer­tain­ly has de­vel­op­ment po­ten­tial: Nicaragua has fertile soils, and diversification in the agricultural and forestry sec­tors is creating op­por­tu­ni­ties for growth. There is also de­vel­op­ment poten­tial for small and medium-sized industrial enter­prises – in the textile industry, for instance – as Nicaragua be­comes eco­no­mi­cally integrated into Central America. Further po­ten­tial lies in the tourist industry, fisheries and energy. The Central American Free Trade Agree­ment (CAFTA) with the US, which entered into force in 2006, also promises to boost growth. Further­more, an Asso­ciation Agree­ment (AA) between the Euro­pean Union and Central America was initialled in March 2011 and includes com­pre­hen­sive trade fa­cil­i­ta­tion provisions.

Priority areas of bilateral cooperation

Germany is still one of Nicaragua's most impor­tant bi­lateral donors, parti­cularly if the total volume of Germany's commit­ments to date is considered – including multi­lateral funding and debt cancellation under the HIPC Initiative, granted in 2004.

At the government negotiations in 2010, the Federal Republic pledged a total of 10 million euros to Nicaragua: 3 million euros as Technical Cooperation and 7 million euros as Financial Cooperation. Since 2004, German Technical Cooperation pro­grammes in the en­vi­ron­men­tal sector have focused on two regions: the south-west, and the autonomous North Atlantic region (RAAN) in the north-east of the country. From mid 2011, activities will focus solely on the RAAN.

Since 2002, de­vel­op­ment co­op­e­ra­tion between the two coun­tries has pursued the following priorities:

  • Decentralisation and strengthening of rule of law and democracy

  • Environmental policy, conservation and sustainable use of natural resources

  • Drinking water supply and sanitation.

The next round of government negotiations is scheduled to take place in 2012, in anticipation of domestic policy developments following the presidential and parliamentary elections in November 2011.

Decentralisation and strengthening of rule of law and democracy

Some years ago, Nicaragua launched a wide-ranging de­cen­tral­i­sa­tion pro­gramme to pro­mote local self-govern­ment. With Ger­many's support, numerous muni­cip­alities have been able to establish their own financial control systems, enabling them to exercise increased autonomy to spend state revenues. However, the practical im­ple­men­ta­tion of these re­forms is hampered by wide­spread cor­rup­tion, the politicisation of gov­ern­ment insti­tu­tions down to the municipal level, and above all, the establishment of a parallel local structure in the form of "Councils of Citizens' Power" (Consejos del Poder Ciu­dad­ano) con­trol­led by the ruling party. In view of the re­sult­ing in­ter­ven­tion by central gov­ern­ment in the autonomy of the local ad­min­is­tra­tions and the massive obstruction of cooperation at municipal level, Germany ceased to provide advisory services to this sector at the end of 2010.

In view of these developments, strengthening civil society is a par­tic­u­lar­ly important goal of German de­vel­op­ment co­op­e­ra­tion. Ger­many cur­rent­ly chairs the Com­mon Fund for Sup­port to Civil Society (Fondo Común de Apoyo a la Socie­dad Civil) which aims to develop the capacities of independent critical non-governmental or­ga­ni­sa­tions. In many cases, it is these or­ga­ni­sa­tions which ad­dress dif­fi­cult issues and open them up to public debate. One example is the strict ban on abortion intro­duced in 2006, or more recently the un­consti­tu­tional circum­stances of Ortega's can­di­dacy for the 2011 pre­si­den­tial elec­tions. Often, too, it is the non-govern­mental or­ga­ni­sa­tions which moni­tor social and poli­tical develop­ments, especially at local level.

As an additional measure, Germany is seeking to intensify its co­op­e­ra­tion with selected public insti­tu­tions, pri­mar­i­ly the National Police, but also the Social Invest­ment Fund (Fondo de Inversión Social de Emergencia – FISE) and the Office of the Comptroller General (Con­traloría General de la República – CGR). These institutions are key actors in promoting a democratic culture. Among other things, since late 2010 GIZ has advised the National Police on matters relating to internal control, civil rights and public security, the prevention of domestic violence and youth crime, and combating internal cor­rup­tion. With­in the FISE frame­work, Financial Co­op­e­ra­tion resources are being used to fund small-scale infra­struc­ture pro­jects that di­rect­ly be­ne­fit the poor and the indigenous territories. The projects financed from the fund are based on proposals from the mu­nic­i­pal­i­ties. The sec­tors covered include edu­ca­tion, health, rural infra­structure, en­vi­ron­ment, cul­ture, and the re­con­struc­tion of the North Atlantic region which was devastated by a hur­ri­cane in 2007.

Environmental policy, conservation and sustainable use of natural resources

A view of Isleta del Sol, Nicaragua. Copyright: BPARapid de­for­es­ta­tion numbers among Nicaragua's most serious en­vi­ron­ment­al prob­lems. Ac­cor­ding to the Food and Agri­cul­ture Or­ga­ni­za­tion of the United Nations (FAO), the annual de­for­es­ta­tion rate in Nica­ra­gua is 70,000 hec­tares. Over­ex­ploitation of natural resources within and outside nature reserves will impact severely on many small farmers' and forest users' livelihoods over the medium term. The situation is exacerbated by the frequent occurrence of natural disasters. In 2007, for example, Hurricane Felix destroyed an estimated 500,000 hectares of forest. In order to counter these threats, the MASRENACE Programme (Manejo Sostenible de Re­cur­sos Naturales y Fomento de Com­pe­ten­cias Empre­sa­riales) has been set up to support farmers, especially indigenous forest users, and their associations. Key objectives are introducing alternative crop­ping methods, timber cer­ti­fi­ca­tion and sus­tain­able man­age­ment of forest re­sources, uti­li­sing sus­tain­able pat­terns of pro­duc­tion and con­sump­tion to create com­pe­ti­tive ad­van­tages in local, regional and inter­na­tio­nal markets, and improving the man­age­ment of con­ser­va­tion areas. Pro­moting entre­pre­neurial skills in rural areas is a par­tic­u­lar­ly im­por­tant issue in this con­text, for example through the ex­pan­sion of eco-tourism or the mar­ke­ting of sus­tain­able, fair trade products.

In response to global climate change and the devastating natural disasters in Central America, Germany has in recent years increased its support for climate change mitigation and adaptation measures. Nicaragua, for example, is participating in the "Reducing Emissions from Deforestation and Forest Degradation" (REDD) regional pro­gramme and other international pro­grammes in which German de­vel­op­ment co­op­e­ra­tion is involved.

Drinking water supply and sanitation

The supply of drinking water in Nicaragua is deficient, and water quality is poor. More than 30 per cent of the rural population has no access to clean drinking water. Sanitation is also inadequate. This results in widespread disease, transmitted in contaminated water, and environmental degradation due to the improper disposal of sewage and waste water.

Germany's commit­ment within the frame­work of Finan­cial Co­op­e­ra­tion in recent years has therefore focused on achieving significant improvements in techno­logy and infra­struc­ture. As a con­tri­bu­tion to a pro­tec­tion pro­gramme for the heavily pol­luted Lake Managua, Latin America's second largest lake, Germany was responsible for constructing a water treatment plant. In a number of small and medium-sized towns and cities, German development cooperation supported the repair and expansion of the drinking water supply and sanitation systems. Responsibility for operating these systems, which are often technically complex, is being progressively trans­fer­red to the Nica­ra­guan water uti­li­ties after a period of advice and sup­port lasting several years.

At the government negotiations in November 2010, it was also agreed that among other things, Germany would support the de­vel­op­ment of the National Water Authority (Autoridad Nacional del Agua – ANA), the work of local water committees, and the provision of advisory services and training of experts in the water sector from Technical Cooperation resources.

Debt relief

In the past, Nicaragua was one of the most highly indebted de­vel­op­ing coun­tries in the world. After the Nicaraguan government pre­pared a poverty re­duc­tion strategy paper (PRSP), in 2004 the coun­try was granted debt relief amount­ing to 2.5 billion US dol­lars under the HIPC Initiative. This is the largest single debt relief package ever granted under the initiative. Germany has made a substantial con­tri­bu­tion to bilateral debt relief for Nica­ra­gua, wri­ting off all bi­la­te­ral debts and ar­rears up to 2004, amount­ing to 491 mil­lion euros in total. This is the largest debt relief package com­mit­ted by Ger­many so far under the HIPC Initiative.

In 2006 Nicaragua benefited from a further round of debt relief under the Multilateral Debt Relief Initiative (MDRI). This puts signi­fi­cant­ly more funds at the country's disposal for poverty reduction.

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