Bounded by the Pacific Ocean to the west and the Caribbean Sea to the east, Nicaragua lies at the heart of Central America. After more than 40 years of dictatorship, the Sandinista revolution in 1978 led to social reforms, but also to 11 years of civil war, which almost destroyed the economy. Right-wing parties have held power since the Sandinistas lost elections in 1990. Despite the devastation caused by Hurricane Mitch in 1998, the economy is slowly recovering.

The Caribbean regions, which in 1987 achieved limited autonomy, are isolated from the more populous Pacific regions. The indigenous Miskito tribes and the descendants of Africans, brought over by Spanish colonists in the 18th century to work the plantations, are concentrated along the Caribbean coast, where English Creole is widely spoken. The Sandinista revolution improved the status of women through changes in the legal system and the incorporation of women into economic and political life. However, poverty and lack of permanent employment have since forced many women into prostitution.

Strengths

Coffee, sugar, and grain exports. Foreign aid and public and private reconstruction work after Hurricane Mitch will benefit tourism, energy, services, and construction.

Weaknesses

Heavy debt burden. Main exports subject to commodity price fluctuations. High unemployment. Poor energy supply and infrastructure. Lack of investment and diversification. Weak banks. Delays in privatization. Skewed land ownership and protracted disputes over property. Corruption.

Defeated in the 1990 and 1996 polls by right-wing parties, the FSLN underwent an internal crisis. The LA, dominated by the PLC, took office in 1997, promising to unite the country but it quickly became unpopular due to austerity measures and allegations of corruption. Two-party domination, strengthened by a controversial pact between the ruling PLC and FSLN in 2000, has weakened democracy. Enrique Bolanos of the PLC was elected president in 2001.

Nicaragua has small quantities of gold and silver. New thermal generation projects are planned to overcome energy deficits. There is possible offshore oil.

The standard of health care improved substantially in the 1980s under the Sandanista government. However, real spending on health fell by 71% between 1988 and 1993, and still has to recover.

The Sandinista "Literacy Crusade" achieved dramatic results in the 1980s, but has long since died away. Student protests in recent years have been for increases in the education budget.

A UNDP study in 1998 revealed that 44% of Nicaragua's population have to survive on the equivalent of less than US$1 a day.

Nicaragua became independent in 1838. Guerrilla forces, led by Gen. Sandino, opposed the US marine presence in the early 1930s.

• 1978–1990 FSLN ends 44-year Somoza dictatorship; civil war between FSLN and Contras.
• 1998 Hurricane Mitch devastates country.