Nicaragua has widespread underemployment and the second lowest per capita income in the Americas. The US-Central America Free Trade Agreement (CAFTA) has been in effect since April 2006 and has expanded export opportunities for many agricultural and manufactured goods.

Textiles and apparel account for nearly 60% of Nicaragua’s exports, but recent increases in the minimum wage have a strong possibility of eroding Nicaragua’s comparative advantage in this industry. Nicaragua’s minimum wage is among the lowest in the Americas and in the World.

Nicaragua relies on international economic assistance to meet internal and external debt financing obligations. In early 2004, Nicaragua secured some $4.5 billion in foreign debt reduction under the Heavily Indebted Poor Countries initiative.

In October 2007, the International Monetary Fund (IMF) approved a new Poverty Reduction and Growth Facility program. Despite the support, severe budget shortfalls resulting from the suspension of large amounts of direct budget support from foreign donors concerned with recent political developments has caused a slowdown in PRGF disbursements.

Similarly, private sector concerns surrounding Daniel Ortega’s handling of economic issues have dampened investment. Economic growth has slowed in 2009, due to decreased export demand from the US and Central American markets from the overall recession, lower commodity prices for key agricultural exports, and low remittance growth. Remittances are equivalent to roughly 15% of the country’s Gross Domestic Product