During the war between the US-backed Contras and the government of the Sandinistas in the 1980s, much of the country’s infrastructure was damaged or destroyed. Inflation averaged 30% throughout the 1980s. After the United States imposed a trade embargo in 1985, which lasted 5 years, Nicaragua’s inflation rate rose dramatically. The 1985 annual rate of 220% tripled the following year and rose to more than 13,000% in 1988, the highest rate for any country in the Western Hemisphere in that year.

The country is still a recovering economy and it continues to implement further reforms to improve profits for foreign businesses, on which aid from the IMF is conditional. In 2005 finance ministers of the leading eight industrialized nations (G8) agreed to forgive some of Nicaragua’s foreign debt, as part of the HIPC program. According to the World Bank, Nicaragua’s GDP was around $4.9 billion US dollars. In March 2007, Poland and Nicaragua signed an agreement to write off 30.6 million dollars which was borrowed by the Nicaraguan government in the 1980s.

Since the end of the war almost two decades ago, more than 350 state enterprises have been privatized. Inflation reduced from 33,500% in 1988 to 9.45% in 2006, and the foreign debt was cut in half.

According to the World Bank, Nicaragua ranked as the 62nd best economy for starting a business: making it the second best in Central America, after Panama. Nicaragua’s economy is “62.7% free” with high levels of fiscal, government, labor, investment, financial, and trade freedom. It ranks as the 61st freest economy, and 14th (of 29) in the Americas.