Thayer Watkins
Silicon Valley
& Tornado Alley

Political and Economic
History of Nicaragua

The most important step in understanding Nicaragua is understanding its geography. The nature of the economy and even the history of the country follow from the geography. There are three natural regions:



Columbus' fourth voyage passed along the Caribbean coast of Nicaragua in 1502. It was not until about twenty years later that entradas (exploratory expeditions) were made into the area. The primary purpose was to determine whether there were treasues in the area comparable to what had been found in Mexico and Peru. When it was found that no such treasure existed in the area the conquistadores lost interest. The incursions did however introduce European diseases into the indigenous population.

In the 17th century the Spanish began to settle areas in the Pacific lowlands. The Spanish Empires hold on the Caribbean lowlands was tenuous and the English declared that area a protectorate of the British Empire, just as they had done in area that is now Belize. Moreover British, French and Dutch privateers raided the Pacific coast area of Nicaragua. In 1678 and 1670 these forces captured and looted the prime city of Spanish settlement, Granada. Granada was not located on the coast but instead was about thirty miles inland on the shores of Lake Nicaragua.

Granada recovered from its sacking by the privateers and became the focus of crop agriculture in Nicaragua. There developed another focus for agricultural development in Nicaragua. This was the city of León, located about sixty miles to the northwest of Granada and about ten miles inland from the coast.

León was the focus of the stock raising industry of the region. The land owners of León and Granada became wealthy and powerful. Each tried to promote the dominance of their city and the political struggle between them was bitter and long lasting.

The differences between the political factions of Granada and León in time became institutionalized and ideological. The León faction was associated with the classical liberal positions on economic policies; i.e., free trade. Liberalism everywhere except the modern U.S. means what conservative means in the modern U.S. The Granada faction was associated with protectionism and the maintenance of the special role of the Catholic Church. This position is called conservative but it represents something off the political spectrum of U.S. politics. Probably the most acurate representation of Latin American conservatives would be as corporatists, although another appropriate term would be feudalists.

In the days of the Spanish Empire what is now Nicaragua was governed as part of the Audiencia of Guatemala. A rebellion in 1821 in Mexico freed all of New Spain. Initially Mexico tried to incorporate the Spanish territories of Central America into a Mexican Empire. In 1823 the United Provinces of Central America separated from Mexico. The component parts of this confederation were too little tied together to function as a unit, although there was some attempts between 1826 and 1829 to militarily enforce centralized control. The effort was abandoned and in 1837 the United Provinces of Central America was dissolved. Nicaragua announced its independence in 1838.

Even eastern Caribbean coast of Nicaragua was not sufficiently linked to the Pacific coastal area to make it effectively part of the same country. During the nineteenth century the Caribbean coastal area was effectively part of the British Empire.

Even the region of Spanish settlement on the Pacific coast was fractured politically and the political instability led to turmoil. The U.S. tried to curb the domination of the Caribbean coast area by Britain and the Nicaraguas began to look to the U.S. for aid in dealing with problems. This penchant for relying on Americans in time of trouble led to a disasterous mistake. One faction in an internal dispute hired a group of mercinaries under the command of William Walker to assist them. Walker and his mercenaries put down the enemy but he decided to take control of Nicaragua for himself. It took many years to excise him from the Central American scene. Here is more of the story.

The Episode of William Walker in Central America

In 1855 the government in Nicaragua was in the hands of feudalists, called then conservatives, and the Nicaraguan economic liberals were trying to depose them. The Liberals to their regret hired American mercenaries under the command of William Walker. William Walker was a meglomaniac from Tennessee who, once his mercenaries had defeated the Nicaraguan president, siezed control of Nicaragua for himself. Walker had himself made president of Nicaragua and re-enstated slavery. He also confiscated the property of Cornelius Vanderbilt, the New York transport magnate. Vanderbilt had created a lucrative transport system in Nicaragua to convey California gold-seekers from the Caribbean side of the country to the Pacific side.

JuanRafael Mora Porras,the president of Costa Rica, decided to do battle with Walker. With a force of nine thousand and the encouragement of Vanderbilt Mora Porras marched toward Nicaragua. Walker sent his mercenaries toward the Costa Rican border to counter the invasion. The Costa Ricans attacked the mercenaries at the border town of Rivas and won when the mercenaries had to flee after a Costa Rican drummer boy set the town on fire.

In 1857 Walker returned to Rivas but his force was again defeated. Walker himself had to seek refuge on an American ship that took him to Panama. When Walker, no wiser than before, brought another mercenary force into the region he was captured off the coast of Honduras by the British who turned him over to the Hondurans who summarily executed him, thus ending a bizaare episode in Central American History.

Return to Conservative Control

From 1858 to 1893 Nicaragua was governmed by conservatives (Latin American style feudalists). In 1893 José Santos Zelaya, a supporter of classical liberal policies, came to power. The projects and policies implemented by Zelaya in his sixteen years in office included:

Zelaya also encouraged nationalism and built a professional army. His dictatorial methods created opposition and he was driven from office by public protests and with the assistance of the U.S. marines.

The U.S. marines which deposed Zelaya did not leave Nicaragua. They remained as a major element in the politics of the country until 1933. During the period immediately after the Spanish-American War of 1898 the maintenance of the U.S. marines in Nicaragua was in keeping with the general policy of the U.S. to maintain control of the Caribbean area. However, after World War I the U.S. political climate shifted to a reluctance to have the U.S. involved in foreign committments that could lead to U.S. soldiers fighting in foreign conflicts.

During the period of isolationism in the 1920's the U.S. tried to disengage in Nicaragua. In June of 1925 the U.S. formed a National Guard of Nicaraguan troops to keep the peace. In August of 1925 the U.S. marines were withdrawn.

To the consternation of everyone the Nicaraguan political situation rapidly deteriorated. The Liberals and Conservatives began to fight for control of the country. The National Guard was not strong enough to stop the civil war and in January of 1927 the U.S. sent the marines back in.

The fighting which had been between liberals and conservatives took on a nationalistic character with some fighting the U.S. forces. The combination of the U.S. marines and the Nicaraguan National Guard was able to suppress the fighting except for the group led by Augusto César Sandino. Sandino's group numbered only a few hundred but their terrorist activities in rural areas got great publicity and were an embarassment to the marines and the National Guard.

In January 1933 President Herbert Hoover just before the end of his term of office withdrew the two thousand U.S. marines in Nicaragua. At that time Juan Bautista Sacasa was president of Nicaragua. His nephew, Anastasio Somoza García, was head of the National Guard.

Somoza García used his control of the National Guard to gain control of Nicaragua. He and his family would retain that control for about forty years.

In January 1934 Somoza's National Guard assassinated Sindino who had been given safe conduct assurances by the government to carry out truce negotiations. In June of 1936 Somoza García deposed his uncle and had himself named as president by the Congress of Nicaragua.

Somoza García's source of power was his contol of the National Guard, but he was also a rather adroid politician. His ideology was chameleon-like although fundamentally corporatist. He maintained an allegiance to the United States. Before Word War II he expressed some affinity for fascism but once the war started he was a strong supporter of the Allied Powers. He supported the political organizations of labor even though they were strongly influenced by communists. On an international level he was militantly anti-communists, yet when a communist regime was driven from power in neighboring Costa Rica he gave the members refuge and support in Nicaragua. In effect, Somoza García was simply a caudillo who did whatever he wanted to do. This included amassing great personal wealth in the form of ranches and businesses.

He survived until September of 1956 when a Nicaraguan dissident was able to assassinate him. The presidency went to his eldest son, Luis Somoza Debayle. A younger son, Anastasio Somoza Debayle, took over control of the National Guard from his brother Luis.

Luis Somoza Debayle ruled Nicaragua from 1956 to 1967, but he suffered from poor health and finally died of a heart attack. During his regime his younger brother Anastasio was usurping power through his control of the National Guard and finally became president shortly before his brother's death.

Anastasio Somoza Debayle aliened almost all segments of the Nicaraguan polity, but retained power through sheer brute force. His degree of corruption seemed to have no limits. When an earthquake severely damaged Managua international organizations gave blood donatiions for transfusions. Somoza took the donated blood supply and sold it on the international market for several million of dollars.

The Downfall of the Somoza Regime

There has developed the notion that the Somoza regime was overthrown by the Sandinista rebels, but that is a distortion of the truth. The Sandinistas were involved but the real story was of colineation of oppositions that led to Somoza dictator resigning and fleeing the country. The Sandinistas took power not because they defeated the National Guard but because they were the only force sufficiently armed and organized to constitute governmental authority. Militarily the Sandinistas were only five thousand to the National Guard's twelve thousand and they were never able to hold territory against Nationa Guard opposition.

The downfall of the last Somoza started in January of 1978 when Pedro Joaquin Chamorro, a man of exemplary courage and the editor of the only opposition new paper, La Prensa, was assassinated. Chamorro had opposed the Somoza family dictatorship in Nicaragua for decades and had spent nine years in prison and suffered torture for that opposition. He was killed when a car pulled up alongside of his car and the occupants opened fire with machine guns. The people of Managua had no doubt that the Somoza family was behind Chamorro's assassination and they came out into the streets in force. About thirty thousand marched to show their outrage by burning Somoza family property despite the real danger that they would be killed by the army and police under the control of the Somozas. The protest continued in the form of a general strike that paralized the country for about two weeks. It was this broadbased opposition which was no longer intimidated by the lethal force of the regime that led to the collapse of the Somoza regime.

The outrage was not limited to Nicaragua. International opposition, particularly by the Carter administration in the United States, made the collapse inevitable. The Somoza government was suffering from a budget deficit exacerbated by the cost of fighting the armed rebellion. The government could finance that deficit by borrowing or printing money. The printing of money led to escalting inflation. The sources of international loans began drying up with the assassination of Chamorro and the revelations of atrocities committed by the National Guard. The financial situation became worce when the Carter administration with drew U.S. military aide and forced the regime to buy weapons and military supplies on the open market. It was able get the weapons from such sources as Israel but only at an elevated cost.

A significant element of the collapse occurred in August of 1978 when rebels under the command of Eden Pastora (Commandante Cero) captured the National Palace while the legislature was in session. The rebels took hostage two thousand government officials and employees and demanded the release of rebel prisoners held by the government and a half million dollars ransom. Somoza capitulated and met all of the demands. The rebels and the released prisoners, which included Daniel Ortega, were allowed to leave Nicaragua. Somoza had to guard against a possible coup d'etat by officers of the National Guard after this humiliation of the regime.

The end came on July 30, 1979 when Anastasio Somoza Debalye flew out of Managua to an exile in the U.S. He had negotiated the surrender of his regime's power to the opposition. This meant that the National Guard, which was under his command, were ordered to end their defense and allow the Sandinistas forces to enter Managua. The National Guard, under the agreement secured from Somoza, was effectively to be put under the command of the Sandinistas.

A junta was to take control of Nicaragua. The wife of assassinated Pedro Chamorro, Violeta Chamorrow, was asked to join the junta.

(To be continued.)

HOME PAGE OF applet-magic
HOME PAGE OF Thayer Watkins