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• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T00589R000400440002-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 34
• Document Creation Date: January 12, 2017
• Document Release Date: April 21, 2011
• Sequence Number: 2
• Publication Date: October 1, 1985
• Content Type: REPORT

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Directorate of
Intelligence
Nicaragua: Shifting International
Economic Linkages
---
ALA 85-10101
October 1985
Copy 3 5 3
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Directorate of Secret
Intelligence
Economic Linkages
Nicaragua: Shifting International
Office of African and Latin
Directorate of Operations.
Division, ALA,
Comments and queries are welcome and may be
directed to the Chief, Middle America-Caribbean
Secret
ALA 85-10101
October 1985
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Scope Note This research paper is the first in a two-part series on Nicaragua's general
economic situation and outlook. This study examines the shift in Nicara-
gua's international economic ties since the Sandinistas seized power in
1979 and the country's growing dependence on the Soviet Bloc. In setting
the scene for a subsequent intelligence assessment on Nicaragua's domestic
economic problems, this Research Paper provides a statistical base that
allows analysis of both the structure and pace of evolving financial and
commercial ties. The statistical estimates in this study are derived from
several-often conflicting-sources. In reconciling the data, we gave
precedence to those reported by the United States and OECD nations.
Official statistics for the Soviet Union and Nicaragua were necessary for
many estimates and were also used for a cross reference.
iii Secret
ALA 85-10101
October 1985
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Summary
Information available
as of 15 September 1985
was used in this report.
Economic Linkages
Nicaragua: Shifting International
partners.
After coming to power in 1979, the Sandinistas began to fundamentally
shift Nicaragua's foreign economic relations away from the West and
toward the Soviet Bloc. Trade data show that nonmilitary transactions
with the Bloc, which were negligible before the revolution, began to rise in
the immediate aftermath of Somoza's fall. By 1984 Bloc trade had climbed
to $280 million, accounting for nearly one-fourth of Nicaragua's trade.
Trade and financial trends so far this year indicate that Bloc countries
have supplanted Nicaragua's Latin neighbors as Managua's key trading
intensified by funding difficulties with the West,
anti-US motivations, the marked shift in trade linkages was further
Even before the US embargo, Nicaragua's trade with the West was on the
wane. According to Embassy reporting, since the revolution the Sandinis-
tas' policy has been to reduce trade with the United States because of
ideological differences. After the United States cut off aid to Nicaragua in
1982, the Sandinistas redoubled their efforts to redirect trade and reduce
their economic dependency. In addition to any conscious policy driven by
From a country and regional perspective:
? US companies cut back on trade as debts piled up and Managua's ability
to repay came into question.
? Some of the sharpest drops came in Nicaragua's trade with its Central
American neighbors, which fell from $400 million in 1980 to $100
million last year, largely because of renewed regional turmoil and
Managua's lack of creditworthiness. In addition, Mexico and Venezuela
have cut trade because of Managua's credit problems.
one-third of total trade.
? Of Nicaragua's Western trade, only that with Western Europe, Japan,
and Canada has held ground at prerevolution levels, accounting for about
Managua's foreign aid linkages have also been dramatically altered since
1979. Before the revolution, official financial support to Nicaragua came
largely from the Western-controlled multilateral lending organizations
that supplied nearly half of Nicaragua's total borrowing. The United
States provided another third, and West European and Latin donors made
up the balance, with no Bloc support being provided. Immediately
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following the revolution, large amounts of concessional funding came from
all corners including the Soviet Bloc, and the share of total funding from
the United States and the multilateral organizations fell, despite increases
in the dollar value of that aid. By 1984 the Bloc's share was up to nearly 45
percent of economic assistance, primarily in the form of credit lines for
Bloc exports. Indeed, by last year the Bloc's importance in relative terms
exceeded that of both the United States and Western Europe on the eve of
the revolution.
Looking ahead we believe Nicaragua's overall trade and financial situation
will increasingly depend on the depth of Moscow's pockets. Extrapolating
from past trends, and given Managua's limited ability to market exports to
its newfound trading partners, we expect Nicaragua's dependence on
Soviet Bloc assistance to continue to grow over the next 12 months.
Because of large new credits granted by the Soviets and their allies during
the first half of 1985, we expect to see a continued rise in economic
support, though probably not at levels sufficient to offset the decline in
Nicaragua's economy.
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The Changing Trade Patterns
The Opening to the Soviet Bloc 1
The Changing Pattern of Foreign Aid Flows 7
Mushrooming Soviet Bloc Economic Support 8
The Cuban Angle 10
The East European Connection 10
Help From Oil-Rich Sympathizers 10
Eroding Aid From the West 11
Appendixes
A. Nicaragua's Soaring Debt
B. Nicaraguan Trade From 1975 Through 1984
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Figure 1
North
Pacific Ocean
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Nicaragua: Shifting International
Economic Linkages
The Changing Trade Patterns
During the past six years, the Sandinistas have funda-
mentally changed the structure and patterns of Nicar-
agua's foreign trade. As far as the level of trade is
concerned, official Nicaraguan statistics indicate that
exports-mostly agricultural products-are off dra-
matically, down 50 percent in volume from their
1975-77 average level, while nonmilitary imports have
also shown a slight decline over the same period. In
addition, the direction of trade has shifted. Long
before the imposition of the US embargo on trade
with Nicaragua last May, official statistics from both
the United States and Nicaragua showed a sharp fall
in bilateral trade. Statistics published by Nicaragua
and the Soviet Union indicate that, as trade with the
United States and other traditional partners dwindled
during the past six years, the Soviet Bloc has steadily
supplanted the West.
The Opening to the Soviet Bloc
During the years just before the revolution, trade
statistics show that Nicaragua had virtually no trade
with Cuba or the USSR and only a few minor deals
with East European countries. Within nine months of
the Sandinista victory, however, Managua had signed
trade pacts with Moscow and Havana, according to
diplomatic and press reports, and had received trade
missions from East Germany, Bulgaria, and Czecho-
slovakia.
The Soviet Union and Cuba have been Nicaragua's
most important new trade partners. Nicaraguan and
Soviet bilateral trade grew to $14 million in 1981, to
$70 million in 1983, and to $171 million by 1984. The
Soviet decision to begin supplying crude oil to the
Sandinistas in late 1983 has accounted for much of
the recent acceleration.
According to Soviet trade statistics, bilateral trade
has continued to mushroom since the end of 1984.
Soviet exports to Nicaragua alone surpassed $70
million during the first three months of this year. If
this pattern continues, as we believe likely, total
Soviet-Nicaraguan trade for 1985 would reach $300
million, 75 percent above last year's level. Oil would
account for about one-third of the total.
The growth of bilateral trade with Cuba has shown a
similar rise. Within a month of the takeover in mid-
1979, Havana trumpeted new bilateral trade ties.
Growth in Cuban-Nicaraguan trade started slowly
but hit $19 million in 1981, $32 million in 1982, and
has averaged $50 million annually during the past two
years.
Nicaraguan trade statistics indicate that commercial
exchanges with Eastern Europe have also grown
rapidly. East Germany, Bulgaria, and Czechoslovakia
have become key new trading partners. During the
last two years, trade with East Germany has averaged
about $25 million per year, Bulgaria $21 million, and
According to official statistics, trade with the Soviet
Bloc began to grow rapidly soon after these new trade
pacts were in place. US Embassy and press reporting
indicates that much of this trade increase was based
on generous concessional credits. Trade between Nic-
aragua and the Soviet Bloc jumped to $60 million in
1981, doubled in 1982, and grew by 50 percent each
year during 1983 and 1984. By 1984, trade with these
countries reached $280 million, one-fourth of the total
Nicaraguan trade.
Czechoslovakia $13 million.
The Sandinistas have been much more successful in
arranging for imports from the Soviet Bloc on credit
terms than they have been in selling their products to
these countries. According to Soviet and Nicaraguan
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Figure 2
Nicaragua: Shifting Trade Partners, 1975-84
a Values shown are cumulative, top line indicates total trade.
b Includes USSR, Cuba, and East Europe except Yugoslavia.
Figure 3
Nicaragua: Trade Volume, 1975-84
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Figure 4
Nicaragua: Imports and Exports From the
US and Soviet Bloc, 1975-84
Soviet Bloc
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306558 10-85
trade data, between 1980 and 1984 Managua's im-
ports of nonmilitary goods from the USSR, Cuba, and
Eastern Europe grew steadily from less than $1
million to about $250 million. On the other hand,
Nicaragua's exports-mostly agricultural products-
to Cuba, the USSR, and Eastern Europe expanded
from almost nothing to $60 million by 1983, then fell
back to $30 million in 1984. While we believe that the
rapid runup in Soviet Bloc sales to Nicaragua was
largely a result of increased financial aid commit-
ments, the reason for the recent reduction in Nicara-
guan export sales is less clear. Part of the falloff was
almost surely caused by Nicaragua's poor harvests
and declining industrial output, but other factors were
also probably at work.
in some cases initial export deliveries to Cuba,
the USSR, and Eastern Europe were rejected because
of poor quality. Other difficulties probably include the
similarity of Cuban and Nicaraguan exports, and the
costs and difficulties in transporting perishable agri-
cultural products over large distances.
Trade With Traditional Partners
Nicaragua's trade with its traditional partners for the
most part has fallen during the past six years, accord-
ing to official OECD and Latin American trade
statistics. The decline in traditional trade, in our view,
has been not only the result of a deliberate tilt toward
the East, but also the erosion of Nicaragua's interna- 25X1
tional credit rating.
nearly all Western businesses that de-
pended on commercial credits to finance trade have
stopped shipping merchandise to Managua during the
past few years after it built up large debts and after
international bankers refused to issue new trade cred-
its. While the Sandinistas have rescheduled all com-
mercial debt owed prior to the revolution, they have
been slow to meet new obligations. In these circum-
stances, most foreign firms have increasingly insisted
on hard currency payment up front, a condition that
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Figure 5
Nicaragua: Import Market Shares
Non-US OECD____________ Non-US OECD Non-US OECD
Other
Figure 6
Nicaragua: Export Market Shares
1975 465 million US $a
Non-US OECD
42
1980 508 million US $e
Non-US OECD
40
1984 443 million US$
Non-US OECD
65
Other
6
Latin America
21
Other
I
Latin America
17
Latin America
31 S 42 10
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Figure 7
Percent of Nicaraguan and Cuban Total Trade
With US Before and After Revolutions
Managua-and particularly Nicaraguan private busi-
ness-has found very difficult to meet, according to
US Embassy reporting. In addition to these normal
financial considerations, trade has been further dis-
rupted as some Western capitals have reduced trade
credits for political reasons.
Among Nicaragua's erstwhile traditional partners,
trade with the United States has fallen the most.
According to US Embassy reporting, the Sandinistas
early on sought to diversify trade away from the
United States for ideological reasons. After US-
Nicaraguan relations deteriorated beginning in late
1981, Managua stepped up efforts to redirect trade to
reduce economic vulnerability. Similar to the Cuban
experience 20 years earlier, bilateral US-Nicaraguan
trade had been cut substantially, even before the
announced embargo. Prior to the revolution, accord-
ing to US and Nicaraguan trade statistics, the US
accounted for about 30 percent of all Nicaraguan
trade, some $375 million per year. In the year follow-
ing the revolution, generous new US trade credits
boosted bilateral trade to $460 million-its highest
level ever. Since then, however, the level of bilateral
trade has fallen substantially. By 1984 US-Nicara-
guan commerce had shrunk to $169 million, about 35
percent of the 1980 level and just one-seventh of total
Nicaraguan trade.
Trade with Nicaragua's traditional Latin partners
has fallen by similar amounts. Now barely one-sixth
of Nicaragua's trade is with Latin America compared
with over 40 percent of trade during the first two
years following the revolution. Some of the sharpest
drops came from declining trade with members of the
Central American Common Market (CACM).'
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Figure 8
Nicaragua: Oil Imports, 1984-85
Feb Mar Apr May Jun
1984
Aug Sep Oct Nov Dec Jan Feb Mar Apr
1985
CACM statistics show that Nicaragua's Central
American trade averaged more than $250 million per
year during 1975-79. By 1980 CACM trade with
Nicaragua increased to over $400 million, as the
CACM countries-following the example of the Unit-
ed States and many other Western nations-initially
expanded trade in a show of support for the new
regime. Since 1980, however, Nicaragua's Central
American neighbors have become increasingly disillu-
sioned with Managua's role in regional turmoil and
with the accumulation of nearly a half billion dollars
in commercial arrearages to its CACM partners,
according to US Embassy sources. As a consequence,
intraregional trade has plunged. By 1984 CACM
trade had fallen by nearly 75 percent to about $100
million.
The reduction of Venezuelan and Mexican oil ship-
ments to Nicaragua also contributed to the dramatic
decline in Nicaraguan-Latin trade. Before 1980, Ven-
ezuela supplied the vast bulk of Nicaragua's oil.
Beginning in 1981, Mexico began supplying major
amounts of oil to Managua. By 1982 Nicaragua's
debt problems began to move the Venezuelans further
out of the supply picture, but Mexico offset the
decline with new concessional credits and increased
shipments-largely for political reasons, according to
Embassy reporting. Since late 1983, we believe Mexi-
co City's reluctance to meet all of Managua's oil
needs without substantial compensation has been a
key factor influencing the Sandinistas to turn increas-
ingly to the Soviets for a steady oil supply, even
though Mexico's political commitment to the Sandi-
nistas has prevented a complete shutoff in oil aid. Of
all the Latin American countries only Argentina,
Brazil, and Colombia have shown slight increases in
trade in the past few years.
Of all Nicaragua's trade outside the Soviet Bloc, only
trade with the non-US OECD-Western Europe,
Japan, and Canada-has not fallen.
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Figure 9
Nicaraguan Imports of Crude Oil and
Petroleum Products by Supplier, 1974-84
Others
USSR
0 Netherlands Antillies
Mexico
14
12
10
8
6
4
2
continued high levels of official
government credit guarantees have kept non-US.
OECD private businesses from substantially scaling
back sales to Nicaragua. At the same time, the
Nicaraguans have worked hard to redirect at least a
portion of their traditional exports from the United
States to West European and Canadian markets.
While overall trade levels have hardly changed since
1979, the share of Nicaragua's trade with Western
Europe, Canada, and Japan has risen somewhat be-
cause of the erosion in Nicaraguan export base.
During 1975-79, trade with these countries averaged
$380 million each year, and accounted for approxi-
mately one-third of all Nicaraguan trade. By 1984 the
trade reached $465 million, equal to 37 percent of the
total. The most important trade partners in this group
have been Japan, West Germany, France, Spain, and
Canada.
The Changing Pattern of Foreign Aid Flows
Before and immediately after the revolution, accord-
ing to OECD and IMF data, the United States and
multilateral lending organizations contributed the
bulk of Nicaragua's economical support. Within three
years of the Sandinista takeover, however-as the
Sandinistas' hostility to democracy, private enterprise,
religion, and personal and political freedoms became
evident-financial support from the West also began
to erode. At the same time, Soviet Bloc financial
support in the form of trade credits and grants began
to grow rapidly. Burgeoning financial support from
the Soviet Bloc has more than offset the decline from
the West. As a result, overall financial support for the
Sandinistas and the Nicaraguan foreign debt are
growing at unprecedented rates.
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Figure 10
Nicaragua: Sources of Official
Foreign Financial Support
1975 1980
Multilateral Multilateral
45 27
Western Europe
IO
Latin America a
15
Mushrooming Soviet Bloc Economic Support
Within a month of the Sandinista victory on 19 July
1979, Managua reached "technical aid" agreements
with Cuba, the USSR, and Bulgaria, setting the
framework for economic assistance. During the last
week in July, Castro publicly promised wide-ranging
support to top Sandinista policymakers visiting Ha-
vana. New accords with the USSR and Bulgaria were
announced by Planning Minister and Commander of
the Revolution Henry Ruiz, upon his return from his
early August visit to those countries. Managua con-
tinued to seek pledges of aid from other Bloc states,
and major commitments for specific new projects
came from East Germany and Cuba in 1979 and 1980
and from the USSR and most of the rest of Eastern
Europe by 1981.1
During the past six years, Bloc economic assistance
has continued to grow.
Bloc commitments totaled some $1.2 billion between
1979 and 1984. Actual disbursements during the
same period were roughly $800 million and represent-
ed about one-fourth of total economic help. Disburse-
ments of economic assistance have tended to lag
agreements by one to two years, in part because of the
long-term nature of some of the development projects.
The bulk of the Bloc's support for the Sandinistas has
been in the form of machinery and equipment for
development projects. We calculate that by last year,
Bloc economic assistance exceeded $280 million, or
nearly 45 percent of total foreign economic support.
This year the Bloc has continued to up the ante. In
May and June alone the Bloc provided over $200
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Figure 11
Nicaragua: Estimated Value of Communist
Economic Disbursements and Military Deliveries,
1979-84
Million US S
600
500
Military
deliveries
400
300
Economic
disbursements
200
100
a Includes $60 million in oil deliveries, which the Nicaraguans have promised
to repay with future commodity shipments.
million in new commitments for financial support,
Moreover, the
US embargo may have changed the character of the
relationship further.
for the first time the USSR and East Germany have
provided nearly $80 million in hard currency balance-
of-payments assistance. Based on these trends so far,
we judge that overall Bloc financial disbursements to
Managua during 1985 probably will exceed 1984
levels by at least $100 million.
The Soviet Role. While initial Bloc economic assis-
tance came largely from Cuba and East Europe, more
recently the Soviet Union itself is providing an in-
creasing share of the support. We calculate that
disbursements for capital goods from the USSR have
averaged about $50 million annually during the last
three years. Much of this is accounted for by Soviet
involvement in port construction at San Juan del Sur,
a large hospital in Chinandega, mining, prospecting
and mapping, and the construction of technical train-
ing centers.
Soviet Bloc Support for the
Sandinista Military Buildup
Parallel to the rapid growth in economic assistance,
there have been the already well documented in-
creases in Soviet Bloc arms deliveries.a While not
publicly announced, new arms deals with Cuba and
the Soviet Bloc were concluded within months of the
Sandinista takeover. Soviet-made hardware began
arriving in 1980, as first the Cubans and then the
Bulgarians made substantial arms deliveries. Direct
Soviet military shipments occurred by 1981, but not
until late 1984 did a Soviet ship deliver major
weapon systems directly to the Sandinistas. Deliver-
ies of promised arms have generally lagged new
agreements by about one year.
Despite initial willingness of several regional govern-
ments to provide military and security help, the
Soviet Bloc has provided some 95 percent of total
foreign military assistance to the Sandinistas since
the revolution. Bulgaria and the USSR have each
delivered about $200 million worth of military sup-
plies. More recently East Germany has stepped up
arms supplies. While Cuba provides large numbers of
military advisers, Havana generally has only provid-
ed small arms rather than heavy weapons.
A major stimulus to the Soviet's aid program has been
Moscow's expanded oil support. The Soviets began
supplying oil in December 1983, and, based on ob-
served deliveries, provided half of Nicaragua's oil in
1984 at a commercial value of $60 million.
Moscow promised to
supply up to 90 percent of Managua's oil needs this
year, although actual deliveries may amount to only
80 percent because Mexico continues to supply some
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oil. While Soviet officials publicly claim that the oil
shipments are handled on commercial credits, foreign
exchange shortages prohibit the Sandinistas from
making a substantial payment for the deliveries any
time soon. Moreover, we believe that the Soviets will
be willing to put up with indefinite delays in Nicara-
guan payments.'
The Cuban Angle. The Cubans were the first to
deliver large-scale economic support to the Sandinis-
tas. Numerous press and diplomatic sources report
that the key role Havana played in financing and
giving technical and military support to the Sandinis-
tas during the final offensive continued unbroken once
the Sandinistas took power. Press reports indicate that
eight days after the revolutionary victory hundreds of
Cuban doctors, nurses, and teachers arrived in re-
sponse to Castro's promise of providing broad-ranging
support for the Sandinistas. By November 1979 the
same sources indicate 700 Nicaraguans were on schol-
arship studying on the Isle of Youth, and 1,000
Cuban teachers were redesigning curriculums and
providing technical advise to the Sandinistas' radio
and television programing. Castro quickly expanded
economic support, largely through highly publicized
technical cooperation agreements, and has kept direct
and indirect aid at high levels since. Indeed, we
calculate that the $310 million in economic support
that Cuba gave Managua between 1979 and 1984 was
modestly higher than either the contribution for eco-
nomic development from the Soviet Union or from
Eastern Europe.
According to US Embassy and press reporting, most
of Havana's support focuses on economic and social
development projects. For example, much of Cuba's
economic assistance has focused on building sugar
refineries, including the large Victoria de Julio facili-
ty inaugurated in January by Fidel Castro. Other
major Cuban projects widely publicized in the Nica-
raguan and Cuban press include road construction
from Matagalpa to Puerto Cabezas, building port and
rail facilities in the El Bluff area, and the airfield
construction at Punta Huete. Havana has also provid-
ed large amounts of agricultural equipment, medical
supplies, and consumer goods. This past July, Havana
and Managua signed an annual assistance agreement
that indicates Cuban aid will continue at about the
same levels during the next 12 months as in the
previous year.
The East European Connection. Eastern Europe has
also been generous to the Sandinista regime. East
Germany has been a major economic donor, providing
large quantities of machinery and equipment for
development projects. Although Bulgaria's contribu-
tion has largely been focused on the military buildup,
Sofia is also providing financial and technical assis-
tance for hydroelectric, mining, and agricultural pro-
jects and to expand Nicaragua's port at El Bluff.
Numerous Nicaraguan press releases indicate that
Poland and Czechoslovakia have also been important
economic donors. While Romania and Hungary have
also signed well-publicized aid agreement protocols
with the Sandinistas, they have delivered only small
amounts-largely, we believe, because of their own
economic problems. In part because East European
economic donors have concentrated on long-term agri-
cultural and mining projects, disbursements from
them have generally been slower than those from
Cuba and the Soviet Union.
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Help From Oil-Rich Sympathizers
We believe stated revolutionary affinity for the Sandi-
nistas has led Libya, Iran, and Algeria to offer
generous credits to Nicaragua. Unlike the Soviet
Bloc, these countries have tended to offer financial
help that the Nicaraguans could use for imports from
the West. In 1981 Qadhafi loaned Managua $100
million and since then has contributed additional
money, in part pegged to agricultural projects,)
Libya, Iran, and Algeria have each provided roughly
$25 million in hard currency each year to Nicaragua
by allowing Managua to resell crude oil to third
parties with long-term deferral of repayment. For
example, Iran in late
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1982 agreed to deliver 2 million barrels of oil to a
West European country during 1983 and 1984. The
West European country paid cash for the oil and sent
the funds to Managua. Even though Managua is
behind on its obligation to repay this loan, the Sandi-
nista official newspaper announced in April 1985 that
Iran had agreed to repeat the deal during the next two
years. Such oil deals have provided foreign exchange
that has helped the Sandinistas buy crucial imports
and service troublesome debts. Despite the generous
aid, thus far new trade deals with these three have
been minor. According to Embassy and press sources,
Algeria and Iran have taken some shipments of
several agricultural commodities, and Libya is dis-
cussing other possibilities.
Eroding Aid From the West
While Bloc assistance has continued to grow, aid from
the West has ebbed as Managua has moved to align
itself with the East. The initial large increase in
Western financial support for the Sandinistas-
offered as support for national reconstruction follow-
ing the civil war-proved short lived in most cases. In
1980 and 1981, financial aid from the West more
than quadrupled from prerevolution levels. The Unit-
ed States tripled its already large assistance program
to Nicaragua during 1979 and 1980. In April 1981,
however, Washington cut off aid after determining
that Nicaragua was supporting international terror-
ism by arming and abetting Salvadoran insurgents.
While no new US money has been committed to the
Sandinistas, a small amount of funding from projects
already in the pipeline was delivered to the Sandinis-
tas during 1982 and 1983.
Within a few years of the Sandinista victory other
regional donors also began reducing their financial
support. Immediately after the revolution, the CACM
countries, Venezuela, and Mexico opened their check-
books to the Sandinistas, providing credits for oil and
other commodity imports that soared to nearly $300
million by 1981, according to US Embassy and press
reports. Since then Latin aid for the Sandinistas has
fallen back to levels near $100 million per year. US
Embassies throughout the region report that this
reduction has been caused by a combination of Nicar-
agua's nonpayment of debt and a growing frustration
with the Sandinistas' unwillingness to moderate harsh
Outside the hemisphere, other Western countries have
continued to provide financial assistance, although
there too support is beginning to erode. Disbursements
from Western Europe jumped from less than $10
million per year before the revolution to near $60
million by 1980. Financial support from these coun-
tries gradually increased to near $100 million by
1983, before sliding to about $90 million last year. In
our view, the non-US OECD countries have largely
maintained aid levels because of residual sympathy
for the revolution, especially among strong social
democratic constituencies; moreover, according to
diplomatic traffic, officials from a number of these
countries say they believe that only by maintaining
financial support to the Sandinistas can they retain
enough influence to moderate the regime's policies.
As Nicaragua's domestic economic problems continue
to mount, with industrial and agricultural production
falling, the Sandinistas are likely to look for ever
larger foreign aid commitments to cover needed im-
ports of machinery, spare parts, industrial chemicals,
and food. With continued depressed exports, Nicara-
gua will remain unable to meet its debt service
obligations, and probably will see further erosion of its
credit lines with Western nations. Prospects for in-
creased intraregional trade are not favorable, because
the other Latin American countries also face growing
debt problems and we see no near-term letup in the
region's turmoil.
The extent to which Western Europe and radical
Islamic nations continue to lend financial support will
depend on their perception of shifts in Nicaraguan
policies-toward moderation or radicalization-and
the status of Nicaragua's debt delinquency. Assuming
no sharp swing in Sandinista policies, trade and aid
with the non-US OECD probably will stay close to
current levels. Several countries, such as France,
Sweden, and Netherlands have announced that they
will marginally boost trade and aid levels with the
Sandinistas to offset some of the impact of the US
economic and political policies.
25X1
25X1
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embargo. At the same time, other countries such as
Spain and West Germany, have reaffirmed cutbacks
because of both economic and political factors. West
Germany froze its aid package, except for some
technical assistance, in 1983 in reaction to Managua's
domestic policies. While the Soviets and East Ger-
mans have recently provided some hard currency to
the Sandinistas to cover overdue trade credits, we
expect that the small debt payments that Managua
makes will only allow it to maintain, and not expand,
Western credit lines. Islamic nations probably will
maintain at least current levels of support.
We believe Nicaragua's overall financial situation will
continue to depend on the depth of Moscow's pockets.
Extrapolating from past trends, we expect Nicara-
gua's dependence on Soviet Bloc assistance to contin-
ue to grow over the next 12 months. Because of large
new Bloc credits granted during the first half of 1985,
we expect to see a continued rise in financial support,
though probably not at levels sufficient to halt the
decline in Nicaragua's economy.
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Secret
Appendix A
Nicaragua's Soaring Debt
The $1 billion debt-including just medium- and
long-term obligations-that the Sandinistas inherited
has expanded nearly threefold during the past six
years. Since the revolution, Managua has taken large
new loans for economic development projects and to
support the military buildup. At the same time, it has
consistently delayed repaying the bulk of its financial
obligations, arranging instead for generous reschedul-
ings. Largely because of Managua's failure to make
debt service payments, commercial bankers have re-
fused to extend new credits, and the great bulk of the
increase in debt has come from official sources,
including governments and multilateral lending orga-
nizations. By the end of 1984, the share of total
Nicaraguan debt held by commercial banks had
fallen from 40 percent to just 20 percent of the total.
Preliminary trade and financial data from a number
of sources indicate that by the end of this year
Managua's medium- and long-term debt will hit $4.8
billion. Since the revolution, in part because of the
large growth in debt arrearages, Managua's short-
term financial obligations have also nearly doubled to
about $650 million. When short-term obligations are
included, Managua's total debt will amount to about
$5.5 billion by the end of this year.
Although the financial obligations for servicing this
debt have also soared, Managua thus far has been
able to delay most debt service payments by resched-
uling the bulk of its obligations. Partly as a result,
overall debt service obligations are now beginning to
increase rapidly. During the years immediately before
the revolution, Nicaragua's annual debt payments
totaled slightly less than $100 million per year and
were largely serviced on time. During the last several
years, by contrast, Nicaragua has faced debt service
obligations of nearly $500 million each year. Press
reports, however, indicate that Managua has been
Figure 12
Nicaragua: External Public Debt,'
1975-85
a Yearend, medium- and long-term.
b Projection.
able to reschedule two-thirds or more of the amounts
coming due. Because the Sandinistas have gone to
commercial bankers and official creditors with empty
pockets, the creditors have had little choice but to
agree to token payments and favorable rescheduling
arrangements.
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Secret
Appendix B
Nicaraguan Trade From
1975 Through 1984
Table 1
Nicaraguan Total Trade by Partners
Latin America 30
0 360 450 530 290 645 581 415 355 279
United States 30
1 365 422 411 351 460 324 209 229 169
Non-US OECD 29
4 340 557 403 293 305 342 331 355 465
a Defined in this paper as USSR, Cuba, and Eastern Europe except
Yugoslavia.
Sources: United Nations Bilateral Trade; IMF Direction of Trade;
US Embassy Managua; Nicaraguan Ministerio De Comercio
Exterior; and Soviet trade statistics.
Note: All trade figures have been rounded to the nearest
million US $.
Table 2
Nicaraguan Exports by Destination
Total 46
5 593 756 792 674 508 539 406 469 443
Soviet Bloc 1
5 6 1 0 1 27 23 60 30
Latin America 97
130 154 196 93 87 86 66 41 45
United States 145
196 199 227 251 211 140 90 97 57
Non-US OECD 196
218 336 262 244 205 233 199 225 288
Other 26
44 61 106 86 4 53 28 46 23
Sources: United Nations Bilateral Trade; IMF Direction of Trade;
US Embassy Managua; Nicaraguan Ministerio De Comercio
Exterior; and Soviet trade statistics.
Note: All trade figures have been rounded to the nearest
million US $.
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Table 3
Nicaraguan Imports by Source
Total 467
526 754 673 349 915 830 714 707 795
Soviet Bloc 6
2 1 4 NEGL NEGL 33 100 124 252
Latin America 203
230 296 334 197 558 495 349 314 234
United States 156
169 223 184 100 249 184 119 132 112
Non-US OECD 98
122 221 141 49 100 109 132 130 177
Other 4
3 13 10 3 8 9 14 7 20
Sources: United Nations Bilateral Trade; IMF Direction of Trade;
US Embassy Managua; Nicaraguan Ministerio De Comercio
Exterior; and Soviet trade statistics.
Note: All trade figures have been rounded to the nearest million
US $.
Table 4
Nicaraguan Exports to Soviet Bloc
Total 1
5 6 1 0 1 27 23 60 30
USSR 0
0 0 0 0 0 8 8 13 1
Cuba 0
0 0 0 0 0 11 1 18 12
Bulgaria 0
0 0 0 0 0 3 4 11 4
Czechoslovakia 0
0 0 0 0 1 0 5 9 4
East Germany 0
0 0 0 0 0 4 5 7 9
Hungary 0
0 0 1 0 0 1 0 2 0
Poland 1
5 0 0 0 0 0 0 0 0
Romania 0
0 6 0 0 0 0 0 0 0
Sources: United Nations Bilateral Trade; IMF Direction of Trade;
Nicaraguan Ministerio De Comercio Exterior; and Soviet trade
statistics.
Note: All trade figures have been rounded to the nearest million
US $.
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Table 5
Nicaraguan Imports From Soviet Bloc
Total 6
2 1 4 0 0 33 100 124 252
USSR 0
0 0 0 0 0 6 50 57 170
Cuba 0
0 0 0 0 0 8 31 42 34
East Germany 0
0 0 0 0 0 18 12 14 19
Hungary 0
0 0 0 0 0 0 0 0 0
Poland 1
1 0 0 0 0 0 0 0 2
Sources: United Nations Bilateral Trade; IMF Direction of Trade;
Nicaraguan Ministerio De Comercio Exterior; and Soviet trade
statistics.
Note: All trade figures have been rounded to the nearest million
US $.
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Table 6
Nicaraguan Exports to Latin America
Total
97
130
154
196
93
87
86
66
41
45
Costa Rica
37
44
48
72
37
39
34
25
18
14
Guatemala
22
31
35
45
21
17
16
14
11
15
Mexico
0
5
8
1
1
0
9
14
8
7
Cam Nes a
13
15
17
22
13
14
11
7
0
4
El Salvador
21
28
34
48
18
11
9
5
3
3
Panama
1
2
2
4
1
6
5
1
1
1
Colombia
0
0
0
0
0
0
0
0
0
1
Venezuela
1
3
9
3
1
0
1
0
0
0
Peru
0
0
0
0
0
0
1
0
0
0
Brazil
0
0
0
0
1
0
0
0
0
0
Dominican Republic
0
2
0
0
0
0
0
0
0
0
Jamaica
1
0
0
0
0
0
0
0
0
0
Netherlands Antilles
1
0
0
1
0
0
0
0
0
0
Trinidad and Tobago
0
0
1
0
0
0
0
0
0
0
a "Central America-Not Elsewhere Specified"-a trade term that
includes Belize, Honduras, and the Panama Canal Zone.
Sources: United Nations Bilateral Trade; IMF Direction of Trade;
US Embassy Managua; Nicaraguan Ministerio De Comercio
Exterior.
Note: All trade figures have been rounded to the nearest million
US $.
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Secret
Table 7
Nicaraguan Imports From Latin America
Total
203
230
296
334
197
558
495
349
314
234
Mexico
10
13
15
15
6
19
119
155
169
80
Costa Rica
37
48
58
57
39
127
80
46
41
19
Guatemala
36
42
52
67
36
113
77
45
56
29
Venezuela
64
57
87
90
66
172
87
40
0
5
El Salvador
29
36
38
41
23
55
34
18
16
12
Panama
6
6
8
13
6
14
18
12
1
8
Netherlands Antilles
3
5
11
12
4
13
7
9
0
0
Cam Nes e
11
15
16
26
13
33
20
8
0
14
Brazil
2
2
5
5
1
5
37
8
12
14
Argentina
1
1
1
2
1
4
9
3
19
28
Colombia
3
3
3
4
2
3
6
2
0
16
Peru
0
0
0
0
0
0
1
2
0
4
Chile
0
1
1
0
0
0
0
1
0
0
Dominican Republic
0
0
0
0
0
0
0
0
0
1
Caribbean
0
0
0
0
0
0
0
0
0
4
Jamaica
1
1
1
2
0
0
0
0
0
0
a "Central America-Not Elsewhere Specified"-a trade term that
includes Belize, Honduras, and the Panama Canal Zone.
Sources: United Nations Bilateral Trade; IMF Direction of Trade;
US Embassy Managua; and Nicaraguan Ministerio De Comercio
Exterior.
Note: All trade figures have been rounded to the nearest million
US $.
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Table 8
Nicaraguan Exports to OECD
OECD 34
1
414
535
489
495
416
373
289
322
345
United States 14
5
196
199
227
251
211
140
90
97
57
Japan 6
4
82
90
62
40
16
62
48
73
105
Germany 4
2
48
115
79
74
52
36
37
38
33
France
5
6
12
14
14
24
21
26
28
40
Canada
6
15
15
13
8
30
48
24
25
39
Italy 1
1
8
14
22
35
20
20
14
15
12
Spain 1
0
9
10
5
5
17
10
11
17
23
Switzerland
2
6
15
9
10
11
5
9
7
7
Netherlands
6
10
12
12
11
8
4
7
10
9
Austria
4
7
13
12
13
9
9
6
6
7
United Kingdom 2
4
2
2
3
2
4
2
6
3
3
Finland
1
3
3
2
4
2
2
4
0
4
Belguim/Luxembourg 1
1
14
23
14
13
9
7
4
3
4
Norway
1
2
3
2
1
0
1
1
0
0
Denmark
8
5
6
11
10
2
4
1
0
1
Australia
0
0
0
1
0
0
1
1
0
1
Ireland
0
0
0
0
0
0
1
0
0
0
Greece
0
0
0
0
1
0
0
0
0
0
Sweden
1
1
3
1
3
1
0
0
0
0
Sources: United Nations Bilateral Trade; IMF Direction of Trade;
US Embassy Managua; and Nicaraguan Ministerio De Comercio
Exterior.
Note: All trade figures have been rounded to the nearest million
US $.
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Table 9
Nicaraguan Imports From OECD
OECD
254
291
444
325
149
349
293
251
262
289
United States
156
169
223
184
100
249
184
119
132
112
Spain
5
9
40
28
4
5
7
21
19
31
Italy
12
7
8
5
5
6
10
20
12
14
West Germany
21
29
46
27
11
16
25
14
13
18
Canada
4
5
9
8
3
13
14
13
13
18
Japan
25
39
73
27
7
20
12
9
9
13
United Kingdom
12
15
15
14
7
6
4
9
4
6
Switzerland
5
5
7
6
1
7
7
5
8
11
Netherlands
3
2
4
6
5
6
13
5
8
8
Ireland
0
0
0
2
1
1
3
4
1
2
Belgium/ Luxembourg
3
2
3
3
1
3
2
4
2
3
Austria
1
0
1
0
0
1
1
3
6
7
Norway
0
0
2
1
0
0
0
1
0
2
Greece
0
0
0
0
0
0
0
0
0
0
Australia
0
1
1
2
0
0
0
0
0
0
Sources: United Nations Bilateral Trade; IMF Direction of Trade;
US Embassy Managua; and Nicaraguan Ministerio De Comercio
Exterior.
Note: All trade figures have been rounded to the nearest million
US $.
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Table 10
Nicaraguan Exports to Other Countries
Others
26
44
61
106
86
4
53
28
46
23
China
0
4
21
46
64
2
21
20
8
8
Taiwan
8
21
6
44
16
0
17
8
7
0
Hong Kong
11
12
11
9
3
0
6
0
0
0
South Korea
0
0
0
3
0
0
4
0
0
1
Thailand
2
1
7
3
3
0
2
0
0
0
North Korea
0
0
0
0
0
0
1
0
0
0
Syria
0
0
0
0
0
0
1
0
0
0
Indonesia
1
0
1
0
0
0
1
0
0
1
Malaysia
0
0
1
0
0
0
0
0
0
1
Philippines
0
3
1
1
0
0
0
0
1
0
India
0
0
8
0
0
0
0
0
0
0
Algeria
0
0
1
0
0
0
0
0
30
12
Morocco
4
3
1
0
0
0
0
0
0
0
Iran
0
0
2
0
0
0
0
0
0
0
Yugoslavia
0
0
0
0
0
2
0
0
0
0
Tunisia
0
0
1
0
0
0
0
0
0
0
Sources: United Nations Bilateral Trade; IMF Direction of Trade;
US Embassy Managua; and Nicaraguan Ministerio De Comercio
Exterior.
Note: All trade figures have been rounded to the nearest million
US $.
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Table 11
Nicaraguan Imports From Other Countries
North Korea
0
0
0
0
0
0
1
0
0
1
China
0
0
1
2
1
1
1
0
0
0
Hong Kong
1
1
1
1
0
0
1
1
0
0
Israel
1
0
0
0
0
0
0
1
1
1
India
0
0
1
0
1
3
0
0
0
0
Yugoslavia
0
0
1
0
0
0
0
0
0
5
South Africa
0
0
1
2
0
0
0
2
0
0
Thailand
0
0
1
0
0
0
0
0
0
2
Sources: United Nations Bilateral Trade; IMF Direction of Trade;
US Embassy Managua; and Nicaraguan Ministerio De Comercio
Exterior.
Note: All trade figures have been rounded to the nearest million
US $.
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Secret
Appendix C
Financial Assistance
Since the Revolution
Table 12
Soviet Bloc Commitments to Nicaragua
1981
128
2
18
148
1982
12
45
11
68
1983
18
67
12
97
1984
59
182
10
251
Total
217
301
56
574
1979
20
20
1980
17
50
67
1981
84
89
64
237
1982
163
84
80
327
1983
16
255
60
331
1984
110
25
40
175
Total
373
490
294
1,157
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Table 13
Summary of Economic Aid Disbursements
to Nicaragua, 1979-84
85.1
139.8
82.3
94.8
99.0
90.0
0.2
0.7
0.7
8.7
8.1
Belgium
0.9
0.3
0.8
0.6
0.5
Canada
0.3
5.6
2.3
6.2
Denmark
0.9
0.1
1.4
0.3
1.6
Finland
0.1
0.6
2.5
1.6
0.5
1.3
8.5
8.7
West Germany
18.2
13.3
14.2
10.3
16.7
Italy
1.1
1.1
5.0
2.5
1.9
Japan
5.5
2.3
0.2
0.3
0.1
Netherlands
6.4
14.6
15.8
23.9
17.6
Norway
0.9
0.5
0.4
2.1
2.3
Spain
10.0
15.0
15.0
15.0
15.0
Sweden
8.1
7.7
3.9
9.3
12.1
Switzerland
2.3
0.5
0.8
1.4
2.5
United Kingdom
0.5
0.3
0.2
0.1
0.1
United States
30.0
82.0
17.0
7.0
4.0
Latin America b
50.0
150.0
294.0
225.0
220.0
120.0
OPEC Countries
100.0
100.0
125.0
130.0
Total Soviet Bloc
17.0
37.0
78.0
154.0
237.0
281.0
USSR
10.0
34.0
79.0
101.0 d
Eastern Europe
2.0
2.0
18.0
50.0
88.0
110.0
Cuba
15.0
35.0
50.0
70.0
70.0
70.0
Total bilateral
152.1
326.8
554.3
573.8
681.0
621.0
Multilateral
51.3
118.4
120.9
63.6
83.2
30.0
Total Loans and Grants
203.4
445.2
675.2
637.4
764.2
651.0
a Country breakout is not available for 1984.
b These data are compiled from a number of sources and should be
considered as estimates, not actual data.
c Algeria, Iran, and Libya.
d Includes $60 million of oil delivered on current account that
probably will be converted to long-term credits.
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 Sanitized Copy Approved for Release 2011/04/21: CIA-RDP86TOO589ROO0400440002-4
Secret
Table 14
Summary of Military Aid Disbursements
to Nicaragua, 1979-84
Bulgaria 0.8 21.0 49.0 134.2
Soviet Union 27.5 31.0 43.7 79.4
East Germany 3.5 0.1 26.3 7.5 21.5
Cuba 2.5 11.0 10.0 12.3 10.0
North Korea 3.0 3.0
Other NA 0.1
Total
205.0
181.6
58.9
45.8
6.0
0.1
fill, ter, Sanitized Copy Approved for Release 2011/04/21: CIA-RDP86TOO589ROO0400440002-4
 II 1
Sanitized Copy Approved for Release 2011/04/21: CIA-RDP86T00589R000400440002-4
Secret
Secret
Sanitized Copy Approved for Release 2011/04/21: CIA-RDP86T00589R000400440002-4