Is economic expansion helping human development in Nicaragua?

Despite a period of steady economic expansion under the second coming of the Sandinista government, Nicaragua has not made any notable progress in the United Nation’s Human Development Index over the past six years.

In the 2013 index, released by the United Nations Development Project (UNDP) last Friday, Nicaragua ranks 129th in the world, occupying the lower half of countries in the category of “medium human development.” The global scale is divided into four categories of human development: “very high,” “high,” “medium” and “low.”

In comparison to the rest of Central America, Nicaragua is well behind Panama (ranked 59th) and Costa Rica (62nd), which both qualify as “high human development” countries. Nicaragua also trails Belize (96th), El Salvador (107th) and Honduras (120th), all of which rank in the “medium development” category. In Central America, Nicaragua is ahead of only Guatemala, which ranks 133 in this year’s human development index.

In 2006, the year prior to President Daniel Ortega’s return to power, Nicaragua was ranked 112th on the human development index, slightly ahead of Honduras (117th) and Guatemala (118th). Back then, Costa Rica led the region with a rank of 48th in the world, followed by Panama at 58th.

The Human Development Index is aggregate of indicators measuring life expectancy, education levels and per capita income into a single statistic intended to serve as a frame of reference for both social and economic development in each country.

The Sandinista government insists human development in Nicaragua has improved notably in recent years due to their “new model of development.” The Sandinistas say their “social and productive programs,” investment in infrastructure, job creation and diversification of exports has helped the country reduce its levels of extreme poverty and lift nearly 300,000 Nicaraguans out of poverty over the past five years. The government also notes international indicators that show Nicaragua has reduced hunger from 55% of the population in 1990 to 20% in 2012, suggesting a notable improvement in human development.

The ‘Rise of the South’

This year’s UNDP Human Development Report, which doesn’t mention Nicaragua outside of listing it on the human development index of all 186 countries, focuses on what it calls “the rise of the South,” which it says has happened at an unprecedented speed and scale.

“When developed economies stopped growing during the 2008–2009 financial crisis but developing economies kept on growing, the world took notice. The rise of the South, seen within the developing world as an overdue global rebalancing, has been much commented on since,” the Human Development Report reads.

The focus of this year’s report, therefore, is to look at what the rise of the south means in terms of human development and “the far-reaching implications for people’s lives, for social equity and for democratic governance at the local and global levels.”

“When dozens of countries and billions of people move up the development ladder, as they are doing today, it has a direct impact on wealth creation and broader human progress in all countries and regions of the world,” the report reads. “There are new opportunities for catch-up for less developed countries and for creative policy initiatives that could benefit the most advanced economies as well.”

This year’s report addresses the particularly rapid advances made by Brazil, China, India, Indonesia, Mexico, South Africa and Turkey. It also notes “substantial progress in smaller economies,” such as Bangladesh, Chile, Ghana, Mauritius, Rwanda and Tunisia.

“For the first time in 150 years, the combined output of the developing world’s three leading economies—Brazil, China and India—is about equal to the combined GDP of the longstanding industrial powers of the North—Canada, France, Germany, Italy, United Kingdom and the United States,” the report notes. “This represents a dramatic rebalancing of global economic power: In 1950, Brazil, China and India together represented only 10% of the world economy, while the six traditional economic leaders of the North accounted for more than half.”

According to the UN’s projections, by 2050, Brazil, China and India will together account for 40% of global output, far surpassing the projected combined production of today’s Group of Seven bloc.

  • Ken

    This is a good article, IMO, since I suppose I like these kinds of measurement things.

    However, you do have to ask yourself what’s going on. By many measures, like reductions in absolute poverty and emigration, Nicaragua has clearly improved. Perhaps using a rank is not appropriate since even though Nicaragua has improved, so also have many other countries, which therefore doesn’t translate to an improvement in Nicaragua’s ranking.

    Though, there remains the possibility that economic development has been skewed toward the already affluent, and the minor improvements for the poor haven’t translated into greater well being.

    I truly don’t know, but I like to see statistical facts like these.

  • mike

    This story suffers from not defining the difference between economic growth and economic development. Take a banana plantation which imports large dollar-value heavy equipment, builds an expensive road or railroad from plantation to a port with heavy investment in loading facilities, and then hires a number of local employees for a few hundred dollars a month in salary. Economic development — measured by equipment and infrastructure — is large, but contribution to local economic growth is minimal.

  • Fred

    Pretty hard to argue with the numbers put out. Perhaps in some ways it’s better now for most Nicaraguans that it was 4 years ago. However compared to others with same resource base it’s not looking rosy. Panama is a bit different since they are making a ton of money and employment from the ocean freight passing through.

    The next downgrade effect is still in the future when oil costs escalate and already expensive electricity continues to soar in cost. Industry needs energy to run and infrastructure support which are lacking here. Even more important is reasonable cost of international freight to support trade in goods with other countries. The system in Nicaragua controlling customs, legal redress and conduct of business is burdened with paper and ‘oh so slow’.

    I’d love to start and run a small business out of Nicaragua employing a few people but it has to service N. American markets in Canada and USA (they have the money and the size of market required). The paperwork required and costs involved just make it easier to do from Canada and yes ‘more profitably’ even after paying higher salaries and taxes.

    That’s not to say there aren’t good prospective business opportunities for Nicaraguans to sell to and service Nicaraguan consumers and businesses. Hard though to make reasonable profit when your customers don’t have a lot of disposable income and everything seems to come down solely to price.

  • car

    economic expansion in nica means one thing: the corrupt sandinistas have gotten rich and fat. there are almost as many luxury vehicles in nica per capita as in the US. monstrous houses are being built all over the place by a very few. the number of private jets at the airport has increased dramatically and disproportionately with the number of real businesses/businessmen making legal money.

    the poor, as always, have remained poor. the unemployment figures are relatively unchanged. prices have gone up to be sure, but also disproportionately with the rest of the world. not much more than wholesale price gouging.

    and as fred noted above, starting and doing business has NOT gotten easier. in fact, it has gotten worse. some friends who have had an export business fro several years have been hounded by the tax men for “unpaid taxes” as a result of the IRS arbitrarily rejecting some of their LEGAL deductions. another two friends that have been in business for nearly ten years, have suddenly become the object of nearly continuous IRS audits. each time, auditors spend almost one month in their business office, combing through every single paper and ledger entry, sometimes going back 5 years! NOT ONCE has the IRS found an illegal act/entry/deduction/underpayment. yet, the cost of the audit and the interference with their business has cost my friends tens of thousands of dollars in the past two years.

    if you are a fat cat like pellas or a huge multi-national like wyndham, perhaps they will leave you alone. but we all know (and the sandinistas do not) that fat cats don’t make the economy churn on their own.

  • car

    p.s. i would LOVE to see proof that 300,000 nicas have been lifted out of poverty. and living in houses built with alba money doesn’t count