Southern Central American nation marked by political instability since gaining independence in 1838.
The United States initially hoped that Nicaragua would be a suitable site for a transisthmian canal linking the Atlantic and Pacific Oceans. However, after American adventurer William Walker briefly took control of Nicaragua in the 1850s and requested its annexation to the United States as a proslavery state, Nicaraguans were suspicious of American motives. Because of mistrust related to this episode and Nicaraguan instability, the United States eventually selected Panama as the site for the canal.
By the end of the nineteenth century, Nicaragua had become a major exporter of coffee to the United States. Nicaragua also encouraged foreign investment to boost production, and Americans invested. Unfortunately, Nicaragua was politically unstable and U.S. Marines occupied Nicaragua in 1909 to protect U.S. interests. In an effort to lend stability, American troops remained and turned Nicaragua into a virtual protectorate until the complete U.S. withdrawal in 1933. During this period, American banks lent development money to Nicaragua, but the United States also controlled Nicaraguan customs duties and rail and steamship revenue.
After withdrawal in 1933, American relations with Nicaragua stabilized until the Sandinista National Liberal Front (FSLN) took control of the government in 1979. Fearful of Sandinista ties to communism, the U.S. government during the administration of President Ronald Reagan covertly supported anti-Sandinista rebels known as the Con-tras. During the ensuing Contra War of the 1980s, the Nicaraguan economy deteriorated because of warfare and an American embargo on Nicaraguan goods that began in 1985. In 1987, because of the publicity of the Iran-Contra scandal (in which Central Intelligence Agency arms were sold to Iran and the profits used to fund the Contras), the Congress stopped all military support for the Contras. Without American support the Contras were unable to keep fighting, and the groups negotiated. As a result of the negotiations, Nicaragua held free elections in 1991, the year thewar ended. Efforts to rebuild the Nicaraguan economy since the end of the war have met with limited success.
