Nicaragua is a country strategically located in the heart of the Americas: at the center of the Central American isthmus that forms a land bridge between North and South America4, with a size of 130,600 sq. km –slightly smaller than New York state- it is ranked #98 worldwide, and it is the largest country in Central America. It is bordered on its eastern and western shores by the Atlantic and Pacific oceans, respectively; to the north lies Honduras, and to the south Costa Rica.
Over the past 16 years, Nicaragua has become one of the safest and fastest-growing countries in Latin America. It is a stable, multi-party democracy, and it has ratified Free Trade Agreements with major markets such as the United States, the Dominican Republic (DR-CAFTA), Taiwan and Mexico, among others5. After 40 years of dictatorship and another 9 years of embargo by the U.S.A., the country has had free democratic elections since 1989 and has made significant progress towards strengthening its democratic institutions.
As evidence of continuous efforts in improving the business climate, Nicaragua has been ranked favorably in a variety of independent evaluations. The 2013 Doing Business Report, published by The World Bank Group, a report that benchmarks various indicators of the investment climate in 183 nations, ranked Nicaragua as the top location in Central America in starting a business, investor protection, closing a business, and resolving insolvency.
Additionally, the country improved in the following categories: registering property, paying taxes, and trading across borders6.
4Nearshore, Executive Alliance, “Latin America Site Intelligence Report: Nicaragua Report”,
http://www.nearshoreexecutives.com/wp-content/uploads/2012/11/LASIR.Nicaragua.FINAL_.110612.pdf
5 Nearshore, Executive Alliance, “Latin America Site Intelligence Report: Nicaragua Report”,
http://www.nearshoreexecutives.com/wp-content/uploads/2012/11/LASIR.Nicaragua.FINAL_.110612.pdf
6 The World Bank, “Doing Business 2013: Smarter Regulations for Small and Medium-Size Enterprises”, October 23, 2012, http://www.doingbusiness.org/reports/global-reports/Doing%20Business%202013
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5% Amerindian -the unmixed descendants of the country's indigenous inhabitant-, and 9.0%black and other races. 58.32% of the population is urban and 41.68% rural7. Relative to its overall population, Nicaragua has never experienced any large-scale immigrant waves. The total number of immigrants to Nicaragua, both originating from other Latin American countries and all other countries, never surpassed 1% of its total population.
The life expectancy was 72.7 years in 2011, a figure roughly equivalent to that of Vietnam and Palau8. The infant mortality rate stood at 18.3, roughly equivalent to that of the Marshall Islands and Paraguay9.
2.2.1. Age distribution
Regarding the Age Distribution, 33% of the population is between 0 and 14 years old; 62% is 15-64 years old; and the remaining 5% corresponds to adults 65 and older. With these statistics, the population’s median age is around 23 years. There is a good distribution gender wise, given 49.44% of Nicaraguans are male, and 50.56% are women10.
2.2.2. Demographic Bonus
Nicaragua is going through a crucial time for its future economic development. Specifically, we are facing a window of opportunity, known as the demographic bonus; this means the beginning of the third stage of the demographic transition, where the population growth rate begins to decline and the working age population increases relative to the dependent population, especially the children.
7 Ethnic groups and Demographic profile, CIA, World factbook
8 Birth rate, CIA, World factbook
9 Death rate, CIA, World factbook
10 CELADE - Population Division of ECLAC. 2011 Revision, Nicaragua: “Long term population estimates and projections 1950-2100”
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population of working age, as well as formal education and working experience to make these young people attractive and productive in the labor market.Research has shown that unemployment and inactivity among young people can have a deep and lasting negative effect on the future employability of young people and therefore, in the future income stream of the homes and their quality of life. 11
Education is one of the key elements that explain the probability of working, but it is also a variable related to the revenue stream that individuals expect to receive in the course of their working lives. Coming from a poor home, young people are faced with the dilemma if they should continue studying or start working to earn money for their families. The more years spent in school make it less likely for them to withdraw; but for someone who is already working, the older they get, the less likely it will be for them to go back to school.12
2.2.3. Education
Education is paid via taxes for all Nicaraguans. Elementary education is free and compulsory, but many children in rural areas are unable to attend due to lack of schools and other reasons.
Communities on the Caribbean coast have access to education in their native languages13. As of 2010 the government of Nicaragua has declared the country “free of illiterates”, with statistics showing only 3.6% of the population above 15 years old does not know how to write and read14.
Recent studies show that from the population over 10 years old 20% don’t have any kind of education; 44% have gone through Primary school –although not necessarily finished it-; 27%
11 International Monetary Fund (IMF), IMF Country Report No. 12/256: Nicaragua.
12 International Monetary Fund (IMF), IMF Country Report No. 12/256: Nicaragua.
13“Nicaragua, Latin America”, Awana International, http://awanainternational.org/resources/Nicaragua.pdf
14 Jeniffer Castillo Bermúdez, “Hay que revisar la cifra de analfabetas” La Prensa, September 29,2012, http://www.laprensa.com.ni/2012/09/29/ambito/118118-hay-que-revisar-cifra
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have technical education; and only 7% of Nicaraguans have attended University15.2.3. Economy
Nicaragua, primarily an agricultural country, faces low per capita income, massive unemployment, and huge external debt. Distribution of income is one of the most unequal on the globe. While the country has made progress toward macroeconomic stability over the past few years, GDP annual growth of around 4% has been far too low to meet the country's needs16.
Real GDP grew 5.2% in 2012 and it is estimated to grow 4.3% in 2013, and 3.7% in 201417. Inflation rate is very high in Nicaragua, oscillating between 8% and 9%; last year’s inflation (i.e. 2012) was 6.6%, and it is calculated that in 2013 it will reach 7.30%, reflecting first and second-round effects of higher world oil prices, electricity tariffs, and minimum wages.18 The country’s exports for 2012 reached 4,581.2 million U.S. dollars, an increase of 14% from the previous year19.
One of the key engines of economic growth has been production for export. Although traditional products such as coffee, meat, and sugar continued to lead the list of Nicaraguan exports, the fastest growth is now in nontraditional exports: textile and apparel, gold, seafood, and new agricultural products such as peanuts, sesame, melons, and onions.
Nicaragua's minimum wage is set for nine different economic sectors, ranging from $95 U.S.
dollars a month in the agricultural sector to $215 U.S. dollars in the financial sector20.
15 CELADE - Population Division of ECLAC. 2011 Revision, Nicaragua: “Long term population estimates and projections 1950-2100”
16 IndexMundi Real GDP Growth Rate Chart, http://www.indexmundi.com/g/g.aspx?c=nu&v=66
17 “Informe Anual 2012”, Banco Central de Nicaragua, Febrero, 2013,
http://www.bcn.gob.ni/publicaciones/anual/memoria/2012/Cap3-Producto_interno_bruto.pdf
18 International Monetary Fund (IMF), IMF Country Report No. 12/256: Nicaragua.
19 “Informe Anual 2012”, Banco Central de Nicaragua, Febrero, 2013,
http://www.bcn.gob.ni/publicaciones/anual/memoria/2012/Informe_anual_2012.pdf
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Only about 25% of the Nicaraguan labor force is part of the social security system and the economy is populated by many small, low-productivity firms. Those firms have little incentives (or means) to either grow or leave the informal sector, hence hindering economic growth.21
Informal labor arrangements also are more prevalent among women and younger workers.
While these patterns are present in other Latin American countries, in Nicaragua informal employment accounts for more than 70% of urban employment—much higher than the 54%
average in the Latin American region.22
As in other Latin American countries, there is a relationship between inflation and adjustments to the exchange rate with respect to the U.S. dollar. Thus, over the last decade the Central Bank of Nicaragua established a "crawling-peg" exchange-rate system whereby small adjustments are planned in the national currency exchange rate against the U.S. dollar. For 2013, the "crawl" with respect to the U.S. dollar continues established at 5%. This assures a high level of currency stability, while at the same time maintaining the country’s export competitiveness.
2.3.1. Poverty
Despite a steady growth performance in the last decade and increased spending in social and poverty-reducing policies, Nicaragua remains one of the poorest countries in the Western Hemisphere.
With a GDP in 2012 of $10,507.7 million U.S. dollars, Nicaragua is considered to have a lower middle income23. Years of political conflict, natural disasters and a civil war, together with unfavorable economic conditions have left Nicaragua the poorest country in Central
20 Wendy Álvarez Hidalgo, “Nuevo Ajuste Salarial”, La Prensa, August 24,2012 http://www.laprensa.com.ni/2012/08/24/activos/113548-nuevo-ajuste-salarial
21 International Monetary Fund (IMF), IMF Country Report No. 12/256: Nicaragua.
22 International Monetary Fund (IMF), IMF Country Report No. 12/256: Nicaragua.
23 “Informe Anual 2012”, Banco Central de Nicaragua, Febrero, 2013,
http://www.bcn.gob.ni/publicaciones/anual/memoria/2012/Informe_anual_2012.pdf
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Nicaragua lives below the poverty line (with less than $1 dollar a day). 25Given the cost of the“typical family basket”, which is formed by 53 products, is $452 U.S. dollars, it means many Nicaraguans are not able to buy it26.
It is a country with huge disparities, where the wealthiest 10% of the population accrues for 31.5% of the total income, and the income share held by the lowest 10% is only 2.5%. This means that, although the GDP per capita is $1,582.2 U.S. dollars, it cannot be assumed that this number constitutes an actual average27.
According to the United Nations Development Program, 3.9% of the population is unemployed –though other programs think this number is underestimated-, and 46.5% are underemployed. Despite the fact that a big proportion of this economically poor Nicaraguans are women, 39% of the urban homes, and 28% of the rural home have a woman as head of household28.
2.4. Nicaragua and Personal Finance
What the information and statistics mentioned above means, is that Nicaragua is very far from being a country characterized by a financial culture. Even though personal finance is quite a new subject all around the world and there is a global movement to accomplish higher financial literacy rates, Nicaragua is far behind.
24 The world bank, Nicaragua,
http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/LACEXT/NICARAGUAEXTN/0,,print:Y
~isCURL:Y~contentMDK:22255024~pagePK:1497618~piPK:217854~theSitePK:258689,00.html
25 The World Bank, http://data.worldbank.org/country/nicaragua
26 “Precios de la Canasta Básica”Instituto Nacional de Información de Desarrollo (NIDE), January, 2013, http://www.inide.gob.ni/CanastaB/CanastaB.htm
27 The World Bank, http://data.worldbank.org/country/nicaragua
28 “Pro Mujer in Nicaragua Hosts Inaugural Velasco & Patterson Society ‘Encuentro’”. ProMujer,
http://promujer.org/wp-content/uploads/2012/11/press_releases_articles_110_Pdf_Pro-Mujer-in-Nicaragua-Hosts-Inaugural-Velasco.pdf
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國立 政 治 大 學
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N a tio na
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With the majority of the population having such low educational level and living standards, the problems Nicaraguans face in personal finance issues are not related to high debt levels due to misconceived mortgage, or losing a large part of their savings on the stock market, or deciding the best account to save for their retirement –like many developed countries-. Instead, the problems met by these people have to do with much simpler things, like: the lack of saving accounts for retirement or any other goal considering the low income they have, high debt due to purchasing consumable goods on high interest rates credits, the inability to pay for college education, misuse of credit cards, among others.
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Because of the nonexistence of financial literacy data in the country, I decided to do a survey as a means to accomplishing two goals:
Determine the current situation of financial literacy in Nicaragua.
Evaluate the market’s needs regarding personal finance.
Assess the potential market for a personal finance advisor in Nicaragua.
Because personal finance is essential to every person’s life, there was not a particular segment of the population that I was targeting, the objective was to get as many people as possible to answer the survey, because the more people that answered, the better notion I could get on the population’s knowledge and needs.
However, given I already have a personal finance Blog –called “Plata con Plática”-, with a Facebook page and twitter account, I determined that those who read the blog, and followed me through those accounts were a good starting point because they are people already aware of the importance of personal finance, and whom are interested on improving their financial literacy levels. I also asked them to re-send the survey to others they knew, in order to get answers from people with a possible lower financial literacy.
Given I am in Taiwan and my target population is in Nicaragua, the survey was done online, through a period of one week, and it consisted of 25 questions, divided in 4 parts. The first part comprised five questions which were related to demographic data (age, gender, marital status, number of children and employment status) because it is important to know the type of person who is answering, so that later on it can be determined if and which type of factors affect people’s financial needs.
The next set of questions was related to people’s appreciation of their own knowledge and performance on different personal finance topics, such as: budgeting, savings, debt,
investments, insurance, retirement plans and entrepreneurship. These questions had a grading scale from 1 to 10, where 1 was the poorest number and 10 meant an excellent financial knowledge/behavior.