Nicaragua is the second poorest country in Latin America after Haiti (IFAD 2012). It was ranked 129th out of 187 on the 2011 UNDP Human Development Index and 21st out of 79 on the 2012 Global Hunger Index. While poverty in the country remains high, however, Nicaragua’s economy has made great strides forward in recent years. In 2011, economic activity grew by 5.1 percent, the highest rate in a decade; inflation also declined in 2011 to around 8 percent, down from a record high of 25 percent in 2008 (World Bank 2012).

Poverty is largely a rural problem in Nicaragua. Close to half of Nicaragua’s population lives in rural areas; of that half, 63 percent lives on less than US$1 per day (IFAD 2012). Most of Nicaragua’s rural poor live in the dry central region where natural resources are limited, land has been over-farmed, and population density is high. Despite the fact that water is scarce and much of the country’s land is marginal for agriculture, 80 percent of rural families depend on agriculture for their livelihood. In addition, dependence on just a few crops (sorghum, maize, beans, and vegetables) make rural households particularly vulnerable to market variations and climatic events. Recent volatility in commodity prices on the international market have increased poverty in several regions, including the central region, which is dependent on the coffee trade. Similarly, recent droughts have also affected wide swathes of rural households.

Unemployment averages 12 percent for the country as a whole and exceeds 20 percent among the rural poor. As a result, remittances are an important source of income for one in five Nicaraguan families and account for 20 percent of Nicaragua’s GDP (IFAD 2012).

An estimated 19 percent of the population was thought to be undernourished in 2007, and food consumption patterns continue to be affected by changing economic constraints. Many Nicaraguan families have significantly reduced their meat and dairy consumption. Twenty-three percent of children under the age of five suffer from chronic undernutrition (WFP 2012).