Economic Survey of Latin America and the Caribbean 1988

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In 1988, the economic crisis of Latin America and the Caribbean took a dramatic turn. For the first time since the 1981-1983 recession, the per capita product declined to a level equivalent to that of 1978; inflation almost quadrupled to an unprecedented average of 760%, and real incomes declined in most of the countries.




In 1988, Nicaragua's economic crisis became truly dramatic: the public sector deficit rose to 24% of the gross domestic product, the expansion of the money supply was close to 12 000%, and the 34 000% annual increase in prices thrust the country into a process of outright hyperinflation. All of these factors fostered the breakdown of the country's productive system, causing an 8% drop in the gross domestic product and an 11% slump in per capita income, which thus fell back to the levels of 30 years ago. Nearly all sectors declined, but the situation of manufacturing became particularly critical. The volume of exports of goods dwindled very severely, triggering a pronounced deficit on current account. For its part, the external debt escalated by nearly US$1 billion due to the non-payment of interest and the receipt of fresh credits from other governments to finance imports from those countries.


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