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Johnson & Johnson, Handling a Major Crisis


            
             HISTORY Nicaragua takes its name from Nicarao, chief of the indigenous tribe then living around present-day Lake Nicaragua. Although it is the largest republic in Central America, has a relatively tiny population of approximately 4.5 million people. Nicaragua is bound on the north by Honduras, on the east by the Caribbean Sea, on the south by Costa Rica, and on the west by the Pacific Ocean. It is slightly larger than the U.S. state of New York with an area of 130,000 square kilometers. The capital city is Managua. .
             Nicaragua began free market reforms in 1991 after 12 years of economic free-fall under the Sandinista regime. Despite some setbacks, it has made dramatic progress: privatizing 351 state enterprises, reducing inflation from 13,500% to 12%, and cutting the foreign debt in half. The economy began expanding in 1994 and grew 2.5% in 2001, with overall GDP reaching 2.44 million in 2001. In 2001, the global recession, combined with a series of bank failures, low coffee prices, and a drought, caused the economy to retract. Nicaragua remains the second-poorest nation in the hemisphere with a per capita GDP of less than $500--below where it stood before the Sandinista takeover in 1979. .
             Unemployment is officially around 11%, and another 36% are underemployed. Nicaragua suffers from persistent trade and budget deficits and a high debt-service burden, leaving it highly dependent on foreign assistance--as much as 25% of GDP in 2001. Distribution of income is extremely unequal. While the country has made progress toward macroeconomic stabilization over the past few years, a banking crisis and scandal has shaken the economy.
             One of the key engines of economic growth has been production for export. Exports were 640 million in 2001. 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: apparel, gold, seafood, and new agricultural products such as peanuts, sesame, melons, and onions.


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