Nicaragua Devalues Currency, Hikes Prices of Oil, Gasoline

The leftist Sandinista government devalued the currency and raised prices for petroleum products on Monday for the third time this year.

The devaluation of the cordoba is part of economic measures designed to contain hyper-inflation, which reached 20,000% in 1988.

The official rate of exchange for the cordoba went to 2,700 to the U.S. dollar from 2,300.

The cordoba was devalued Jan. 4 from 920 to 2,000 per dollar at the official rate of exchange and then from 2,000 to the dollar to 2,300 Jan. 25.

The dollar continued trading at 5,200 cordobas on the black market and 4,500 cordobas in the so-called parallel market. The government-authorized parallel market complements the official one and serves to provide dollars for nonessential imports.

As the cordoba is devalued, prices for petroleum products have been rising proportionately. Nicaragua has no petroleum resources of its own and must import all its crude oil, mostly from Soviet Bloc countries.

Diesel fuel went to 4,100 cordobas a gallon from 3,500 after Monday’s devaluation; gasoline rose to 5,600 cordobas a gallon from 4,800.

Meanwhile, the official Sandinista newspaper Barricada quoted Finance Minister William Hupper as saying that tax laws will be applied rigorously this year and tax evaders will be prosecuted.

President Daniel Ortega on Jan. 30 announced his government’s 1989 economic plan, which included budget cuts of more than 40% and the laying off of at least 30,000 government workers.

Opposition leaders and private businessmen say these measures will not be effective unless the government works out a political accord with them.

Nicaragua’s economy has been hurt by eight years of war with the U.S.-backed Contra rebels, a U.S. trade embargo in force since 1985 and Hurricane Joan, which struck this Central American country last October and inflicted heavy damage on agriculture.

The Sandinistas and the Contras signed a temporary cease-fire in March, 1988, which the government has been extending on a month-by-month basis. The U.S. Congress stopped military aid to the Contras in February, 1988.