Introduction
International accounting practices are no longer confronted only with accounting
complications, which ends at domestic borders. The purpose of this research paper is to
understand Nicaragua accounting practices and how a U.S. based company Abbott Laboratories,
is able to operate overseas. When companies, equity, or capitals cross borders they are
confronted with new cultures, challenging new laws and differences in political systems. In
addition that there are the differences in accounting standards abroad.
II Country Information
Country Introduction, Origin, History & Evolution
Nicaragua is a Central American country that lies on the southern continent just below the
equator. As result of the Nicaragua position on the globe makes it vulnerable to natural disasters
especially hurricanes. Nicaragua has more than seen its fair share of hurricanes. Nicaragua has
survived through the landfall of hurricane Mitch that caused extensive destruction that has
minimized employment opportunities for the community.
Political System
On the other hand Nicaragua has been in the middle of a major power struggle that dates
back to the early 1500’s when the country was first inhabited. Nicaragua independence was not
proclaimed until September 15, 1821 when it joined “independence of the five provinces of
Central America.”1 Not until April 30, 1838 Nicaragua fully declared its independence from the
“United Provinces of Central America”2 and sought to adopt a new constitution. Between the
times periods of 1850’s – 1860’s Nicaragua’s was being torn apart by a bitter power struggle with
León Liberals, and Granada Conservatives. Liberals won making and between 1893 – early
1900’s José Santos Zelaya was known for developing railroads, and lake transportation, also help
grow coffee plantations. In 1909, Zelaya was overthrown by the conservative party. Juan B.
Sacasa was elected into office in 1934. However, that same year Sandino was shot by the
National Guard which opened the doors for the Somoza’s family to deposed Sacasa from office
just three years later. This began the reign of Somoza family, ruled Nicaragua for the next 42
years. In 1962 a law was passed, prohibiting relatives within four generations to immediately
succeed office. Despite the law Anastasio Somoza Debayle who is Luis Somoza younger brother
succeeded as president. The Somoza dictatorship resulted in the formation of the Frente
Sandinista de Liberación Nacional(FSLN). FSLN main focus was to agitate against Somoza rule
and end the family’s monopolistic and corrupt economic practices. An example of corrupt
practices was when Nicaragua suffered a devastating earthquake in 1972, more than half of the
US relief aid extended to Nicaragua was stolen for private use. This occurrence along with other
corrupt policies led to the Guerrillas kidnapping 13 prominent political personalities, including
several members of the Somoza family December 1974. The Guerrillas demands entailed a
ransom of $1 million US dollars for the release of 14 political hostages. Somoza family did not
take the threats lightly and responded by declaring martial law with the National Guard on high
alert. The result ended up creating more enemies for the Somoza regime, and repression
continued throughout the 1970s. By May 1979 Somoza became very isolated diplomatically, due
to the loss of support from the Catholic Church, which left Somoza without any domestic allies
from the business community. Short time after the beginning of the downfall US president
Jimmy Carter began to cut off all military aid which then further weakened the ability for
Somoza to stay in power. FSLN had overthrown Somoza July 1979, he fled the country and was
later assassinated September 17, 1980 in Asunción, Paraguay. It’s been said that the estimated
death toll was 30,000 – 50,000 during the course of the conflict. Thereafter the aspiring programs
to advance Nicaragua and progress its healthcare, literacy rates, and land reform, were of high
priority when the Sandinistas engaged in the programs. Campaigns were put out to announce the
series of public health programs, they politically declared democratic standards but conveyed
only sporadically. With increasing antigovernment activity, the government declared a state of
emergency from 1982-1987. Thus began the counter– revolutionary group “contras”, the group
was aided by the administration of US president Ronald Reagan. April 1981 President Ronald
Regan cut off Nicaragua’s aid and announced a trade embargo in response to Nicaragua’s support
of leftist guerrillas in El Salvador. Sandinistas efforts to please the United States consisted of
them pulling out 2,200 advisors out of Cuba. Despite their overtures the United States continued
to provide support with aid was coming from the CIA to over 12,000 contras’ from Honduras and
Costa Rica. Due to the Sandinistas failure to improve socioeconomic conditions, inflation rate
skyrocketed in 1988 and reserves dwindled. Price controls had led to serious shortages in basic
harvests, lack of any capital for investment, the situation was becoming hopeless, economic
situation worsened. Nicaragua signed the Arias peace plan for Central America August 1987,
which promised “guarantees of democratic rights, and a reduction of hostilities with the contras,
including a cease-fire, a reduction in the armed forces, repatriation or resettlement of refugees,
and amnesty for the rebels.”3 Many of the rural families have been slowly migrating over to
Nicaragua to be able to find work. Given that Nicaragua is fourth poorest Latin American
country, most of the poverty in Nicaragua exists to rurally approximately 80 percent even after
reports of poverty has decreased within the recent years. About 50 percent of the community
lives below the poverty line. Some of the neighborhoods are impoverished and reside in the
capital of Managua. With roughly about 40 percent of its population living in the rural areas and
about 70 percent of them are currently trying to make it with just over one dollar a day.
The poverty in this county has caused poor health conditions and have also lead to bigger
issues that point towards HIV and AIDS. Many organizations have been working together to
prevent the further spread of these diseases and to provide support with the ones that have been
diagnosed with it. These organizations have also come together to empower the women to figure
for their freedom of violence and to empower the youth for a better society. “Remittances are
vital sources of income for one in every five families and account for 20 percent of the country’s
GDP.”4 These are a few of the factors that have contributed to the Nicaraguan remaining in
poverty.
Business Landscape: Environment, Vital statistics & Population data
Unfortunately five million people living in Nicaragua are living below the poverty line. Which is
approximately 46 percent of the country, classifying it as one of the poorest counties of the
