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The story of Nicaragua's recent troubles is the story of many Latin American nations - politicised economic policies, hesitant foreign investors and an impoverished populace. But unlike some neighbours, there are no vast amounts of mineral or petroleum wealth, and no strategic location to give the country an economic edge....

The story of Nicaragua's recent troubles is the story of many Latin American nations - politicised economic policies, hesitant foreign investors and an impoverished populace. But unlike some neighbours, there are no vast amounts of mineral or petroleum wealth, and no strategic location to give the country an economic edge. In the end, Nicaragua's economy is based largely on agricultural exports and remittances, and the global economic downturn has all but completely eroded those sources of revenue.

Nicaragua's lawyers see multilateral aid and institutional loans as the nation's best hopes for breaking the hold of poverty on the economy. But allegations of fraud in 2008's municipal election led to the US cancelling $60 million in aid remaining from US aid agency Millennium Challenge Corporation's account in July 2008.

The move puts many infrastructure projects and aid packages for farmers in jeopardy. With European donors considering similar courses of action at the time of writing, the Nicaraguan government is relying more and more on aid from Venezuela and other sympathetic countries, with the possibility of Russia and Iran chipping in as well.

The government of Nicaragua is keen to break the nation's dependence on foreign oil, and is promoting as many energy projects as it can with the limited resources it has. One affordable source of energy being promoted is the so-called mini-hydroelectric plant, which can be built and operated for a fraction of the money needed to build large-scale dams and turbines. Even a modest 320KW generator can power a village of several hundred households, and institutional developers including the World Bank and IFC (International Finance Corporation) are financing projects throughout the rural areas.

In addition to hydroelectric projects, Nicaragua recently saw power production begin at its first wind energy project, the 400-acre Amayo wind farm in the southern part of the country, which went online last February. The San Jacinto-Tizate geothermal power project near the city of León - one of the largest geothermal energy projects in the Western hemisphere - recently completed the first phase of its expansion and is expected to produce 72MW by 2010.

The local capital markets have been somewhat active and financial lawyers see Nicaragua's stock exchange as a good source of bargain-priced bonds for foreign investors. Last April, the International Airports Mangement Company, which oversees Nicaragua's airports, issued $60 million in bonds on the Nicaraguan market to refinance its debt and improve the airport at Puerto Cabezas. Lawyers are expecting more offerings in the latter part of 2009 and 2010 as authorised placements that are on hold move forward.