Nicaragua experienced economic growth during the 1960s and 1970s largely as a result of industrialization,[30] and became one of Central America's most developed nations despite its political instability. Due to its stable and high growth economy, foreign investments grew, primarily from U.S. companies such as Citigroup, Sears, Westinghouse and Coca Cola. However, the capital city of Managua suffered a major earthquake in 1972 which destroyed nearly 90% of the city creating major losses.[31] It leveled a 600-square block area in the heart of Managua.
Some Nicaraguan historians see the 1972 earthquake that devastated Managua as the final 'nail in the coffin' for Somoza. Instead of helping to rebuild Managua, Somoza siphoned off relief money to help pay for National Guard luxury homes, while the homeless poor had to make do with hastily constructed wooden shacks. The mishandling of relief money also prompted Pittsburgh Pirates star Roberto Clemente to personally fly to Managua on 31 December 1972, but he died enroute in an airplane accident.[32] Even the economic elite were reluctant to support Somoza, as he had acquired monopolies in industries that were key to rebuilding the nation,[33] and did not allow the businessmen to compete with the profits that would result.
In 1973 (the year of reconstruction) many new buildings were built, but the level of corruption in the government prevented further growth. Strikes and demonstrations developed as citizens became increasingly angry and politically mobilized. The elite were angry that Somoza was asking them to pay new emergency taxes to further his own ends. As a result, more of the young elite joined the Sandinista Liberation Front (FSLN). The ever increasing tensions and anti-government uprisings slowed growth in the last two years of the Somoza dynasty.
In 1961 Carlos Fonseca, turned back to the historical figure of Sandino, and along with 2 others founded the Sandinista National Liberation Front (FSLN).[19] The FSLN was a tiny party throughout most of the 1960s, but Somoza's utter hatred of it and his heavy-handed treatment of anyone he suspected to be a Sandinista sympathizer gave many ordinary Nicaraguans the idea that the Sandinistas were much stronger.
After the 1972 earthquake and Somoza's brazen corruption, mishandling of relief, and refusal to rebuild Managua, the ranks of the Sandinistas were flooded with young disaffected Nicaraguans who no longer had anything to lose.[34] These economic problems propelled the Sandinistas in their struggle against Somoza by leading many middle- and upper-class Nicaraguans to see the Sandinistas as the only hope for removing the brutal Somoza regime.
[snip]
Upon assuming office in 1981, U.S. President Ronald Reagan condemned the FSLN for joining with Cuba in supporting Marxist revolutionary movements in other Latin American countries such as El Salvador. His administration authorized the CIA to have their paramilitary officers from their elite Special Activities Division begin financing, arming and training rebels, some of whom were the remnants of Somoza's National Guard, as anti-Sandinista guerrillas that were branded "counter-revolutionary" by leftists (
contrarrevolucionarios in Spanish).[38] This was shortened to
Contras, a label the anti-socialist forces chose to embrace. Eden Pastora and many of the indigenous guerrilla forces, who were not associated with the "Somozistas," also resisted the Sandinistas.
The Contras operated out of camps in the neighboring countries of Honduras to the north and Costa Rica to the south.[38] As was typical in guerrilla warfare, they were engaged in a campaign of economic sabotage in an attempt to combat the Sandinista government and disrupted shipping by planting underwater mines in Nicaragua's Corinto harbour,[39] an action condemned by the World Court as illegal.[40][41] The U.S. also sought to place economic pressure on the Sandinistas, and the Reagan administration imposed a full trade embargo.[42]
U.S. support for this Nicaraguan insurgency continued in spite of the fact that impartial observers from international groupings such as the European Economic Community, religious groups sent to monitor the election, and observers from democratic nations such as Canada and the Republic of Ireland concluded that the Nicaraguan general elections of 1984 were completely free and fair. The Reagan administration disputed these results however, despite the fact that the government of the United States never had any observers in Nicaragua at the time.