The Nicaraguan Córdoba — A Revolution Financed at the Printing Press, Reset to Gold

The Nicaraguan córdoba died in stages between 1988 and 1991, killed by a decade of war finance and a command economy run on the printing press, and was finally replaced by the gold córdoba — the córdoba oro — under the stabilization that Violeta Barrios de Chamorro’s government drove through in 1991. By the Hanke-Krus World Hyperinflation Table, the episode ran from June 1986 to March 1991 and peaked at roughly 261% per month in March 1991, prices doubling in under two weeks at the worst. In annual terms the numbers are still more lurid: Encyclopaedia Britannica records an inflation rate of “more than 30,000 percent in 1988,” and several accounts put the twelve months from January 1988 to January 1989 above 40,000%.

The cause was a government that had two expensive commitments and no honest way to pay for either. The Sandinista National Liberation Front, in power from 1979, was simultaneously building a socialist command economy — nationalized firms, subsidized staples, a swollen state payroll — and fighting the Contras, the US-backed counter-revolutionaries whose insurgency from 1981 onward consumed a punishing share of the budget. A 1985 United States trade embargo choked the economy further. After 1985, with revenues falling and military spending climbing, the government covered the gap the only way it could: it printed córdobas.

Day to day, the money simply stopped working. The central bank overprinted old plates with ever-larger numbers and then issued fresh notes up to ten million córdobas. A first reform in February 1988 lopped three zeros (a second córdoba at 1,000 to 1) and bolted on price controls; within months Hurricane Joan and renewed spending blew the program apart. The real fix came under Chamorro, who took office in April 1990 after defeating Daniel Ortega at the ballot box. Her government launched the córdoba oro — a new unit pegged at par to the US dollar — phased it in through 1990, devalued and consolidated in a March 1991 shock plan, and on 30 April 1991 made the córdoba oro the sole legal tender, retiring the old córdoba at five million to one.

The reform held because it came with the things printing could not fake: an end to the war, fiscal austerity, more than US$300 million in American aid, and IMF backing. Inflation fell to roughly 13% in 1991 and into single digits after. The córdoba oro is still Nicaragua’s money today.