The expropriation of lands owned by the Somozas in 1979 left the new Sandinista administration holding about 20 percent of the country's arable lands. At first, these holdings were turned into state farms. In 1981 the administration passed the Agrarian Reform Law defining the process of nationalization and stating what could be done with expropriated land. The law guaranteed property rights to those who continued to use their property, but land that was underdeveloped or abandoned was subject to expropriation. Land could also be declared necessary for agrarian reform and purchased from its owners at a price set by the government. The Agrarian Reform Law gave free title to land, mostly in eastern Nicaragua, that was occupied by homesteaders. Bank foreclosures in the event of default on a bank loan were prohibited.

Farmland that had been bought or expropriated could be turned over to agricultural cooperatives. The farmers who constituted a cooperative were then given title to the land. These "agrarian reform" titles could be inherited, but the title or any part of the land could not be sold. The process of turning state farms into cooperatives with the transfer of title began slowly at first. The process picked up steam in 1984 when rumors began circulating that the government would use a lack of clear title on state farms as an excuse to remove farmers from state farms. In 1985 it was estimated that 120,000 families were farming lands redistributed by the Agrarian Reform Law, half on state farms and half in cooperatives.

In its last months in office, the Ortega government awarded additional land to Sandinista supporters as payment for government service. Nicknamed the Piñata, after a children's game in which a hollow papier-mâché animal filled with candy is broken open and the candy falls out, the property giveaway consisted of more than 5,000 houses and hundreds of thousands of hectares of land.

The new administration of President Chamorro promised to compensate the large landowners whose land had been taken over by the Sandinista government. President Chamorro also issued two controversial land decrees: one provided for temporary rental of idle state farmland to those willing to work the land for a year, and another established a commission to adjudicate more than 1,600 claims on land confiscated by the former government. Bank foreclosures were allowed again, and the government indicated that it favored changing the titling provision of the Agrarian Reform Law to allow for sale of property.

Combined opposition forces would soon force the Chamorro administration to ease some of its new policies. The critical issue of land ownership would, in fact, prove to be the most contentious issue confronting the new government. The Sandinistaled opposition derided the rental decree, which primarily benefited former Contras, as a return of land to supporters of the Somoza family. Threatened by a major strike, President Chamorro agreed to suspend the rental land decree. Former President Ortega called the revocation of the degree a major victory, while critics assailed it as24f as an abrogation of power. Because Chamorro's plan did not take back property given away in the piñata, the powerful private-sector umbrella group, Cosep, refused to participate in her economic plan. Henceforth, Nicaragua's private sector would prove to be an intractable opponent.

Data as of December 1993