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It is also the administrative centre of the surrounding municipality of the same name. It is Nicaragua's fifth largest city, with a population of , inhabitants , and a total of , in the municipality. The city is served by Chinandega Airport. The region around Chinandega produces agricultural products, particularly oil , flour , peanuts , shrimp , and sugarcane , and distilled liquors.
The city's weather is warm and humid due to its location at a low altitude in the tropics. Chinandega is a center of agriculture growing sugarcane , bananas , peanuts , sesame seeds , cashews , oranges, and grains.
It is a shrimping and fishing center and it manufactures salt and leather goods. Its name is of Nahuatl origin; although its exact meaning is disputed, it may come from the words Chinamitl-tacalt , "place surrounded by reeds. Chinandega was a small city during the colonial era , but its location among fertile flatlands and its position as a commercial center led to its eventual rise in importance. The town of Chinandega is comprised of many Indians, plentiful corn, and all of the fruits of the earth, and appears to be a piece of paradise.
Officially a settlement poblado from , the city was planned by engineer Antonio Rojas. On March 30, , a law was instituted that established a fair on December 8 of every year. In , it was named capital of the short-lived Federal Republic of Central America , and, in , it became the center of a new administrative department. On November 1, , Chinandega was hit by massive flooding caused by Hurricane Mitch. The flooding resulted in many thousands of people losing their homes, as well as damages to infrastructure which had not been repaired as of In accordance with its colonial past and colonial-era urban planning, the city is centered around a central park with the Romanesque -style Our Lady Santa Ana Colonial Church.
It has withstood over a century of violent storms, earthquakes, and wars. The church was severely affected by an earthquake in , and was later rebuilt into its current state. This is not the location of the original building in the seventeenth century, however.