Costa Rica actively courts FDI, placing a high priority on attracting and retaining high-quality foreign investment.

PROCOMER and CINDE lead Costa Rica’s investment promotion efforts. CINDE has had great success over the last several decades in attracting and retaining investment in specific areas, currently services, advanced manufacturing, life sciences, light manufacturing, and the food industry. In addition, the Tourism Institute (ICT) attends to potential investors in the tourism sector. CINDE, PROCOMER, and ICT are strong and effective guides and advocates for their client companies, prioritizing investment retention and maintaining an ongoing dialogue with investors.

Costa Rica recognizes and encourages the right of foreign and domestic private entities to establish and own business enterprises and engage in most forms of remunerative activity. The exceptions are in sectors that are reserved for the state (legal monopolies – see #7 below “State Owned Enterprises, first paragraph) or that require participation of at least a certain percentage of Costa Rican citizens or residents (electrical power generation, transport services, professional services, and aspects of broadcasting). Properties in the Maritime Zone (from 50 to 200 meters above the mean high-tide mark) may only be leased from the state and with residency requirements. In the areas of medical services, telecommunications, finance and insurance, state-owned entities dominate, but that does not preclude private sector competition. Costa Rica does not have an investment screening mechanism for inbound foreign investment, beyond those applied under anti-money laundering procedures. U.S. investors are not disadvantaged or singled out by any control mechanism or sector restrictions; to the contrary, U.S. investors figure prominently among the various major categories of FDI.

On May 25, 2021, Costa Rica officially became the 38th OECD member. A comprehensive review of the Costa Rican economy was published by the OECD at the conclusion of the accession process, which offered valuable insights into challenges faced by the economy, “OECD Economic Surveys Costa Rica 2020: https://www.oecd.org/countries/costarica/oecd-economic-surveys-costa-rica-2020-2e0fea6c-en.htm . In the same context, the OECD offered a March 2020 review of international investment in Costa Rica: https://www.oecd.org/investment/OECD-Review-of-international-investment-in-Costa-Rica.pdf . For the index of OECD reports on Costa Rica, go to https://www.oecd.org/costarica/ 

The World Trade Organization (WTO) conducted its 2019 “Trade Policy Review” of Costa Rica in September of that year. Trade Policy Reviews are an exercise, mandated in the WTO agreements, in which member countries’ trade and related policies are examined and evaluated at regular intervals: https://www.wto.org/english/tratop_e/tpr_e/tp492_e.htm  .

The United Nations Conference on Trade and Development (UNCTAD) produced in 2019 the report Overview of Economic and Trade Aspects of Fisheries and Seafood Sectors in Costa Rica:

https://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=2583  .

The Environmental Justice Atlas – https://ejatlas.org/country/costa-rica  – highlights a number of environmental disputes involving foreign investors, some moribund and some ongoing.

A new company in Costa Rica must typically register with the National Registry (company and capital registry), Internal Revenue Directorate of the Finance Ministry (taxpayer registration), National Insurance Institute (INS) (basic workers’ comp), Ministry of Health (sanitary permit), Social Security Administration (CCSS) (registry as employer), and the local Municipality (business permit). Legal fees are the biggest single business start-up cost, as all firms registered to individuals must hire a lawyer for a portion of the necessary paperwork. Costa Rica’s business registration website Crearempresa functions but in 2021 is rated last of 76 national business registration sites evaluated by “Global Enterprise Registration” ( www.GER.co ).

Traditionally, the Costa Rican government’s small business promotion efforts have tended to focus on participation by women and underserved communities.  The National Institute for Women (INAMU), National Training Institute (INA), the Ministry of Economy (MEIC), and PROCOMER through its supply chain initiative have all collaborated extensively to promote small and medium enterprise with an emphasis on women’s entrepreneurship. In 2020, INA launched a network of centers to support small and medium-sized enterprises based upon the U.S. Small Business Development Center (SBDC) model.

The Costa Rican government does not promote or incentivize outward investment. Neither does the government discourage or restrict domestic investors from investing abroad.

Costa Rican laws, regulations, and practices are generally transparent and meant to foster competition in a manner consistent with international norms, except in the sectors controlled by a state monopoly, where competition is explicitly excluded. Rule-making and regulatory authority is housed in any number of agencies specialized by function (telecom, financial, personal data, health, environmental) or location (municipalities, port authorities). Tax, labor, health, and safety laws, though highly bureaucratic, are not seen as unfairly interfering with foreign investment. It is common to have Professional Associations that play a role in policing or guiding their members.

Costa Rica is a member of UNCTAD’s international network of transparent investment procedures ( http://www.businessfacilitation.org ). Within that context, the Ministry of Economy compiled the various procedures needed to do business in Costa Rica: https://tramitescr.meic.go.cr/ . Accounting, legal, and regulatory procedures are transparent and consistent with international norms. The stock and bond market regulator SUGEVAL requires International Accounting Standards Board for public companies, while the Costa Rican College of Public Accountants (Colegio de Contadores Publicos de Costa Rica -CCPA) has adopted full International Financial Reporting Standards for non-regulated companies in Costa Rica; for more, see the international federation of accountants IFAC: https://www.ifac.org/about-ifac/membership/country/costa-rica .

While the government does not require companies’ environmental, social, and governance (ESG) disclosure, to facilitate transparency and better inform investors, government entities do regularly encourage commitments to environmental and social standards (e.g., within the coffee and tourism industries) beyond or complementary to purely legal requirements.  Certifications with Responsible Business Conduct (RBC) components used by the Costa Rican private sector include an array of agricultural certifications, the B Corporation Certificate, the Environmental Design Certification from the Green Building Council, and the ISO 26000 Social Responsibility standard.  In the banking sector, entities under the supervision of the Superintendencia General de Entidades Financieras (Financial Regulator) must comply with corporate governance regulations such as transparency and accountability to shareholders.

Regulations must go through a public hearing process when being drafted. Draft bills and regulations are made available for public comment through public consultation processes that will vary in their details according to the public entity and procedure in question, generally giving interested parties sufficient time to respond. The standard period for public comment on technical regulations is 10 days. As appropriate, this process is underpinned by scientific or data-driven assessments. A similarly transparent process applies to proposed laws. The Legislative Assembly generally provides sufficient opportunity for supporters and opponents of a law to understand and comment on proposals. To become law, a proposal must be approved by the Assembly by two plenary votes. The signature of 10 legislators (out of 57) is sufficient after the first vote to send the bill to the Supreme Court for constitutional review within one month, although the court may take longer.

Regulations and laws, both proposed and final, for all branches of government are published digitally in the government registry “La Gaceta”: https://www.imprentanacional.go.cr/gaceta/ . The Costa Rican American Chamber of Commerce (AmCham – http://amcham.co.cr  ) and other business chambers closely monitor these processes and often coordinate responses as needed.

The government has mechanisms to ensure laws and regulations are followed. The Comptroller General’s Office conducts operational as well as financial audits and as such provides the primary oversight and enforcement mechanism within the Costa Rican government to ensure that government bodies follow administrative processes. Each government body’s internal audit office and, in many cases, the customer-service comptroller (Contraloria de Servicios) provide additional support.

There are several independent avenues for appealing regulatory decisions, and these are frequently pursued by persons or organizations opposed to a public sector contract or regulatory decision. The avenues include the Comptroller General (Contraloria General de la Republica), the Ombudsman (Defensor de los Habitantes), the public services regulatory agency (ARESEP), and the constitutional review chamber of the Supreme Court. The State Litigator’s office (Procuraduria General) is frequently a participant in its role as the government’s attorney.

Costa Rica is transparent in reporting its public finances and debt obligations, including explicit and contingent liabilities. Debt obligations are transparent; the Ministry of Finance provides updates on public debt through the year, with the debt categorized as Central Government, Central Government and Non-Financial Sector, and Central Bank of Costa Rica.

https://www.hacienda.go.cr/contenido/12519-informacion-de-la-deuda-publica .

The following chart covers contingent debt as of January 31, 2022:

https://www.hacienda.go.cr/docs/6213fa8ea594c_01-2022%20DEUDA%20CONTINGENTE%20PUBLICAR.pdf

The review and enforcement mechanisms described above have kept Costa Rica’s regulatory system relatively transparent and free of abuse, but have also rendered the system for public sector contract approval exceptionally slow and litigious. There have been several cases in which these review bodies have overturned already-executed contracts, thereby interjecting uncertainty into the process. Bureaucratic procedures are frequently long, involved and can be discouraging to new investors.

Furthermore, Costa Rica’s product market regulations are more stringent than in any other OECD country, according to the OECD’s 2020 Product Market Regulations Indicator, leading to market inefficiencies. Find this explanation as well as a detailed review of the regulatory challenges Costa Rica faces in the September 2020 OECD report on regulatory reform:

https://www.oecd.org/countries/costarica/enhancing-business-dynamism-and-consumer-welfare-in-costa-rica-with-regulatory-reform-53250d35-en.htm 

While Costa Rica does consult with its neighbors on some regulations through participation in the Central American Integration System (SICA) ( http://www.sica.int/sica/sica_breve.aspx ), Costa Rica’s lawmakers and regulatory bodies habitually refer to sample regulations or legislation from OECD members and others. Costa Rica’s commitment to OECD standards as an OECD member has accentuated this traditional use of best-practices and model legislation. Costa Rica regularly notifies all draft technical regulations to the WTO Committee on Technical Barriers in Trade (TBT).

Costa Rica uses the civil law system. The fundamental law is the country’s political constitution of 1949, which grants the unicameral legislature a particularly strong role. Jurisprudence or case law does not constitute legal precedent but can be persuasive if used in legal proceedings. For example, the Chambers of the Supreme Court regularly cite their own precedents. The civil and commercial codes govern commercial transactions. The courts are independent, and their authority is respected. The roles of public prosecutor and government attorney are distinct: the Chief Prosecuting Attorney or Attorney General (Fiscal General) operates a semi-autonomous department within the judicial branch while the government attorney or State Litigator (Procuraduria General) works within the Ministry of Justice and Peace in the Executive branch. The primary criminal investigative body “Organismo de Investigacion Judicial” OIJ, is a semi-autonomous department within the Judicial Branch. Judgments and awards of foreign courts and arbitration panels may be accepted and enforced in Costa Rica through the exequatur process. The Constitution specifically prohibits discriminatory treatment of foreign nationals. The Costa Rican Judicial System addresses the full range of civil, administrative, and criminal cases with a number of specialized courts.  The judicial system generally upholds contracts, but caution should be exercised when making investments in sectors reserved or protected by the Constitution or by laws for public operation. Regulations and enforcement actions may be, and often are, appealed to the courts.

Costa Rica’s commercial code details all business requirements necessary to operate in Costa Rica. The laws of public administration and public finance contain most requirements for contracting with the state.

The legal process to resolve cases involving squatting on land can be especially cumbersome. Land registries are at times incomplete or even contradictory. Buyers should retain experienced legal counsel to help them determine the necessary due diligence regarding the purchase of property.

Costa Rican websites are useful to help navigate laws, rules and procedures including that of the investment promotion agency CINDE, http://www.cinde.org/en , the export promotion authority PROCOMER, http://www.procomer.com/ (“inversionista”), and the Health Ministry, https://www.ministeriodesalud.go.cr/  (product registration and import/export). In addition, the State Litigator’s office ( www.pgr.go.cr,  the “SCIJ” tab) compiles relevant laws.

Two public institutions are responsible for consumer protection as it relates to monopolistic and anti-competitive practices. The “Commission for the Promotion of Competition” (COPROCOM), an autonomous agency housed in the Ministry of Economy, Industry and Commerce, is charged with investigating and correcting anti-competitive behavior across the economy. The Telecommunications Superintendence (SUTEL) shares that responsibility with COPROCOM in the Telecommunications sector. Both agencies are charged with defense of competition, deregulation of economic activity, and consumer protection. Their decisions may be appealed judicially. For the OECD assessment of competition law and policy in Costa Rica, see this July 2020 report: https://www.oecd.org/countries/costarica/costarica-competition.htm. 

The three principal expropriating government agencies in recent years have been the Ministry of Public Works – MOPT (highway rights-of-way), the state-owned Costa Rican Electrical Institute – ICE (energy infrastructure), and the Ministry of Environment and Energy – MINAE (National Parks and protected areas). Expropriations generally conform to Costa Rica’s laws and treaty obligations.

Article 45 of Costa Rica’s Constitution stipulates that private property can be expropriated without proof that it is done for public interest. The 1995 Law 7495 on expropriations further stipulates that expropriations require full and prior payment, and upon full deposit of the calculated amount the government may take possession of land despite the former owner’s dispute of the price. The law makes no distinction between foreigners and nationals. The expropriations law was amended in 1998, 2006, and 2015 to clarify and expedite some procedures, including those necessary to expropriate land for the construction of new roads. (For full detail go to https://PGRweb.go.cr/SCIJ  . When reviewing the articles of the law go to the most recent version of each article.)

There is no discernible bias against U.S. investments, companies, or representatives during the expropriations process. Costa Rican public institutions follow the law as outlined above and generally act in a way acceptable to the affected landowners. However, when landowners and government differ significantly in their appraisal of the expropriated lands’ value, the resultant judicial processes generally take years to resolve. In addition, landowners have, on occasion, been prevented from developing land which has not yet been formally expropriated for parks or protected areas; the courts will eventually order the government to proceed with the expropriations but the process can be long.

The Costa Rican bankruptcy law, addressed in both the commercial code and the civil procedures code, has long been similar to corresponding U.S. law. In February 2021, Costa Rica’s National Assembly approved a comprehensive bankruptcy law #9957 “Ley Concursal”, in effect since December 1, 2021. The new law eases bankruptcy processes and help companies in financial distress to move through the “administrative intervention” intended to save the companies. The previous law too often ended with otherwise viable companies ceasing operations, rather than allowing them to recover, due to a bias towards dissolution of companies in distress. As in the United States, penal law will also apply to criminal malfeasance in some bankruptcy cases.

Four investment incentive programs operate in Costa Rica: the free trade zone system, an inward-processing regime, a duty drawback procedure, and the tourism development incentives regime. These incentives are available equally to foreign and domestic investors, and include tax holidays, training of specialized labor force, and facilitation of bureaucratic procedures. PROCOMER is in charge of the first three programs and companies may choose only one of the three. As of early 2022, 568 companies are in the free trade zone regime, 90 in the inward processing regime, and 10 in duty drawback.

ICT administers the tourism incentives; through early 2022, 1,133 tourism firms are declared as such with access to incentives of various types depending on the firm’s operations (hotels, rent-a-car, travel agencies, airlines and aquatic transport). The free trade zone regime is based on the 1990 law #7210, updated in 2010 by law #8794 and attendant regulations, while inward processing and duty drawback derive from the General Customs Law #7557. Tourism incentives are based on the 1985 law #6990, most recently amended in 2001.

The inward-processing regime suspends duties on imported raw materials of qualifying companies and then exempts the inputs from those taxes when the finished goods are exported. The goods must be re-exported within a non-renewable period of one year. Companies within this regime may sell to the domestic market if they have registered to do so and pay applicable local taxes. The drawback procedure provides for rebates of duties or other taxes that were paid by an importer for goods subsequently incorporated into an exported good. Finally, the tourism development incentives regime provides a set of advantages, including duty exemption – local and customs taxes – for construction and equipment to tourism companies, especially hotels and marinas, which sign a tourism agreement with ICT.

Costa Rica has not established distinct incentives for under-represented investors, for example women. Incentives for environmentally “green” investment tend towards structural or institutional facilitation rather than subsidy. Electricity tariffs, including net-metering and access tariffs for rooftop solar installation, are designed to encourage renewable energy generation and use without creating a clear subsidy of those activities. Green hydrogen production is encouraged through several executive decrees that provide import tariff exemptions for equipment and seek to establish a flexible and enabling regulatory framework for the use of national grid surpluses in the development of a green hydrogen economy in Costa Rica.

Individual companies are able to create industrial parks that qualify for free trade zone (FTZ) status by meeting specific criteria and applying for such status with PROCOMER. Companies in FTZs receive exemption from virtually all taxes for eight years and at a reduced rate for some years to follow. Established companies may be able to renew this exemption through additional investment. In addition to the tax benefits, companies operating in FTZs enjoy simplified investment, trade, and customs procedures, which provide a convenient way to avoid Costa Rica’s burdensome business licensing process. Call centers, logistics providers, and software developers are among the companies that may benefit from FTZ status but do not physically export goods. Such service providers have become increasingly important participants in the free trade zone regime. PROCOMER and CINDE are traditionally proactive in working with FTZ companies to streamline and improve law, regulation and procedures touching upon the FTZ regime. A study of the benefits of FTZ regime for the broader economy is available on PROCOMER’s website.

Costa Rica does not impose requirements that foreign investors transfer technology or proprietary business information or purchase a certain percentage of inputs from local sources. However, the Costa Rican agencies involved in investment and export promotion do explicitly focus on categories of foreign investor who are likely to encourage technology transfer, local supply chain development, employment of local residents, and cooperation with local universities. The export promotion agency PROCOMER operates an export linkages department focused on increasing the percentage of local content inputs used by large multinational enterprises.

Costa Rica does not have excessively onerous visa, residence, work permit, or similar requirements designed to inhibit the mobility of foreign investors and their employees, although the procedures necessary to obtain residency in Costa Rica are often perceived to be long and bureaucratic. Existing immigration measures do not appear to have inhibited foreign investors’ and their employees’ mobility to the extent that they affect foreign direct investment in the country. The government is responsible for monitoring so that foreign nationals do not displace local employees in employment, and the Immigration Law and Labor Ministry regulations establish a mechanism to determine in which cases the national labor force would need protection. However, investors in the country do not generally perceive Costa Rica as unfairly mandating local employment. The Labor Ministry prepares a list of recommended and not recommended jobs to be filled by foreign nationals. Costa Rica does not have government/authority-imposed conditions on any permission to invest.

Costa Rica does not require Costa Rican data to be stored on Costa Rican soil. Under law #8968 ‒ Personal Data Protection Law – and its corresponding regulation, companies must notify the Data Protection Agency (PRODHAB) of all existing databases from which personal information is sold or traded. Costa Rica does not impose measures that unduly impede companies from securing and freely transmitting customer or other business-related data. While Costa Rica in the next several years is looking to modernize its law pertaining to data privacy and cross border data transfer, Costa Rica’s vibrant digital services industry will likely ensure that the new regulations do not interfere unduly with legitimate digital services business.

The laws governing investments in land, buildings, and mortgages are generally transparent. Secured interests in both chattel and real property are recognized and enforced. Mortgage and title recording are mandatory and the vast majority of land in Costa Rica has clear title. However, the National Registry, the government entity that records property titles, has been successfully targeted on occasion with fraudulent filing, which has led in some cases to overlapping title to real property. Costa Rican law allows long-time occupants of a property belonging to someone else (i.e. squatters) to eventually take legal possession of that property if unopposed by the property owner. Potential investors in Costa Rican real estate should also be aware that the right to use traditional paths is enshrined in law and can be used to obtain court-ordered easements on land bearing private title; disputes over easements are particularly common when access to a beach is an issue.

Foreigners are subject to the same land lease and acquisition laws and regulations as Costa Ricans with the exception of concessions within the Maritime Zone (Zona Maritima Terrestre – ZMT). Almost all beachfront is public property for a distance of 200 meters from the mean high tide line, with an exception for long-established port cities and a few beaches such as Jaco. The first 50 meters from the mean high tide line is severely restricted. The next 150 meters, also owned by the state, is the Maritime Zone and can only be leased from the local municipalities or the Costa Rican Tourism Institute (ICT) for specified periods and particular uses, such as tourism installation or vacation homes. Concessions in this zone cannot be given to foreigners or foreign-owned companies.

Costa Rica’s legal structure for protecting intellectual property rights (IPR) is quite strong, but enforcement is sporadic and does not always get the attention and resources required to be effective. In the 2019 United States Trade Representative (USTR) Special 301 Report, USTR noted the substantial progress made by Costa Rica in protecting IPR. As a result, USTR did not include Costa Rica in the 2020 or 2021 Special 301 reports. Costa Rica was not listed in USTR’s 2021 Review of Notorious Markets for Counterfeiting and Piracy.

Costa Rica is a signatory of many major international agreements and conventions regarding intellectual property.  Building on the existent regulatory and legal framework, the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) required Costa Rica to strengthen and clarify its IPR regime further, with several new IPR laws added to the books in 2008.  Prior to that, the World Trade Organization’s Agreement on Trade-Related Aspects of Intellectual Property (TRIPS) took effect in Costa Rica on January 1, 2000.  In 2002, Costa Rica ratified the World Intellectual Property Organization (WIPO) Performances and Phonograms Treaty and the WIPO Copyright Treaty.

On June 22, 2020, the General Directorate of the National Registry merged the Registry of Industrial Property and the Registry of Copyright and Related Rights into a single Registry of Intellectual Property, improving the National Registry’s efficiency.

While online piracy remains a concern for the country, in February 2019 Costa Rica modified the existing regulation on internet service providers (ISPs) to shorten significantly the 45 days previously allowed for notice and takedown of pirated online content, creating an expeditious safe harbor system for ISPs in Costa Rica.

In August 2020, Costa Rica’s Intellectual Property Registry launched a WIPO online platform that will allow interested parties to submit online applications to register trademarks.  The online service has improved efficiency and encouraged registrations from small-to-medium-sized companies across the country. In 2021, the Intellectual Property Registry launched the development of the second stage of WIPO File that will allow for online filing of applications for patents, models, and industrial designs. In 2019, the National Registry of Industrial Property announced the implementation of TMview and DesignView, search tools that allow users to consult trademarks and industrial design data.

The Costa Rican government does not release official statistics on the seizure of counterfeit goods, but the Chamber of Commerce compiles statistics from Costa Rican government sources: http://observatorio.co.cr/  In the first six months of 2021, Costa Rica’s Economic Crimes Prosecutor investigated 26 IPR cases, up from the total of 14 cases in 2020. As in years past, prosecutors ultimately dismissed several cases due to lack of interest, collaboration, and follow-up by the representatives of trademark rights holders.  Government authorities complained that the lack of response by trademark representatives is a recurring behavior dating back to at least 2016 and may explain the drop in IPR cases.  In 2020, the Prosecutor’s Office established a specialized cybercrime unit with the purpose of improving the country’s response toward computer-oriented crimes, including copyrights infringements.

On September 4, 2019, Costa Rican Customs issued an executive decree titled “Contact of the Representatives of Intellectual Property Rights for Enforcement Issues” establishing a formal customs recordation system for trademarks that allows customs officers to make full use of their ex officio authority to inspect and detain goods. Under the decree, customs offices have the power to include new trademark rights holders in a formal database for use by customs officials in the field. As of 2021, 173 trademarks are included in this database.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

The Costa Rican government’s general attitude towards foreign portfolio investment is prudently welcoming, seeking to facilitate the free flow of financial resources into the economy while minimizing the instability that might be caused by the sudden entry or exit of funds. The securities exchange (Bolsa Nacional de Valores) is small and is dominated by trading in bonds. Stock trading is of limited significance and involves less than 10 of the country’s larger companies, resulting in an illiquid secondary market. There is a small secondary market in commercial paper and repurchase agreements. The Costa Rican government has in recent years explicitly welcomed foreign institutional investors purchasing significant volumes of Costa Rican dollar-denominated government debt in the local market. The securities exchange regulator (SUGEVAL) is generally perceived to be effective.

Costa Rica accepted the obligations of IMF Article VIII, agreeing not to impose restrictions on payments and transfers for current international transactions or engage in discriminatory currency arrangements, except with IMF approval. There are no controls on capital flows in or out of Costa Rica or on portfolio investment in publicly traded companies. Some capital flows are subject to a withholding tax (see section on Foreign Exchange and Remittances). Within Costa Rica, credit is largely allocated on market terms, although long-term capital is scarce. Favorable lending terms for USD-denominated loans compared to colon-denominated loans have made USD-denominated mortgage financing popular and common. Foreign investors are able to borrow in the local market; they are also free to borrow from abroad, although a 15% withholding tax on interest paid will apply when the creditor is a non-tax resident in the country, under the reasoning that the interest payment constitutes income from a Costa Rican source. Potential overseas borrowers must also consider Costa Rica’s limitation on the deductibility of financial expenses by the debtor when the creditor is not an entity regulated in its country of origin by a body like the Costa Rican financial supervisory authority (SUGEF). In such cases, deductible interest for the current fiscal year is around 30% of EBITDA -Earnings Before Interest Taxes Depreciation and Amortization.

Costa Rica’s financial system boasts a relatively high financial inclusion rate, estimated by the Central Bank through August 2020 at 81.5 percent (the percentage of adults over the age of 15 holding a bank account). Non-resident foreigners may open what are termed “simplified accounts” in Costa Rican financial institutions, while resident foreigners have full access to all banking services.

The banking sector is healthy and well-regulated, although the 2020 non-performing loan ratio of 2.4 percent of active loans as of December 2021 (2.8 percent in state-owned banks) would be significantly higher if not for Covid-19 temporary regulatory measures allowing banks to readjust loans. The country hosts a large number of smaller private banks, credit unions, and factoring houses, although the four state-owned banks (two commercial, one mortgage and one workers’) are still dominant, accounting for 46 percent of the country’s financial system assets. Consolidated total assets of those state-owned banks were USD 29.6 billion, while combined assets of the regulated financial sector (public banks, private banks, savings-and-loans and others) were almost USD 64 billion as of December 2021.

Costa Rica’s Central Bank performs the functions of a central bank while also providing support to the four autonomous financial superintendencies (Banking, Securities, Pensions and Insurance) under the supervision of the national council for the supervision of the financial system (CONASSIF). The Central Bank developed and operates the financial system’s transaction settlement and direct transfer mechanism “SINPE” through which clients transfer money to and from accounts with any other account in the financial system. The Central Bank’s governance structure is strong, with a significant degree of autonomy from the Executive Branch.

Foreign banks may establish both full operations and branch operations in the country under the supervision of the banking regulator SUGEF. The Central Bank has a good reputation and has had no problem maintaining sufficient correspondent relationships. Costa Rica is steadily improving its ability to ensure the efficacy of anti-money laundering and anti-terrorism finance. The Costa Rican financial sector in broad terms appears to be satisfied to date with the available correspondent banking services.

The OECD 2020 report “review of the financial system” for Costa Rica is an excellent resource for those seeking more detail on the current state of Costa Rica’s financial system: https://www.oecd.org/countries/costarica/Costa-Rica-Review-of-Financial-System-2020.pdf .

Costa Rica does not have a Sovereign Wealth Fund.

Costa Rica’s total of 28 state-owned enterprises (SOEs) are commonly known by their abbreviated names. They include monopolies in petroleum-derived fuels (RECOPE), lottery (JPS), railroads (INCOFER), local production of ethanol (CNP/FANAL), water distribution (AyA), and electrical distribution (ICE, CNFL, JASEC, ESPH). SOEs have market dominance in insurance (INS), telecommunications (ICE, RACSA, JASEC, ESPH) and finance (BNCR, BCR, Banco Popular, BANHVI, INVU, INFOCOOP). They have significant market participation in parcel and mail delivery (Correos) and ports operation (INCOP and JAPDEVA). Six of those SOEs hold significant economic power with revenues exceeding 1 percent of GDP: ICE, RECOPE, INS, BNCR, BCR and Banco Popular. The 2020 OECD report “Corporate Governance in Costa Rica” reports that Costa Rican SOE employment is 1.9% of total employment, somewhat below the OECD average of 2.5%. Audited returns for each SOE may be found on each company’s website, while basic revenue and costs for each SOE are available on the General Controller’s Office (CGR) “Sistema de Planes y Presupuestos” https://www.cgr.go.cr/02-consultas/consulta-pp.html . The Costa Rican government does not currently hold minority stakes in commercial enterprises.

Costa Rican state-owned enterprises have not in recent decades required continuous and substantial state subsidy to survive. Several (notably ICE, AyA and RECOPE) registered major losses in pandemic year 2020, while others (INS, BCR, BNCR) registered substantial profits, which are allocated as dictated by law and boards of directors. Financial allocations to and earnings from SOEs may be found in the CGR “Sistema de Informacion de Planes y Presupuestos (SIPP)”.

U.S. investors and their advocates cite some of the following ways in which Costa Rican SOEs competing in the domestic market receive non-market-based advantages because of their status as state-owned entities.

• According to Law 7200, electricity generated privately must be purchased by public entities and the installed capacity of the private sector is limited to 30 percent of total electrical installed capacity in the country: 15 percent to small privately-owned renewable energy plants and 15 percent to larger “buildoperatetransfer” (BOT) operations.
• Telecoms and technology sector companies have called attention to the fact that government agencies often choose SOEs as their telecom services providers despite a full assortment of private-sector telecom companies. The Information and Telecommunications Business Chamber (CAMTIC) has long protested against what its members feel to be unfair use by government entities of a provision (Article 2) in the public contracting law that allows noncompetitive award of contracts to public entities (also termed “direct purchase”) when functionaries of the awarding entity certify the award to be an efficient use of public funds. CAMTIC has compiled detailed statistics showing that while the yearly total dollar value of Costa Rican government direct purchases in the IT sector under Article 2 has dropped considerably from USD 226 million in 2017, to USD 72.5 million in 2018, USD 27.5 million in 2019, USD 54 million in 2020, and USD 5 million in 2021, the number of purchases has actually increased from 56 purchases in both 2017 and 2018 to 86 in 2019, 104 in 2020, and 115 in 2021.
• The state-owned insurance provider National Insurance Institute (INS) has been adjusting to private sector competition since 2009 but in 2021 still registered 66 percent of total insurance premiums paid; 13 insurers are now registered with insurance regulator SUGESE: ( https://www.sugese.fi.cr/SitePages/index.aspx ). Competitors point to unfair advantages enjoyed by the stateowned insurer INS, including a strong tendency among SOE’s to contract their insurance with INS.

Costa Rica is not a party to the WTO Government Procurement Agreement (GPA) although it is registered as an observer. Costa Rica is working to adhere to the OECD Guidelines on Corporate Governance for SOEs ( www.oecd.org/daf/ca/oecdguidelinesoncorporategovernanceofstate-ownedenterprises.htm ). For more information on Costa Rica’s SOE’s, see the OECD Accession report “Corporate Governance in Costa Rica”, dated October 2020: https://www.oecd.org/countries/costarica/corporate-governance-in-costa-rica-b313ec37-en.htm  .

Costa Rica does not have a privatization program and the markets that have been opened to competition in recent decades – banking, telecommunications, insurance and Atlantic Coast container port operations – were opened without privatizing the corresponding state-owned enterprises (SOs). Two relatively minor SOEs, the state liquor company (Fanal) and the International Bank of Costa Rica (Bicsa), are the most likely targets for privatization if such political sentiment grows.

Corporations in Costa Rica, particularly those in the export and tourism sectors, generally enjoy a positive reputation within the country as engines of growth and practitioners of Responsible Business Conduct (RBC).  The Costa Rica government actively highlights its role in attracting high-tech companies to Costa Rica; the strong RBC culture that many of those companies cultivate has become part of that winning package.  Large multinational companies commonly pursue RBC goals in line with their corporate goals and have found it beneficial to publicize RBC orientation and activities in Costa Rica.  Many smaller companies, particularly in the tourism sector, have integrated community outreach activities into their way of doing business. There is a general awareness of RBC among both producers and consumers in Costa Rica.

Multinational enterprises in Costa Rica have not been associated in recent decades in any systematic or high-profile way with alleged human or labor rights violations.  The Costa Rican government maintains and enforces laws with respect to labor and employment rights, consumer protection and environmental protection.  Costa Rica has no legal mineral extraction industry with its accompanying issues, but illegal small scale gold mining, particularly in the north of the country, is a focal point of serious environmental damage, organized crime, and social disruption.  Large scale industrial agriculture is also occasionally the focus of health or environmental complaints, including in recent years the pineapple industry for allegedly affecting water supplies and a banana producer with many workers with rashes allegedly induced by pesticide use. The government appears to respond appropriately. Indigenous communities in specific areas of the country have longstanding grievances against non-indigenous encroachment on their reserves, which has led to recent incidents of violence.

Costa Rica encourages foreign and local enterprises to follow generally accepted RBC principles such as the OECD Guidelines for Multinational Enterprises (MNE) and maintains a national contact point for OECD MNE guidelines within the Ministry of Foreign Trade (see https://www.comex.go.cr/punto-nacional-de-contacto/  or  http://www.oecd.org/investment/mne/ncps.htm ). Costa Rica has been a participant since 2011 in the Montreux Document reaffirming the obligations of states regarding private military and security companies during armed conflict.

Costa Rica has a national climate strategy and a sophisticated system for monitoring natural capital, biodiversity, and ecosystem services. While the Central Bank compiles environmental accounts ( https://www.bccr.fi.cr/en/Economic-Indicators/environmental-accounts ), the Ministry of Environment and Energy oversees policies on environmental impact assessments and emissions. As part of Costa Rica’s nationally determined contribution to the United National Framework on Climate Change, Costa Rica targets maximum national net emissions in 2030 of 9.11 million tons of CO2. This number is consistent with the targeted trajectory of their National Decarbonization Plan which seeks to achieve net-zero emissions by 2050. Within the transportation sector Costa Rica aims to adopt standards to migrate towards a zero-emission motorcycle fleet by 2025, have 8% of their fleet of small vehicles be electric, and by 2030 have 8% of the public transportation fleet fully electric. There are currently no regulatory incentives or rebates for private sector contributions to achieve these goals. Costa Rican government efforts to reach net-zero emissions are largely limited to encouraging purchase and use of electric vehicles through tax reduction. In the absence of any significant budget for climate change response, the Costa Rican government necessarily relies on the private sector and international donors to implement its ambitions to be net zero by 2050. Costa Rica supports labels or designations meant to encourage good behavior with some considerable success: blue flag program at beaches and the Costa Rican country brand “Essential Costa Rica”. Official procurement policies do not include environmental or green growth considerations beyond those otherwise mandated by law.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

Costa Rica has laws, regulations, and penalties to combat corruption. Though the resources available to enforce those laws are limited, Costa Rica’s institutional framework is strong, such that those cases that are prosecuted are generally perceived as legitimate. Anti-corruption laws extend to family members of officials, contemplate conflict-of-interest in both procurement and contract award, and penalize bribery by local businessmen of both local and foreign government officials. Public officials convicted of receiving bribes are subject to prison sentences up to ten years, according to the Costa Rican Criminal Code (Articles 347-360). Entrepreneurs may not deduct the costs of bribes or any other criminal activity as business expenses. In recent decades, Costa Rica saw several publicized cases of firms prosecuted under the terms of the U.S. Foreign Corrupt Practices Act.

Costa Rica ratified the Inter-American Convention Against Corruption in 1997. This initiative of the OECD and the Organization of American States (OAS) obligates subscribing nations to implement criminal sanctions for corruption and implies a series of follow up actions: http://www.oas.org/juridico/english/cri.htm . Costa Rica also ratified the UN Anti-Corruption Convention in March 2007, has been a member of the Open Government Partnership (OGP) since 2012, and as of July 2017 is a party to the OECD Convention on Combatting Bribery of Foreign Public Officials.

The Costa Rican government has encouraged civil society interest in good governance, open government and fiscal transparency, with a number of NGO’s operating unimpeded in this space. While U.S. firms do not identify corruption as a major obstacle to doing business in Costa Rica, some have made allegations of corruption in the administration of public tenders and in approvals or timely processing of permits. Developers of tourism facilities periodically cite municipal-level corruption as a problem when attempting to gain a concession to build and operate in the restricted maritime zone.

For further material on anti-bribery and corruption in Costa Rica, see the 2020 OECD study: https://www.oecd.org/countries/costarica/costa-rica-has-improved-its-foreign-bribery-legislation-but-must-strengthen-enforcement-and-close-legal-loopholes.htm 

Also on the OECD website, information relating to Costa Rica’s membership in the OECD anti-bribery convention: https://www.oecd.org/countries/costarica/costarica-oecdanti-briberyconvention.htm 

Name:  José Armando López Baltodano
Title:  Procurador Director, Procuraduría de la Ética Pública.
Organization:  Procuraduría General de la República (PGR)
Address: Avenida 2 y 6, Calle 13.  San José, Costa Rica.
Telephone Number:  2243-8330, 2243-8321
Email Address: armandolb@pgr.go.cr     
evelynhk@pgr.go.cr 

Contact at “watchdog” organization:

Evelyn Villarreal F.
Asociación Costa Rica Íntegra
Tel:. (506) 8355 3762
Email: evelyn.villarreal@cr.transparency.org 

Since 1948, Costa Rica has not experienced significant domestic political violence. There are no indigenous or external movements likely to produce political or social instability. However, Costa Ricans occasionally follow a long tradition of blocking public roads for a few hours as a way of pressuring the government to address grievances; the traditional government response has been to react slowly, thus giving the grievances time to air. This practice on the part of peaceful protesters can cause logistical problems.

Crime increased in Costa Rica in recent decades and U.S. citizen visitors and residents are frequent victims.  While petty theft is the main problem, criminals show an increased tendency to use violence. Some crime in Costa Rica is associated with the illegal drug trade.  Please see the State Department’s Travel Advisory page for Costa Rica for the latest information- https://travel.state.gov/content/travel/en/traveladvisories/traveladvisories/costa-rica-travel-advisory.html

Although the unemployment rate fell in 2021, unemployment remains a major issue for Costa Rica’s economy. According to the National Statistics Institute (INEC) as of January 2022, the unemployment rate was 13.1 percent, or 319,000 unemployed workers. The unemployment rate among the male population was estimated at 10.6 percent and the female population at 16.8 percent. When comparing these figures with the same quarter in 2020-21, there was a 4.6 percent decrease among males and a 7.8 percent reduction among females. 45.7 percent of work was in the informal sector (45.7 percent among males and 45.6 percent among females) with no significant variation compared to the same period in 2020-21. From the percentage of individuals with informal employment, 91.5 percent were self-employed, and 29.4 percent received a salary.

INEC reported that from November 2021 to January 2022, 532,000 persons in the labor force (employed and unemployed) were negatively affected by COVID-19. Of the country’s employed population, 213,000 had a reduction in salary or income associated with suspension or reduction in working hours or had to suspend their own activity or business during the pandemic, which represented 10.1 percent of the employed population, of which 63.5 percent were male, and 36.5 percent were female. Of the total number of unemployed persons, 318,000 were negatively affected by the pandemic. Of those, 48.7 percent were men and 51.3 percent were women. Of the total number of unemployed persons affected, 97.5 percent indicated that they could not find a job due to COVID-19; and 2.5 percent stated that they were fired, suspended, or closed their business or activity.

INEC reported that during the pandemic more formal jobs were preserved and more informal jobs were lost. It is possible that some of the informal businesses that survived the pandemic chose to seek formal work, given increased demand for health insurance. Some of the activities most affected by health restrictions and the consequences of the pandemic (such as tourism, commerce, construction, and entertainment activities) had high demand for workers, including informal workers, before the pandemic.

According to the Central Bank of Costa Rica, formal employment returned to levels registered before the beginning of the pandemic, while as of November 2021, the number of informally employed persons was 11.4 percent lower than in February 2020. The recovery of employment for workers operating in the informal sector and those with medium qualifications has been much slower than that of the most qualified and those who work in the formal sector. Workers in the informal sector were not covered by wage, hour, and occupational health and safety laws and inspections, nor were they enrolled in the public health system.

The Costa Rican labor force has high educational standards. The country boasts an extensive network of publicly funded schools and universities while Costa Rica’s national vocational training institute (INA) and private sector groups provide technical and vocational training.

The growth of Costa Rica’s service, tourism, and technology sectors has stimulated demand for English-language speakers. The pool of job candidates with English and technical skills in the Central Valley is sufficient to meet current demand. However, the current finite number of job candidates with these skills limits the ability of foreign and local businesses to expand operations.

The government implemented a controlled entry of foreign migrant workers (Migration Traceability System, SITLAM) through the northern and southern borders. In a joint effort, the Costa Rican Social Security System (CCSS), Ministry of Labor and Social Security (MTSS) and the Costa Rican Coffee Institute implemented a program to enroll coffee workers in the health insurance system while taking into account turnover, migratory conditions, and harvest seasons while protecting the families of the workers.

The government does not keep track of shortages or surpluses of specialized labor skills. Foreign nationals have the same rights, duties, and benefits as local employees. The government is responsible for ensuring that foreign nationals do not displace local employees in employment. Labor law provisions apply equally across the nation, both within and outside free trade zones. The Immigration Law and the Labor Ministry’s regulations establish a mechanism to determine in which cases the national labor force would need protection. The Labor Ministry prepares a list of recommended and not-recommended jobs to be filled by foreign nationals.

There are no restrictions on employers adjusting employment to respond to fluctuating market conditions. The law does not differentiate between layoffs and dismissal without cause. There are concepts established in the law related to unemployment and dismissals such as the mandatory savings plan (Labor Capitalization Fund or Fondo de Capitalizacion Laboral, FCL), as well as the notice of termination of employment (preaviso) and severance pay (cesantia). The FCL, which is funded through employer contributions, functions as an unemployment insurance; the employee can withdraw the savings every five years if the employee has worked without interruption for the same employer. Costa Rican labor law requires that employees released without cause receive full severance pay, which can amount to close to a full year’s pay in some cases. Although there is no insurance for workers laid off for economic reasons, employers may voluntarily establish an unemployment fund.

In response to government-ordered temporary business closures due to the Covid-19 pandemic, in 2020, the Labor Ministry implemented the temporary suspension of employment contracts, a procedure established in the Labor Code, which grants employers the option of stopping the payment of wages temporarily during an emergency. Executive orders (Nos. 42522-MTSS and 42248-MTSS) established the procedures for employers to request the temporary suspension of labor contracts with their employees. Employers requested the suspension of contracts through the Labor Inspectorate of the Labor Ministry. In 2021, the Labor Ministry continued implementing the temporary suspension of employment contracts but only in sectors most adversely affected by the COVID-19 pandemic due to the restrictions and closures imposed by authorities.

The National Assembly approved a law (Law 9832) in 2020 to reduce working hours during the pandemic. Under the law, if income in a company decreases by 20 percent, compared to the income during the same month in 2019 or compared to the income of the previous three months, the employer can reduce the employees’ hours and salary up to 50 percent. If the decrease in income is greater than 60 percent, the reduction in salary can reach 75 percent. Legislators initially authorized this reduction for three months and employers could request extensions for two equal terms (9 months) and then to five terms (15 months) as the emergency continued. In May 2021, the National Assembly approved an extension (Legislative Order No. 9982) in the tourism sector which authorizes a reduction for four equal terms with previous approval from the Labor Ministry.

In 2020, the National Assembly authorized employees, whose labor contracts were terminated or suspended or whose salaries were reduced during the state of emergency declaration, to withdraw their contributions to the FCL plan (Law 9839).

Costa Rican labor law and practice allows some flexibility in alternate schedules; nevertheless, it is based on a 48-hour week made up of eight-hour days. Workers are entitled to one day of rest after six consecutive days of work. The labor code stipulates that the workday may not exceed 12 hours. Use of temporary or contract workers for jobs that are not temporary in nature to lower labor costs and avoid payroll taxes does occur, particularly in construction and in agricultural activities dedicated to domestic (rather than export) markets. No labor laws are waived to attract or retain investment‒all labor laws apply in all Costa Rican territory, including free trade zones. The government has been actively exploring ways to introduce more flexibility into the labor code to facilitate teleworking and flexible work schedules.

Costa Rican law guarantees the right of workers to join labor unions of their choosing without prior authorization. Unions operate independently of government control and may form federations and confederations and affiliate internationally. Most unions are in the public sector, including in state-run enterprises. Collective bargaining agreements are common in the public sector. “Permanent committees of employees” informally represent employees in some enterprises of the private sector and directly negotiate with employers; these negotiations are expressed in “direct agreements,” which have a legal status. Based on 2021 statistics, 15 percent of employees were union members. The Labor Ministry reported that from 2019 to 2021, they approved 27 collective agreements and accompanied 43 negotiation processes and handled 7 conciliation processes of a social economic nature. In 2021, the Ministry reported that collective bargaining agreements covered 10.6 percent of the working population, 50.7 percent within public sector entities and 1.1 percent within the private sector. The Ministry reported that 13,897 workers were covered by “direct agreements” in different sectors (agriculture and manufacturing industry) during 2021.

In the private sector, many Costa Rican workers join “solidarity associations,” through which employers provide easy access to saving plans, low-interest loans, health clinics, recreation centers, and other benefits. A 2011 law solidified that status by giving solidarity associations constitutional recognition comparable to that afforded labor unions. Solidarity associations and labor unions coexist at some workplaces, primarily in the public sector. Business groups claim that worker participation in permanent committees and/or solidarity associations provides for better labor relations compared to firms with workers represented only by unions. However, some labor unions allege private businesses use permanent committees and solidarity associations to hinder union organization while permanent workers’ committees displace labor unions on collective bargaining issues in contravention of internationally recognized labor rights.

The Ministry of Labor has a formal dispute-resolution body and will engage in dispute-resolution when necessary; labor disputes may also be resolved through the judicial process. The Ministry of Labor’s regulations establish that conciliation is the mechanism to solve individual labor disputes, as defined in the Alternative Dispute Resolution (ADR) Law (No. 7727, dated 9 December 1997). The Labor Code and ADR Law establish the following mechanisms: dialogue, negotiation, mediation, conciliation, and arbitration. The Labor Law promotes alternative dispute resolution in judicial, administrative, and private proceedings. The law establishes three specific mechanisms: arbitration to resolve individual or collective labor disputes (including a Labor Ministry’s arbitrator roster list); conciliation in socio-economic collective disputes (introducing private conciliation processes); and arbitration in socio-economic collective disputes (with a neutral arbitrator or a panel of arbitrators issuing a decision). The Labor Ministry also participates as mediator in collective conflicts, facilitating and promoting dialogue among interested parties. The law provides for protection from dismissal for union organizers and members and requires employers found guilty of anti-union discrimination to reinstate workers fired for union activities.

The law provides for the right of workers to conduct legal strikes, but it prohibits strikes in public services considered essential (police, hospitals, and ports). Strikes affecting the private sector are rare and do not pose a risk for investment.

Child and adolescent labor is uncommon in Costa Rica, and it occurs mainly in agriculture in the informal sector.  In 2020, the government published the results of a child labor risk identification model and a strategy to design preventive measures at local level. In 2021, the government continued a pilot project for the prevention of child labor in two at-risk cantons in the province of Limón. The government also activated the Houses of Joy (“Casas de la Alegría”) during the coffee harvest season 2021-2022. These are daycare centers for children of workers in different coffee regions of the country, mainly in the Brunca, Los Santos, and Western Valley regions.

Chapter 16 of the U.S.-Central American Free Trade Agreement obliges Costa Rica to enforce laws that defend core international labor standards. The government, organized labor, employer organizations, and the International Labor Organization signed a memorandum of understanding to launch a Decent Work Program for the period 2019-2023, which aims to improve labor conditions and facilitate employability for vulnerable groups through government-labor-business tripartite dialogue.

The National Assembly recently approved a public employment reform bill that aims to establish the same salary for equal responsibilities in the public sector, eliminating different wage systems and salary bonus structures, which is projected to reduce the fiscal deficit.The legislation will take effect in March 2023.

* Source for Host Country Data: Costa Rican Central Bank. The “FDI Stock” positions detailed here are an accounting expression of the accumulation of FDI through 2020, while the “FDI inflow” statistic given in the first paragraph of the executive summary is the sum of foreign direct investment made in Costa Rica during calendar year 2020, as reported by the Costa Rican Central Bank.    

Attention: Investment Climate Statement
Economic Section
Embassy San Jose, Costa Rica
2519-2000
SanJoseEcon@state.gov 

The Nicaraguan government seeks foreign direct investment to project normalcy and signal international support. As traditional sources of foreign direct investment have declined amid the ongoing political crisis, the government has increasingly pursued investment from ideologically friendly countries such as Iran, Russia, and China. Investment incentives target export-focused companies that require large amounts of unskilled or low-skilled labor.

Local laws and practices generally do not treat foreign and domestic investors differently. Foreign investors report significant delays in receiving residency permits, requiring frequent travel out of the country to renew visas.

ProNicaragua is the country’s official investment and export promotion agency. The agency is highly politicized and run by the President’s and Vice President’s OFAC-sanctioned son Laureano Ortega. ProNicaragua provides information packages, investment facilitation, and prospecting services to interested investors.

Personal connections and affiliation with influential industry associations and chambers of commerce are critical for foreigners investing in Nicaragua. Though municipal and ministerial authorities may enact decisions relevant to foreign businesses, all actions are subject to de facto approval by the Presidency.

Foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activity. Any individual or entity may make investments of any kind. In general, Nicaraguan law provides equal treatment for domestic and foreign investment.

Investors should be cautious of the 2020 Foreign Agents Law. While the law targets NGOs and exempts business entities, some companies have been required to register or end their social responsibility efforts. The law requires anyone receiving funding from foreign sources to register with the Ministry of the Interior and provide monthly, detailed accounts of how funds are intended to be used. The government used the law to strip 48 NGOs of their legal status as of April 2022.

Nicaragua allows foreigners to be shareholders of local companies, but the company representative must be a Nicaraguan citizen or a foreigner with legal residence in the country. Many companies satisfy this requirement by using their local legal counsel as a representative. Legal residency procedures for foreign investors can take up to 18 months and require in-person interviews in Managua.

The government can limit foreign ownership for national security or public health reasons under the Foreign Investment Law. The government generally requires all investments in the petroleum and mining sectors to include one of Nicaragua’s state-owned enterprises as a partner. Investments in the mining sector have similar requirements.

The government does not formally screen, review, or approve foreign direct investments. However, in practice, President Ortega and Vice President Murillo maintain de facto review authority over any foreign direct investment. This review process is not transparent.

The WTO conducted a trade policy review of Nicaragua in 2021. The review noted that Nicaragua’s trade policy had remained largely unchanged since the previous review in 2012.

While the Government of Nicaragua is eager to attract foreign investment, it lacks a systematic business facilitation effort and instead relies on one-on-one engagement with potential investors.

Nicaragua does not have an online business registration system. Companies must typically register with the national tax administration, social security administration, and local municipality to ensure the government can collect taxes. Those registers are typically not available to the public.

According to the Ministry of Growth, Industry, and Trade (MIFIC), the process to register a business takes a minimum of 14 days. In practice, registration usually takes much longer. Establishing a foreign-owned limited liability company takes eight procedures and 42 days.

Nicaragua does not promote or incentivize outward investment and does not restrict domestic investors from investing abroad.

The Nicaraguan government does not use transparent policies to establish clear “rules of the game.” Legal, regulatory, and accounting systems exist but implementation is opaque. The government does not foster competition on a non-discriminatory basis. The Ortega-Murillo regime maintains direct control over various sectors of the economy to enrich loyalists. Investors regularly complain that regulatory authorities are arbitrary, negligent, or slow to apply existing laws, at times in an apparent effort to favor one competitor over another.

The executive branch retains ultimate rule-making and regulatory authority. In practice, the relevant government agency is empowered to levy fines directly. In some instances, the prosecutor’s office may also enforce regulations. These actions are widely perceived to be controlled by the executive branch and are neither objective nor transparent. There have not been recent regulatory or enforcement reforms.

Prior to 2018, leading business chambers managed some informal regulatory processes. Leading business chambers filled policy voids left by inadequate government institutions and procedures, meeting with influential government officials to resolve common business issues. This model largely collapsed, however, as business chambers wanted to avoid the reputational risks of making ad hoc deals with the increasingly authoritarian Ortega-Murillo regime. There are currently few options to resolve commercial issues with the government.

There is no accountancy law in Nicaragua. International accounting standards are not a focus for most of the economy, but major businesses typically use IFRS standards or U.S. GAAP standards. The national banking authority officially requires loans to be submitted using IFRS standards.

There is no legal requirement to disclose environmental, social, or governance indicators.

Draft legislation is ostensibly made available for public comment through meetings with associations that will be affected by the proposed regulations. In practice, drafts are typically not published on official websites or made available to the public. The legislature is not required by law to give notice. The executive branch proposes most investment legislation, and the regime-controlled National Assembly rarely makes modifications. Nicaragua publishes regulatory actions in La Gaceta, the official journal of government actions, including official summaries and the full text of all legislation. La Gaceta is available online.

There are no effective oversight or enforcement mechanisms to ensure the government follows administrative processes.

Public finances and debt obligations are not transparent, with little accountability or oversight. The Central Bank has increasingly refused to publish key economic data starting in 2018, including public finances and debt obligations. The Central Bank published limited data in 2020 as a condition of funding from the International Monetary Fund.

All CAFTA-DR provisions are fully incorporated into Nicaragua’s national regulatory system. However, authorities regularly flout national regulations, and investors claim that customs practices regularly violate CAFTA-DR provisions.

Nicaragua is a signatory to the Trade Facilitation Agreement and reported in July 2018 that it had implemented 81 percent of its commitments to date; however, Nicaragua’s trade facilitation is challenged by bureaucratic inefficiency, corruption, and lack of transparency. Nicaragua is a member of the WTO and generally notifies draft technical regulations to the WTO Committee on Technical Barriers to Trade.

Nicaragua is a civil law country in which legislation is the primary source of law. The legislative process is found in Articles 140 to 143 of the Constitution. However, implementation and enforcement of these laws is neither objective nor transparent. Contracts are ostensibly legally enforced through the judicial system, but extrajudicial factors are more likely to influence rulings than the facts at issue. The legal system is weak and cumbersome. Nicaragua has a Commercial Code, but it is outdated and rarely used. There are no specialized courts.

Members of the judiciary, including those at senior levels, are widely believed to be corrupt and subject to significant political pressure and direction from the executive branch, specifically the President and Vice President. The judicial process is neither competent, fair, nor reliable. Regulations and enforcement actions are technically subject to judicial review, but appeals procedures are neither transparent nor objective.

Nicaragua has laws that relate to foreign investment, but implementation, enforcement, and interpretation are subject to corruption and political pressure. The CAFTA-DR Investment Chapter establishes a secure, predictable legal framework for U.S. investors in Central America and the Dominican Republic. The agreement provides six basic protections: 1) nondiscriminatory treatment relative to domestic investors and investors from third countries; 2) limits on performance requirements; 3) the free transfer of funds related to an investment; 4) protection from expropriation other than in conformity with customary international law; 5) a minimum standard of treatment in conformity with customary international law; and 6) the ability to hire key managerial personnel without regard to nationality. The full text of CAFTA-DR  contains additional details.

Nicaragua’s Foreign Investment Law (2000/344) defines the legal framework for foreign investment. It permits 100 percent foreign ownership in most industries. (See Limits on Foreign Control and Right to Private Ownership and Establishment for exceptions.) It also establishes national treatment for investors, guarantees foreign exchange conversion and profit repatriation, clarifies foreigners’ access to local financing, and reaffirms respect for private property.

The Ministry of Growth, Industry, and Trade’s (MIFIC) information portal  details applicable laws and regulations for trade and investment. It contains administrative procedures for investment and income generating operations such as the number of steps, contact information for relevant entities, required documents costs, processing time, and applicable laws. The site is available only in Spanish.

The mission of the Institute for the Promotion of Competition (Procompetencia) includes investigating and disciplining businesses engaged in anticompetitive practices. In practice, it has no effective power, and the Ortega-Murillo regime controls decisions regarding competition.

Nicaragua has a long history of government expropriation without due process. Considerable uncertainty remains in securing property rights (see Protection of Property Rights). Conflicting land title claims are abundant and judicial appeals are very challenging.

Since 2018, the government has cancelled the legal status of 118 NGOs, including 14 universities. The government seized six universities’ assets and is turning them into publicly administered and controlled institutions. In December 2021, the government broke diplomatic ties with Taiwan and officially recognized the People Republic of China (PRC). Subsequently, the government blocked Taiwan’s donation of its former Embassy, confiscated the property, and gave it to the PRC.

Multiple landowners have reported land invasions by government-affiliated actors since the political crisis began in 2018. Landowners were sometimes able to end these invasions through government connections or bribes. In instances where the government claimed legal right to the land, offers of compensation – if any – were calculated on cadastral value, a vast underestimate of market value. The Ortega-Murillo regime has stated on numerous occasions that it would not act to evict those who had illegally taken possession of private property.

In late 2020 and early 2021, the Government of Nicaragua disposed of real property seized from independent news outlets. The Government did not follow due process and transferred the facilities to the Ministry of Health to install health clinics.

Bankruptcy provisions are included in the Civil and Commercial Codes, but there is no tradition of bankruptcy in Nicaragua. Nicaragua’s rules on bankruptcy focus on the liquidation of business entities rather than the reorganization of debts and do not provide equitable treatment of creditors. Insolvent companies usually close without going through formal bankruptcy proceedings and set up a new entity. Creditors are effectively unprotected. Creditors typically attempt to collect as much as possible directly from the debtor to avoid an uncertain judicial process or abandon any potential claims.

Nicaragua has several investment incentives available to foreign investors. The government has also occasionally issued sweeping tax incentives to promote large one-time investments, such as for a foreign-owned power plant in 2020.

The Social Housing Construction Law (2009/677) provides incentives for the construction of housing units 36-60 m2 in size with construction costs less than $30,000 per unit. Developers are exempt from paying local taxes on the construction, purchase of materials, equipment, or tools.

The Hydroelectric Promotion Law (amended 2005/531) and the Law to Promote Renewable Resource Electricity Generation (2005/532) provide incentives to invest in electricity generation, including duty-free imports of capital goods and exemptions for income and property taxes. Regulatory concerns limit investment despite these incentives (see Transparency of the Regulatory System). The National Assembly must approve all projects larger than 30 megawatts.

The law promoting renewable energy provides tax exemptions to investors in the renewable energy sector. The government has amended the law several times to extend the exemptions, most recently in September 2020. The law includes exemptions, each valid from two to five years, from the following taxes: import duty; value added tax; income tax; municipal tax; natural resources exploitation tax; and tax stamp.

Amendments made in February 2022 to the Energy Stability law (2005/554) authorize tax exemptions for the import and purchase of any electric vehicle intended for public or private use.

The Tourism Incentive Law (amended 2005/575) includes the following incentives for investments of $30,000 or more outside Managua and $100,000 or more within Managua: income tax exemption of 80 to 90 percent for up to 10 years; property tax exemption for up to 10 years; exoneration from import duties on vehicles; and value added tax exemption on the purchase of equipment and construction materials.

The Fishing and Fish Farming Law (2004/489) exempts gasoline used in fishing and fish farming from taxes. The Forestry Sector Law (2003/462) provides income, property, and municipal tax incentives for plantation investments and tax exemptions on importing wood processing machinery and equipment. The Special Law on Mining, Prospecting and Exploitation (2001/387) exempts mining concessionaires from import duties on capital inputs (see Transparency of the Regulatory System for additional information on the mining sector).

Nicaragua does not have a practice of issuing guarantees for foreign direct investment. It has jointly financed some foreign infrastructure projects. Nicaraguan law mandates joint ventures with government agencies in the energy sector.

The Free Zones Incentive Law (Decree 46-91 and amendments) and the Free Zone Export Law passed in 2015 (including Decree 12-2016) grant free trade zone (FTZ) companies special tax treatment, including: a permanent exemption from all import duties and taxes for raw materials, equipment, and other materials necessary to operate the business, provided all products are exported; 100 percent income tax exemption for the first 10 years of operation, and 60 percent income tax exemption thereafter; and exemptions from all export, value added, consumption, municipal, transportation, and property transfer taxes. FTZ companies must pay a deposit to guarantee final salaries and other expenses if a company goes out of business. FTZ salaries are negotiated separately from other wage negotiations and are set for five-year periods. FTZ companies may employ foreign employees with the permission of the FTZ Commission. Foreign-owned firms have the same investment opportunities as local firms. The majority of FTZ companies are foreign owned, and most production is aimed at the U.S. market.

Nicaragua’s FTZs have historically been a key driver of the Nicaraguan economy. FTZ exports fell 15 percent in 2020 due to reduced demand caused by the pandemic. Exports rebounded in 2021, increasing 37 percent. Companies in the FTZ currently employ more than 131,000 workers, surpassing a previous 2019 high. Prior to the ongoing crisis, companies in the FTZ reported good relations with the government and frequent interaction with the FTZ Commission, which regulates the FTZ. Companies in the FTZ report few interactions with the government and less interference than companies operating outside the FTZs in the Nicaraguan economy.

The government does not impose performance requirements, conditions on permission to invest, or minimum levels of domestic content for foreign investors to use in goods or technology. Nicaraguan tax and customs incentives apply equally to foreign and domestic investors. Nicaragua does not impose measures that prevent or unduly impede freely transmitting customer or other business-related data outside the country.

Nicaraguan authorities may electronically monitor individuals’ activities. Under Nicaragua’s 2020 Cybercrimes Law, telecom providers must retain one year’s worth of data for all users. A local judge may issue an order, at the National Police or Prosecutor General’s request, to force internet providers to release specific information about an individual customer, as well as collect, extract, or record data about this customer, such as real time data traffic.

Property rights and enforcement are notoriously unreliable in Nicaragua. The government regularly fails to enforce court decisions on the seizure, restitution, or compensation of private property. Legal claims are subject to non-judicial considerations, and members of the judiciary, including those at senior levels, are widely believed to be corrupt or subject to political pressure. During ongoing crisis, Ortega-Murillo regime loyalists illegally took over privately owned lands, with implicit and explicit support from municipal and national government officials. Some land seizures were politically targeted and directed against the political opposition. Under the first Ortega-led government in the 1980s, the expropriation of 28,000 foreign-owned and Nicaraguan-owned properties created a significant number of real estate claims and counterclaims. Property registries suffer from years of poor recordkeeping, making it difficult to establish a title history. In 2019, the Supreme Court modified property registry rules to prohibit most access to these records. Mortgages and liens exist, but the recording system is not reliable.

Investors should conduct extensive due diligence and use extreme caution before investing in real property. Unscrupulous individuals have engaged in protracted confrontations with U.S. investors to wrest control of prime properties, particularly in tourist areas. Judges and municipal authorities are known to collude with such individuals, and a cottage industry supplies false titles and other documents. In the Autonomous Caribbean Regions, communal land cannot be legally purchased; however, a known scheme involves individuals selling communal land with apparently legal documentation before communal authorities strip buyers of their property.

Those interested in purchasing property in Nicaragua should seek experienced legal counsel early in the process. The Capital Markets Law (2006/587) provides a legal framework for securitization of movable and real property. There are no specific restrictions regarding foreign or non-resident investors aside from certain border and other properties considered important to national security.

Given the state of the public records registry, it is not possible to determine what percentage of land does not have clear title. There is no defined government effort to resolve this. Squatters can obtain ownership of unoccupied property, particularly if they have government backing.

Nicaragua established standards for the protection and enforcement of intellectual property rights (IPR) through CAFTA-DR implementing legislation, which is consistent with U.S. and international IPR standards. Enforcement of IPR law is limited. Infringement on rights and theft – particularly media piracy and trademark violations – are common. The United States has expressed concerns about the implementation of Nicaragua’s patent obligations under CAFTA-DR, including: the mechanism through which patent owners receive notice of submissions from third parties; how the public can access lists of protected patents; and the treatment of undisclosed test data.

Nicaragua does not publicly report on seizures of counterfeit goods. Nicaragua is not listed in the U.S. Trade Representative’s Special 301 Report or its Review of Notorious Markets for Piracy and Counterfeiting.

For additional information about national laws and points of contact at local IP offices, please see the World Intellectual Property Organization’s country profile for Nicaragua .

There are no restrictions on foreign portfolio investment. Nicaragua does not have its own equities market and there is no regulatory structure to facilitate publicly held companies. There is a small bond market that trades primarily in government bonds but also sells corporate debt to institutional investors. The Superintendent of Banks and Other Financial Institutions (SIBOIF) supervises the bond market. The overall size and depth of Nicaragua’s financial markets and portfolio positions are very limited.

Nicaragua has officially accepted the obligations of IMF Article VIII and maintains an exchange system that is free of restrictions on the making of payments and transfers for current international transactions. New policies, however, threaten the free flow of financial resources into the product and factor markets, as well as foreign currency convertibility. Banks must now request foreign currency purchases in writing, 48 hours in advance, and the Central Bank reserves the right to deny these requests.

While the banking system has grown and developed in the past two decades, Nicaragua remains underbanked relative to other countries in the region. Only 31 percent of Nicaraguans aged 15 or older have bank accounts, and only 8 percent have any savings in such accounts, approximately half the rate of other countries in the region according to World Bank data. Nicaragua also has one of the lowest mobile banking rates in Central America.

Following a sharp contraction in 2018, the banking sector recovered slightly in 2019 and 2020. In 2021, liquidity ratios continued high and stable at 45 percent and portfolios increased 5.5 percent. Despite expanded lending, banks remain cautious when granting new financing. The ratio of non-performing loans to banking sector assets was 15 percent in 2021. Despite improving indicators, the banking sector remains vulnerable to sociopolitical uncertainty. Since 2018, banks have reduced their branches from 612 to 445 across the country.

The banking industry remains conservative and highly concentrated, with four banks – Banpro, LAFISE, BAC, and Fichosa – controlling an estimated 77 percent of the country’s market. The 2018 crisis sparked large withdrawals of deposits from the banking system. Those withdrawals have stabilized, but total assets remain below pre-crisis levels. In 2021, the financial system had total assets worth $4.7 billion – a 9 percent increase over 2020’s $4.3 billion, but 14 percent lower than in March 2018’s $5.5 billion.

The Central Bank of Nicaragua was established in 1961 as the regulator of the monetary system with the sole right to issue the national currency, the córdoba. Foreign banks can open branches in Nicaragua. Since 2018, Nicaragua has lost several correspondent banking relationships. Wells Fargo Bank withdrew altogether, and Bank of America withdrew correspondent services from a local bank. Recent amendments to the Consumer Protection Law could force local banks to service suspicious account holders – including persons designated under international sanctions regimes – further jeopardizing correspondent banking relationships.

Foreigners can open bank accounts if they are legal residents in the country. The Foreign Investment Law allows foreign investors residing in the country to access local credit, and local banks have no restrictions on accepting property located abroad as collateral.

In 2019, the Department of Treasury’s OFAC designated Bancorp – a subsidiary of ALBANISA, a joint venture between the state-owned oil companies of Nicaragua and Venezuela – for money laundering and corruption. Bancorp submitted its dissolution to the Superintendency of Banks and Other Financial Institutions (SIBOIF), but the closure was secretive and outside the legal framework that governs financial institutions in Nicaragua. In 2021, OFAC designated two senior government officials overseeing the banking system. OFAC designated the President of the Central Bank for implementing Nicaragua’s consumer protection law that could obligate Nicaraguan financial institutions to facilitate sanctionable transactions. OFAC also designated the head of SIBOIF for forcing commercial banks to provide financial information on the regime’s political opponents.

Nicaragua does not have a sovereign wealth fund.

It is virtually impossible to identify the number of companies that the Nicaraguan government owns or controls, because they are not subject to any regular audit or accounting measures and are not fully captured by the national budget or in other public documents. Beyond the official state-owned enterprises (SOE), which are not transparent or subject to oversight, the Ortega-Murillo regime uses a vast network of front men to control companies. State-controlled companies receive non-market-based advantages, including tax exemption benefits not granted to private actors. In some instances, these companies are given monopolies through implementing legislation. In other instances, the government uses formal and informal levers to advantage its businesses.

The government owns and operates the National Sewer and Water Company (ENACAL), National Port Authority (EPN), National Lottery, and National Electricity Transmission Company (ENATREL). Private sector investment is not permitted in these sectors. In sectors where competition is allowed, the government owns and operates the Nicaraguan Insurance Institute (INISER), Nicaraguan Electricity Company (ENEL), Las Mercedes Industrial Park, Nicaraguan Food Staple Company (ENABAS), Nicaraguan Post Office, International Airport Authority (EAAI), Nicaraguan Mining Company (ENIMINAS), and Nicaraguan Petroleum Company (Petronic).

Many of Nicaragua’s SOEs and quasi-SOEs were established using ALBANISA, now OFAC sanctioned. The Ortega-Murillo regime used ALBANISA funds to purchase television and radio stations, hotels, cattle ranches, power plants, and pharmaceutical laboratories. ALBANISA’s large presence in the Nicaraguan economy and its ties to the government disadvantage companies trying to compete in industries dominated by ALBANISA or government-managed entities. In 2020, the government nationalized Nicaragua’s main electricity distributor Disnorte-Dissur, which was previously owned by ALBANISA.

In 2020, following the OFAC designation of state-owned petroleum distributor Distribuidor Nicaraguense de Petroleo (DNP), the government created four new entities: the Nicaraguan Gas Company (ENIGAS); the Nicaraguan Company to Store and Distribute Hydrocarbons (ENIPLANH); the Nicaraguan Company for Hydrocarbon Exploration (ENIH); and the Nicaraguan Company to Import, Transport, and Commercialize Hydrocarbons (ENICOM).

Through the Nicaraguan Social Security Institute (INSS), the government owns a pharmaceutical manufacturing company, and other companies and real estate holdings. The Military Institute of Social Security (IPSM), a state pension fund for the Nicaraguan military, controls companies in the construction, manufacturing, and services sectors. In January 2022, OFAC sanctioned three members of the IPSM board of directors.

Nicaragua does not have an active privatization program.

Many large businesses have active Responsible Business Conduct (RBC) programs that include improvements to the workplace environment, business ethics, and community development initiatives. Prominent business groups such as CCSN and the Nicaraguan Union for Corporate Social Responsibility (UniRSE) are working to create more awareness of corporate social responsibility. Nicaragua’s Foreign Agents Law has forced many businesses to curtail or end their corporate social responsibility operations to avoid the burdensome and intrusive registration process.

The government does not factor RBC policies or practices into its procurement decisions, nor does it explicitly encourage RBC principles. The government does not participate in the Extractive Industries Transparency Initiative or the Voluntary Principles on Security and Human Rights. There are no domestic transparency measures requiring the disclosure of payments made to governments. Nicaragua is not a signatory to the Montreux Document on Private Military and Security Companies or a participant in the International Code of Conduct for Private Security Service Providers’ Association.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

In June 2021, Nicaragua announced the creation of a national climate management system and guidelines for a national climate policy. However, the regulation contained few details and is still being developed. Nicaragua has not set a net-zero carbon emissions goal or outlined a long-term low-carbon strategy.

Nicaragua has a legal framework criminalizing corruption, but there is no expectation that the framework will be enforced. A general state of permissiveness, lack of strong institutions, ineffective system of checks and balances, and the Ortega-Murillo regime’s complete control of government institutions, create conditions for rampant corruption. The judicial system remained particularly susceptible to bribes, manipulation, and political influence. Businesses reported that corruption is an obstacle to investment, particularly in government procurement, licensing, and customs and taxation.

The government does not require private companies to establish internal controls. However, Nicaraguan banks have robust compliance and monitoring programs that detect corruption. Multiple government officials and government-controlled entities have been sanctioned for corruption.

Nicaragua ratified the United Nations Convention against Corruption (UNCAC) in 2006 and the Inter-American Convention Against Corruption in 1999. It is not party to the OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions.

Nicaragua’s supreme audit institution is the Contraloria General de la República de Nicaragua (CGR). The CGR can be reached at +505 2265-2072 and more information is available on the CGR website .

The regime of President Daniel Ortega and his wife and Vice President Rosario Murillo dominates Nicaragua’s highly centralized, authoritarian political system. Ortega is serving in his fourth consecutive term as president following rigged elections in November 2021. The regime’s rule has been marked by increasing human rights abuses, consolidation of executive control, and consolidation of strategic business sectors that enrich Ortega and his inner circle. Political risk remains high, and the future of the country’s political institutions remains uncertain.

An ongoing sociopolitical crisis began in April 2018 when regime-controlled police violently crushed a peaceful student protest. The ensuing conflict killed more than 325 people, injured thousands, imprisoned hundreds of peaceful protestors, and exiled more than 100,000. The regime amended terrorism laws to include prodemocracy activities and used the legislature and justice system to characterize civil society actors as terrorists, assassins, and “coup-mongers.” The regime continues to hold 170 political prisoners – most suffering from a lack of adequate food and proper medical care. Prisoners were arrested for activities considered normal in a free society, including practicing independent journalism, working for civil society organizations, seeking to compete in elections, or publicly expressing an opinion contrary to the government. Excessive use of force, false imprisonment, and other harassment against opposition leaders – including many private sector leaders – is common. The regime-controlled Nicaraguan National Police maintains a heavy presence throughout Nicaragua, including randomized checkpoints.

In response to the Ortega-Murillo regime’s antidemocratic behavior and human rights abuses, the U.S. Department of State and U.S. Department of Treasury have imposed visa and financial restrictions on multiple government agencies and hundreds of individuals.

Nicaragua’s labor market is highly informal. According to government statistics from third quarter 2021, 44 percent of the population is underemployed. These individuals operate in the informal sector, facing economic instability and lacking social security benefits. Independent economists estimate most underemployed people earn 25 to 50 percent of the minimum wage, which itself is not sufficient to afford the basic basket of goods. Social security provider INSS reported in December 2021 the number of enrolled employees remained 6 percent below pre-2018 levels. Independent think tanks estimate that 1.6 million people or 25 percent of the population lived below the poverty line in 2021.

Despite the absence of reliable government data, independent economists estimate unemployment at 5 percent. Official government estimates of 4 percent are skewed by the government’s definition of unemployment, which considers any individual who worked at least one hour in a month, regardless of remuneration, to be employed.

Nicaragua lacks skilled and technical labor. The government-run National Technological Institute (INATEC) regulates technical education and professional training in Nicaragua. Employers often import administrative or managerial employees from outside of the country, as permitted by law. Article 14 of the Nicaraguan Labor Code states that 90 percent of any company’s employees must be Nicaraguan. The Ministry of Labor may make exceptions when justified for technical reasons.

Minimum wages are low and, prior to 2018, revised through an inclusive dialogue process between the private sector, labor unions, and the government. Nicaragua’s minimum wages are reviewed yearly for nine sectors of the economy, while a tenth sector – free trade zones – reviews its minimum wage every five years. The most recent negotiations did not include COSEP, formerly the most influential independent business chamber and traditional private sector representative. This year APRODESNI, a newly created and regime-aligned alternative chamber, was the official private sector representative. In 2022, the minimum wages for all nine sectors were increased 7 percent. The next review for the free trade zone minimum wage will be in 2023 and will cover the period 2023-2027.

Nicaraguan labor law requires employers to pay at year-end the equivalent of an extra month’s salary. Upon termination of an employee, the employer must pay a month’s salary for each year worked, up to five months’ salary. There are no special laws or exemptions from regular labor laws, including in the free trade zones. The CAFTA-DR Labor Chapter establishes commitments to ensure effective labor law enforcement within the country and comply with commitments made to the International Labor Organization.

Nicaraguan law provides for the right of public and private sector workers, except for the military and police, to form and join independent unions of their choice without authorization and to bargain collectively. Workers can exercise this right in practice, but unions not affiliated with the regime face challenges. A collective bargaining agreement cannot exceed two years and is automatically renewed if neither party requests revision. Strikes are legal but rare due to the government’s control over unions. The Nicaraguan Ministry of Labor can receive labor complaints and emit enforceable resolutions in labor disputes. The Ministry can perform health and safety inspections and virtual and in-person labor inspections.

For more information regarding labor conditions in Nicaragua, please see the annual Human Rights Report and the Department of Labor Child Labor reports 

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

* Source for Host Country Data: Nicaraguan Central Bank https://www.bcn.gob.ni/publicaciones/periodicidad/anual/informe_anual/index.php

Table 3: Sources and Destination of FDI
Data not available.

Economic Section
U.S. Embassy Managua
+505 7877-7600
ManaguaEcon@state.gov