1. Openness To, and Restrictions Upon, Foreign Investment
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.
3. Legal Regime
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.
5. Protection of Property Rights
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 .
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 .
10. Political and Security Environment
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.