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Executive Summary

In April 2018, government security forces and government-affiliated gangs brutally attacked peaceful protests sparking significant civic unrest and ongoing violent confrontations between pro-government and opposition forces throughout the country. As of June 22, international human rights organizations have estimated that at least 212 have died. Violent crime is growing significantly as the breakdown in law enforcement capability and trust continues. Political risk has increased significantly as a result, and the future of the country’s political institutions remains very uncertain.

Ongoing and intensifying political unrest, physical insecurity, property seizures, land invasions, and the absence of the rule of law make Nicaragua a very challenging environment for foreign investors. The Government of Nicaragua’s decision to reform unilaterally the country’s social security system in April 2018 sparked protests throughout the country that were met with deadly repression by government forces and civic unrest unprecedented since the civil war in the 1980s. The crisis now encompasses themes well beyond social security, including the legitimacy of President Daniel Ortega’s government. The Government of Nicaragua appears to be acting to retain political power at the expense of human rights and economic stability. Since the crisis started and particularly since June 1, 2018, the number of property expropriations, land invasions, and property confiscations have increased significantly; at least some of the land invasions appear to have taken place with the support of law enforcement.

Even before the current crisis started on April 18, very weak public institutions, deficiencies in the rule of law and administration of justice, and extensive single-branch executive control created significant obstacles for doing business in Nicaragua, particularly for smaller investors. Presidential and municipal elections held in 2016 and 2017 concentrated power for the Ortega family, with Rosario Murillo, spouse of President Ortega, elected as the country’s Vice President; they now preside over an authoritarian executive branch exercising total control over the legislative, judicial, and electoral functions as well as municipal governments. Corruption and inefficiency, particularly within customs and tax offices, impeded foreign investors; for example, on December 21, 2017, the U.S. Department of Treasury sanctioned Roberto Rivas, President of the Supreme Electoral Council (CSE), for corruption under the Global Magnitsky Act. Additionally, the important presence of state-owned enterprises and firms owned or controlled by government officials and members of the ruling party reduces transparency and can put foreign companies at a disadvantage

Traditionally, a key draw for investors is Nicaragua’s relatively low-cost and young labor force, with approximately 75 percent of the country under 39 years old. Additionally, the country’s crime statistics compared favorably to neighboring countries, although criminal activity, much of it supported by government controlled forces in civilian clothing, has eliminated the security benefit. Nicaragua is a party to the Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) and enjoys a strong trade relationship with its largest trading partner, the United States. To attract investors, Nicaragua offers significant tax incentives in many industries, including mining and tourism. The country has a free trade zone regime with foreign investments in textiles, auto harnesses, tobacco, medical equipment, and call centers. Should the current crisis end soon, these draws will likely be reasons to consider investing in Nicaragua.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2017 151 of 180
World Bank’s Doing Business Report “Ease of Doing Business” 2017 131 of 190
Global Innovation Index 2017 N/A
U.S. FDI in partner country (M USD, stock positions) 2016 USD 117
World Bank GNI per capita 2016 USD 2,100

Policies Towards Foreign Direct Investment

The Government of Nicaragua says it actively seeks to attract foreign direct investment to generate economic growth and increase employment. Many of the investment incentives attract export-focused companies that require large amounts of unskilled or low-skilled labor.

ProNicaragua is the country’s investment and export promotion agency that facilitates foreign investment. The agency provides a range of services, including information packages, investment facilitation, and prospecting services to interested investors. Its authority has weakened over the past year, however, as the office of the Presidency assumes more control over government institutions. For more information, see .

Looting by government-controlled gangs during civic unrest targeted several American firms operating in Nicaragua.

Limits on Foreign Control and Right to Private Ownership and Establishment

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. There are a few exceptions imposed by specific laws, such as the Border Law (2010/749), which prohibits foreigners from owning land in certain border areas. Domestic air transportation and television broadcasting also has certain limits on foreign ownership. In practice, the government also requires that all investments in the energy sector include the state owned enterprise Petronic as a partner. Other sectors, such as electricity transmission and port and airport operation also have de facto rules to inhibit foreign investment.

Nicaragua allows foreigners to be shareholders of local companies, but a company representative must be a national 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 eighteen months and require in-person interviews in Managua.

The Government of Nicaragua does not formally screen, review, or approve foreign direct investments. However, President Daniel Ortega and the executive branch maintain de facto review authority over any foreign direct investment. This review process remains unclear and opaque.

Other Investment Policy Reviews

In the past three years, the Government of Nicaragua has not undergone any third-party investment policy reviews through multilateral organizations such as the Organization for Economic Co-operation and Development (OECD), World Trade Organization (WTO), or the United Nations Conference on Trade and Development (UNCTAD).

Business Facilitation

Nicaragua does not have an online business registration system. At a minimum, a company must typically register with the national tax administration, social security administration, and local municipality. According to the Ministry of Industrial Development and Trade (MIFIC), the process to register a business takes a minimum of 14 days. In practice, registration usually takes more time. Establishing a foreign-owned limited liability company (LLC) takes eight procedures and 42 days. One of the legal representatives of the company must be a resident of Nicaragua. There is no regime allowing simplified business creation without a notary. MIFIC has established single window offices (Ventanilla Unica) in several cities in Nicaragua to assist with business registration.

Outward Investment

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

Nicaragua has signed and ratified bilateral investment treaties with Argentina, Chile, the Czech Republic, Denmark, France, Germany, Italy, the Netherlands, the Russian Federation, South Korea, Spain, Switzerland, and the United Kingdom. Nicaragua also has treaties with investment provisions with Canada, Mexico, Panama, Taiwan, and CAFTA-DR member states as part of Free Trade Agreements.

In November 2016, Nicaragua and four other Central American countries signed a free trade agreement with South Korea. The agreement eliminates tariffs on about 95 percent of goods within ten years of implementation. The treaty has not yet entered into force.

Nicaragua does not have a bilateral income tax treaty with the United States or any other country. The country’s taxation authority increased audits of foreign investors in 2017 and has become more aggressive in collection and enforcement procedures against foreign investors.

Transparency of the Regulatory System

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. Lack of a reliable means to resolve disputes with government administrative authorities or business associates quickly results in some disputes becoming intractable. The vast majority of companies in Nicaragua have little accounting and few adhere to internationally accepted accounting standards. The Government of Nicaragua does not have transparent policies to establish clear “rules of the game.” Additional regulatory hindrances can occur in the Autonomous Caribbean Region where regional government and territorial authorities exist in addition to central government and municipal authorities.

Personal connections and affiliation with industry associations and chambers of commerce are useful but the Presidency retains ultimate rule making and regulatory authority, and has used that power in decisions related to the minimum wage and social security, subjects which previously had been areas of collaboration between the Government, private sector, and unions. Though municipal and ministerial authorities may enact decisions relevant to foreign businesses, all actions are subject to de facto approval by the Presidency.

Draft legislation is ostensibly made available for public comment through meetings with associations that will be affected by the proposed regulations, however, in most cases consultations are limited to pro-government groups. Not all information is published on official websites and the legislature is not required by law to give notice. Draft texts may be distributed directly to stakeholders the government deems impacted by the legislation. The ruling Sandinista party has a super majority in the National Assembly, and in practice, the legislative branch has no power to modify legislation proposed by the Executive.

Key regulatory actions are published in La Gaceta, the official journal of government actions in Nicaragua, including official summaries and the full text of all legislation. There are limited oversight or enforcement mechanisms to ensure the government follows administrative processes.

International Regulatory Considerations

All CAFTA-DR provisions are fully incorporated into Nicaragua’s national regulatory system. Nicaragua is a member of the WTO and notifies draft technical regulations to the WTO Committee on Technical Barriers to Trade. Nicaragua is a signatory to the Trade Facilitation Agreement and reported in July 2017 that it had implemented 77 percent of its commitments to date. However, this self-reported figure likely overstates trade facilitation progress, which remains beset with bureaucratic inefficiency and lack of transparency.

Legal System and Judicial Independence

The Nicaraguan judicial system is not independent and is fully controlled by the Presidency. The judicial system is frequently used as a method to pressure and control political enemies. 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. Difficulty in resolving commercial disputes, particularly the enforcement of contracts, remains one of the most serious drawbacks to investment in Nicaragua. Members of the judiciary, including those at senior levels, are widely believed to be corrupt. A commercial code and bankruptcy law exist, but both are outdated and rarely used. While regulations and enforcement actions are technically appealable through judicial review, these procedures are not viewed as reliable.

Laws and Regulations on Foreign Direct Investment

CAFTA-DR entered into force on April 1, 2006, for the United States and Nicaragua. 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 is available at .

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

In June 2017, the Government of Nicaragua passed Law 953  to establish a state-owned mining enterprise (ENIMINAS) operating under the authority of the Ministry of Energy and Mines (MEM). The law requires ENIMINAS participation in the exploitation of mineral resources from national mining reserves, which necessitates that state mining company shall have some level of commercial interest in new mining concessions.

MIFIC maintains an information portal regarding applicable laws and regulations for trade and investment at . Foreign and national investors can find detailed information on administrative procedures applicable to investment and income generating operations including the number of steps, name and contact details of the entities and persons in charge of procedures, required documents and conditions, costs, processing time and legal bases justifying the procedures. The site is available only in Spanish.

Competition and Anti-Trust Laws

The Competition Promotion Law (2007/601) established the Institute for the Promotion of Competition (Procompetencia), to investigate and discipline businesses engaged in anticompetitive business practices, including price fixing, dividing territories, exclusive dealing, and product tying. Procompetencia does competent research but has no effective power. In October 2016, Procompetencia opened an investigation into price manipulation by four beef slaughterhouses after a formal complaint was filed by industry and consumer representatives. The investigation is ongoing.

Expropriation and Compensation

Considerable uncertainty remains in securing property rights in Nicaragua. The World Bank reported in June 2017 that 35–40 percent of all property was in some form of dispute. Since June 1, 2018, new property invasions and irregular expropriations have increased substantially as groups affiliated with the ruling Sandinista party have taken advantage of the growing civil unrest to seize property, sometimes violently. Some property seizures appear to be politically motivated, targeting property owners that have spoken against the government. Some U.S. citizens report difficulties exercising property rights due to lack of government action, such as failure by local authorities to remove illegal occupants or long unexplained delays in government authorities’ performing basic duties such as cadastral surveys or issuance of documents needed by property owners. U.S. citizens have also encountered challenges executing and enforcing final court orders, even when orders come from the Supreme Court of Nicaragua. Conflicting land title claims are abundant and judicial appeal in these cases is very challenging. The U.S. Embassy continues to advocate that the government resolve all outstanding property claims and prevent new irregular expropriations, particularly those involving U.S. citizens, and improve its overall investment and business climate. U.S. citizens who wish to report an expropriation or confiscation of their property by government authorities may contact

Dispute Settlement

ICSID Convention and New York Convention

Nicaragua is a member of the Convention of the Settlement of Investment Disputes between States and Nationals of Other States (ICSID). The Government of Nicaragua signed the 1958 New York Convention on the recognition and enforcement of foreign arbitration awards in 2003. There is no specific domestic legislation providing for enforcement under the 1958 New York Convention or for the enforcement of awards under the ICSID Convention.

Investor-State Dispute Settlement

CAFTA-DR establishes an investor-state dispute settlement mechanism. An investor who believes the government has breached a substantive obligation under CAFTA-DR or that the government has breached an investment agreement may request binding international arbitration in a forum defined by the Investment Chapter in the Agreement. In December 2017, a group of 24 U.S. investor entities filed a claim against Nicaragua over an alleged expropriation of a hydrocarbon concession. The case is currently pending.

International Commercial Arbitration and Foreign Courts

The Mediation and Arbitration Law (2005/540) establishes the legal framework for alternative dispute resolution. The Nicaraguan Chamber of Commerce and Services founded Nicaragua’s Mediation and Arbitration Center. Arbitration clauses should be included in business contracts, but legal experts are uncertain whether local courts would enforce awards resulting from international or local proceedings.

Enforcement of court orders is frequently subject to non-judicial considerations. Courts routinely grant injunctions (“amparos”) to protect citizen rights by enjoining official investigatory and enforcement actions indefinitely. Foreign investors are at a disadvantage in disputes against Nicaraguans with political or personal connections. Misuse of the criminal justice system sometimes results in individuals being charged with crimes arising out of civil disputes, often to pressure the accused into accepting a civil settlement.

Dispute resolution is even more difficult in the Northern and Southern Caribbean Autonomous Regions, where most of the country’s fishery, timber, and mineral resources are located. These large regions, which share a Caribbean history and culture, comprise more than one-third of Nicaragua’s land mass, much of which is controlled by territorial collective systems of both Afro-Caribbean and indigenous populations. The division of authority between the central government and regional authorities is complex and ambiguous. Local officials may act without effective central government oversight, and industry-wide regulations, like those of timber, mining, and fishing, often contradict autonomous recognition of the region.

Bankruptcy Regulations

Although bankruptcy provisions are included in the Civil and Commercial Codes, there is no tradition or culture of bankruptcy in Nicaragua. More often than not, companies simply choose to close their operations and set up a new entity without going through a formal bankruptcy procedure, effectively leaving their creditors unprotected. For their part, creditors typically avoid a judicial procedure fraught with uncertainty and instead attempt to collect as much as they can directly from the debtor, or they simply give up on any potential claims they may have. Nicaragua’s rules on bankruptcy focus on the liquidation of business entities rather than on reorganization. They do not provide for an equitable treatment of creditors, to the detriment of creditors located in foreign jurisdictions.

Investment Incentives

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

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 income and property tax exemptions. Regulatory concerns limit investment despite these incentives (see Transparency of the Regulatory System). In particular, private investment in hydroelectric dams is banned from the Asturias, Apanas, and Rio Viejo Rivers, and the approval of the National Assembly is required for projects larger than 30 megawatts on all other rivers.

The Tourism Incentive Law (amended 2005/575) includes the following basic incentives for investments of USD 30,000 or more outside Managua and USD 100,000 or more within Managua: income tax exemption of 80 percent 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 General Tourism Law (amended 2010/724) stipulates that hotel owners pay a tax of USD 0.50 per customer and two percent of the rental rate per room for tourism promotion. It also imposes anti-discrimination, public health, and environmental regulations on tourism-oriented businesses.

The Fishing and Fish Farming Law (2004/489) exempts gasoline used in fishing and fish farming from taxes. This law’s Article 111 was amended (2012/797) to allow individuals or companies to request a temporary permit to take advantage of unexploited or underexploited aquatic resources during closed season. Environmental regulations also apply (see Transparency of the Regulatory System).

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).

Foreign Trade Zones/Free Ports/Trade Facilitation

The National Free Trade Zone (FTZ) Commission, a government agency, regulates FTZ activities. As of 2018, 225 companies operate with FTZ status in Nicaragua and employ 118,087 people. The Nicaraguan Customs Agency monitors all FTZ imports and exports. Most free zones are in Managua and approximately 40 percent belong to the textile and apparel sector.

The Tax Equity Law (amended 2009/712) allows firms to claim an income tax credit of 1.5 percent of the free-on-board (FOB) value of exports. The Law of Temporary Admission for Export Promotion (2001/382) exempts businesses from value-added tax (VAT) for the purchase of machinery, equipment, raw materials, and supplies if used in export processing. Businesses must export 25 percent of their production to take advantage of these tax benefits.

In addition to export incentives and duty free capital imports granted by the Tax Concertation Law and the Temporary Admission Law for Export Promotion, the Free Trade Zones for Industrial Exports Decree (1991/46 and amendments) provides a 10-year income tax exemption for Nicaragua and foreign investments in FTZs. The National Free Trade Zone Commission of Nicaragua (CNFZ) administers the FTZ regime. The CNFZ requires a deposit to guarantee that final salaries and other expenses be paid if a company goes out of business. Free trade zone salaries are negotiated separately from other wage negotiations and are set for five-year periods.

The Government of Nicaragua focus on pragmatic collaboration with large companies comes at the expense of small and medium size enterprises (SMEs), which are mostly sidelined from policy dialogue. As a result, SMEs are left to bear the same fiscal and bureaucratic responsibilities as large companies but without the incentives and benefits received by large companies, putting them at a strategic disadvantage. In the agricultural sector, where cooperative structures are promoted with generous tax benefits, SMEs are particularly disadvantaged.

Performance and Data Localization Requirements

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.

Although visas and work permit procedures are not excessively onerous for foreign investors and their employees, Nicaraguan authorities have denied entry to or expelled foreigners, including U.S. government officials, NGO workers, academics, journalists, and others for reasons not clearly defined. Residency permit applications can take 18 months or longer to receive final approval.

Foreign investors in Nicaragua are not required to purchase from local sources or to export a specific percentage of output, nor are their access to foreign exchange limited in proportion to their exports. Likewise, Nicaraguan tax and customs incentives apply equally to foreign and domestic investors.

There are no requirements for foreign IT providers to turn over source code or provide access to surveillance. The Government of Nicaragua does not require forced localization nor are there other measures that prevent or unduly impede freely transmitting customer or other business-related data outside the country.

Real Property

Many investors in Nicaragua have traditionally experienced difficulties defending their property rights. The expropriation of 28,000 properties in Nicaragua from both Nicaraguans and foreign investors during the 1980s continues to cause problems. During the current administration, there are continued and growing reports of land invasions including with government encouragement, particularly since the outbreak of the civil unrest that began in April 2018. Groups affiliated with the ruling Sandinista party have taken advantage of the growing civil unrest to seize property, sometimes violently. Some property seizures appear to be politically motivated, targeting property owners that have spoken against the government. President Ortega declared on numerous occasions that the government will not act to evict those who have illegally taken possession of private property without discrimination for the nationality of the owner. Police often refuse to intervene in property invasion cases or assist in the enforcement of court orders to remove illegal occupants; in some cases, police appear to assist the armed invaders.

Those interested in purchasing property in Nicaragua should seek experienced legal counsel and consult with security firms very early in the process.

Intellectual Property Rights

Nicaragua established standards for the protection and enforcement of intellectual property rights (IPR) through CAFTA-DR implementing legislation consistent with U.S. and international intellectual property standards. While the legal regime for protection of IPR in Nicaragua is adequate, enforcement has been limited. Piracy of optical media and trademark violations are common. The United States also has 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. The country does not publicly report on seizures of counterfeit goods. Nicaragua is not listed in the Office of the U.S. Trade Representative’s Special 301 Report or the Notorious Market report.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at .

Capital Markets and Portfolio Investment

Existing policies allow the free flow of financial resources into the product and factor markets, as well as foreign currency convertibility. The Central Bank respects IMF Article VIII and does not impose any restrictions. Credit is allocated on market terms, and foreign investors are able to secure credit on the local market through a variety of credit instruments. The overall size and depth of the country’s financial markets and portfolio positions are very limited, however.

The Capital Markets Law (2006/587) provides a legal framework for securitization of movable and real property. The banking system previously expanded its loan programs for housing purchases and car purchases, but there is currently only a limited secondary market for mortgages.

Money and Banking System

The modern banking system in Nicaragua is relatively young, small, and undercapitalized. In the 1980s, all domestic banks were nationalized and foreign banks were not permitted to accept local deposits, though they could continue to provide loans. In 1990, the National Assembly reestablished private banking in the country. During a banking crisis from 2000–2001, four banks went into bankruptcy and were dissolved. The current political crisis has significantly increased the strain on the banking sector.

Although the banking system has grown and developed in the past two decades, Nicaragua remains underbanked relative to other countries in the region. Only 19 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 2014 World Bank data. One-third of Nicaraguans continue to save their money in their home or other location while 49 percent have no savings. Nicaragua also has one of the lowest mobile banking rates in Central America.

Lending interest rates are relatively high—with a base rate between 12 and 15 percent—due to weak collateralization of loans, relatively scarce capital, and historically poor repayment rates. Access to credit is restricted, with the vast majority of loans going to large companies rather than consumers. The country’s banks have an adequate number of correspondent banking relationships with U.S. banks.

Among other services, local financial institutions offer commercial loans, credit lines, factoring, leasing, and bonded warehousing. The banking industry is conservative and highly concentrated, with three banks (BANPRO, Lafise BANCENTRO, and BAC) constituting 77 percent of the country’s market share. As of December 2017, the three banks had total assets worth USD 5.9 billion.

BANCORP is a subsidiary of ALBA de Nicaragua (ALBANISA), a joint venture between the State-owned oil companies of Nicaragua (49 percent) and Venezuela (51 percent) and began accepting deposits in 2015. Because of its ownership structure, U.S. sanctions against the Venezuelan petroleum firm PDVSA apply to Bancorp.

The Foreign Investment Law allows foreign investors residing in the country to access local credit and local banks have no restriction in accepting property located abroad as collateral. However, many investors find lower cost financing and more product variety from offshore banks. Short-term government and Central Bank bonds, issued in Coordobas, dominate Nicaragua’s infant but growing capital market, and some limited stock issuances have become more prominent. Foreign banks have acquired a presence in Nicaragua through the purchase of local banks, many acting as second floor banks.

Foreigners are allowed to open bank accounts as long as they are legal residents in the country. Recent Central Bank data show that in 2017 the credit portfolio of Nicaraguan commercial banks grew 14 percent. The banking system’s loan portfolio totaled USD 51 billion as of December 2017. Interest rates on loans denominated in Coordobas averaged 11.08 percent; loans denominated in U.S. dollars averaged 9.16 percent. Loans denominated in U.S. dollars accounted for 89 percent of loans and 75 percent of deposits.

The Superintendent of Banks and other Financial Institutions (SIBOIF) regulates banks, insurance companies, stock markets, and other financial intermediaries. SIBOIF requires that supervised entities provide audited financial statements, prepared according to international accounting standards, on a regular schedule. The Deposit Guarantee System Law (2005/551) established the Financial Institution Deposit Guarantee Fund (FOGADE) to guarantee bank deposits up to USD 10,000 per depositor, per institution. SIBOIF dependence on commercial banks limits its transparency and independence.

CAFTA-DR allows U.S. financial services companies to establish subsidiaries, joint ventures, or bank branches in Nicaragua. The agreement also allows cross-border trade in financial services. Nicaragua has ratified its commitments under the 1997 WTO Financial Services Agreement. These commitments cover most banking services, including the acceptance of deposits, lending, leasing, the issuing of guarantees, and foreign exchange transactions. However, they do not cover the management of assets or securities. Nicaragua allows foreign banks to operate as 100 percent-owned subsidiaries or as branches.

Nicaragua has not explored or announced that it intends to implement or allow the implementation of blockchain technologies in its banking transactions, though there are some consumer driven efforts to mainstream blockchain technologies.

Foreign Exchange and Remittances

Foreign Exchange Policies

Nicaragua is a highly dollarized economy. The Foreign Investment Law (2000/344) and the Banking, Nonbank Intermediary, and Financial Conglomerate Law (2005/561) allow investors to convert freely and transfer funds associated with an investment. CAFTA-DR ensures the free transfer of funds related to a covered investment. Local financial institutions freely exchange U.S. dollars and other foreign currencies. The Superintendent of Banks and other Financial Institutions (SIBOIF) monitors financial transactions for illicit activity, and the Financial Intelligence Unit (UAF) enforces anti-money laundering legislation. Transfers of funds over USD 10,000 requires additional paperwork and due diligence.

The Nicaraguan Central Bank adjusts the official exchange rate daily according to a crawling peg that devalues the Cordoba against the U.S. dollar at an annual rate of five percent. The Central Bank has made no statements indicating they will change this policy. The official exchange rate as of December 31, 2017, was 30.79 Cordobas to one U.S. dollar. The daily exchange rate can be found on the Central Bank’s website . According to the BCN, the accumulated rate of inflation for 2017 was 5.68 percent.

The current crisis has put significant strain on the banking sector, which could result in additional restrictions on the transfer of U.S. dollars.

Remittance Policies

The Foreign Investment Law (2000/344) allows foreign investors to transfer funds abroad, whether dividends, interest or principal on private foreign debt, as well as royalties, and from compensation payments for declarations of eminent domain. Foreign investors also enjoy foreign currency convertibility through the local banking system. There are no limitations on the inflow or outflow of funds for remittances of profits or revenue.

Sovereign Wealth Funds

Nicaragua does not have a sovereign wealth fund.

President Ortega has used funds provided by Venezuela through the Bolivarian Alliance for the Americas (ALBA) to increase the role of the state and quasi-state actors in the economy. Through Petronic, Nicaragua’s state-owned oil company, the government owns a 49 percent share in ALBA de Nicaragua (ALBANISA), the company that imports and monetizes Venezuelan petroleum products through the ALBA Energy Agreement. The other 51 percent of ALBANISA is owned by the Venezuelan state-owned oil company PDVSA, which means that U.S. sanctions against Venezuela and PDVSA apply to ALBANISA. President Ortega and the Sandinista Party (FSLN) have used ALBANISA funds to purchase television and radio stations, hotels, cattle ranches, electricity generation plants, and pharmaceutical laboratories. ALBANISA’s large presence in the Nicaraguan economy and its ties to the Government of Nicaragua government put companies trying to compete in industries dominated by ALBANISA or government-managed entities at a disadvantage.

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), the Nicaraguan Post Office, the International Airport Authority (EAAI), the Nicaraguan Mining Company (ENIMINAS) and Nicaraguan Petroleum Company (Petronic). 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) also has a controlling interest in companies in the construction, manufacturing, and services sectors. Other companies have unclear ownership structures that likely include at least a minority ownership by the Government of Nicaragua or government officials.

Total assets of all SOEs in Nicaragua are unknown as not all SOEs have publicly available or audited accounts. There are few mechanisms to ensure the transparency and accountability of state business decisions. The U.S. Department of State’s Fiscal Transparency report cites the need for Nicaragua to improve reporting on allocation to and from state-owned enterprises. Nicaragua is not a signatory to the WTO Agreement on Government Procurement.

Many large businesses had active Responsible Business Conduct (RBC) programs that include improvements to the workplace environment, business ethics, and community development initiatives before the recent economic crisis brought a halt to most programs. The Nicaraguan Union for Corporate Social Responsibility (UniRSE), which includes 102 companies, is working to create more awareness for Corporate Social Responsibility (CSR) in Nicaragua. UniRSE organizes events and studies best practices throughout the region. Increasingly, both Nicaraguan and foreign businesses recognize that CSR and RBC programs must go beyond compliance with environmental or labor law, but more work is needed in this area.

The Government of Nicaragua does not factor RBC policies or practices into its procurement decisions nor explicitly encourage generally accepted 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.

Public sector corruption remains a major challenge for U.S. firms operating in Nicaragua. Companies report that bribery of public officials, unlawful seizures, and arbitrary assessments by customs and tax authorities are common. Corruption is particularly prevalent within the judicial system. In a 2016 survey of 2,500 Nicaraguan companies, one-third of all respondents reported arbitrariness and illegal actions by government offices that regulate property rights and business establishment.

In 2017, Transparency International ranked Nicaragua as one of the most corrupt countries in the region and more corrupt then its neighbors, scoring worse than Honduras and Guatemala and on par with authoritarian regimes like Cuba and Venezuela.

Nicaragua has a well-developed legislative framework criminalizing acts of corruption, but it is unevenly enforced. The Penal Code (amended 2007/641) and the Special Law on Bribery and Crimes Against International Trade and Foreign Investment (2006/581) define corruption offenses and establish sanctions. Offering or accepting a bribe is a criminal act punishable by a fine and a minimum three years in prison. Legislation similar to the U.S. Foreign Corrupt Practices Act makes bribery by a Nicaraguan company of a foreign official a criminal act punishable by a minimum five years in prison. The Attorney General and the Controller General share responsibility for investigating and prosecuting corruption cases. The anticorruption provisions of CAFTA-DR require each participating government ensure under its domestic law that bribery in matters affecting trade and investment is treated as a criminal offense or subject to comparable penalties.

On December 21, 2017, the U.S. Department of Treasury sanctioned Roberto Rivas, President of the Supreme Electoral Council, for corruption under the Global Magnitsky Act. On January 16, 2018, the President of the Nicaraguan Contraloria General de la Republica(CGR), Nicaragua’s audit authority said it would not investigate Mr. Rivas as it was not the competent entity. On February 7, 2018, the National Assembly reaffirmed Rivas’ leadership of the CSE and preserved his immunity from prosecution for corruption.

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

Resources to Report Corruption

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

In April 2018, government security forces and government-affiliated gangs brutally attacked peaceful protests sparking significant civic unrest and ongoing violent confrontations between pro-government and opposition forces throughout the country. As of June 22, international human rights organizations have estimated that at least 212 have died. Violent crime is growing significantly as the breakdown in law enforcement capability and trust continues. Government controlled gangs in civilian clothing are behind much of the crime. Political risk has increased significantly as a result, and the future of the country’s political institutions remains very uncertain.

Political rallies and demonstrations can occur with little notice or predictability; some have resulted in injuries and deaths. The presence of ruling party affiliated members and counter-demonstrators, often directed by the government can lead to an escalation in tension and violence. Typically, protests in Managua take place at major intersections or rotundas, impeding traffic flows. Outside the capital, they often take place in the form of road/highway blockages. Protests have included the use of tear gas, fireworks, rock throwing, tire/vehicle burning, and road blocks.

The democratic process in Nicaragua continues to erode. The United States and others have characterized recent elections as severely flawed, which has precluded the possibility of free and fair national elections in 2016 and municipal elections in 2017. In advance of the 2016 elections, the Government of Nicaragua sidelined opposition candidates for president, limited domestic observation at the polls and access to voting credentials, and took other actions to deny democratic space in the process. The decision by the government not to invite independent international electoral observers further degraded the legitimacy of the election. The U.S. government continues to press the Government of Nicaragua to uphold democratic practices including press freedom and respect for universal human rights in Nicaragua, consistent with our countries’ shared obligations under the Inter-American Democratic Charter.

In advance of the 2017 municipal elections, the government signed a memorandum of understanding for election observation with the Organization of American States (OAS), while the OAS electoral observation mission noted important advances it also identified significant structural weaknesses in the entire electoral process and recommended a comprehensive electoral reform. To date, the government has not made any efforts to address OAS recommendations and concerns.

While official unemployment rates are low (3.8 percent in 2017), 55 percent of the working population is underemployed and nearly three-quarters of all employment is in the informal economy. Nicaragua lacks skilled and technical labor and often employers import administrative or managerial employees from outside of the country. Recent studies show a particular need for technical level workers. The minimum wage is low and revised every six months through a dialogue process between the private sector, labor unions, and the government. As of March 2018, the monthly minimum wage is between USD 134 and USD 299, depending on the industry. Wages in Free Trade Zones are negotiated separately for five-year time periods.

Per Nicaraguan labor law, at year-end employers must pay an 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. Some business groups say this provides an incentive for workers to seek dismissal once they have completed five years with a firm. There are no special laws or exemptions from regular labor laws 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.

The law provides for the right of all public and private sector workers, with the exception of those in the military and police, to form and join independent unions of their choice without prior authorization and to bargain collectively. Workers can exercise this right in practice, though unofficial roadblocks exist for unions not affiliated with the ruling Sandinista party. The law provides the right to collective bargaining. A collective bargaining agreement cannot exceed two years and is automatically renewed if neither party requests its revision. Strikes are legal and the government generally does not interfere in private sector disputes.

There were no strikes in 2017 that posed a risk to investment. A broad-based alliance of students, civil society, and the private sector held a national one-day strike on June 14 which was widely observed. There could be future national work stoppage efforts as a part of ongoing civil unrest.

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

The U.S. Overseas Private Investment Corporation (OPIC) offers financing and insurance against political risk, expropriation, and inconvertibility to U.S. investments in Nicaragua. Nicaragua is a member of the World Bank’s Multilateral Investment Guarantee Agency.

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

Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) (M USD) 2017 USD 13,330 2016 USD 13,290 
Foreign Direct Investment Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country (M USD, stock positions) N/A 2016 USD 119 BEA data available at
Host country’s FDI in the United States (M USD, stock positions) N/A 2014 USD 27 BEA data available at
Total inbound stock of FDI as % host GDP 2017 10.6% N/A N/A

*Source: Central Bank of Nicaragua, ProNicaragua
Table 3: Sources and Destination of FDI

Note: The IMF’s CDIS site does not have the data available for Nicaragua, nor is such data available from publicly available Government of Nicaragua sources.

Table 4: Sources of Portfolio Investment

Note: The IMF’s CDIS site does not have the data available for Nicaragua, nor is such data available from publicly available Government of Nicaragua sources.

Embassy Managua – Economic Section
Km 5½ Carretera Sur, Managua, Nicaragua
+505 2252-7100

2018 Investment Climate Statements: Nicaragua
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