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Investors should be extremely cautious about investing in Nicaragua. The regime of President Ortega and Vice President Murillo continues to suspend constitutionally guaranteed civil rights, detain political prisoners, seize private property, and disregard the rule of law, creating an unpredictable investment climate rife with reputational risk and arbitrary regulation.

After committing widespread electoral fraud and jailing opponents, the Ortega-Murillo regime secured a fourth consecutive presidential term in November 2021. In 2022, the regime revoked the legal registration and expropriated the assets of more than 3,000 nonprofit organizations – including environmental advocacy groups, private universities, Catholic-linked charities, and organizations that provide free dental and health care to impoverished children – ostensibly for being at high risk of money laundering and terrorist financing. In February 2023, shortly after releasing more than 200 political prisoners into the custody of the United States, the regime stripped each of their Nicaraguan citizenship, removed them from the civil registry, froze their bank accounts, and in several instances seized their properties.

The regime ramped up its repression of the Nicaraguan private sector in March 2023, revoking the legal registration and expropriating the assets of 19 of the nation’s leading business chambers. Business chambers had for decades played a crucial role in Nicaragua’s private sector as advocates for the business community on policy matters among other issues. Individual businesses must now interact directly with the Nicaraguan government, often at greater cost for firms and from a weaker negotiating position.

In 2020, the National Assembly approved six repressive laws that alarmed investors. Some of the most concerning include: a foreign agents law that requires organizations and individuals to report foreign assistance and prevents any person receiving foreign funding from running for office; and a consumer protection law that could prevent financial institutions from making independent decisions on whether to service financial clients, including OFAC-sanctioned entities. Tax authorities have seized properties following reportedly arbitrary tax bills and jailed individuals without due process until taxes were negotiated and paid. Arbitrary fines and customs inspections prejudice companies that use or sell imported products.

In response to the Ortega-Murillo regime’s deepening authoritarianism, almost all international financial institutions have stopped issuing new loans to Nicaragua, and most external financing will wind down by 2025. The regime’s hopes that a new economic partnership with the People’s Republic of China (PRC) would provide fresh investment and financing have not yet materialized.

Despite regime repression and growing poverty, Nicaragua continues to showstable macroeconomic fundamentals, including a record-high $4 billion in foreign reserves, a sustainable debt load, and a well-capitalized banking sector. Independent forecasts predict Nicaragua’s $14 billion economy will grow between 1.5 and 3 percent in 2023, down from a robust 10 percent post-pandemic expansion in 2021. Inflation rose to 11 percent year-on-year in January 2023, however, and remains a concern. The price of a basket of typical consumer goods and services – a key measure of inflation’s impact on the general population – rose to a record high of $514 per month in January 2023, more than double the minimum wage of $215. Some 200,000 formal sector jobs have disappeared from the economy, and Nicaraguan families now earn 15 percent less on average in real terms than in 2018. Following an unprecedent wave of hundreds of thousands of Nicaraguan migrants in the United States in 2022, remittances rose to a new record of $3.2 billion – or nearly 20 percent of Nicaragua’s GDP – driving local consumption and generating significant tax revenue.

Nicaragua’s economy still has significant potential for growth if investor confidence can be restored by strengthening institutions and improving the rule of law. Its assets include: ample natural resources; a well-developed agricultural sector; and ready access to major shipping lanes. The United States is Nicaragua’s largest trading partner – it is the source of 35 percent of Nicaragua’s imports and the destination of 65 percent of Nicaragua’s exports.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2022 167 of 180 
Global Innovation Index 2022 108 of 132 
U.S. FDI in partner country ($M USD, historical stock positions) 2021 USD 3.00  
World Bank GNI per capita 2021 USD 1,950 

Policies Towards Foreign Direct 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 the PRC, Russia, and Iran. 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.

In October 2022, the government eliminated ProNicaragua – the former official investment and export promotion agency – to create a new Secretariat for the Promotion of Investment and Exports. This new institution is under direct Presidential control and has authority to sign investment agreements on behalf of the government. Investment and export promotion in Nicaragua is highly politicized and managed by the President’s and Vice President’s OFAC-sanctioned son Laureano Ortega, who serves as Presidential Advisor on Investments, Trade, and International Cooperation.

Personal connections with regime insiders 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.

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.

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 more than 3,000 NGOs of their legal status as of March 2023.

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 sector to include one of Nicaragua’s state-owned enterprises as a partner. Investments in the mining sector have similar requirements but the government has not enforced them since the OFAC-designation of state-owned mining company ENIMINAS in June 2022.

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.

Other Investment Policy Reviews

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.

Business Facilitation

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.

Outward Investment

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

Nicaragua has bilateral investment treaties signed or in force with 15 countries. The United Nations Conference on Trade and Development maintains a full list of Nicaragua’s international investment agreements . Nicaragua also has treaties with investment provisions with Chile, Mexico, Panama, South Korea, and is a member of the CAFTA-DR free trade agreement. Nicaragua withdrew from a free trade agreement with Taiwan shortly after breaking diplomatic ties in December 2021 and formally recognizing the PRC. Nicaragua joined the PRC’s Belt and Road Initiative in January 2022, signed an early harvest agreement in June 2022, and stated its intention to sign a full free trade agreement in 2023.
Nicaragua is not a party to any bilateral income tax treaty. Nicaragua is not a member of the OECD Inclusive Framework on Base Erosion and Profit Shifting.

The Ortega-Murillo regime uses tax laws and enforcement to intimidate opponents and increase government revenue. Companies cite increased tax audits, arbitrary fines, revised tax laws, and inflated tax liabilities as specific challenges to operating in Nicaragua.

The Nicaraguan Tax Authority (DGI) has increased the frequency, duration, and scope of audits on businesses.  In some cases, these audits take several months and require businesses to dedicate office space and support staff to the auditors.  In addition, some businesses report that up to eight different government entities – including labor authorities, social security authorities, and city and regional tax authorities – have arrived at the same time to conduct audits. These audits nearly always find that businesses owe additional taxes and often include fines equal to the amount of taxes purportedly owed. These fines appear to lack a legal basis. The government has seized private property and jailed individuals for failure to pay these tax bills and fines, often while legal proceedings are still ongoing. These tax issues have impacted U.S. companies and companies owned by U.S. citizens.

Tax reforms passed in February 2019 continue to prejudice importers and U.S. businesses. The tax reforms tripled the alternative minimum tax rate from 1 to 3 percent for companies earning more than five million dollars in gross annual revenue and doubled it from 1 to 2 percent for businesses with incomes between two and five million dollars in gross annual revenue. The law also increased the selective consumption tax for many items, with annual increases for some specific products such as non-alcoholic and alcoholic beverages. The selective consumption tax disadvantages importers. Customs authorities tax imported goods at the border, not based on the product’s retail price but on an arbitrary valuation that can triple the declared value of the good. Domestic producers pay the selective consumption tax at the actual point of sale. The government promised revisions to the reform after an observation period of 90 days. As of March 2023 – four years after the reform was implemented – it still has not proposed revisions. Companies report the reforms have narrowed profit margins and increased consumer prices.

Several large companies – including some U.S. companies and franchises – have disputed their tax liabilities with the government, which often results in negative outcomes for the companies. The government assesses income taxes based on gross revenue rather than net profit as provided by law. The government’s calculation resulted in multi-million dollar tax bills that, if imposed, could force the closure of these companies.

Transparency of the Regulatory System

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 many 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. The regime revoked the legal registration and expropriated the assets of 19 of Nicaragua’s leading business chambers in March 2023. There are currently few options to resolve commercial issues with the government. Individual businesses must now interface with the Nicaraguan government directly, raising costs and weakening negotiating positions.

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. While the government made limited information on debt obligations publicly available, information on major state-owned enterprise debt was unavailable.  The government did not prepare documents according to internationally accepted principles, and the government did not break down expenditures supporting the office of the president.

International Regulatory Considerations

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 had committed to implement 96 percent of the agreement to date, according to the WTO. Nicaragua’s trade facilitation, however, 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.

Legal System and Judicial Independence

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.

Laws and Regulations on Foreign Direct Investment

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.

Competition and Antitrust Laws

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.

Expropriation and Compensation

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 slow and cumbersome.

Since 2018, the government has cancelled the legal status and expropriated the assets of more than 3,000 NGOs – including environmental advocacy groups, private universities, Catholic-linked charities, and organizations that provide free dental and health care to impoverished children – ostensibly for being at high risk of money laundering and terrorist financing. The government seized these organizations’ assets and real estate properties turning some into government administered and controlled facilities. In December 2021, the government broke diplomatic ties with Taiwan and officially recognized the 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 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.

In February 2023, the regime cancelled the citizenship of 222 former political prisoners and 94 political opponents, deleted them from the civil registry, froze their bank accounts, and seized their properties.

Dispute Settlement

ICSID Convention and New York Convention

Nicaragua has been a member of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID) since 1995 and signed the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral awards in 2003. There is no specific domestic legislation providing for enforcement of either convention.

Investor-State Dispute Settlement

Nicaragua is a member of CAFTA-DR, which 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 of CAFTA-DR. There have only been two official claims or disputes by U.S. investors under CAFTA-DR, the most recent in April 2021. Both cases are still pending before the ICSID. There are no known instances of local courts recognizing and enforcing arbitral awards issued against the government.

Businesses operating in Nicaragua say the investor-state dispute settlement mechanism is not a viable means of enforcing CAFTA-DR obligations due to the high expense and likelihood of reprisal from the Nicaraguan government. Many investors report customs and other procedures are not compliant with Nicaragua’s obligations under CAFTA-DR. It does not appear that foreign investors have been targeted due to nationality.

International Commercial Arbitration and Foreign Courts

Alternative dispute resolution (ADR) is not common, and many Nicaraguan companies are unfamiliar with the practice. Nicaragua’s Mediation and Arbitration Law (2005/540) is based on the UNCITRAL model law and established the legal framework for ADR. The Nicaraguan Chamber of Commerce and Services (CCSN) ran Nicaragua’s Mediation and Arbitration Center, conducted trainings, and promoted the value of ADR. The regime revoked CCSN’s legal registration and expropriated its assets in March 2023, closing the center. Arbitration clauses are included in some business contracts, but their enforceability has not been tested in Nicaraguan courts.

There are no known cases of local courts enforcing foreign arbitral awards or recent domestic decisions involving investment disputes with a state-owned enterprise. Enforcement of court orders is frequently subject to corruption and favoritism.

Bankruptcy Regulations

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 then 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.

Investment Incentives

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 of 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.

Foreign Trade Zones/Free Ports/Trade Facilitation

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. Companies in the FTZ currently employ more than 138,000 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 generally report less government interference than companies operating outside the FTZs in the Nicaraguan economy.

Performance and Data Localization Requirements

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.

Real Property

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. Since 2018, 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.

Intellectual Property Rights

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 .

Capital Markets and Portfolio Investment

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.

Money and Banking System

While the banking system has grown and developed in the past two decades, Nicaragua remains underbanked relative to other countries in the region. As of 2021, only 26 percent of Nicaraguans aged 15 or older have a bank account or mobile-money service provider, 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.
Following a sharp contraction in 2018, the banking sector recovered slightly since 2019. In 2022, liquidity ratios continued high and stable at 37 percent and portfolios increased 16 percent since 2021. 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 and dropped to 8 percent in 2022. 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, and total assets now approach pre-crisis levels. In 2022, the financial system had total assets worth $5.3 billion – a 13 percent increase over 2021’s $4.7 billion, almost equaling March 2018’s previous high of $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. Amendments to the Consumer Protection Law in 2021 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.

Foreign Exchange and Remittances

Foreign Exchange

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. Transfers of funds over $10,000 require additional paperwork and due diligence.

Local financial institutions freely exchange U.S. dollars and other foreign currencies. Some business report the Superintendency of Banks and Other Financial Institutions (SIBOIF) has taken steps to ensure more Nicaraguan córdobas are in circulation to shore up the local currency. In 2018, the Central Bank notified banks that, in place of an online automated clearing house for foreign currency purchases, banks must now request such purchases in writing, 48 hours in advance, as well as provide the names of the deposit holders who want to withdraw their foreign currency deposits and the amount each individual requests.

The Central Bank adjusts the official exchange rate daily according to a crawling peg that devalues the córdoba against the U.S. dollar at an annual rate. As of January 2023, the devaluation rate is 1 percent. The Central Bank has steadily reduced the devaluation rate from 5 percent from 2004 to 2019, 3 percent in 2020, and 2 percent in 2021. The official exchange rate as of December 31, 2022, was 36.62 córdobas to one U.S. dollar. The daily exchange rate can be found on the BCN’s website. 

Remittance Policies

There are no limitations on the flow of funds for remittances or access to foreign exchange for remittances. Remittances are an increasingly important part of the Nicaraguan economy. In 2022, remittances from the growing ranks of Nicaraguan migrants in the United States reached a new record of $3.2 billion – or nearly 20 percent of Nicaragua’s GDP – driving local consumption and generating significant tax revenue.

Sovereign Wealth Funds

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 Petroleum Company (Petronic), and Nicaraguan Mining Company (ENIMINAS). In June 2022, OFAC sanctioned ENIMINAS and its President.

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.

Privatization Program

Nicaragua does not have an active privatization program.

Many large businesses have low-profile 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) used to promote corporate social responsibility, until the regime closed both organizations in February and March 2023. 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.

Additional Resources

Department of State

Department of the Treasury

Department of Labor

Climate Issues

Nicaragua approved a national climate change policy in February 2022. The policy provides general guidance on climate change management and identifies sensitive systems and significant sources of emissions. 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.

Resources to Report Corruption

Nicaragua’s supreme audit institution is the Contraloría 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 sham 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 held more than 200 political prisoners under deplorable conditions without adequate food and or medical care. These individuals 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. In February 2023, the regime unilaterally released 222 former political prisoners into the custody of the United States before stripping of their Nicaraguan citizenship and deleting them from the civil registry.

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, 45 percent of the population was underemployed in December 2022. 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 2022 the number of enrolled employees remained 4 percent below 2018 levels and 14 percent below 2017 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 4.5 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’s lack of skilled and technical labor worsened in 2022 as record numbers of migrants fled the country, mostly to the United States. Most sectors of the formal economy experienced a significant increase in personnel turnover in 2022. 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, the once-influential independent business chamber that the regime closed in 2023. APRODESNI, a newly created and regime-aligned alternative chamber, was the official private sector representative in the last two negotiations. In 2023, the minimum wages for all nine sectors were increased 10 percent. In November 2022, the free trade zone minimum wages covering the period 2023-2027 were revised, establishing an 8 percent increase for 2023 and 2024, 7 percent for 2025, and 6.7 percent for 2026 and 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 

The U.S. International Development Finance Corporation does not currently support projects in Nicaragua.


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) 2021 $14,013 2021 $14,013 World Bank: 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2021 $3 BEA:
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2021 $2 BEA:
Total inbound stock of FDI as % host GDP 2021 10.5% 2021 8.7 % UNCTAD:   

* Source for Host Country Data: Central Bank of Nicaragua publishes year-end data at the end of the following year’s first trimester. 

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

Economic Section
U.S. Embassy Managua
+505 7877-7600 

On This Page

  2. 1. Openness To, and Restrictions Upon, Foreign Investment
    1. Policies Towards Foreign Direct Investment
    2. Limits on Foreign Control and Right to Private Ownership and Establishment
    3. Other Investment Policy Reviews
    4. Business Facilitation
    5. Outward Investment
  3. 2. Bilateral Investment and Taxation Treaties
  4. 3. Legal Regime
    1. Transparency of the Regulatory System
    2. International Regulatory Considerations
    3. Legal System and Judicial Independence
    4. Laws and Regulations on Foreign Direct Investment
    5. Competition and Antitrust Laws
    6. Expropriation and Compensation
    7. Dispute Settlement
      1. ICSID Convention and New York Convention
      2. Investor-State Dispute Settlement
      3. International Commercial Arbitration and Foreign Courts
    8. Bankruptcy Regulations
  5. 4. Industrial Policies
    1. Investment Incentives
    2. Foreign Trade Zones/Free Ports/Trade Facilitation
    3. Performance and Data Localization Requirements
  6. 5. Protection of Property Rights
    1. Real Property
    2. Intellectual Property Rights
  7. 6. Financial Sector
    1. Capital Markets and Portfolio Investment
    2. Money and Banking System
    3. Foreign Exchange and Remittances
      1. Foreign Exchange
      2. Remittance Policies
    4. Sovereign Wealth Funds
  8. 7. State-Owned Enterprises
    1. Privatization Program
  9. 8. Responsible Business Conduct
    1. Climate Issues
  10. 9. Corruption
    1. Resources to Report Corruption
  11. 10. Political and Security Environment
  12. 11. Labor Policies and Practices
  13. 12. U.S. International Development Finance Corporation (DFC), and Other Investment Insurance or Development Finance Programs
  14. 13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
  15. 14. Contact for More Information
2023 Investment Climate Statements: Nicaragua
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