Investment Climate Statements for 2019 - Nicaragua

2019 Investment Climate Statements: Nicaragua

Executive Summary

The deterioration of democratic governance in Nicaragua reached an inflection point in 2018. The increasingly authoritarian Ortega regime committed grave human rights abuses as it repressed peaceful protests and severely restricted freedom of expression and other civil liberties. These actions derailed Nicaragua’s already fragile economy, erasing gains from several years of steady growth and depleting the country’s foreign currency reserves. All industries that rely on confidence (tourism, banking, investment) sharply reversed the growth trend of past years, resulting in an estimated 4.0 percent contraction in 2018 and an expected contraction of 7.1 percent for 2019. The United States is Nicaragua’s largest trading partner, the source of roughly a quarter of Nicaragua’s imports, and the destination of approximately two-thirds of its exports.

Very weak public institutions, deficiencies in the rule of law and administration of justice, corruption, inefficiency, and extensive single-branch executive control create significant challenges for doing business in Nicaragua, particularly for smaller investors. Prior to the 2018 civil unrest, large-scale investors and firms with positive relations with the ruling party were advantaged in their dealings with government bureaucracy. During 2018, Nicaragua’s model of consensus and dialogue with a select few private sector and labor representatives collapsed due to the ongoing civil crisis. The Government of Nicaragua has not taken counter-cyclical steps to address the economic recession, instead focusing on raising revenue by cutting the national budget, increasing taxes, and reducing benefits. The Central Bank has reduced the money supply and contributed to higher interest rates in an attempt to defend the value of the national currency.

Absent a political resolution to the crisis, the economic forecast is for continued contraction due to international isolation (including sanctions), lack of support from international financial institutions, an unsustainable fiscal deficit, unserviceable deficits in the social security system, and the absence of investment. Measures to contain the twin deficits come at the cost of higher taxes, deferring investment, and falling consumption. Tax revenues are declining and the government struggles to find financing. Despite the increasing challenges, many existing businesses are still open, hoping to get by until economic growth returns. Few new investors, however, have opted into Nicaragua’s risky markets.

Economists expect that a political agreement to end the socio-political crisis would allow Nicaragua to resume its recent pattern of steady economic growth. The country’s many resources include: an ecologically diverse geography for tourism; a well-developed agricultural sector; reserves of gold and other valuable minerals; a highly organized and sophisticated private sector committed to a free economy; ready access to major shipping lanes; and a young, low-cost labor force that supports a vibrant manufacturing sector. The country further has favorable crime statistics, and is a party to the Central America-Dominican Republic Free Trade Agreement (CAFTA-DR). Nicaragua also offers significant tax incentives in many industries.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2018 152 of 180
World Bank’s Doing Business Report “Ease of Doing Business” 2018 132 of 190
Global Innovation Index 2018 N/A of 126
U.S. FDI in partner country ($M USD, stock positions) 2017 $187
World Bank GNI per capita 2017 $2,130

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Foreign direct investment has all but stopped since the onset of Nicaragua’s political crisis began in April 2018. The Government of Nicaragua nevertheless continues to seek foreign direct investment. Investment incentives target export-focused companies that require large amounts of unskilled or low-skilled labor.

The Government of Nicaragua encourages investors to work through ProNicaragua, the country’s investment and export promotion agency. ProNicaragua provides a range of services, including information packages, investment facilitation, and prospecting services to interested investors. Its reputation for professionalism has deteriorated over the past few years, becoming increasingly politicized after President Ortega installed his son as the organization’s figurehead. For more information, see

Personal connections and affiliation with industry associations and chambers of commerce are critical for foreigners investing in Nicaragua. Prior to the crisis, the Superior Council of Private Enterprise (COSEP) had functioned as the main private sector interlocutor with the Government of Nicaragua through a series of roundtable and regular meetings with the government. These roundtables have ceased since the onset of Nicaragua’s crisis in April 2018 as has 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.

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 process for 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.

2. Bilateral Investment Agreements and Taxation Treaties

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. On February 27, 2019 the Government of Nicaragua approved new tax reforms. Previously, the government collected one percent of gross revenue as an alternative minimum tax. A new law triples this alternative minimum tax rate for “large businesses” – the approximately 600 companies that earn more than five million dollars in gross annual revenue – and doubling it for “medium businesses” with incomes between USD 1.9 and five million in gross revenue. The law also increases the number of items subject to value added taxes and increases taxes on investment income, among other changes. Industry executives assert that the reform will cause loss of competitiveness with Central American neighbors and steep drops in consumption due to higher prices and unemployment.

3. Legal Regime

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. Few companies in Nicaragua 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.

Prior to the crisis, the Superior Council of Private Enterprise (COSEP) provided the Government of Nicaragua with input to proposed regulations and laws. These channels had become increasingly centralized and tended to disfavor smaller investors and businesses who may have more difficulty placing items on the agenda. These roundtables have ceased since the onset of Nicaragua’s crisis in April 2018. The Executive Branch retains ultimate rule making and regulatory authority, and they have used that power to make unilateral economic decisions related to taxation, minimum wage, and social security — subjects that were previously areas of collaboration between the Government, private sector, and unions.

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 supermajority in the National Assembly; in practice the legislative branch seldom modifies 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

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. The legal system is weak and cumbersome. Members of the judiciary, including those at senior levels, are widely believed to be corrupt and are subject to significant political pressure, especially from the executive branch. A commercial code and bankruptcy law exist, but both are outdated and rarely used. While regulations and enforcement actions are technically subject judicial review, appeals 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 the 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.

Expropriation and Compensation

Considerable uncertainty remains in securing property rights in Nicaragua. The World Bank reported in February 2018 that an estimated one-third of land parcels in rural areas were still held without a clear title and stated that land tenure insecurity has hindered potential investments and land market transactions in Nicaragua. Recent changes to public property registry policy prohibit the disclosure of ownership information to most outside parties, making the verification of ownership claims even more difficult. Police often refuse to intervene in property invasion cases or assist in the enforcement of court orders to remove illegal occupants. U.S. citizens have also encountered challenges executing and enforcing final court orders, even under orders from the Supreme Court of Nicaragua. Conflicting land title claims are abundant and judicial appeal in these cases is very challenging.

During the civil unrest of 2018, US Embassy Managua received numerous reports of land invasions. 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. President Ortega declared on numerous occasions that the government would not act to evict those who had illegally taken possession of private property.

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.

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.

4. Industrial Policies

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, Apanás, and Río 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.

5. Protection of Property Rights

Real Property

Many investors in Nicaragua experience difficulties defending their property rights. The government regularly failed to enforce court decisions with respect to seizure, restitution, or compensation of private property. Enforcement of court orders was frequently subject to non-judicial considerations. Members of the judiciary, including those at senior levels, were widely believed to be corrupt or subject to political pressure. The government failed to evict those who illegally took possession of private property. Within the context of social upheaval starting on April 19, members of the FSLN illegally took over privately owned lands, with implicit and explicit support by municipal and national government officials. Some land seizures were politically targeted and directed against specific individuals, such as businessmen traditionally considered independent or against the ruling party. As of August 24, the private sector contended that approximately 15,000 acres remained seized.

Previously during the 1980s, the expropriation of 28,000 properties in Nicaragua from both Nicaraguans and foreign investors resulted in a large number of claims and counter claims involving real estate. Property registries suffer from years of poor recordkeeping, making it difficult to establish a title history, although some improvements have ensued from World Bank-financed projects to modernize the land administration systems in certain regions.

The Embassy recommends extensive due diligence and extreme caution before investing in property. Unscrupulous individuals have engaged in protracted confrontations with U.S. investors to wrest control of beachfront properties along the Pacific coast in the departments of Carazo, Rivas, and Chinandega, as well as prime real estate in the cities of Managua, Granada, and Leon. Judges and municipal authorities have been known to collude with such individuals, and a cottage industry supplies false titles and other documents to those who scheme to steal land.

Additional constraints can occur with property in the Autonomous Caribbean Region in which communal land cannot be legally purchased. However, unscrupulous individuals sell communal land and lawyers and notaries will knowingly extend the apparent correct paperwork, only to have property buyers be stripped from their property by communal authorities.

Those interested in purchasing property in Nicaragua should seek experienced legal counsel very early in the process.

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

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

6. Financial Sector

Capital Markets and Portfolio Investment

New policies have restricted 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. In an effort to shore up liquidity, banks have sharply restricted lending, increased interest rates, and implemented stricter collateral standards. The overall size and depth of the country’s financial markets and portfolio positions are very limited.

Money and Banking System

The modern banking system in Nicaragua is relatively young, small, and undercapitalized. The Central Bank of Nicaragua was established in 1961, as the state regulator of the monetary system with the sole right to issue of the national currency, the córdoba. 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 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.

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 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.

Due to the ongoing socio-political crisis, Nicaragua’s private banks have faced many serious challenges. In an attempt to secure their liquidity, banks cut off most new lending immediately after the crisis began as banks have limited resources to cover withdrawals. Although the Nicaraguan Central Bank (BCN) supported the banks at the beginning of the crisis, since June 2018 the BCN cut financing to banks and unilaterally modified regulations governing Financial Assistance Lines (LAF), making them all but inaccessible. The reduction in lending has reduced the banks revenue, which has had a 29 percent reduction in 2018.

The banking industry remains conservative and highly concentrated, with four banks (BANPRO, Lafise, BANCENTRO, BAC, and FICOHSA) constituting 77 percent of the country’s market share. The ongoing crisis that began on April 18 sparked large withdrawals of deposits from the banking system in the following months. As of December 2018, the four banks had total assets worth USD USD 3.9 billion, a 28.3 percent drop from the 5.5 billion held in March 2018. Due to an increasingly high country risk and a relatively small business volume, the number of correspondent banking relationships with the United States has come under risk in 2018. In December, Wells Fargo Bank informed the four banks that it would withdraw from the country and would not continue to provide correspondent services. Bank of America has also withdrawn correspondent services from a local bank.

BANCORP, a subsidiary of ALBA de Nicaragua (ALBANISA), a joint venture between the State-owned oil companies of Nicaragua (49 percent) and Venezuela (51 percent) began accepting deposits in 2015. Because of its ownership structure, U.S. sanctions against the Venezuelan petroleum firm PDVSA apply to Bancorp. On March 7, 2019, in an attempt to circumvent sanctions, the National Assembly of Nicaragua approved the sale of BANCORP to the state of Nicaragua through the creation of a new National Bank, which has yet to be signed into law.

Foreigners are still allowed to open bank accounts as long as they are legal residents in the country. Due to capital flight, Central Bank data show that in 2018 the credit portfolio of Nicaraguan commercial banks fell by 14.8 percent from May to December. Loans to industry plummeted by 17.9 percent, to consumers by 18.2 percent and to the commerce sector by 15.3 percent. Despite considerable restructuring, as a result of the Establishment of Special Conditions for the Renegotiation of Debts by the SIBOIF (which expired in December 2018), non-performing loan ratios increased as a result of the economic recession. Loans in default at the end of December increased from 1 percent to 2.5 percent of total loans, while those at risk of entering default rose to 8.3 percent, up from 2.7 percent prior to the crisis.

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 Córdobas, 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.

On October 3, 2018 President Ortega issued a decree that granted the UAF direct access to the private information of individuals and organizations collected by the following government institutions: Customs, the Supreme Electoral Council, Tax Authority, Social Security Institute, General Directorate for Migration and Foreigner Service, National Police, the Judiciary, and the Superintendency of Banks and Other Financial Institutions. The new regulation would give the UAF access to vital records that include salaries, travel information, police records, gun permits, vehicle registration, companies’ exports and imports, bank and insurance information, and tax payments. Further, the new regulation broadens the entities subject to UAF supervision, previously limited to financial institutions like banks and insurance companies and now including nonprofits, payment companies, car dealerships, accountants, real estate firms, jewelry stores, and fiduciary services providers. Entities under UAF supervision must comply with invasive UAF audits or face fines or the suspension of business operations. The repeated failure to provide information can result in permanent closure. With the passage of the new regulations, there will be no institutional barriers between UAF investigators and troves of personal data.

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. However, on August 24, the Nicaraguan Central Bank Board of Directors amended regulations to enable the Bank’s President to determine discretionarily the amount it will charge local banks for the sale of U.S. dollars, Euros and other foreign currencies. Currently, the Central Bank charges one percent higher than the official exchange rate, covering operating costs and anchoring exchange rate expectations. With the new regulation, the Central Bank’s President can charge more than the one percent, implicitly devaluing the currency as local banks would likely pass on the additional cost to consumers seeking to purchase foreign currency. It is unclear whether the revisions remain valid.

On October 19th, BCN officials notified Nicaragua’s private banks that in place of an on-line automated clearing house, banks must now request foreign currency purchases in writing, 48 hours in advance, and provide the BCN with the names of savers who want to withdraw their foreign currency deposits, as well as the amounts each individual requests. The BCN has not formally asserted the right to deny requests to purchase dollars implication.

The official exchange rate as of December 31, 2018, was 32.3 Córdobas 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 2018 was 3.9 percent.

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.

7. State-Owned Enterprises

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. 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.

On January 28, 2019 the Office of Foreign Assets Control (OFAC) designated PDVSA and as a result all assets and subsidiary companies of PDVSA operating in Nicaragua have been subjected to the same restrictions as those in Venezuela. This includes ALBANISA and all of its subsidiaries, including Bancorp. For years, President Daniel Ortega and Vice President Rosario Murillo have engaged in corrupt deals via PDVSA that have pilfered the public resources of Nicaragua for private gain.

In October 2018, the National Assembly approved a law that would grant the forty-year-old Nicaraguan Import Company (ENIMPORT) a new mandate as the “discretionary importer and exporter of the State,” as well as a new name. The law creates a state-owned Nicaraguan Import and Export Company (ENIMEX), raising concerns in the business community that the regime plans to supplant private exporters in an effort to access foreign currency. This state-owned enterprise (SOE) would be empowered to act as the agent of the government of Nicaragua in import and export transactions, form joint enterprises with the private sector, transport, store, and sell goods and services to the public, and participate in unrestricted commercial activities. ENIMEX is to be exempt from most taxes and duties, putting any private competitors at a sharp 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.

8. Responsible Business Conduct

Many large businesses have active Responsible Business Conduct (RBC) programs that include improvements to the workplace environment, business ethics, and community development initiatives. 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.

9. Corruption

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.

Corruption and impunity remain rampant among government officials, including in the police, the CSE, CSJ, customs and tax authorities, which continues to pose a major challenge for U.S. firms operating in Nicaragua. A general state of permissiveness continues to hinder the possibility of addressing the problem effectively. A lack of strong institutions, a system of checks and balances, and the overbearing political control of government institutions allowed for corruption to remain. The CSJ and lower-level courts remained particularly susceptible to bribes, manipulation, and political influence, especially by the FSLN. Companies reported that bribery of public officials, unlawful seizures, and arbitrary assessments by customs and tax authorities were common. 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.

Executive branch officials continued to be involved in businesses financed by economic and developmental assistance funds lent by the Venezuelan-led Bolivarian Alliance for the Peoples of Our America (ALBA), all of it outside the normal budgetary process controlled by the legislature. Media reported ALBA-funded contracts were awarded to companies with ties to the president’s family and noted the funds from Venezuela served as a separate budget tightly controlled by the FSLN, with little public oversight. Cases of mismanagement of these funds by public officials were reportedly handled personally by FSLN members and President Ortega’s immediate family, rather than by the government entities in charge of public funds.

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.

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 Contraloría General de la República (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

10. Political and Security Environment

Nicaragua has a highly centralized, authoritarian political system dominated by President Daniel Ortega Saavedra and his wife, Vice President Rosario Murillo Zambrana. Ortega’s Sandinista National Liberation Front (FSLN) party exercises total control over the executive, legislative, judicial, and electoral functions despite the country’s official status as a multiparty constitutional republic. President Ortega was inaugurated to a third term in office in January 2017 following a deeply flawed electoral process. The 2016 elections expanded the ruling party’s supermajority in the National Assembly, which previously allowed for changes in the constitution that extended the reach of executive branch power and the elimination of restrictions on re-election for executive branch officials and mayors. Observers have noted serious flaws in municipal, regional, and national elections since 2008. Civil society groups, international electoral experts, business leaders, and religious leaders identified persistent flaws in the 2017 municipal elections and noted the need for comprehensive electoral reform.

In April 2018, President Ortega and Vice President Murillo ordered police and parapolice forces to violently repress peaceful protests that began over discontent with a government decision to reduce social security benefits. The government’s disproportionate response included the use of live ammunition, snipers, fire as a weapon, and armed civilians. Protesters built makeshift roadblocks and confronted NNP and parapolice with rocks and homemade mortars. The ensuing conflict left over 325 dead, thousands injured, and more than 52,000 exiled in neighboring countries. Hundreds were illegally detained and tortured. Beginning in August, the Ortega government instituted a policy of “exile, jail, or death” for anyone perceived as regime opponents. Terrorism laws were amended to include prodemocracy activities, and the legislature and justice system were used to characterize civil society actors as terrorists, assassins, and coup-mongers. Political risk has increased dramatically as a result, and the future of the country’s political institutions remains very uncertain.

The Department of State’s Bureau of Consular Affairs advises that travelers reconsider travel to Nicaragua due to civil unrest, crime, limited healthcare availability, and arbitrary enforcement of laws. 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 malls, shopping centers, and 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 roadblocks.

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.

11. Labor Policies and Practices

The unreliable government-provided unemployment rate from before the crisis was 3.8 percent in 2017, but think tanks contended that 55 percent of the working population is underemployed and nearly three-quarters of all employment is in the informal economy. According to think tank FUNIDES, the political crisis and resulting economic contraction has thrown hundreds of thousands of additional Nicaraguans into poverty and intensified the hardships faced by the already-poor. This is driven primarily by job losses and secondarily by a steep decline in domestic consumption, which has left business owners and commission-based employees with a fraction of their expected income. According to the National Social Security Institute (INSS), 142,760 jobs in the formal sector disappeared between April and October, a decline of 16 percent. A joint study with the Nicaraguan Foundation for Economic and Social Development (FUNIDES) and umbrella private sector organization COSEP calculated that 453,000 individuals were laid off or suspended from their jobs between April and December, leaving 127,000 unemployed at the end of the year as a result of the political crisis.

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 was historically revised every six months through a dialogue process between the private sector, labor unions, and the government. Due to the crisis and the private sector’s participation in the opposition led movement, they were not invited by the government to participate in such discussions. Due to an impasse, the Ministry of Labor announced that the sectoral minimum wages will remain unchanged until August of 2019. However, the ministry will continue to review wages monthly to determine whether changing conditions warrant wage rises. As of March 2018, the monthly minimum wage was between USD USD 134 and USD 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. Prior to the socio-political crisis in Nicaragua, strikes were legal but rare due to the government’s alliance with the private sector and control over unions. Since the political crisis began in April, the private sector has broken its relationship of convenience with the Ortega regime.

While not the result of union activity, three one-day national strikes to express support for democracy paralyzed up to 90 percent of the country’s economic activity in 2018. However, in a September 21, 2018 speech, President Ortega railed against the “economic terrorism” represented by the three national strikes called by the private sector to protest government violence and repression. He stated that the next time a strike was called he would send police to force businesses to remain open, and called on party loyalists to stand against enterprises that participate in a future work stoppage. Political pressure on private enterprise have only accelerated the flight of capital out of the country and the country’s continuing economic decline.

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

12. OPIC and Other Investment Insurance Programs

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.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

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) 2018 $13,120 2017 $13,810
Foreign Direct Investment Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2017 $187 BEA data available at
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2016 $7 BEA data available at
Total inbound stock of FDI as % host GDP N/A N/A 2017 78.9% UNCTAD data available at

Table 3: Sources and Destination of FDI

*Source: Central Bank of Nicaragua, ProNicaragua

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.

14. Contact for More Information

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