Consortium Legal - Nicaragua
June 11, 2014 - Nicaragua
Nicaragua, Global Destination for Investments
by Rodrigo Taboada
In recent years, Nicaragua has experienced sustained economic growth, as a result of a strict management of its fiscal, financial, monetary and exchange policies. Its business-related administrative procedures and laws have contributed to a strong inflow of direct foreign investment, so much that the country intends to exceed this year an amount of 1500 million in investments in sectors such as: power, manufacture, agriculture, tourism and others.
Nicaragua is the fastest growing country in Central America, and has become the second recipient of investments in the region. This would allow it to have growth this year of more than 4.6%, based on various specialized estimates. In addition, its financial performance has been such, that it has been recognized by the International Monetary Fund (IMF) by means of a series of reviews in recent years. In its latest review in September 2013, the IMF underscored that “the recent economic performance of Nicaragua has been favorable”.
For a more in-depth understanding of the panorama of investments in this Central American country, we interviewed Dr. Rodrigo Taboada, partner of Consortium Nicaragua.
Why has Nicaragua become an attractive destination for foreign investments?
There are several factors. One of them is that Central America is becoming a globalized marketplace in America and Nicaragua, as part of the Central American Region, is very attractive for investment, due, among other reasons, its privileged geographic location and the security of the country dealing with violence and organized crime.
Another factor is the legal framework that has been modernized to reflect the demands and trends of new companies, thus encouraging not only foreign but also local investment, by means of incentives such as exemptions and waivers in certain sectors of the Nicaraguan business activity.
Which legal and political elements are influential to make Nicaragua a destination for investments?
The current legal framework is very favorable to an investment climate in Nicaragua. Among these laws, we have: the Commercial Code, currently under review and amendment, the Law of Promotion of Foreign Investments, the Law of Incentives for the Tourism Industry, the Free Zones Law, and Free Trade Agreements, which intend to introduce Nicaragua into a more globalized economy. Furthermore, up to the date hereof, the Higher Council of Private Enterprise (Consejo Superior de la Empresa Privada - Cosep) has achieved consensus for more than 75 laws directed to make more favorable the legal framework for companies.
Which will be the investment trend in the country in the following years?
The indicators of direct foreign investment disclose that the industry sector is at the top, with 29% of the total flows, followed by trade and services with 21% and finally the power sector with 19%. On the other hand, the activities that are actually reflecting the highest growth rates are exports through Free Zones, agriculture, livestock and fishery, the manufacturing industry, the hotel and restaurant trade, the communications sector, construction and mining. It is likely that such activities may remain as the main investment trends based on their behavior in recent years.
Which are the main investments that the country would need, according to you?
In my opinion, the country needs to invest in the following sectors: infrastructure, agroindustry, commerce and services.
Are we prepared for mega-investments in this country?
Yes, we are prepared, at least from a legal point of view. We have laws and treaties that favor investments on a macro basis. For example, in the power and Free Zone sectors, we have exemptions, and in the tourism and forestry sector, we have waivers. These incentives are essential tools and the main attractions for projects of larger size. The National Assembly has also enacted special laws to grant concessions for development of strategic projects.
Is it necessary to adapt the universities and education in general for the formation of professionals duly trained for megaprojects?
It is my opinion that education is closely linked to the economic development of a country. There is no doubt that if our young people are academically prepared to lead and implement megaprojects, we will make sure that Nicaragua will be able to develop its potential, helping us to reduce the very high indexes of poverty and unemployment.
How do you assess the position of Nicaragua with regard to investment in comparison with other countries in the Central American region?
In 2013, foreign investment in Nicaragua amount to 858 million dollars, placing it in the fourth place of the Region. In general, direct foreign investment has been growing more noticeable in recent years, in the specific sectors of cement, paint, retail, packages, construction and transportation.
Do you think that there is legal certainty in the country to attract investments?
Yes, there is legal certainty. As I said before, there is a sound legal framework that provides the conditions required to make investments in Nicaragua safe and in compliance with the law.
In your opinion, which other types of investments might be likely to come to the country?
I believe that it will be the same sectors mentioned above, that is, industry, commerce and services, and the telecommunications and insurance markets, that will become stronger.
In what way does the security that exists in the country favor the attraction of investments?
It is definitively a positive factor. Security in all respects is an essential element for a foreign investment at the time of making the decision to invest. If we compare Nicaragua with other countries in the region, security is an important asset that we have to protect.
How do you think that legal operators are preparing themselves to attract investment into Nicaragua?
By means of the issuance of new regulations and the implementation of those that already exist. In the case of Nicaragua, the private enterprise, represented by Cosep, together with the Government, has reached consensus for more than 75 laws seeking the strengthening of national and foreign investment. They have also negotiated the last six free trade agreement. All of this creates and prepares a suitable climate for investment.
How do you see the present and future of the country on a short-term basis?
I currently see our country with many investment opportunities, and we are working to prepare the country for greater opportunities, seeking sustainable economic progress. With regard to the future, I hope to see Nicaragua developing projects that bring the creation of dignified jobs, an improvement in the living standards of our Nicaraguan families and, therefore, the eradication of poverty, based on a legal framework increasingly updated to meet the current economic requirements.
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