Nicaragua: Investing
According to the UNCTAD's 2021 World Investment Report, FDI flows to Nicaragua accounted for USD 182 million in 2020, a significant drop from USD 503 million in 2019, mainly as a result of the economic and health crisis triggered by the Covid-19 pandemic. The stock of FDI was estimated at USD 9.4 billion in 2020. The energy, infrastructure and tourism sectors attract most FDI. The United States, Mexico and Spain are the country's main investors.
Nicaragua ranked 142nd out of 190 countries in the last Doing Business report, published by the World Bank in 2020, which indicates a ten-spot drop compared to the previous year. The government measures the importance of foreign investment in Nicaragua, and the dependancy of the economic growth from the FDI. For that reason, in recent years, the government has passed a number of laws to attract and protect foreigners investing in the country. Some of these laws include the Tourism Industry Incentives Law, and the Foreign Investment Promotion Law. Among other things, the Foreign Investment Promotion Law allows foreign investors in all sectors to hold 100% of capital in businesses, and guarantees repatriation of capital and profits at any time as well as fast and efficient compensations if the investor's property is expropriated on the grounds of public interest. The same law also allows investors to choose their arbitration court in case of conflict and guarantees no discriminatory treatment for foreigners investing in Nicaragua. The establishment of free zones has strongly supported FDI growth in the country. However, Nicaragua faces many challenges: weak institutions, an inefficient judicial system and bureaucratic obstacles. As for current investment projects, a master plan between El Salvador, Honduras and Nicaragua for the Fonseca Gulf was presented in 2019; it includes ferries between key cities as well as implementation of a logistics park, a free trade zone and a sustainable tourism hub.
| Nicaragua | Latin America & Caribbean | United States | Germany | |
|---|---|---|---|---|
| Index of Transaction Transparency* | 1.0 | 4.1 | 7.0 | 5.0 |
| Index of Manager’s Responsibility** | 5.0 | 5.2 | 9.0 | 5.0 |
| Index of Shareholders’ Power*** | 6.0 | 6.7 | 9.0 | 5.0 |
Source: Doing Business - Latest available data.
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.
| Foreign Direct Investment | 2019 | 2020 | 2021 |
|---|---|---|---|
| FDI Inward Flow (million USD) | 503 | 747 | 1,220 |
| FDI Stock (million USD) | 9,239.5 | 9,986.0 | 11,206.1 |
| Number of Greenfield Investments* | 8.0 | 2.0 | 3.0 |
| Value of Greenfield Investments (million USD) | 661 | 295 | 73 |
Source: UNCTAD - Latest available data
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
| Individual income tax | Progressive rate up to 30% |
| Until NIO 100,000 | 0% |
| From NIO 100,001 to 200,000 | 15% |
| From NIO 200,001 to 350,000 | 20% |
| From NIO 350,001 to 500,000 | 25% |
| Over NIO 500,001 | 30% |
| Nicaragua | Latin America & Caribbean | United States | Germany | |
|---|---|---|---|---|
| Number of Payments of Taxes per Year | 43.0 | 28.2 | 10.6 | 9.0 |
| Time Taken For Administrative Formalities (Hours) | 201.0 | 327.5 | 175.0 | 218.0 |
| Total Share of Taxes (% of Profit) | 60.6 | 46.8 | 36.6 | 48.8 |
Source: Doing Business - Latest available data.
| Setting Up a Company | Nicaragua | Latin America & Caribbean |
|---|---|---|
| Procedures (number) | 7.00 | 8.00 |
| Time (days) | 14.00 | 25.22 |
Source: Doing Business.
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Latest Update: February 2023
