The United States Department of State recommended “extreme caution” to those who plan to invest in Nicaragua, considering the rarefied business environment that dominates the country; the political instability that suffocates freedoms and the four years of crises affecting the economyall of which raises the country risk to levels that are not recommended for investment.
If the world economy stopped as of March 2020, at the beginning of the covid-19 pandemicThe same thing happened in Nicaragua two years earlier, as a reaction to the repression unleashed by the regime of Daniel Ortega and Rosario Murillo against the citizens who protested civically during the so-called ‘April Rebellion’.
“The regime of President Ortega and Vice President Murillo continues to suspend constitutionally guaranteed civil rights, detaining political prisoners Y disregarding the rule of lawcreating an unpredictable investment climate riddled with reputational risks and arbitrary regulations.
He says this because “in 2020, the National Assembly approved six repressive laws that alarmed investors,” referring, among others, to “a Gag Law that criminalizes political speech; a Foreign Agents Law requiring organizations and individuals to report foreign assistance and preventing anyone who receives foreign funding from running for office; and one Consumer protection law that could prevent financial institutions from making independent decisions about whether to serve financial customers, including OFAC-sanctioned entities.”
Echoing multiple complaints filed by businessmen anonymously, it is indicated that the tax authorities seized properties after charging allegedly arbitrary taxes, and imprisoned people without due process, until they paid those tributes. “Arbitrary fines and customs inspections hurt businesses foreign companies that import products”, reiterated the text.
Nicaragua would grow more… if the laws were respected
When referring to the “increasing authoritarianism of the Ortega-Murillo regime”, it is mentioned that “almost all international financial institutions have stopped granting new loans to Nicaragua, and external financing will fall drastically beyond 2022”, as well as the hope of the regime in establishing relations with China, after breaking up with Taiwanprovide “new investments and financing to compensate for their growing isolation.
After nine months of diplomatic relations with the Chinese giant, those hopes of generous economic and investment support, have proven to be dreams of little or no content.
In terms of the country’s economic performance, he says that the forecast for Nicaragua “is uncertain and subject to downside risks,” noting that independent economists predict that our GDP growth will slow considerably at a rate of less than 3.0% in 2022, remembering that, if in 2021 growth “was unexpectedly high”that happened after three years of contractions, between 2018 and 2020.
By listing some macroeconomic data, the publication states that the Central Bank of Nicaragua estimates a growth of between 4.0% and 5.0% for this year; that inflation increased to 7.0% in 2021, and that the number of affiliates to Social Security“remains 6.0% below 2018 levels. After several years of very low activity, Nicaragua’s credit market began to expand in 2021,” he points out.
In an effort to balance its warning, the text states that “Nicaragua’s economy still has significant growth potential if investor confidence can be restored by strengthening institutions and improving the rule of law.”
Among the main assets of the country, they include extensive natural resources; a well-developed agricultural sector; an organized and sophisticated private sector committed to a free economy; easy access to major shipping lanes; and a young, low-cost workforce that supports the manufacturing sector.”
Also, remember that The United States is our largest trading partner; it is the source of about a quarter of our imports, and the destination of about two-thirds of our exports.
Seeking to project ‘normality’
The State Department also points out to its citizens that Nicaragua seeks foreign direct investment “to project normality” and ensure that it has international support, but as traditional sources of foreign investment decrease, the Government has increasingly sought investment from “friendly countries.” such as Iran, Russia and China.
They also clarify that investment incentives are directed at export-focused companies that require large amounts of unskilled or low-skilled labor.
Other observations include the warning that “foreign investors report significant delays in receiving residence permits, requiring frequent trips outside the country to renew visas,” and that ProNicaragua, the official investment and export promotion agency , “is highly politicized” and is led by the sanctioned Laureano Ortega Murilloson of the presidential couple.
Explaining how Nicaragua works, they point to the benefit of having “personal connections and affiliation with influential industry associations and chambers of commerce,” and that while municipalities and ministries can enact relevant decisions for foreign companies, all actions are subject to the de facto approval of the presidency. “In practice, Ortega and Murillo maintain de facto review authority over any foreign investment…a process that is not transparent,” he reflects.
Then, in terms of business facilitation, he explains that “although the Government of Nicaragua is eager to attract foreign investment, it lacks a systematic business facilitation effort and, instead, relies on individual engagement with potential investors.” , in line with old accusations that point out the importance of having a line of communication with Ortega, which is as direct as possible.
Finally, they warn that the country does not have an online company registration system, despite the fact that, for tax purposes, they must register with the General Directorate of Revenue, the Nicaraguan Social Security Institute, and in their respective municipality, records that “ They are not normally available to the public. Also, according to the Ministry of Development, Industry and Commerce, registering a company takes a minimum of 14 days, but it usually takes much longer, such as the eight procedures and 42 days required to establish a private limited liability company. foreign.
