The U.S. Department of State’s Investment Climate Statements provide information on the business climates of more than 170 economies and are prepared by economic officers stationed in embassies and posts around the world. They analyze a variety of economies that are or could be markets for U.S. businesses.  The Investment Climate Statements are also references for working with partner governments to create enabling business environments that are not only economically sound, but address issues of labor, human rights, responsible business conduct, and steps taken to combat corruption.  The reports cover topics including Openness to Investment, Legal and Regulatory Systems, Protection of Real and Intellectual Property Rights, Financial Sector, State-Owned Enterprises, Responsible Business Conduct, and Corruption.

2022 Nicaragua Investment Climate Statement Executive Summary

Investors should exercise extreme caution when considering investing in Nicaragua.  The regime of President Ortega and Vice President Murillo continues to suspend constitutionally guaranteed civil rights, detain political prisoners, and disregard the rule of law, creating an unpredictable investment climate rife with reputational risk and arbitrary regulation. 

President Ortega awarded himself a fourth consecutive term in November 2021 after jailing opposition figures without a fair trial, barring all credible opposition political parties from participating in elections, blocking legitimate international election observation efforts, and committing widespread electoral fraud.  Through a sham judicial process, regime-controlled courts subsequently convicted more than 40 political prisoners – including all of those who aspired to run against Ortega as presidential candidates – on vague, spurious charges.  The Ortega-Murillo regime has also targeted independent media and journalists and in 2021 seized La Prensa, Nicaragua’s only print newspaper.  Independent universities have faced invasive governmental investigations and extreme budget cuts, causing 14 university closures.  The regime-controlled National Assembly subsequently took control of six universities, leaving 30,000 students in limbo.

In 2020, the National Assembly approved six repressive laws that alarmed investors.  Some of the most concerning include:  a gag law that criminalizes political speech; 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 foreign companies that import products. 

In response to the Ortega-Murillo regime’s deepening authoritarianism, almost all international financial institutions have stopped issuing new loans to Nicaragua, with the notable exception of the Central American Bank for Economic Integration (CABEI), and external financing is projected to fall sharply after 2022.  The regime is publicly betting that a new economic partnership with the People’s Republic of China – following a break in diplomatic relations with Taiwan and re-establishment of ties with China in December 2021 – will provide fresh investment and financing to make up for its growing isolation.

Nicaragua’s economic forecast is uncertain and subject to downside risks.  Independent economists predict Nicaragua’s economic growth will slow considerably to a rate of less than 3 percent in 2022.  Growth in 2021 was unexpectedly high at more than 9 percent but followed three years of contractions from 2018 to 2020.  Official estimates from the Nicaraguan Central Bank project growth between 4 and 5 percent in 2022.  Inflation increased to 7 percent in 2021.  The number of Nicaraguans insured through social security, a measure of the robustness of the formal economy, remains 6 percent below 2018 levels.  After several years of very low activity, Nicaragua’s credit market began expanding in 2021.  The uncertainty surrounding the government’s 2019 tax reforms – and multiple years of still-unresolved legal challenges – continue to pause companies’ plans for expansion or reinvestment.

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; an 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 the manufacturing sector.  The United States is Nicaragua’s largest trading partner – it is the source of roughly one quarter of Nicaragua’s imports, and the destination of approximately two-thirds of Nicaragua’s exports.

To access the ICS, visit the U.S. Department of State Investment Climate Statements website.