Provides an overview of the size and process of Nicaraguan government projects and financing of the projects.
Selling to the Government
U.S. firms should be extremely cautious when considering participating in a government tender in Nicaragua. There are reputational and legal risks in doing business with any ministry or high-level official, since many have been sanctioned by the U.S. Department of the Treasury.
Nicaragua is not a party to the WTO Agreement on Government Procurement. Nicaragua must comply with provisions on government procurement in Chapter 9 of CAFTA-DR.
U.S. companies bidding on Government tenders may also qualify for U.S. Government advocacy. A unit of the U.S. Commerce Department’s International Trade Administration, the Advocacy Center coordinates U.S. Government interagency advocacy efforts on behalf of U.S. exporters bidding on public sector contracts with international governments and government agencies. The Advocacy Center works closely with our network of the U.S. Commercial Service worldwide and inter-agency partners to ensure that exporters of U.S. products and services have the best possible chance of winning government contracts. Advocacy assistance can take many forms but often involves the U.S. Embassy or other U.S. Government agencies expressing support for the U.S. bidders directly to the foreign government. Consult Advocacy for Foreign Government Contracts for additional information.
Financing of Projects
International financing has largely dried up following the government’s violent repression of peaceful demonstrations in 2018 and 2019. Most multilateral banks significantly reduced their portfolios in Nicaragua as concerns about transacting with the regime mounted.
The Central American Bank of Economic Integration (CABEI) remains the lone exception, although it has significantly curtailed its activity over the past year. CABEI continues to support Nicaragua with a wide portfolio that includes infrastructure, development, climate change, and humanitarian assistance. The government carries out many of the projects, but private investors also take advantage of these development funds.
Multilateral development banks, including CABEI, the World Bank, and the IADB, continue to provide humanitarian and disaster relief in response to events like hurricanes and the COVID-19 pandemic.
Outside of international financial institutions, long-term financing may not be available. Banks are unwilling to extend credit as confidence has waned, and average loan rates are generally much higher than those available to U.S. businesses from banks outside Nicaragua. Loans are available both in dollars and Nicaraguan córdobas. Significant collateral is required to borrow locally, which may pose a constraint for businesses that lack assets in Nicaragua. Real estate mortgages are issued for terms of up to 20 years. The equity market is extremely shallow and not a reliable source of project financing.
Multilateral Development Banks and Financing Government Sales
Price, payment terms, and financing can be a significant factor in winning a government contract. Many governments finance public works projects through borrowing from the Multilateral Development Banks (MDB). A helpful guide for working with the MDBs is the (pdf) Guide to Doing Business with the Multilateral Development banks. The U.S. Department of Commerce’s (USDOC) International Trade Administration (ITA) has a Foreign Commercial Service Officer stationed at each of the five different Multilateral Development Banks (MDBs): the African Development Bank; the Asian Development Bank; the European Bank for Reconstruction and Development; the Inter-American Development Bank; and the World Bank.
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