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.
2023 Nicaragua Investment Climate Statement Executive Summary:
Investors should be extremely cautious about investing in Nicaragua. The regime of President Ortega and Vice President Murillo continues to suspend constitutionally guaranteed civil rights, detain political prisoners, seize private property, and disregard the rule of law, creating an unpredictable investment climate rife with reputational risk and arbitrary regulation.
After committing widespread electoral fraud and jailing opponents, the Ortega-Murillo regime secured a fourth consecutive presidential term in November 2021. In 2022, the regime revoked the legal registration and expropriated the assets of more than 3,000 nonprofit organizations – including environmental advocacy groups, private universities, Catholic-linked charities, and organizations that provide free dental and health care to impoverished children – ostensibly for being at high risk of money laundering and terrorist financing. In February 2023, shortly after releasing more than 200 political prisoners into the custody of the United States, the regime stripped each of their Nicaraguan citizenship, removed them from the civil registry, froze their bank accounts, and in several instances seized their properties.
The regime ramped up its repression of the Nicaraguan private sector in March 2023, revoking the legal registration and expropriating the assets of 19 of the nation’s leading business chambers. Business chambers had for decades played a crucial role in Nicaragua’s private sector as advocates for the business community on policy matters among other issues. Individual businesses must now interact directly with the Nicaraguan government, often at greater cost for firms and from a weaker negotiating position.
In 2020, the National Assembly approved six repressive laws that alarmed investors. Some of the most concerning include: 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 companies that use or sell imported products.
In response to the Ortega-Murillo regime’s deepening authoritarianism, almost all international financial institutions have stopped issuing new loans to Nicaragua, and most external financing will wind down by 2025. The regime’s hopes that a new economic partnership with the People’s Republic of China (PRC) would provide fresh investment and financing have not yet materialized.
Despite regime repression and growing poverty, Nicaragua continues to show stable macroeconomic fundamentals, including a record-high $4 billion in foreign reserves, a sustainable debt load, and a well-capitalized banking sector. Independent forecasts predict Nicaragua’s $14 billion economy will grow between 1.5 and 3 percent in 2023, down from a robust 10 percent post-pandemic expansion in 2021. Inflation rose to 11 percent year-on-year in January 2023, however, and remains a concern. The price of a basket of typical consumer goods and services – a key measure of inflation’s impact on the general population – rose to a record high of $514 per month in January 2023, more than double the minimum wage of $215. Some 200,000 formal sector jobs have disappeared from the economy, and Nicaraguan families now earn 15 percent less on average in real terms than in 2018. Following an unprecedent wave of hundreds of thousands of Nicaraguan migrants in the United States in 2022, remittances rose to a new record of $3.2 billion – or nearly 20 percent of Nicaragua’s GDP – driving local consumption and generating significant tax revenue.
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; and ready access to major shipping lanes. The United States is Nicaragua’s largest trading partner – it is the source of 35 percent of Nicaragua’s imports and the destination of 65 percent of Nicaragua’s exports.
To access the full text of the 2023 ICS, visit the U.S. Department of State Investment Climate Statements website.