Doing business in Nicaragua: Nicaragua trade and export guide
Published 11 August 2015
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This publication is available at https://www.gov.uk/government/publications/exporting-to-nicaragua/doing-business-in-nicaragua-nicaragua-trade-and-export-guide
Brexit
Learn about changes for UK exporters to Nicaragua if the UK leaves the EU without a deal.
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Find out how UK companies can control risks when doing business in Nicaragua.
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1. Nicaragua export overview
The Nicaraguan workforce comprises of just under 3 million people, 77% of which are under the age of 39. Many Nicaraguans are bilingual and educated to degree level.
Unskilled labour is also widely available and is relatively low-cost.
Nicaragua offers investment incentives in many sectors, including forestry, mining, and tourism. Incentives can include exemptions or reductions in import, property and income taxes.
Contact a Department for International Trade (DIT) Nicaragua export adviser for a free consultation if you are interested in exporting to Nicaragua.
Contact UK Export Finance (UKEF) about trade finance and insurance cover for UK companies. You can also check the current UKEF cover position for Nicaragua.
Many UK businesses operate from Nicaragua, including BG, Biwater, British American Tobacco, De La Rue and GlaxoSmithKline.
Strengths of the market:
- abundant human capital
- competitive operational costs
- solid legal framework
- investment incentives
- excellent life quality
2. Challenges to doing business in Nicaragua
Some of the challenges when exporting to Nicaragua are:
- bureaucracy and corruption
- poor infrastructure and expensive electricity systems
- slow and bureaucratic customs authorities
- limited purchasing power among Nicaraguan population
- difficulty to find skilled people for certain positions
You should ensure you take the necessary steps to comply with the requirements of the UK Bribery Act.
3. Growth potential
In recent years, Nicaragua has experienced sustained economic growth. In 2013 the country’s Gross Domestic Product (GDP) was USD 11.26 billion. This growth is due to years of economic liberalisation and the implementation of policies to stimulate investment and exports.
Foreign Direct Investment (FDI) in 2013 accounted for USD 1388 million, which represents 12.2% of the Nicaraguan GDP. The FDI was mainly for:
- energy
- mining
- free trade zones
- industrial
- telecommunications
Together, these represent 75% of all investment flows to the country. The development of these sectors has contributed significantly to Nicaragua’s productive capacity and economy.
Foreign investors have the same rights and responsibilities as domestic investors. There are also special incentives for investing in some sectors.
3.1 Free Trade Agreements (FTAs)
Nicaragua has FTAs with a number of countries, including the United States and Mexico. It is also part of the following agreements:
- Association Agreement with the European Union
- the Central American Common Market
- the Bolivarian Alternative for the Americas
4. UK and Nicaragua trade
In 2014, the export of UK products to Nicaragua reached £5.5 million.
Top UK exports to Nicaragua are:
- automotive
- pharmaceutical
- fungicide
- whisky
5. Opportunities for UK businesses in Nicaragua
Department for International Trade (DIT) publish over 1,000 export opportunities per month across all sectors and over 100 markets. Search for export opportunities.
Identify opportunities to supply products and services to the international aid agencies. Contact the Department for International Trade (DIT) Aid Funded Business Service for more information.
Contact UK Export Finance (UKEF) about trade finance and insurance cover for UK companies.
5.1 Tourism
According to the Nicaraguan Hotel Association, tourism has had a 65% growth rate in the last 6 years. It is now Nicaragua’s largest industry.
The increase in tourism is due to the political and economic stability, and the easier access with improved roads and more constant and accessible flights.
Contact the Department for International Trade (DIT) team for Nicaragua for more information about the opportunities available in the tourism sector.
5.2 Agribusiness and forestry
The Atlantic region of Nicaragua has great potential for forestry plantations. It receives of rain levels of between 2,500 and 5,000 mm per year.
There are opportunities for the cultivation of products such as:
- cacao
- African palm and other biofuel crops
- rubber
- coconut
Contact the Department for International Trade (DIT) team for Nicaragua for more information about the opportunities available in the agribusiness and forestry sector.
5.3 Renewable energy
Nicaragua aims to have 94% of its electricity come from renewable energy by 2017. This ambitious plan arose from an energy crisis due to heavy reliance on foreign oil. Reducing reliance from 70% to 6% could be made possible by renewable energy infrastructure development
As part of a renewable energy plan, several governmental institutions have been set up to support the industry. Laws have been implemented that benefit renewable energies.
There are many opportunities for UK companies in this sector.
Contact the Department for International Trade (DIT) team for Nicaragua for more information about the opportunities available in the renewable energy sector.
5.4 Infrastructure
There are a number of projects in Nicaragua to improve the infrastructure. These include:
- the wet canal – a pipeline that will connect the 2 coasts
- railways
- 2 free zones
- 2 deepwater ports
- a new international airport
The funding is an estimated in USD 40,000 million and for period of 10 years.
Contact the Department for International Trade (DIT) team for Nicaragua for more information about the opportunities available in the infrastructure sector.
6. Start-up considerations
The use of agents and distributors is the most common way to export UK products and services. The typical routes to market in Nicaragua are:
- general partnership
- ordinary limited partnership
- joint-stock company
- stock company
- branch and/or permanent establishment
- joint venture
The general formation procedure for a company in Nicaragua includes the following steps:
- drafting a Public Deed of Incorporation
- application for registration as a trader and for tax and municipal registration
- registering corporate and accounting books
- recording the board of directors minutes to appoint the Legal Representative of the company
- registration of the General Power of Administration
- registering for taxes, social security and public health
7. Legal considerations
Business activities, including forms of enterprise, are mainly governed by the Commercial Code that became effective in 1917.
Contact the Department for International Trade (DIT) team for Nicaragua to help find tax and legal advisers before entering into agreements.
7.1 Regulations
Employers should be aware of the rules and regulations that govern labour contracts as set out in the Nicaraguan Labour Code.
Contact the Department for International Trade (DIT) team for Nicaragua for more details of your legal responsibilities as an employer in Nicaragua.
7.2 Intellectual Property (IP)
Trademarks, designs, patents and copyright are the principal forms of IP protection available to companies and individuals.
8. Tax and customs considerations
There are a number of fiscal incentives offered in Nicaraguan. These include many tax breaks which vary by sector, but most include a 100% tax-free incentive for the first 10 years of investment. The tax-free incentives can often be extended for a further decade.
Taxes include:
- Income tax
- Value added tax (IVA) – set at 15%, but varies depending on the type of activity
9. Entry requirements
You don’t need a visa to enter Nicaragua, provided your stay is less than 3 months. You should hold a valid passport and an onward ticket out of Nicaragua.
9.1 Travel advice
If you’re travelling to Nicaragua for business, check the Foreign and Commonwealth Office (FCO) travel advice beforehand.
10. Contacts
Contact the Department for International Trade (DIT) team for Nicaragua for more information and advice on opportunities for doing business in Nicaragua.