Forestry

Overview

Nicaragua currently has more than 3.5 million hectares of forestry potential, with approximately more than 19,000 km² of economically valuable natural forests apt for sustainable management projects, the majority of which are found in the Atlantic region.

The country has over 1.8 million hectares of land suitable for forest plantations of species with commercial value, including royal cedar, mahogany, pochote, teak, eucalyptus, melina, among others. Recognized companies such as Precious Woods, Futuro Forestal, Hemco, NicaForestal and Norteak have already ventured into this sector.

Nicaragua has considerable extensions of land that are currently under-utilized, which are apt for the production of energy and bio-fuels based on forestry biomass, which can be used as raw material for second generation bio-fuels. As part of the strategy to foster biomass production, the Law for the Promotion of Electric Energy from Renewable Sources (Law 532) also includes incentives for biomass generation.

Nicaragua has more than 1.7 million hectares  suitable for precious wood production as teak  and 2.7 million hectares suitable for intensive  production of natural rubber, a product that  is currently experiencing very high demand  worldwide.

Investment Opportunities

The Atlantic region of Nicaragua is characterized by precipitations between 2,500 and 5,000 mm per year. The region has great potential for forestry plantations, as well as the cultivation of products such as cacao, African palm, and other biofuel crops. Additionally, the Government of Nicaragua is proactively promoting investments specifically in rubber and coconut.

The main areas for investment opportunity in forestry are:

• Forest plantations of commercially valuable timber
• Rubber plantations
• Cocoa bean production for export
• Carbon credits

Competitive Advantages

Nicaragua has made important progress in the diversification of exports and in the industrialization of its productive sector. Agro-exports have become one of the most dynamic sectors in the economy. Consumer products such as snacks and cookies, and fruit and vegetable juices have become lucrative markets for new business opportunities. The expansion of supermarket chains and the growing demand for food products in the region continue to attract important investment in the agro-export sector. In addition to this, we have the growing demand of bio-fuels and the enormous amount of underutilized land with forestry potential. 

Generous Fiscal Incentives

Tax Coalition Law (Law 822)
This law grants fiscal exemptions to the export of goods and of services provided abroad and also establishes several fiscal benefits to certain productive sectors of the economy with the purpose of fostering their growth and development. Read more.

Temporary Admissions Law (Ley 382)
This law establishes a system that allows the entry of goods into national customs territory and local purchases of the same without payment of any duties and taxes. Companies that export directly or indirectly at least 25% of their total sales are eligible for this scheme. Read more.

Free Zones Law (Decree 46-91)
Nicaragua offers significant tax incentives under free zones regime for those companies interested in establishing export-oriented operations, in compliance with World Trade Organization regulations. Read more.

Conservation, Development and Sustainability of the Forestry Sector Law (462)
This law grants a series of fiscal exemptions to projects dedicated to reforestation and to the establishment of forestry plantations.Read more.

Qualified Labor Pool at a Competitive Cost

The agricultural sector represents the main source of employment in Nicaragua. Most of the jobs come from cattle raising and farming industries, and to a minor extent, in the forestry and fishing industries.

There is a large pool of qualified labor for middle and upper management. Close to 5,000 university students graduate each year with titles in business management, agro-engineering, zoology, agribusiness, biology and veterinary science, among other fields.

Nicaragua has the most competitive labor costs in the region, as shown in the following graph:

Regional Average Salaries in the Agroindustry Sector

This benchmark shows fully-loaded market wages in the region for agribusiness and forestry sector. Fringe benefits in Nicaragua include: social security, holidays and vacation leave, severance, Christmas bonus and contribution to the National Training Institute (INATEC).  

Nicaragua is characterized by having a young, qualified and productive labor force. The country possesses a solid university system and centers of technical education in areas related to agribusiness and the forest industry.

Companies find that cost-saving benefits, along with qualified, productive human resources, contribute to improve their company's competitiveness. The Nicaraguan labor force is recognized for being highly productive, with a fast capacity of learning and by its stability.

Market Access

Nicaragua has signed Free Trade Agreements (FTA's) with the United States, Mexico, Dominican Republic, Taiwan, Panama, Chile and most recently with the European Union. Additionally, Nicaragua is part of the Central American Common Market, which confers with the free movement of capital, services and human resources in the region, and is constructing the Centralamerican Customs Union. At the moment, the country is negotiating Free Trade Agreements with Chile, Canada, CARICOM and is working on the FTA signed with Mexico and other Central American nations. 

Additionally, Nicaragua already counts with preferential access to the Canada, Norway and Japan through Generalized System of Preferences (GSP). Also they are negotiating GSPs with the countries of the ALBA and Mercosur.

The Free Trade Agreement with the United States, known as DR-CAFTA, entered into force in 2006, consolidating Nicaragua's advantageous position as an export platform to this important market. Under DR-CAFTA, Nicaragua was provided:

• Free and immediate access for 95 percent of agricultural and industrial goods, including: fruits, vegetables, preserved fruits and vegetables, shellfish and seafood, processed foods, forestry products, furniture and wood products, handicrafts, and leather goods, among other things.
• Access through special quotas for all other agricultural goods, including sugar, peanuts, peanut butter, meat and dairy products (cream, yogurt, cheese, ice cream and other products). 

Testimonial

Las Limas, S.A.

The company considers that its experience investing in Nicaragua has been “completely positive and the government´s support has been very pleasing. Everything that was promised during the exploration process was delivered. Regarding the labor force, we are very impressed by the great attitude and the willingness to work. In general aspects, we are totally convinced that having invested in Nicaragua was the right decision."

With a total projected investment of US$15 million, the company estimates that by the time it reaches a fully operational status, it will have the capacity to produce and annually export up to 180 million plant cuttings, mostly to the United States. The production will feature more than 50 different plant species, which include impatiens, coleus and nemesias.

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