Sector Profile

Nicaragua is a traditionally agricultural and cattle-farming country. Both these industries have been a fundamental part of the country's exports for more than 150 years. Historically known as the "breadbasket of Central America", Nicaragua is recognized for its fertile soils.

Nicaragua has diversified its exportable offer in the last few years. Within main export products include: bovine meat, coffee, peanut, kidney bean, banana, shrimp, sesame, lobster, sugar and cheese.

Nicaragua is divided into four major regions with distinct characteristics of climate, soil types and topography. The regions are: the Pacific, the Central, the Atlantic and the Northern zone.

The Central region of the country is home to 50 percent of the country's cattle farming and is the main zone for dairy exports.The Atlantic region is characterized by precipitations between 2,500 and 5,000 mm per year. The region has a great potential for forestry plantations, as well as the cultivation of products such as cacao, african palm and other biofuel crops.

The Northern zone is the most mountainous region of the country, where you will find some of the coolest temperatures in Nicaragua (24⁰ C / 75⁰ F annual average). This zone is the main coffee-producing and exporting region of the country. The region also has a lot of potential for the cultivation of vegetables and ornamental plants.

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Investment Opportunities

The main areas for investment opportunity in agribusiness are:

1. Agribusiness:

2. Food Industry:

3. Bio – Fuels:

4. Forestry:

• Forestry plantations of commercially valuable wood
• Carbon credits
• Biomass

Renowned international companies such as Kraft Foods, Parmalat, Cargill, Nestlé, Hortifruti (Wal-Mart), Precious Woods and Numar have established operations in Nicaragua due to the advantages the country offers.

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Why Nicaragua?

Nicaragua has made important advances in the diversification of exports and in the industrialization of its productive sector. Agro-export has 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

Forestry Incentives

Nicaragua has established a series of incentives for the forestry sector through the Law of Conservation and Sustainable Development of the Forestry Sector (Law 462):

• Exoneration of 50 percent of municipal sales tax and 50 percent of utilities.
• Exoneration on property taxes for plantations under a forestry management plan.
• The possibility to obtain capital by deducting as an expense 50 percent of money spent on income tax.
• Exoneration of import taxes for businesses of second or third transformation.
• Five percent of the difference in licitation prices that prioritize goods made from wood certified by the National Forestry Institute (INAFOR).
• 100 percent deduction of money spent on income tax for projects that promote reforestation or the creation of forestry plantations.

Law of Fiscal Equality (Law 453)

Article 126 of the Law of Fiscal Equality exonerates the agribusiness sector from regular import taxes (Derecho Arancelario a la Importation, or DAI) and value-added taxes. The products that are exempt are: primary material, intermediate goods, capital and spare parts, parts and accessories for machinery and equipment for use in the farming sector.

Free Zone Regime (Decree 46-91)

All projects that involve a process of transformation or value-added, and which are export oriented and in compliance with the law, can apply for the Free Zone regime.

The benefits for businesses under this regime are:

• 100 percent exoneration on income tax (IR)
• 100 percent exoneration on import taxes for machinery, equipment and intermediate goods
• 100 percent exoneration on value-added tax (IVA)
• 100 percent exoneration on dividends and expatriation of capital

Temporary Admission System (Law 382)

Companies that directly or indirectly export at least 25 percent of their total production (no less than US$50,000 annually) are eligible to apply for the temporary admission system:

• This system allows the import of merchandise and the local purchase of goods and primary materials completely tax and tariff free. The merchandise that is tax exempt is: intermediate products or raw material which has to be later re-exported after undergoing some type of transformation, repair or alteration, capital used in the production process, materials and equipment essential for the installation of production.

The agricultural sector represents the main source of employment in Nicaragua, generating more than 600,500 jobs in 2009. 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:

Average Salary of the Region

Source: Ministries of Labor of Central America

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 on 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 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.

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).

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Testimonials

Foreign investors already established in Nicaragua respond to the question: Why is Nicaragua an attractive country for investment?

Nestor Plasencia, representing Plasencia Cigars, assures that some of the main advantages Nicaragua offers to investors include a highly skilled and productive workforce, a competitive cost structure and attractive fiscal incentives such as the Free Zone regime. These advantages have motivated the company to continue investing and expanding their operations in Nicaragua.

"Our experience has been very successful, as our investments have grown considerably since our beginning" said Nestor Plasencia. "I would say [to other investors] to come to Nicaragua, as this is a country where there is so much to do, with hardworking and capable people that have faced many challenges and were able to come out triumphantly.

"Manolo Porro, General Manager of Hidropónicas de Nicaragua, a company dedicated to the production of sweet bell peppers, answers:

"Nicaragua is definitely a country of opportunities for different areas but especially for the agribusiness sector. Key factors to consider are:

• Commitment by the government for agricultural production development in the country
• Dedication to the socioeconomic development of the country
• Relatively short time to U.S. market
• Weather
• Fiscal incentives from the Free Trade Zone Regime
• Highway network as good as any other country in the region
• The safest country in Central America"

Luis Valverde of Proyecto Agroforestal Lupe, a Spanish company dedicated to agribusiness and forestry plantations, said:

"Nicaragua is a country in which a great number of business opportunities are opening, given that it belongs to the list of signatory countries to Free Trade Agreements (FTAs), including one with the largest economy in the world (referring to the United States and DR-CAFTA). Nicaragua's attractive labor costs, the abundance of labor, its geographical location and its superior level of security in regards to neighboring countries, all indicate that we made the right decision by investing here."

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Contacts

Let us arrange a personalized agenda for your visit to Nicaragua that suits your business needs. We invite you to discover why Nicaragua is the right move for your business!

To obtain more information about business opportunities in this industry, please send us your questions or comments to This e-mail address is being protected from spambots. You need JavaScript enabled to view it

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