Light Manufacturing And Assembly Nicaragua Global Manufacturing Outsourcing Pronicaraguaorg

The light manufacturing industry is one of the most dynamic sectors of Nicaragua's economy. Since its establishment, the industry has grown significantly and has become a leader in job creation and exports.

Nicaragua has managed to become an ideal location for manufacturing & assembly operations, establishing itself as an export platform, because of advantages such as a strategic geographical location, generous and attractive tax incentives, the quality of its workforce and one of the most competitive cost structures in Latin America for labor intensive industrial processes.

Currently, there are 138 companies operating under the Free Zones Regime, including medical devices and automotive products manufacturers. Among the most prominent companies in the industry you will find: ARNECOM, an auto wire harness manufacturer; Command Medical, a company that manufactures, assembles and packages medical devices; and Stainless Ride, which designs and manufactures stainless steel products and other metals used in luxury motorcycles. All of these companies have found ideal conditions in Nicaragua to develop its operations.

Among the sub-sectors with the most potential within the Light Manufacturing Industry you will find:

Medical Industry

Disposable Medical Devices
Orthopedic Support
Medical Apparel
Assembly

Automotive Industry

Wire Harness
High-end aftermarket products

Refurbishment

Cell Phones
Computers

The medical industry in Nicaragua is an emerging market and, regardless of the economic downturn, the country continues to draw the attention of medical device companies abroad who are looking to offshore operations in countries that will allow them to increase their productivity and lower operational costs.

Companies within this heavily regulated industry are able to achieve the benefits of offshoring in Nicaragua without compromising the quality of their products due to the commitment of Nicaragua's workforce to manufacturing high-quality products. Companies established in Nicaragua comply with ISO certifications including ISO 13485.

Nicaragua has the ability to fulfill the needs of this highly labor intensive industry with technicians and professionals in the medical field such as chemists, physicians and biologists that are able to contribute and become an asset to companies in this industry.

An important factor to the development of this industry is the extensive experience of neighboring countries such as Costa Rica. Plastic injection molding, precision machining, sterilization and packaging suppliers are only a few hours away and eager to provide solutions and services to companies established in Nicaragua.

Offshore manufacturing has increased in recent years as automobile manufacturers persist in the need to reduce their operational costs. As a result companies continue to build low cost supply chains around the world. Nicaragua has proven companies already established in the country, to be successful in filling the expectations of this industry by providing a competitive cost structure, availability of qualified labor force and proximity to exporting markets, among other benefits.

Since 2002, and in exception of the effects the economic crisis had worldwide, Nicaragua's exports of automotive harnesses have grown at an average annual rate of 275 percent, reaching US$268 million in 2008. Moreover, during that same period, jobs in the sector have increased an average of 20 percent annually, reaching up to 7,000 jobs today.

Companies established in Nicaragua, including manufacturers of harnesses, auto electronics and aftermarket products comply with ISO quality control certification. Companies operating in Nicaragua manufacture for clients such as DaimlerChrysler, Ford, Nissan, Isuzu, Mitsubishi, Subaru, Toyota, General Motors, BMW and Harley Davidson motorcycles.

As a larger part of the world population continues to grow with concerns on environmental issues, more "Go Green" campaigns are being held to move towards a big change in protecting the environment. Nicaragua has begun to promote investment in this industry to help contribute to the awareness of the need to "Go Green" as well as help companies that are looking to combine business with responsible environmental practices.

The growth of cell phone subscribers worldwide has been impressive and is likely to reach the four billion mark and keep rising. The year-on-year growth averages 24 percent between 2000 and 2008. Refurbishing is an emerging industry that will continue to grow even more so when taking into consideration the current global economy. The world continues to embrace recycling with more than 66.5 million pounds of used electronics recycled in 2008. Refurbishing a product is far more economical and environmentally friendly than manufacturing a product from raw materials.

Most recycled phones are collected through charity fundraisers and refurbished in order to be re-sold. Recycled phones are playing a growing role in the spread of wireless communications across the developing world, where landlines can be costly or unavailable. Nicaragua is able to satisfy this emerging industry with its available and qualified human resource, attractive incentives and strategic location.

Nicaragua, located in the center of the Americas, is an excellent location to manufacture products that require speed and proximity to market. Its strategic location, only a two and a half hour flight from major United States hubs, allows for ease of travel for business executives and a shipping response of only three to five days.

In an effort to become a true export platform, Nicaragua has negotiated free trade agreements with major trading partners around the world.

DR-CAFTA (Central America, USA and Dominican Republic).
Free Trade Agreements with Mexico and Taiwan, Panama and the European Union.
Generalized System of Preference with Canada, Japan, and Norway.
Central American Common Market (CACM).
Partial Preferential Agreements with Venezuela, Colombia and Panamá.

In addition to the existing agreements, ongoing efforts to negotiate access to other markets are being done: AACA-UE (Association Agreement between Central America and the European Union), CARICOM (Caribbean Community and Common Market), Free Trade Agreements with Canada, Chile, and MERCOSUR (Southern Common Market).

Nicaragua offers significant tax incentives under the Free Zones Regime for companies that are looking to establish export oriented operations, including the following:

Private industrial park developers who build and manage industrial parks can also apply for the benefits granted under the Free Zone Regime. These benefits are granted for ten years and may be renewed for an additional five year period.

Nicaragua has a young and dynamic population, with 80 percent of it under the age of 39. Nicaragua's labor force-2.3 million strong-is known for being flexible and highly productive, with good working habits and the capacity to learn quickly. Nicaraguans have a short learning curve. Approximately 45 percent of the companies operating in the country train their operators in four weeks or less, and 77 percent of them have training programs of eight weeks or less.

Nicaragua offers the most competitive labor costs in the region, which makes the country a prime location for labor-intensive operations. The following graph shows a comparison of market wages in the region for manufacturing and assembly operations.Nicaragua's Tripartite

Source: PRONicaragua, 2010, based on official information disclosed by the Central American countries' Central Banks and Ministries of Labor.
For Mexico, official information from the Comité Nacional de Salario Mínimo (CONASAMI, National Commission on Minimum Wage) for the country's three different economic zones.

With the objective to determine actions that will allow the Free Zones to protect and promote employment, facing the challenges imposed by the current international crisis, the Government of Nicaragua, workers, and the private sector convened a Nicaraguan Free Zone Tripartite Committee, which has served as a mechanism to resolve labor controversies and other issues of national interest. So far, an essential achievement accomplished by the Committee has been to define minimum wage increases for the years of 2009-2013.

Indexed in US dollars, minimum wage will increase by 3 percent in the year 2011, 4 percent in the year 2012 and 7 percent in the year 2013. This decision provides certainty for Free Zone companies as they are able to project labor costs for the period of May 2009 to January 1, 2013. This goes to show that the current Government is highly interested in maintaining a favorable investment climate and creating new jobs.

Arnecom was born in 1987 and manufactures and sells automotive harnesses. As part of its expansion plans in the continent, Arnecom came to Nicaragua and began operations in 2002 with 400 employees in the city of Leon because of the wide availability of human.

The success that Arnecom has found has enabled it to offer products of the highest quality to world-renowned companies of the automotive industry and make significant expansions in the country that go far beyond the original projections, increasing its production lines, number of employees and even building new plants.

At present, Arnecom is 100 percent Japanese owned and has 24 plants in Latin America, of which 5 are located in the northwestern region of Nicaragua, 4 in Leon and one in El Viejo, which together employ more than 7,500 people. The company has been certified with ISO 9000-1 and ISO 14000-1, and also received the Excellence in Cleaner Production Award in 2007 from the Government of Nicaragua. According to studies by the National Commission of Free Zones, the company has an annual economic spill in the northwest of 16 million cordobas (US$842,105), which benefit more than 145 thousand people indirectly. View testimonial

After Command Medical Products' manufacturing plant started operations in Managua, Nicaragua, in September of 2005, the facility continues to grow in response to favorable market conditions. Command has recently expanded their operations by opening a new 30,000 square foot facility in Nicaragua which offers additional assembly and packaging capacity along with custom tube extrusion.

Designed for high-volume, labor-intensive products, Command's facility in Nicaragua offers cost-competitive pricing with all of the benefits of working with a domestic supplier, as all orders are processed through the Florida corporate offices.

The Nicaraguan facility is located in an ideal spot just outside the Managua international airport in the country´s largest free trade zone. The plant is currently operating with virtually all of the originally hired staff that was employed over a year ago, which speaks very positively of the stable labor market. View testimonial

Aside from the recent expansion made by Command Medical, Draexlmaier has recently announced its plan to invest up to U$25 million in the installation of an auto wire harness facility in the department of Masaya, Nicaragua. The company will begin operations in the first quarter of 2010 and will initially generate 1,000 new jobs during its first phase, and up to 2,000 once the project is fully implemented.

Draexlmaier is a German automotive corporation founded in 1958. It currently has more than 30,000 employees located in 49 plants in 18 countries on 4 continents. The company manufactures automotive harnesses for prestigious clients such as BMW, Mercedes-Benz, Volkswagen, Audi, GM, Porsche, Jaguar, Toyota and Bugatti. Draexlmaier is one of the few suppliers in the automotive industry that has the experience and knowledge in automotive electronics, interiors, upholstery, plastics, tools and logistics. "The new plant in Nicaragua will not be an investment for short term success. We have gained excellent projects which require us to increase the capacity we have in the region between now and 2011, and this drew our way to Nicaragua. Initially we saw the need to learn more about the country and its people, and with the government's support we've laid the groundwork for intensive training programs for our future Nicaraguan associates, as well as to develop a transfer of knowledge," said Stefan Bude.

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