Some of the factors that make Nicaragua an attractive investment destination for tourism projects include its cultural richness, natural beauty, competitive property costs, talented labor force, generous tax incentives, the country's strategic location and its easy access from international markets.
Despite the widespread global slowdown in tourist traffic, according to data from 2009 of the WTO, Nicaragua is among the places with very positive results in tourism arrivals. Preliminary statistics from the Nicaraguan Tourism Board (INTUR, for its acronym in Spanish) registered a growth of 8.6 percent in tourist arrivals with 931,904 tourists and tourism revenues registered a 25.2 percent growth compared to the previous year, reaching US$345.9 million.
Source: Nicaraguan Tourism Board (INTUR, for its acronym in Spanish)
For over a decade, tourism has been one of the most vibrant sectors of the Nicaraguan economy, experiencing consistent and sustained growth. Between 2005 and 2009, tourism arrivals grew at an average rate of 8.7 percent per year and tourism receipts also experienced a 16 percent annual growth rate during that period.
Source: Central Bank of Nicaragua (BCN, for its acronym in Spanish)
The main source markets for tourism in Nicaragua are found in Central America, North America and Europe. Preliminary statistics recorded for 2009 highlight the Central American region as the most important source market with 61.3 percent of total visitors, followed by North America with 26.9 percent and Europe with 7.5 percent.
The sustained growth of the industry, the diverse tourist supply and the strategic location make Nicaragua an interesting emerging tourism destination, representing excellent opportunities for the establishment of new hotels.
Lodging Industry
Nicaragua’s lodging industry has more than 7,000 rooms distributed mainly in Managua, the capital city, and the departments of Granada, Leon and South Atlantic Autonomous Region (RAAS, for its acronym in Spanish) and Rivas. During 2005-2009 period, INTUR reported an 11 percent annual growth rate in the numbers of rooms nationwide.
Given the increasing number of business travelers, the hotel industry has been developing mainly in Managua, which holds 38 percent of the hotel rooms of the country.The main lodging segments are:
Business in Managua
Beach in the Pacific Coast
Colonial in Granada and León
Nature along the San Juan River and the northern region of the country
Nicaragua offers 720 kilometers of coastline in the Pacific and Atlantic, 25 volcanic formations, more than 10,000 km2 of lakes, lagoons and rivers, with the second largest lake in Latin America, which in turn holds the largest island in a lake in the world. In addition, the country has over 22,088 km2 of nature reserves and colonial cities with great cultural richness, amongst which the city of Granada stands out for being one of the oldest cities founded in mainland American soil. All these features, along with the high levels of personal safety combine to make Nicaragua an attractive tourism destination.
Strategic Location
Located in the heart of America, Nicaragua enjoys a unique setting that facilitates the arrival of tourists from different parts of the world by air, land or sea.
Nicaragua has one international airport located in Managua which is considered one of the safest in Central America. This facilitates the entry of tourists from major tourist source markets through more than 120 weekly flights. International airlines currently operating in Nicargaua include American, Continental, Delta, Copa, Taca and Aeromexico.
Also, there are three airports that serve local flights to the Caribbean Coast and five important seaports, amongst which two are the main points of entry for visitors from cruiseships: San Juan del Sur and Corinto.
Availability of Qualified Human Resources
The tourism industry employs over 120 thousand people directly and indirectly. Within these figures are professionals with high academic formation, as well as medium and advanced level technical graduates.
Nicaragua has more than 25 universities that offer degrees in tourism and hotel administration. Additionally, Nicaragua has a National Lodging School (ENAH, for its acronym in Spanish) which offers modern facilities that meet international quality standards and provides training programs for chefs, waiters, bartenders, housekeepers, receptionists and tour guides.
Cost Competitiveness
The average wages paid by international franchises in the hotel, food and beverages industry allow them to earn greater profit margins in the short term, while offering excellent customer service because of the qualified labor force and competitive labor costs. The cost-benefit relationship regarding the labor force allows companies to offer clients a valuable customer service with the most competitive costs of the region.
Moreover, the growing tourism market in Nicaragua still offers competitive costs of land for the development of tourism projects. In the south pacific region, one of the most attractive areas for tourism, the cost of land is substantially more competitive than those found in the rest of the Central American region.
Favorable Legal Framework and Attractive Fiscal Incentives
In addition to the Foreign Investment Promotion Law (Law 344) that provides a solid framework of legal guarantees for foreign investors, the tourism sector benefits from other regulations for the development of this industry.
Tourism Incentive Law (Law 306)
This law provides the investor with a diverse and generous tax incentive framework, considered among the best in the region. The law provides incentives and benefits for investments in lodging, food and beverages, tour operators, transportation of tourists, airlines, among others.
The incentives include:
Exemption from 80 to 90 percent Income Tax for a period of 10 years
Exemption from property tax (IBI) for a period of 10 years.
Exemption from Sales tax applicable to design services, engineering and construction
Exemption of import duties and VAT on the purchase of equipment and fixtures of the building for a period of 10 years.
In the case of re-investment, if upon completing the 10-year incentive period the investor decides to invest an additional 35 percent of the original amount, the investor may receive all the applicable benefits and exemptions for an additional 10 years.
Law of Resident Pensioners and Retirees (Decree 628)
Nicaragua passed a legislation to encourage retirees and pensioners to move to the country. The Law of Resident Pensioners and Retirees gives benefits mostly in the form of tax incentives and entitles the retirees to the following:
Import up to US$20,000 worth of household goods for your own home, duty-free.
Import or purchase of a new car of up to US$ 25,000, for personal or general use, exempt from import and Sales tax. If used, the car has to be 7 years old at the most.
Import an additional vehicle every 4 years under the same tax exemptions.
Import and or purchase of construction materials for up to $ 50,000, tax free, for the construction of a house.
Exoneration of the Sales Tax on rental cars for tourism purposes.
Coastal Zones Development Law (Law 690)
The purpose of the law is to promote sustainable development of coastal areas and use their invaluable tourist potential. The law recognizes and respects the rights of property legally acquired by individuals and companies, domestic and foreign.
One of the most important elements established by this law is the scope of ownership rights and government property over the coastal zones:
Waterfront area for public use: is the open area between low tide and high tide, plus 50 meters from the high tide mark to the mainland average. In natural lakes and crater lagoons is from the historic average maximum five meters to shore.
On the islands of more than two square kilometers with a permanent population, the coastal zone is from the historical average of the maximum level of water in winter, or possibly, tides, five meters to the mainland.
Waterfront restricted use: is the area including 200 meters to the mainland from the limit of the waterfront area for public use, and lakes will be 30 meters.
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