Nicaragua presents both opportunities and challenges for foreign investment in the country. The country has a small, open economy that benefits from foreign direct investment and remittances. The country is rich in natural resources, including gold, silver, copper, and timber, and has a well-established legal and regulatory framework for mining.
The government has been offering incentives to foreign investors, such as tax breaks and duty-free access to necessary inputs and equipment. The government has also been working to improve the transparency and efficiency of the mining sector to attract foreign investment. The country’s mining industry has the potential to contribute significantly to economic diversification and growth.
However—the political crisis has led to a decline in foreign investment, a decrease in economic growth, and a rise in inflation. The country’s economy is highly vulnerable to climatic shocks, and the impact of climate change has led to a decrease in agricultural productivity, exacerbating food insecurity and poverty. The level of extreme poverty is expected to reach 44.1% in 2023 and the country is highly vulnerable to climatic shocks.
The Nicaragua government has been urged to adopt ambitious institutional and economic reforms to place Nicaragua on a more dynamic path and offer better economic opportunities to the entire population, especially women and young people around the nation.
Nicaragua still offers low labor costs, free trade zone incentives, and proximity to major consumer markets in the U.S. as advantages for foreign investors. Restoration of stable democratic institutions and the rule of law needed to improve investor confidence going forward in increasing the country’s economical status.
However—political volatility, concerns over policy uncertainty and respect for contracts/property rights, and perceptions of corruption and weak rule of law pose barriers. Top foreign investment continues in manufacturing (textiles, automotive components), agriculture and mining, but new investment slowed dramatically since 2018.
