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Contents

Summary

Nicaragua is considered one of the least developed countries in Central America, with a weak economy and one of the lowest GDPs in the Americas. Its economy is a mix of agricultural, apparel, and textiles industries, but remittances via international money transfers are the major source of income for the country, accounting for approximately 15% of overall GDP. Due to the importance of remittances from abroad, Nicaraguas government and financial regulatory authorities have made it relatively easy to make international fund transfers into or out of the country.

The global downturn of 2008 2009 caused a reduction in export demands and lowered prices for Nicaraguas agricultural goods, causing more turmoil in a country that is already suffering high poverty rates and struggling to attract foreign direct investment. The countrys economic status continues to be largely dependent on international assistance from foreign donors and financial institutions. In 2004, Nicaragua received a USD $4.5 billion reduction on its foreign debt under the Heavily Indebted Poor Countries program. However, its foreign funding has been restricted due to the countrys 2008 electoral fraud, further impeding its economic growth.

Nicaragua’s money transfer regulations

Transferring money to or from Nicaragua currently has no restrictions. Under the countrys Banking, Nonbank Intermediary, and Financial Conglomerate Law, as well as the Foreign Investment Law, investors are guaranteed the ability to freely convert currency, send remittances into or out of the country, or transfer funds related to an investment without delay or restriction. Investors report no issues with obtaining US dollars or other foreign currencies through local banks and financial institutions, and there are no restrictions on foreigners opening a bank account.

Foreign investment in Nicaragua

Nicaragua does seek to increase its economic growth through encouraging foreign direct investment (FDI) in its economy, but the country has a number of obstacles to overcome before foreign investors will consider it an attractive investment option. Currently, Nicaraguas investment environment suffers from public sector corruption, a weak judicial system that does not enforce contracts, and a high level of bureaucracy. Despite these problems, Nicaraguas government has tried to attract investors through a variety of investment incentives in a number of sectors, including tourism, mining, and renewable energy. These incentives include such benefits as exemptions from import duties, income tax relief, and property tax incentives.

Nicaragua has two significant pieces of legislation to help it attract and protect FDI: The Free Trade Agreement CAFTA-DR, signed by the United States, Central America, and the Dominican Republic, provides a legal framework for US investors in Central America and the Dominican Republic. The Foreign Investment Law also provides a legal framework to provide protections for foreign investment, allowing for 100% foreign ownership in most sectors of the economy, as well as establishing that domestic and foreign investors are treated the same. The law also guarantees profit repatriation and foreign exchange conversion. Despite these investment laws and the governments attempts to fully implement them, investors have complained that support from regulatory officials is slow, negligent, and unreliable.

Nicaragua’s monetary and regulatory authority

The Nicaraguan Central Bank is responsible for setting the countrys fiscal and economic policies, and overseeing its financial systems. The bank monitors the performance of Nicaraguas currency in the foreign exchange markets, and adjusts the official exchange rate according to the current crawling peg arrangement with the US dollar. The responsibility for ensuring the countrys financial systems do not engage in illicit activity is held by the Superintendent of Banks and other Financial Institutions (SIBOIF).

Currency

Nicaraguas official currency, the cordoba (NIO), was first introduced in 1912, replacing the peso at a fixed rate of 1 cordoba = 12.5 pesos. The currency is named after the founder of Nicaragua, Francisco Hernandez de Cordoba. The cordoba was reissued in 1988, with the fixed rate of one new Cordoba equal to 1,000 original cordoba. In April 1991, a third issuance of the cordoba was released.

The cordoba is based on a systems of hundredths, with 1 cordoba equal to 100 centavos, its subunit. The cordoba and centavo coins commonly used today include the 5, 10, 25, and 50 centavo coins, and the C$1, C$5, and C$10 cordoba coins. Common banknotes are the C$10, C$20, C$50, C$100, C$200, and C$500 bills.