Country Presentation 2018 OUR SERVICES Information about - - PowerPoint PPT Presentation

Country Presentation ● 2018

PRONicaragua is the Official Investment Promotion Agency of the Government of Nicaragua.

• Information about

Nicaragua and business

• pportunities
• Customized information

packages

• Organization of site visits:

meetings with companies and institutions

• Support with information
• n the structure of
• perational costs and

fiscal charges

• Identification of real

estate options for business locations

• Directory of suppliers of

related goods and services

• Support and facilitation
• Facilitate and expedite

government procedures

• Information about

business opportunities in the Caribbean Coast through our regional

• ffice PRONiCaribe

Assessment and decision making Implementation of the project Aftercare

OUR SERVICES

Capital Managua Area 130,373 km2 Official Language Spanish Population 6.3 million Currency Córdoba Exchange Rate (2018 Average) C$31.55 = US$1.00 Time Zone UTC/GMT – 6 hours

Source: BCN Región Central / Central Region Región Pacífico/ Pacific Region Región Caribe/ Caribbean Region

COUNTRY PROFILE

STRATEGIC LOCATION

Sources: BCN, MIFIC, and PRONicaragua

Gross Domestic Product US$13.81 billion (4.9% growth vs 2016) GDP per capita US$2,160.6 Exports US$5.19 billion FDI Inflows US$1.46 billion Gross International Reserves US$2.76 billion (2.6 times the monetary base) Inflation 5.68% Devaluation of Currency 5% annual vs. US Dollar

2017 ECONOMIC FIGURES

8.50 8.30 8.76 9.77 10.53 10.98 11.88 12.61 13.18 13.81 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 US$ Billion

Gross Domestic Product In the last 6 years, Nicaragua's GDP has grown an average of 5.1 percent.

Source: BCN .

Real GDP Growth (%) 2012 2013 2014 2015 2016 2017 6.5 4.9 4.8 4.8 4.7 4.9

ECONOMIC GROWTH

NICARAGUA

GDP 2017: 4.9% Average of 6 years: 5.1%

GUATEMALA GDP 2017: 3.2% Average of 6 years: 3.5%

Source: BCN and ECLAC

EL SALVADOR GDP 2017: 2.4% Average of 6 years: 2.0% COSTA RICA GDP 2017: 3.9% Average of 6 years: 3.7% HONDURAS GDP 2017: 3.9% Average of 6 years: 3.5% PANAMA GDP 2017: 5.3% Average of 6 years: 6.3%

GDP GROWTH IN THE REGION

Nicaragua maintains positive working relations with different multilateral organizations such as the International Monetary fund (IMF), World Bank (WB), the Inter-American Development Bank (IDB) and the Central American Bank for Economic Integration (BCIE).

• In February 2018, Standard & Poor's ratified B+ rating for

credit, local and foreign currency. The outlook is stable.

• In July 2017, Moody´s upgraded Nicaragua's credit rating
• utlook from "stable" to "positive" and maintained the B2

rating.

• In August 2017, Fitch Ratings ratified its B+ rating for

Nicaragua with a stable outlook. “The macroeconomic policies implemented by the Government of Nicaragua are positive, and should serve as an example for Latin America” Min Zhu, Deputy Managing Director of the IMF

MACROECONOMIC STABILITY

In 2017, the sectors that attracted the highest FDI revenues were: industry, financial, commerce and services, telecommunications and mines.

Source: MIFIC, BCN and PRONicaragua

FOREIGN DIRECT INVESTMENT

0.63 0.43 0.51 0.94 1.24 1.35 1.45 1.38 1.43 1.46

• 0.20

0.40 0.60 0.80 1.00 1.20 1.40 1.60 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 US$ Billion

Foreign Direct Investment Inflows 10% compound annual growth rate

In 2017, the main export destinations were: the United States, Central America, Mexico, the European Union, and Venezuela.

EXPORTS

2.75 2.63 3.44 4.30 4.83 4.79 5.20 4.92 4.84 5.19 0.00 1.00 2.00 3.00 4.00 5.00 6.00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 US$ Billion

Total Exports 7% compound annual growth rate

Source: BCN..

2017 Main Export Products (% of total value) Textile and Apparel (30.6%) Cigars and Tobacco (4.0%) Automotive Harnesses (11.4%) Dairy Products (3.5%) Coffee (9.8%) Sugar (3.4%) Beef (9.8%) Peanuts (2.2%) Gold (6.3%) Beans (1.4%)

Source: BCN and CNZF

MAIN EXPORT PRODUCTS

Access to 1.5 billion people

Free Trade Agreements Preferential Access Agreements Solidarity Alliance Agreements Central American Common Market Agreements under Negotiation

Source: MIFIC

AN IDEAL EXPORT PLATFORM

Agreements Countries Free Trade Agreements United States, Central America with Dominican Republic, Mexico, Panama, Taiwan, Chile, South Korea and European Union Central American Common Market Nicaragua, Guatemala, El Salvador, Honduras, Costa Rica and Panama; additionally, free movement of capital, services and people among CA-4 countries Generalized System of Preferences Japan, Norway, Canada, Russia and Switzerland Partial Scope Agreements Cuba and Ecuador with bilateral preferences Venezuela and Colombia with unilateral preferences in favor of Nicaragua ALBA agreement Venezuela, Ecuador, Granada, Saint Lucia, Bolivia, Cuba, Antigua & Barbuda, Dominica and Saint Vicent and the Grenadines Agreements currently been negotiated Canada, ALADI (Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay, Venezuela, and Cuba)

Nicaragua constantly seeks to increase its access to the world’s most important markets in order to consolidate itself as the ideal export platform.

Source: MIFIC

MARKET ACCESS

Sources: Commission of Police Chiefs and Directors of Central America, Mexico , the Caribbean and Colombia; World Economic Forum

PUBLIC SAFETY INDICATORS

0.0 0.7 0.9 1.0 1.4 1.7 1.9 3.4 4.0 4.9 5.6 5.6 7.5 8.0 10.8 12.9 13.9 14.0 15.5 19.5 0.0 5.0 10.0 15.0 20.0 25.0

Canada Argentina Ecuador Nicaragua Costa Rica Uruguay Brazil Chile Paraguay United States Colombia Panama Venezuela Peru Dominican R. Mexico Honduras Guatemala Jamaica El Salvador

Crime and Theft as a Major Problem for Doing Business in The Americas in 2017

8 11 11 35 57 101 7 9 12 27 59 81 7 10 12 26 44 60 20 40 60 80 100 120 Nicaragua Panama Costa Rica Guatemala Honduras El Salvador

Homicide Rate in Central America (per every 100,000 inhabitants)

2015 2016 2017

LABOR FORCE

Source: BCN and INSS. *NIDE - 2017.

Indicators Population under 39 years old 76.1% Unemployment* 3.3% Labor Force 3.2 million Underemployment* 42.7% 493 504 535 578 623 673 710 773 857 914 100 200 300 400 500 600 700 800 900 1000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Thousands of employees

Average of Formal Employment

Source: MITRAB. 2018 average exchange rate. *Does not include food

Sector Monthly in US$ Hourly in US$ Construction, Financial Establishments and Insurance 418.18 2.00 Electricity, Gas and Water, Commerce, Restaurants and Hotels, Transport, Warehouse and Communications 342.74 1.64 Mines and Quarries 335.60 1.61 Fishing 284.13 1.36 Free Zones Regime Industry 257.03 1.23 Community, Social, Domestic and Personal Services 261.96 1.26 Manufacturing Industry 251.26 1.20 Federal and Municipal Government 233.03 1.12 Micro and Small Craft Industry and National Tourism 200.77 0.96 Agricultural* 186.66 0.90 Salaries include social benefits

MINIMUM WAGE

The Government of Nicaragua, the private sector and workers coordinate efforts and design strategies to: 1. Promote economic development 2. Increase employment 3. Reduce poverty The model is based on the joint monitoring of the Government, workers and private sector representatives, to follow up on agreements and promote better working relationships. Constitution The model of dialogue and consensus has been included in article 101 of the Political Constitution of Nicaragua Tripartite Agreement Signing of tripartite agreement between government, private sector and workers to determine minimum wage levels Laws More than 100 laws passed by consensus with the Superior Council of the Private Enterprise (COSEP) business umbrella

• rganization

MODEL OF DIALOGUE AND CONSENSUS

64% 36%

Goal 2023

Since 2007, the Nicaraguan government has striven to increase generation capacity, expand coverage and create green energy as part of its country development strategy.

71% 29%

2007

Fuente: Instituto Nicaragüense de Energía (INE).*Datos a Septiembre 2015

Installed Capacity: 1,500 MW Installed Capacity: 819 MW Installed Capacity: 1,942 MW

Installed capacity has increased 83% from 2007 to 2018. Coverage reached 94% of the national territory in 2018 vs 52% in 2007.

Non Renewable Energy Renewable Energy

DEVELOPING THE ENERGY SECTOR

Source: INE *Data to January 2018

46% 54%

2018*

The Foreign Investment Promotion Law (Law 344) gives investors fundamental guarantees including:

• Full currency convertibility
• Freedom to expatriate all capital and profits
• No requirement for a national partner
• Non discriminatory treatment for foreign investors
• Full protection of intellectual property rights, patents, and brands
• Access to loans through banks

Additionally, the Mediation and Arbitration Law (Law 540) offers two alternate methods to the judicial process to expeditiously resolve any dispute resulting from contractual relations between parties.

LEGAL FRAMEWORK FOR FOREIGN INVESTMENT

“Performance has been solid, macroeconomic management has been good and there is an important agenda to reduce poverty, for example, on issues such as education in agriculture, the environment and energy."

Jorge Familiar, Vice President of the World Bank – January 2018

INVESTMENT OPPORTUNITIES

• AGRIBUSINESS AND FORESTRY
• LIGHT MANUFACTURING
• OUTSOURCING SERVICES

• Nicaragua has a long agricultural tradition and was
• nce known as “The breadbasket of Central America.”
• The agribusiness & forestry sector is one of the main

drivers of the economy, representing:

• 14.3% of gross domestic product
• 31.5% of the economically active population
• Over the last five years, formal employment in this

sector has grown by 40%, reaching 78,500 direct jobs and 215,000 indirect ones in 2017. ‐ Coffee (9.8%) ‐ Beef (9.8%) ‐ Cigar and Tobacco (4.0%) ‐ Dairy products (3.5%) ‐ Sugar (3.4%) ‐ Peanuts (2.2%) Main Agro-Exports

ABOUT THE AGRIBUSINESS AND FORESTRY SECTOR

Source: BCN

• Nicaragua has 3.9 million hectares of land suitable for agriculture activities and the most

competitive land costs in the region.

• The country´s diverse geography and climate allows for a wide range of agricultural crops and

products.

• More than 9,300 km2 of surface water and abundant underground water.
• The Government of Nicaragua grants generous fiscal incentives for agricultural, forestry,

fishery and agro-industrial activities, as well as all export–oriented activities.

• The country possesses the lowest hourly labor costs per hour in the region (including

mandatory social benefits):

• US$0.90 for the agricultural sector
• US$1.20 for the industrial sector
• US$1.23 for the free zones sector

FAVORABLE CONDITIONS FOR THE SECTOR

Agro-export Products ‐ Coffee, cocoa, okra, fruits, cassava, tubers, ornamentals, among

• thers

Aquaculture ‐ Shrimp, lobster and fish Dairy and livestock ‐ Processed milk (dairy products, powdered milk) and meat Food industry ‐ Processed foods (snacks, cookies, sweets and confectionary) ‐ Grains and milled products Forestry ‐ Plantations of valuable timber ‐ Carbon credits

Nicaragua offers excellent conditions for investment in different agro- industry sub-sectors.

Present in Nicaragua

INVESTMENT OPPORTUNITIES

• The manufacturing industry of Nicaragua employs around 166,00 people. Export of

manufactured goods in 2017 reached US$2.85 billion.

• The U.S., Mexico, Venezuela, Panama and South Korea represent sources of capital for

important manufacturing projects in the country. The sector has registered an estimated US$1.55 billion of foreign direct investment over the last five years.

• Some of the most important sub-sectors include:
• Automotive harnesses
• Apparel
• Footwear
• Medical devices
• The tripartite agreement between the government, private sector and workers seeks to

resolve issues related to the development of investment under the free zone system, including topics such as minimum wage and worker benefits.

ABOUT THE LIGHT MANUFACTURING SECTOR

Local name Extraceite Origin Guatemala Initial Investment +US$66 million Beginning of Operations 2011 Employees 1,200 approx. Products Palm Oil Markets United States, Central America, Mexico Location El Rama, RACCS

“Nicaragua is the country with the largest area available for the cultivation of palm oil. It has the most competitive costs in the agricultural sector, a solid legal framework, and fiscal incentives for the long term.”

• Carlos De Franco, CFO

• The Free Zones system Nicaragua offers generous fiscal incentives for industrial export

projects for a period of up to 20 years.

• A vast labor force of approximately 3.2 million people, 46% of which are underemployed and

have potential to work in light manufacturing.

• Nicaragua´s trade agreements provide preferential access to the world´s most important

markets, including the United States and the European Union.

• Nicaragua is an ideal destination for labor-intensive operations with the lowest hourly labor

costs per hour of the region (including mandatory social benefits):

• US$1.20 for the industry sector
• US$1.23 for the free zone sector
• The Free Zone offers investors predictability of labor costs, which are agreed upon years in
• advance. The current Agreement establishes wages for the 2018 – 2022 period.

FAVORABLE CONDITIONS FOR THE SECTOR

Textile and Apparel Textile production:

• Knitted fabrics (cotton and synthetic)
• Women

fabrics twill and denim (cotton and synthetic) Apparel production:

• Denim and twill garments.
• Sportswear and uniforms for athletic teams
• Single transformation: boxers, brassieres, jackets,

woven pajamas, woven shirts, baby wear, etc.

• Medical garments, work and institutional uniforms

Accessories:

• Buttons, zippers and elastic bags for garments.

Auto Parts and Accessories: ‐ Autowire harnesses ‐ Carpets and seat covers ‐ Seatbelts ‐ Wooden dash boards Footwear:

• Leather footwear
• Security boots
• Synthetic footwear

Disposable medical devices Labor intensive Industrial operations Present in Nicaragua

INVESTMENT OPPORTUNITIES

Local name Hialpesa Nicaragua S.A. Origin Peru Initial Investment +US$9 million Beginning of Operations 2016 Employees 400 approx. Products Textiles Markets United States, Europe, Honduras and Nicaragua Location Managua, Nicaragua “Nicaragua is a great place to invest in. Wage related costs are very competitive. This is an extremely safe country when compared to its Central and South American peers, and the conditions to invest in the textile and manufacturing sectors are really good.”

• Luis Aliaga, General Manager

• Outsourcing services is one of the fastest growing industries in Nicaragua and today employs

almost 9,000 people.

• More than 47 companies export a wide range of services to the United States, Europe and

Latin America. Customer service, telemarketing, patent research, development of software and website development are among the key services offered.

• Between 2007 and 2016, approximately US$82 million were invested in the sector.
• Outsourcing has become an important source of jobs for a growing number of graduates each

year from the national university system. Multinational telecommunications providers:

ABOUT THE OUTSOURCING SERVICES SECTOR

Modern infrastructure telecommunications infrastructure, redundancy and reliable Internet service through connections to submarine cable networks ARCOS, MAYA y Emergia.

• Nicaragua´s labor costs for agents are the

most competitive in the region: ⁻ US$550 for bilingual agents ⁻ US$350 for Spanish-speaking agents

• Within 3 hours flying time of major U.S.

cities and sharing time zones year round helps outsourcing companies to privide superior services.

• Generous free zone incentives for export

service companies for a period over 20 years.

FAVORABLE CONDITIONS FOR THE SECTOR

Business Processing Outsourcing (BPO)

• Contact centers
• Collections
• Telemarketing

Knowledge Process Outsourcing (KPO)

• Patent design & Development
• Architectural Services
• Digital Marketing

Shared Services Centers (SSC)

• Recruitment
• Accounting
• Legal Advice

Nicaragua offers excellent conditions for investment in different outsourcing functions such as:

Present in Nicaragua

INVESTMENT OPPORTUNITIES

Local name MRP Servicorp Origin Ireland – Costa Rica Initial Investment +US$9 million Beginning of Operations 2014 Employees 107 approx. Services B2b sales, digital marketing, lead generation Markets United States and Brazil Location Managua, Nicaragua “Of all the incentives offered by the country, we have benefited largely from the human talent. We had an initial headcount of 30 people, now we have a team of 107 employees. We are surprised by the talent we have found here in Nicaragua. Our client portfolio went from being only CISCO to Fortune 500 companies such as HP, DELL and FORTINET.”

• Carlos Odio, Operations Manager

FISCAL INCENTIVES FOR INVESTMENT

Tax Coalition Law (Law 822)

Benefits for Exporters

• Exports are exempt from Value Added Tax (IVA) and Selective Consumption Tax (ISC).
• 1.5% of FOB value of exports is deductible from Income Tax.

Benefits for Agricultural Producers

• Article 127: Establishes a list of products that are exempt from the Value Added Tax, including

products from the agricultural sector.

• Article 274: Establishes a list of agricultural products, including raw materials, intermediate

goods, machinery, capital goods, spare parts and accessories, that are exempt from Value Added Tax and Selective Consumption Tax. Benefits for Forestry

• Registered plantations have a 50% exemption on Municipal Income Tax (IMI) and 50%

exemption of Federal Income Tax.

• 100% exemption on Property Tax (IBI).
• 100% exemption on payment of duties and taxes on imports to companies of secondary and

tertiary processing.

• Companies may use up to 50% of their Income Tax to invest in forestry plantations.

FISCAL INCENTIVES

Temporary Admissions System (Law 382)

A tax system that allows both the entry of goods into the national customs territory and local purchase of goods exempt from payment of duties and taxes. Companies that export directly or indirectly at least 25% of total sales with a minimum value of US$50,000, are eligible for this framework. Goods qualifying under this system are:

• Intermediate goods and raw materials
• Capital goods directly involved in the production process
• Materials and equipment required for the production process

FISCAL INCENTIVES

Free Zones Incentives Law (Law 917)

• Income tax 1
• Import taxes for machinery, equipment and

raw materials

• Municipal tax
• Sales tax
• Capital and property tax
• Real state taxes

1Valid for 10 years and renewable upon approval

Nicaragua offers attractive fiscal incentives under the free zones system for industrial companies with an export – oriented focus.

FISCAL INCENTIVES

100% exemption of:

A Competitive Cost Structure

Low labor costs + generous fiscal incentives + FTAs with major international markets High degree of social stability resulting from dialogue between the Government, the private sector and workers Pro-business Government that values foreign investment and supports its successful development High levels of personal safety and great quality of life

NICARAGUA’S VALUE PROPOSITION

Total New Investment: 30 projects +US$350 millions 12,400 jobs

NEW INVESTMENT PROJECTS 2017