Nicaragua WT/TPR/S/274 
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  I. ECONOMIC ENVIRONMENT 
(1) INTRODUCTION  
1. The Nicaraguan economy has weathered the intern ational financial crisis relatively well, 
maintaining positive GDP growth rates, with the excep tion of 2009.  This is due in large measure to 
prudent macroeconomic management, which made it possible largely to mitigate the impact of 
adverse external shocks.  This so lid economic growth led to an im provement in Nicaragua's social 
indicators, notably in the form of significantly re duced poverty and illiteracy rates.  Despite this, the 
poverty rate remains above 40 per cent and there are still challenges to be addressed if the disparities 
between urban and rural areas are to be reduced.  Mo re jobs also need to be created to reduce the 
dependency on remittances from workers abroad, which accounted for over 12 per cent of GDP 
in 2011 and financed a considerable portion of consumption. 
2. During the period under review (2006-2011)  Nicaragua embarked upon fiscal reform 
designed to broaden the tax base and strengthen tax administration.  This led to an increase in tax 
revenues and in their percentage share of GDP.  Nicaragua's balance-of-payments current account 
recorded a deficit continuously between 2006 and 2011 .  It fluctuated between 16 and 23.7 per cent of 
GDP and reflected a structural trade deficit and the insu fficiency of current transfers to offset it.  This 
was the case even when goods exports grew fast er than imports during the period under review. 
(2) OVERVIEW AND STRUCTURE OF THE ECONOMY  
3. Nicaragua's economy is relatively diversified,  and the portion of GDP corresponding to 
agriculture and manufacturing showed an upward tr end during the review period, whilst that of 
services and construction declined (Table I.1).  Despite this, the services sector still accounts for 
some 46 per cent of Nicaragua's GDP, thanks mainly  to the contribution made by the tourism and 
general government services subsectors.  Despite its comparatively modest contribution to GDP, 
agriculture provides a livelihood for almost 43 per cen t of the population;  climatic conditions are still 
a key determinant in the sector's performance.  D espite the mining sector's as yet small share of GDP, 
it has benefited from robust international dema nd for gold and silver as investment assets. 
Table I.1 
Basic economic indicators, 2005-2011 
 2005 2006 2007 2008a 2009a 2010a 2011a 
Memorandum items        
Total population (thousands) 5,424 5,494 5,564 5,636 5,710 5,788 5,870 
Working-age population (% of the total) 58.1 58.7 59.2 59.8 60.4 60.9 61.5 
Rural population (% of the total) 44.1 43.82 43.54 43.26 42.98 42.7 .. 
Current GDP (US$ million) 4,872 5, 230 5,662 6, 372 6,214 6, 591 7,297 
Per capita GDP (current US$) 894 947 1,012 1,124 1,082 1,133 1,239 
Real GDP, growth rate (%) 4.3 4.2 3.6 2.8 -1.5 4.5 4.7 
Total government debt (% of GDP) 139.0 111.9 82.0 74.8 80.1 78.0 71.8 
Total external debt (% of GDP) 109.8 86.5 59.8 55.1 58.9 58.8 55.8 
Debt servicing/export ratio (% ) 6.6 6.2 8.0 4.4 4.6 3.4 2.8 
Gross international reserves (US$ million) 730 924 1,103 1,141 1,573 1,799 1,892 
Gross international reserves/monetary ba se ratio 1.9 2.0 2.1 2.2 2.6 2.7 2.4 
Gross international reserves in months of imports .. .. 3 3 5.4 5.2 4.4 WT/TPR/S/274 Trade Policy Review 
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   2005 2006 2007 2008a 2009a 2010a 2011a 
GDP by branch of economic activity (% of current GDP) 
Total industries 81.3 80.7 81.2 81.1 81.8 81.1 80.8 
  Agriculture, livestock farming, forestry and fishing 16.8 16.5 16.9 17.7 17.6 18.3 18.8 
  Mining and quarrying 1.1 1.2 1.1 1.1 1.1 1.6 1.8 
  Manufacturing industries 16.4 16.6 16.1 16.4 17.1 17.4 17.9 
  Electricity, water and sewerage 2.8 2.7 2.7 2.9 2.8 2.9 2.7 
  Construction 5.7 5.5 5.6 5.5 5.0 4.2 4.8 
  Trade, hotels and restaurants 13.8 13.9 13.6 13.5 13.6 13.4 12.9 
  Transport and communications 5.4 5.5 5.6 5.3 5.4 5.2 4.9 
  Financial intermediation and related services 4.4 4.5 5.4 5.3 5.2 4.6 4.2 
  Other services 14.9 14.3 14.1 13.4 14.1 13.7 12.9 
  Real estate 7.8 7.6 7.5 7.1 7.5 7.2 6.8 
  Personal and business services  7.1 6.7 6.6 6.3 6.6 6.4 6.1 
(+) General government services 11.2 11.3 11.4 12.6 12.4 11.4 11.0 
(+) Net taxes on products 12.0 12.5 12.7 12.0 11.4 12.2 12.6 
(-) Bank allocations 4.5 4.5 5.3 5.6 5.6 4.7 4.4 
GDP by expenditure (% of real GDP) 
Total consumption 92.7 91.4 91.7 92.6 93.2 92.1 91.3 
  Household consumption 79.6 78.6 79.0 79.3 80.0 79.5 78.5 
  Final government consumption 13.1 12.8 12.7 13.3 13.2 12.6 12.8 
Gross capital formation 25.2 24.2 25.8 24.7 18.7 19.2 21.9 
  Gross public fixed capital formation 4.8 3.4 3.3 3.2 3.9 3.5 3.7 
  Gross private fixed capital formation 18.2 19.1 19.7 20.4 15.4 16.3 18.0 
  Inventory changes 2.2 1.7 2.8 1.1 -0.6 -0.6 0.2 
Exports of goods and services 30.6 33.0 34.5 37.6 39.5 43.1 43.6 
Imports of goods and services 48.4 48.6 52.0 54.9 51.3 54.4 56.9 
Prices and interest rates        
Annual cumulative inflation 9.6 9.5 16.9 13.8 0.9 9.2 8.0 
Short-term deposit rate 9.4 11.6 12.9 13.6 14.3 10.2 12.8 
Long-term deposit rate 19.0 34.5 22.6 23.1 19.5 18.2 14.4 
Exchange rate        
Córdoba per US$. (annual average)  16.7 17.6 18.4 19.4 20.3 21.4 22.4 
Real effective exchange rate i ndex  124.7 122.6 114.4 105.6 112.9 109.8 109.7 
Central Government finances (% of current GDP) 
Total income 18.0 19.1 19.7 19.0 18.9 19.6 21.1 
  Taxes 16.7 17.7 18.2 17.6 17.5 18.2 19.4 
  Other non-tax income 1.3 1.4 1.5 1.4 1.3 1.4 1.7 
     Incidental sales by non-market es tablishments 0.8 0.8 0.9 0.9 0.9 1.0 1.0 
 Total expenditure 17.8 19.5 19.3 20.3 20.7 19.9 20.1 
  Remuneration of employees 6.1 6.7 6.9 7.3 8.1 7.6 7.3 
  Purchase of goods and services 2.2 2.8 2.4 3.2 2.6 2.6 3.4 Nicaragua WT/TPR/S/274 
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   2005 2006 2007 2008a 2009a 2010a 2011a 
  Interest on government debt  1.9 1.8 1.5 1.2 1.4 1.4 1.4 
  Current transfers 2.5 3.0 3.7 3.6 4.0 3.9 4.0 
  Capital transfers 3.8 3.4 3.1 2.9 2.4 2.5 2.3 
  Social benefits 0.3 0.5 0.5 0.7 1.0 0.9 0.5 
  Other expenditure 0.9 1.3 1.1 1.3 1.2 1.1 1.2 
     State-owned enterprises 0.2 0.2 0.3 0.4 0.2 0.1 0.2 
Net acquisition of non-financial asse ts 5.4 3.5 3.8 2.8 2.9 2.6 2.4 
Fiscal balance (cash, excluding grants) -5.2 -3.9 -3.3 -4.1 -4.7 -3.0 -1.3 
External grants  3.3 4.0 3.7 2.9 2.4 2.0 1.9 
Fiscal balance (cash, including grants) -1.8 0.1 0.4 -1.2 -2.3 -1.0 0.6 
Financing 1.8 -0.1 -0.4 1.2 2.3 1.0 -0.6 
  Net domestic -2.4 -3.2 -3.1 -0.3 -0.9 -1.5 -2.5 
     of which:  BCN -1.7 -1.4 -2.3 0.8 -0.7 -1.6 -0.9 
  Net external 4.0 2.9 2.6 1.5 3.2 2.5 1.8 
  Privatization receipts  0.2 0.2 0.0 0.0 0.0 0.0 [..] 
.. Not available. 
a  Preliminary figures. 
Source : Central Bank of Nicaragua, Anuario de Estadísticas Macroeconómicas (Yearbook of macroeconomic statistics);  
and World Bank, World Development Indicators . 
4. Several factors sustain Nicaragua's potential fo r achieving steady economic growth.  The first 
is its favourable geographical location, with coast s on the Pacific Ocean and the Caribbean, as well as 
its abundant natural resources.  In addition, the country's population dynamics, more specifically a 
working-age population that is growing faster th an the dependent population, offer a window of 
opportunity for its future economic development. 
5. Yet certain factors continue to limit Nicaragua 's capacity to exploit this potential.  For 
structural reasons mainly bound up with the suppl y of electricity and transportation, Nicaragua's 
economic activity is highly dependent  on petroleum products and is therefore vulnerable to exogenous 
shocks.  Current electricity genera ting capacity, consisting mostly of  liquid fuel power stations, has 
kept this dependence in place over the past decade.   Thermal power generation currently represents 
some 65 per cent of the country's energy matrix, as compared to a Central American average of 43 per 
cent.  The available renewable resources, particularly  those of hydraulic or geothermal origin, are still 
under-exploited.  Although electrification covers  70 per cent of the country, power outages, 
compounded by excessive losses in the distribution system, are still one of the biggest drawbacks affecting the business environment. 
6. The Nicaraguan economy continues to be highly do llarized, and this was the case for 71.6 per 
cent of the banking system's assets and 71 per cent of  its liabilities at the end of 2011;  91 per cent of 
all loans are taken out in foreign currency.
1  Because monetary policy is de facto limited by the 
maintenance of a crawling-peg regime (see belo w), fiscal policy plays a key role in Nicaragua, 
although the leeway in that regard is constraine d by the magnitude and con tinuing unsustainability of 
government debt.  Indeed, despite substantial exte rnal debt relief under the Highly Indebted Poor 
                                                      
1 Central Bank of Nicaragua. WT/TPR/S/274 Trade Policy Review 
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  Countries (HIPC) initiative and the Multilateral De bt Reduction Initiative (MDRI), government debt 
represented 71.8 per cent of GDP as at 31 December 2011  (Table I.1);  the implementation of bilateral 
debt relief, which is still awaiting formalization, will reduce this leve l by some 14.9 percentage points. 
7. After a general decline over many years of so cial and political strife, Nicaragua's social 
indicators improved markedly in the second half of the past decade, in particular with noteworthy 
reductions in the poverty and illiteracy rates.  The latest available data show that between 2005 
and 2009, poverty in general fell from 48.3 to 42.5 per cent of the population and extreme poverty 
dropped from 17.2 to 14.6 per cent.2  Despite this, if the disparities between urban and rural areas are 
to be reduced, many challenges still have to be addressed. 
(3) MACROECONOMIC TRENDS  
8. Generally speaking, Nicaragua's economy grew  at a steady pace over the period 2006-2011, 
despite a difficult context marked by the damage caused by hurricane Felix and the worldwide food, 
oil and financial crises.  Prudent macroeconom ic management, mainly through a fiscal policy 
designed to contain the budget deficit, made it possibl e largely to offset the effects of these adverse 
shocks and achieve positive GDP growth rates thr oughout the period except in 2009, which saw the 
only contraction in real GDP (Table I.1). 
9. In the area of fiscal policy, Nicaragua took a series of steps in 2009 intended to broaden the 
tax base and strengthen tax administration, impl emented under the Law Amending the Fiscal Equity 
Law.3  The tax reform mainly concerned income ta x and was designed to introduce a higher rate on 
capital income (Box I.1).  Some exemptions and waivers were also eliminated, though not all 
exemptions in force could be fully streamlined.4  According to the authorities, in addition to 
expanding the tax base, the reform should reduce the tax burden on wage earners and encourage 
companies to plough back profits.  Tax collection improved during the review period thanks to the 
modernization of the tax management system, whic h included the implementation of a new Internal 
Tax Information System in 2011, whose aim is bett er harmonization between the Directorate-General 
of Revenue and the Directorate-General of Customs Services. 
                                                      
2 National Development Information Institute (2011). 
3 The Law on Amendments and Additions to Law No . 453, Fiscal Equity Law, and to Law No. 528, 
Law on Amendments and Additions to the Fiscal Equity Law No. 712, adopted on 3 December 2009, published in Official Journal No. 241 of 21 December 2009. 
4 An IMF report dated October 2011 points out that Nicaragua's tax system still provides a number of 
fiscal exemptions, in particular with respect  to VAT and corporate taxation (IMF, 2011). Nicaragua WT/TPR/S/274 
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  Box I.1:  Main points of the amendments to the Fiscal Equity Law, 2009 
Income tax 
- Elimination of taxes on assets (1%) and on deposits in the financial system (0.6%). 
- Introduction of a definitive minimum payment on gross income (1%). 
- Non-taxable base increased from C$50,000 to C$75,000 for wage earners (C$50,000 for other 
natural persons). 
- Introduction of a definitive rate (10%) on divide nds and shares in profits declared or paid. 
- Introduction of a definitiv e withholding tax (10%) on interest on all types of deposits and loans to 
residents and non-residents;  as of 2010, elimination of the exemption for interest on Government 
papers and securities. 
- Definitive withholding tax on commodities traded on the agricultural exchange increased from 1% 
to 1.5% (for major taxpayers the withholding tax counts against income tax). 
- Introduction of a withholding tax against income ta x for the transfer of goods subject to public 
registration:  1% for values of up to US$ 50,000;  2% for values between US$50,000 and US$100,000;  and 3% for values exceeding US$100,000. 
- Introduction of a definitiv e withholding tax (10%) on gaming pr izes and gambling winnings, with a 
non-taxable base of C$25,000. 
- Introduction of a special tax on casinos:  US$400 per gaming table, US$25 per machine in 
establishments with less than 100 machines, US$35 per machine in establishments with 101 
to 300 machines;  and US$ 50 per machine in establishments with more than 300 machines. 
Selective consumption tax (ISC)  
- Elimination of the possibility of reclaiming tax credits for the ISC paid on fuel. 
- Replacement of the ISC rate on cigarettes (43%) w ith a rate of C$4.5 pe r pack of cigarettes. 
- A 5 percentage point increase in the ISC rate on vehicles for private use of over 3,000 cc. capacity. 
Exemptions and waivers  
- Elimination of the exemptions and waivers on liquors, tobacco, perfumes, jewellery, cosmetics, 
aircraft and yachts for private use. 
Source : Central Bank of Nicaragua (2010), Memoria Anual 2009 (Annual Report).  Viewed at:  
http://www.bcn.gob.ni/publicaciones/anual/memoria/2009/Memoria_Anual_2009.pdf. 
10. The improved revenue collection, which can be  ascribed both to the strengthening of the 
taxation system as well as the dynamism of impor ts, effectively moved th e tax burden from 17.5 per 
cent of GDP in 2009 to 19.4 per cent in 2011 (T able I.1).  The increased tax revenue enabled 
Nicaragua to pay off certain government debts, especi ally with the electricity sector, and to further 
increase the balance of international reserves deposite d with the Central Bank.  Despite the increased 
flow of gross international reserves, both monetary base coverage and coverage  in months of imports 
diminished in 2011. 
11. Nicaragua maintains its national currency,  the córdoba, freely convertible under a 
crawling-peg system;  during the review period, the exchange rate was kept in line with the 
predetermined range with an annual depreciation rate of 5 per cent.  The credibility of the 
predetermined devaluation programme, backed up by international reserves, serves as a nominal 
anchor for prices as the economy is highly dollarized (section 2). 
12. Domestic inflation fluctuated, mainly in line w ith world food and oil prices.  Inflationary 
pressures were exacerbated by domestic supply f actors stemming from adverse climatic shocks 
(Table I.1).  Like other countries, Nicaragua has taken specific steps to curb inflation, including 
reduction and suspension of VAT and/or customs tari ffs applied to certain staples (Chapter III(1).  WT/TPR/S/274 Trade Policy Review 
Page 6 
  
  Moreover, the charges for electricity and drin king water supplies remained unchanged, as did 
subsidies for public transport and powe r consumption not exceeding 150 kwh. 
13. The Central Bank of Nicaragua (BCN) continues to intervene in the money market, mainly 
through open market operations and by managing minimum reserve requirements so as to maintain 
precautionary liquidity levels.  As of April 2011,  the weekly remuneration rate of 16.25 per cent 
accruing to liabilities subject to reserve requirements was replaced by a daily minimum rate of 12 per cent and another amounting to an average fortnightly rate of 15 per cent.  Furthermore, in November 2011, access to the BCN's overnight cred it line was eased by means of a 100-basis point 
cut in the minimum interest rate and a reduc tion of the guarantee required from financial 
intermediaries from 125 to 110 per cent.  To underpin  the security of the financial system, the BCN 
also renewed a standby line of credit of up to US$200 million with the Ce ntral American Bank for 
Economic Integration.  In June  2011, Nicaragua also passed the Law Encouraging and Regulating 
Microfinance, which provides for a series of benefits and rules of conduct within the industry.
5 
14. As regards external accounts, between 2006 and 2011 Nicaragua's balance-of-payments 
current account posted a continuous deficit that fluctuated between 16 and 23.7 per cent of GDP 
(Table I.2).  Its evolution reflected that of the trade deficit (goods and services) and the insufficiency 
of current transfers to offset it.  The overall value of imports almost doubled between 2006 and 2011 
owing to strong domestic demand for inputs and ca pital goods, as well as higher world oil and food 
prices.  This increase was partly offset by fa mily remittances, which rose to US$911.6 million 
(12.5 per cent of GDP) in 2011.  These remittances are an important source of income for the 
population and help to finance a large part of c onsumption.  The current account deficit was funded 
mainly by foreign direct investment, external borrowing and grants. 
Table I.2 
Balance of payments, 2005-2011  
(US$ million) 
 2005 2006 2007 2008 2009a 2010a 2011a 
Current account -784 -845 -1,225 -1,507 -775 -883 -1,302 
Goods -1,302 -1,472 -1,803 -2,200 -1,539 -1,635 -2,068 
  Credit 1,654 1,932 2,186 2,531 2,391 3,158 4,057 
  Debit -2,956 -3,404 -3,989 -4,731 -3,929 -4,792 -6,125 
Services -140 -156 -283 -224 -104 -146 -178 
  Credit 309 345 374 526 560 573 660 
  Debit -448 -502 -657 -750 -664 -719 -838 
Revenue -199 -220 -213 -224 -251 -275 -247 
  Credit 23 41 48 41 15 15 17 
  Debit -222 -262 -261 -264 -265 -289 -265 
Current transfers 857 1,003 1,075 1,140 1,118 1,173 1,192 
  Credit 857 1,003 1,075 1,140 1,118 1,173 1,192 
    Central government 0 0 80 0 0 0 0 
    Other sectors 857 1,003 995 1,140 1,118 1,173 1,192 
       Workers' remittances 616 698 740 818 768 823 912 
  Debit 0 0 0 0 0 0 0 
Capital and financial account 846 1, 246 1,258 1,821 854 1,183 1,689 
Capital account 479 1,590 2,903 437 557 282 262 
  Credit 479 1,590 2,903 437 557 282 262 
    Capital transfers, credit 479 1,590 2,903 437 557 282 262 
      Central government 345 1,440 2,733 243 315 133 151 
         Debt cancellations 182 1,230 2,520 59 163 11 12 
         Other capital transfers 163 210 213 184 152 122 140 
      Other sectors 134 150 171 194 242 149 111 
  Debit 0 0 0 0 0 0 0 
Financial account 367 -344 -1,645 1,384 297 901 1,428 
                                                      
5 Law No. 769, Law Encouraging and Regulating Microfinance.  Published in Official Journal No. 128 
of 11 July 2011. Nicaragua WT/TPR/S/274 
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   2005 2006 2007 2008 2009a 2010a 2011a 
 Direct investment 241 287 382 626 434 508 968 
 Portfolio investment 0 0 0 0 0 0 0 
 Other investment 132 -452 -1,860 790 122 615 533 
  Assets -182 5 -189 113 -189 -101 -232 
  Liabilities 314 -457 -1 .671 677 311  716 765 
 Reserve assets -6 -179 -167 -32 -259 -222 -73 
Other capital (net) -63 -401 -34 -314 -79 -300 -387 
Indicators (percentage)        
Balance of goods/GDP -26.7 -28.1 -31.8 -34.5 -24.8 -24.8 -28.3 
Current account balance/GDP -16.1 -16.2 -21.6 -23.7 -12.5 -13.4 -17.8 
.. Not available. 
a Preliminary figures. 
Source : Central Bank of Nicaragua. 
(4) TRADE AND INVESTMENT TRENDS  
(i) Goods and services trade 
15. Nicaragua's goods trade increased significantly over the period reviewed.  Between 2006 
and 2011, imports and exports increased by 168 and 2 23 per cent, respectively;  free zone imports and 
exports also increased by some 201 per cent (Chart I. 1).  The total value of imports far exceeded that 
of exports throughout the period under study. 
16. Food products continue to dominate Nicaragua 's exports, with coffee as the main single 
export product, even though its share contracted from 20.2 per cent in 2006 to 18.9 per cent in 2011 (Chart I.2 and Table AI.1).  In contrast, exports of frozen beef and of sugar increased appreciably.  
Gold for its part accounted for 16 per cent of tota l exports in 2011, as compared to 5.7 per cent 
in 2006.  Generally speaking, climatic conditions and world price fluctuations are a major influence 
on earnings from sales abroad.  Although exports of  manufactures seem relatively limited, free zone 
exports of clothing and harnesses increased consider ably.  Nicaragua's goods exports go mainly to the 
United States, the other members of the Central American Common Market (CACM), the Bolivarian 
Republic of Venezuela and Canada (Chart I.3 and Ta ble AI.3).  The relative share of the Bolivarian 
Republic of Venezuela and Canada in  total exports rose sharply, whilst that of the Central American 
region dropped from 34.6 per cent in 2006 to 19.6 per cent in 2011.  Some 11.2 per cent of 
Nicaragua's exports went to Europe in 2011, the main destinations being Spain, the United Kingdom 
and Belgium. 
17. The substantial increases in the price of o il and food on international markets, as well as 
higher domestic demand for fuel, are the main de terminants of the composition and geographical 
distribution of Nicaragua's imports.  Oil products re mained the leading imports, followed by transport 
equipment, goods for the food industry (soyab ean and palm oil and wheat and other food 
preparations), medicines and telecommunications eq uipment (Table AI.2).  Moreover, the Bolivarian 
Republic of Venezuela became th e second largest individual supplier of goods, almost equalling the 
share of the United States in Nicaragua's total impor ts (Table AI.4).  Imports from China also grew 
steadily, whilst Mexico slipped from second to fourth place as a single supplier.  Imports from the 
European Union made up some 5 per cent.  Germany and Spain stood out with 1.3 per cent 
and 1.1 per cent, respectively. 
  WT/TPR/S/274 Trade Policy Review 
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0200400600800100012001400160018002000
2006 2007 2008 2009 2010 2011Chart I.1
Trade in free zone goods, 2006-2011
Source: DGA, MEM, CNZF.Exports f.o.b. Imports f.o.b.(US$ million)
 
 
 18. Nicaragua is still a net importer of services, with a trade deficit in most service categories.  
The notable exceptions are tourism (travel), communications, other transport services and services of an official nature (government, n.i.e.), which show ed a surplus (Table AI.5).   The largest deficits 
occurred in freight and passenge r transport and in insurance. Nicaragua WT/TPR/S/274 
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  Chart I.2
Trade in goods by product, 2006 and 2011
2006 2011
(a)    Ex ports (f.o.b. )
Total:  US$1,023 millons
(b)    Im ports (c.i.f.)
Manufactures
Total: US$3,002 millons Total:  US$5,049 millons
Source :   WTO Secretariat, based on data provided by the Nicaraguan authorities.Total:  US$2,277 millonsFuel
1.3%
Other agric. 
products
1.2%Other 
manuf.
4.1%Other
5.7%
Agric. 
products
Chemicals
15.6%Other mining
0.4%Fuel
23.4%Food 
products
14.2%
Agri. 
products
Manufactures MiningAgri. 
products
MiningFood
81.9%Manuf.
Manuf.Chemicals
2.6%
Other mining
1.6%Other semi-
manuf.
1.5%
Food
75.3%Fuel
0.7%
Other agric. 
products
1.4%Other 
mining
1.7%Chemicals
1.1%Other semi-manuf.
1.2%Other manuf.
2.6%Other
16.0%
Agric. 
products
Other agric. 
products
0.5%
Other semi-
manuf.
8.7%Machinery
21.9%Other manuf.
14.0%Food
17.2%
Other agri. 
products
0.7%
Fuel
22.1%
Other mining
0.4%
Chemicals
16.7%Other semi-
manuf.
8.5%Machinery
21.1%Other manuf.
13.2%Mining
Mining
Other
1.4%Other
0.1%
 WT/TPR/S/274 Trade Policy Review 
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  Chart I.3
Trade in goods by trading partner, 2006 and 2011a
2006 2011
(a)    Exports (f.o.b.)
Total: US$1,023 millon
(b)    Im ports (c.i.f.)
Total: US$3,002 millon Total: US$5,049 millon
a  Exlcuding free zone trade.
Source: United Nations Comtrade database and authorities.Total: US$2,277 millonCanada
4.4%Other
1.1%
United States
34.2%
El Salvador
8.7%Other America
28.1%Other 
Europe
Mexico
14.3%AmericaUnited States
30.5%EU (27)
15.3%
Other America
17.5%Other Europe
0.4%Asia
5.4%Other
1.4%
Europe
AmericaEurope
United States
20.9%
Costa Rica
8.5%
Other America
27.9%EU (27)
5.6%Other Europe
0.5%Japan
3.7%
China
7.0%Other 
Asia
5.0%Other
1.6%
United States
18.8%
Bol. Rep. of 
Venezuela
15.7%
Costa Rica
8.6%Other America
23.7%EU (27)
5.2%Other Europe
0.5%
Mexico
8.1%China
9.2%Other 
Asia
5.2%Other
2.1%
America AmericaEurope
EuropeAsia
AsiaEU (27)
10.8%
El Salvador
14.6%
Japan
2.9%Bol. Rep. of 
Venezuela
13.3%
Bol. Rep. 
of 
Venezuela
4.9%Canada
12.0%Bol. Rep. of 
Venezuela
0.2%Asia
2.1%(US$ million)
 Nicaragua WT/TPR/S/274 
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  (ii) Foreign direct investment 
19. The evolution of foreign direct investment (FDI) in Nicaragua for the period 2006-2011 
(Table I.3) largely reflects the execution of major wo rks and projects related to the installation of new 
capacities for electricity generation, oil refining and telecommunications (mobile telephony).  Other 
sectors with appreciable FDI inflows are manufac turing, especially under the free zone regime, 
mining and trade.  In 2011, the ratio of investment  inflows to Nicaragua's GDP was 13.3 per cent, the 
highest in the Central American region.  Yet despite a relatively stable socio-political and 
macroeconomic context, FDI inflows to Nicaragua  have still not reached their full potential.  
According to the World Bank's latest survey of the business sector, the main obstacles include 
frequent power outages and unfair competition fro m the informal sector, whilst concerns over 
political instability and access to funding  seem to have lessened somewhat.6 
Table I.3 
Balance of foreign direct investment by recipient economic sector, 2005-2011 
(US$ million) 
 2005 2006 2007 2008 2009 2010 2011 
Energy 23 20 73.1 214.6 222.4 158.9 271.1 
Telecommunications 109 50.10 145.1 196.7 61.6 118.72 160.3 
Free zones 77.1 49 120.4 88.9 60.8 96.6 130.2 
Trade and services 8 19.7 9.8 41.1 2.7 7.6 118.4 
Forestry 0 0 0 6.7 30.7 36.5 1 
Tourism 14.3 19.1 21.7 5 29.3 51.2 26.5 
Mining 0 1.9 11.3 39.1 11.9 25.3 114.3 
Other 6.7 122.5 0.3 34 14.8 13.2 146.2 
Total 238.2 282.3 381.7 626.1 434.2 508 967.9 
Source : Ministry of Development, Industry and Trade (MIFIC). 
20. Between 2006 and 2011, Mexico was the bigg est foreign investor with a total of 
US$602.3 million (Table I.4).  Other major inv estors were the United States, Canada and 
the Bolivarian Republic of Venezuela.  According to  the authorities, FDI inflows to Nicaragua came 
from 41 countries in 2011, as compared to 22 in 2007. 
Table I.4 
Balance of foreign direct investme nt by country of origin, 2005-2011 
(US$ million) 
 2005 2006 2007 2008 2009 2010 2011 
Bolivarian Republic of Venezuela 0 0 46.5 132.3 147.4 29.2 45 
United States 36 70.8 83.6 51.9 57.8 211.9 158.8 
Mexico 85.5 54.4 128.4 164.4 51.1 88.8 115.2 
Canada 43.2 7.4 32.5 69.4 49.8 52.7 255.5 
Guatemala 3 8.3 0 75.1 29.3 1 37.6 
Spain 35.8 11.4 44.7 59 26.4 33.3 115.6 
Others 35.3 130 46 74 72.4 91.1 240.3 
Total 238.2 282.3 381.7 626.1 434.2 508 967.9 
Source : Ministry of Development, Industry and Trade (MIFIC). 
                                                      
6 World Bank (2011). WT/TPR/S/274 Trade Policy Review 
Page 12 
  
  (5) OUTLOOK  
21. Growth is expected to slow somewhat in th e short term.  The IMF forecasts GDP growth of 
about 3.7 per cent in 2012 and 4 per cent in 2013.  Infla tion for its part is expected to rise to 9 per cent 
in 2012 before declining slightly to 8 per cent in 2013.7  The BCN's short-term projections are similar;  
for the medium term, the authorities expect growth  to accelerate gradually to 4.5 per cent in 2016, 
while inflation is expected to hold steady at around 7 per cent for the period 2014-2016.  The IMF estimates that the consolidated public sector will pos t a deficit of around 0.5 per cent of GDP in 2012 
and 2013 owing to some spending pressure.  The bala nce-of-payments current account deficit will rise 
and is expected to exceed 20 per cent of GDP in 2012, owing to weaker world demand and a rising oil 
bill.  The economic growth outlook is also being a ffected by greater uncertainty surrounding future 
development aid flows. 
22. The Nicaraguan economy is vulnerable to outside  turbulence, including climatic factors and 
world market commodity price fluctuations.  Alth ough the share of renewable sources in Nicaragua's 
energy matrix is expected to reach 78.9 per cent by 2017, the country's dependence on imports of oil 
products will remain relatively high in the short term and could give rise to contingent liabilities for 
the Government in the future.  Despite the improved revenue flow, the dynamics of a still 
unsustainable government debt could be affect ed by pressures arising from the wage increases 
approved in 2011 and from the social security syst em, especially if the latter is not reformed soon.
8  In 
the light of these structural shortcomings, budget an d trade imbalances are very likely to persist over 
the medium term. 
                                                      
7IMF Public Information Notice No. 12/75, "Executive Board Concludes 2012 Article IV. Consultation 
with Nicaragua", 12 July 2012.  Viewed at:  h ttp://www.imf.org/external/ np/sec/pn/2012/pn1275.htm. 
8 In 2011, the Central Government raised public-sector salaries (9.5% in the health and education 
sectors and 7.5 per cent for the remaining public institutions), as well as the minimum wage (by 13%) and effected a de facto increase in the minimum pensi on granted by the Nicaraguan Social Security Institute .  
According to independent actuarial calculations cited by th e IMF, unless changes are made  to the social security 
system it will become insolvent in 2021 (IMF, 2011).