Nicaragua WT/TPR/S/167 
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IV. TRADE POLICIES BY SECTOR 
(1) OVERVIEW  
1. Since the previous review in 1999, the relative sizes of Nicaragua's ec onomic sectors have not 
undergone any major changes.  Agriculture is still the key sector and accounts for over 80 per cent of 
exports of goods as well as employing one third of the labour force.  In recent years, producers of 
export-oriented crops have achieved a greater incr ease in productivity compared to farmers growing 
traditional crops;  the output and efficiency of the Nicaraguan fishing industry has also continued to grow.  Average MFN tariff protection in the agri cultural sector (Major Division 1 of the ISIC, 
Revision 2) rose from 6.6 per cent in 1999 to 8.5 per cent in 2005;  nevertheless, for some poultry cuts 
the tariff reaches 170 per cent. 
2. Gold is Nicaragua's leading mineral export.  It  also exports silver, limestone, basalt, building 
stone and sand.  All Nicaragua's natural resources belong to the State, which grants concessions to 
exploit them.  Nicaragua's major import is crude petroleum (some 10 per cent of total imports of 
goods).  Only just over half the population has access to electricity.  The mining sector's basic legal 
framework dates from the 1950s and 1960s and the sector is being reorganized.  The average 
MFN tariff applied in mining and quarrying is 2.2 per cent (Major Division 2 of the ISIC, Revision 2), 
compared to 2 per cent in 1999. 
3. The majority of Nicaragua's manufacturing sector produces foodstuffs and beverages and 
three quarters of exports of manufactures are com posed of processed agricultu ral products made from 
meat, milk and sugar.  In general, Nicaragua's te xtile and clothing industry has competed successfully 
at the international level since the expiry of the Multifibre Arrangement.  Nicaragua has recently been 
promoting the creation of free zones, which have benefited the manufacturing sector (for example, by 
providing tariff concessions and tax credits).  The average MFN tariff on manufactures (Major Division 3 of the ISIC, Revision 2) is 5.7 per cent;  if food processing is excluded, it falls to 4.7 per 
cent. 
4. Nicaragua has adopted measures to overcome so me of the structural problems in specific 
services activities.  The framework for monitori ng financial services has been reinforced, the 
Nicaraguan Telecommunications Company (ENITEL) has been privatized and a policy to open up 
telecommunications is being pursued.  Nevertheless, Nicaragua needs to make substantial improvements in its infrastructure (especially the high ways and ports), and lower the cost of financial 
services, telecommunications and transport in order to enhance the efficiency of other economic 
activities and the competitiveness of its exports.  Nicaragua undertook commitments in various 
services categories under the General Agreement on Tr ade in Services (Table AIV.2);  in financial 
services, however, it maintains an exemption to the MFN regime because of its commitments in the 
Central American Common Market (CACM).  Nicara gua has already made its initial offer in the 
current services negotiations. 
(2) A
GRICULTURE AND RELATED ACTIVITIES  
(i) Main features 
5. Just over one-fifth of Nicaragua's GDP comes from the agricultural sector (agriculture, 
livestock, fisheries, forestry) (9.9 per cent from ag riculture alone), a higher figure than for any other 
Central American country.  In 2004, the sector wa s responsible for 81.3 per cent of all exports of 
goods and five agricultural products alone (coff ee, bovine meat, bovine cattle, groundnuts and sugar 
cane) accounted for nearly half of all exports.  Employment in agriculture and related activities in 
Nicaragua has not increased as rapidly as the size of th e overall labour force.  The sector is still one of WT/TPR/S/167 Trade Policy Review 
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the major sources of employment, however, accounting for 36.1 per cent of all jobs during the period 
2004-2005 (compared to 37.6 per cent in 1999-2000).1 
6. Some 36 per cent of Nicaragua's surface area is devoted to agriculture and raising livestock.  
As can be seen from Table IV.1, Nicaragua increas ed the acreage devoted to the most important 
agricultural crops by 13.8 per cent during the period 1999-2004.  Three out of every four of these 
hectares continue to be used for the production of domestic staple commodities.  The two most 
traditional crops, maize and beans, occupy 62.6 per cent of the area under crops.  In terms of value of 
production, however, green coffee is Nicaragua's l eading crop.  In 2004, it accounted for 22.3 per cent 
of the value of agricultural production.  Other im portant export crops were sugar cane (11.5 per cent 
of production in value terms), groundnuts (6.9 per cen t), tobacco (1.6 per cent), and bananas (1 per 
cent).  Taken as a whole, however, products for domestic consumption accoun ted for well over half 
(55.2 per cent) of the total value of agricultura l production.  Chief among these crops were beans 
(11.6 per cent), rice (9.5 per cent), maize (8.4 per cent) and sorghum (1 per cent).2 
7. Producers of export-oriented crops have improve d their productivity more than the traditional 
sector in recent years.  The figures in Table IV.1 show  that per hectare yields increased for five of the 
six export crops over the period 1999-2004, but the same was true for just three of the five crops for 
domestic consumption.  Only one traditional crop increased its yield by more than 20 per cent, 
whereas three of the six export crops managed to do so. 
8. Since the previous review, exports of agricu ltural products have grown more rapidly than 
imports.  As a result, the agricultural trad e surplus rose from US$107.1 million in 1999 to 
US$260.6 million in 2004.  Exports of agricultural and livestock, fisheries and forestry products 
increased by 46.3 per cent over the period 1999-200 4, from US$436.4 million to US$638.6 million.  
Recently, there has been an increase in the volumes  of meat, sugar, livestock, coffee and other non-
traditional products exported, whereas exports of bana nas and beans fell because of a decline in their 
production levels.  The major destinations for Nicara gua's agricultural exports are the United States of 
America and Central America. 
Table IV.1 
Agriculture:  area, pro duction and yields, 1999-2004 
(Thousands of hectares and thousands of metric tonnes) 
  1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 1999-04a(%) 
Export 
products: Area ('000 ha) 189.87 196.05 183.20 177.78 193.53 207.03 9.04 
Coffee (green) Area ('000 ha) 100.37 108.29 109.28 115.65 115.65 115.65 15.22 
  Production 
('000) 94.49 82.03 66.66 60.11 82.55 55.74 -41.01 
  Yield 0.94 0.76 0.61 0.52 0.71 0.48 -48.94 
Area ('000 ha) 55.87 51.22 40.77 41.26 43.95 45.47 -18.61 Sugar cane  
Production 
('000 ST)b 183.97 175.85 156.9 155.64 204.59 200.93 9.22 
  Yield 3.29 3.43 3.85 3.77 4.66 4.42 34.35 
Area ('000 ha) 23.04 22.41 21.58 16.07 23.10 26.87 16.62 Groundnuts 
(natural) Production 
('000 ) 67.97 67.76 80.48 60.24 93.67 104.15 53.23 
  Yield 2.95 3.02 3.73 3.75 4.05 3.88 31.53 
Table IV.1 (cont'd)
                                                      
1 Calculations based on the information provided by the Nicaraguan authorities. 
2 The data on the value of agricultural production in this paragraph come from the Central Bank of 
Nicaragua (2004), page 51. Nicaragua WT/TPR/S/167 
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  1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 1999-04a(%) 
Area ('000 ha) 8.09 11.34 8.29 2.36 8.26 16.35 102.10 Sesame 
(natural) Production 
('000) 4.08 4.24 4.17 1.00 5.35 9.02 121.08 
  Yield 0.50 0.37 0.50 0.42 0.65 0.55 10.00 
Area ('000 ha) 0.78 0.94 1.33 1.33 1.56 1.75 124.36 
Production 
('000) 1.17 1.48 1.83 1.99 2.26 2.72 132.48 Havana 
tobacco (un-
manufactured) 
Yield 1.49 1.57 1.38 1.50 1.45 1.56 4.70 
Area ('000 ha) 1.72 1.85 1.95 1.11 1.01 0.94 -45.35 Bananas 
(boxes) Production 
('000 boxes)c 178.37 114.90 151.91 133.92 140.14 124.22 -30.36 
  Yield 104.01 62.17 77.78 121.09 139.03 132.73 27.61 
Area ('000 ha) 591.93 692.78 680.83 780.66 838.85 682.47 15.30 Products for 
domestic 
consumption: Production 
('000) 679.92 847.95 847.97 1007.32 1113.68 868.14 27.68 
Maize Area ('000 ha) 261.44 326.42 318.34 375.07 395.02 324.46 24.10 
  Production 
('000) 297.62 411.33 418.98 498.41 587.36 442.80 48.78 
  Yield 1.14 1.26 1.32 1.33 1.49 1.36 19.30 
Beans Area ('000 ha) 208.87 223.48 231.01 250.48 290.21 232.56 11.34 
  Production 
('000) 134.91 172.81 176.46 196.53 229.85 172.88 28.14 
  Yield 0.65 0.77 0.76 0.78 0.79 0.74 13.85 
Rice Area ('000 ha) 61.52 93.18 84.41 92.49 93.34 74.13 20.50 
  Production 
('000) 135.83 175.88 159.69 190.35 173.58 148.24 9.14 
  Yield 2.21 1.89 1.89 2.06 1.86 2.00 -9.50 
Sorghum Area ('000 ha) 51.07 46.45 44.96 60.33 56.43 47.61 -6.78 
  Production 
('000) 91.9 81.52 88.69 117.52 115.63 96.38 4.87 
  Yield 1.80 1.76 1.97 1.95 2.05 2.02 12.22 
Soybeans Area ('000 ha) 9.03 3.25 2.11 2.29 3.85 3.71 -58.91 
  Production 
('000) 19.66 6.41 4.15 4.51 7.26 7.84 -60.12 
  Yield 2.18 1.97 1.96 1.97 1.89 2.11 -3.21 
Total Area ('000 ha) 781.80 888.83 864.03 958.44 1,032.38 889.50 13.78 
a Rate of growth. 
b Thousands of short tons. 
c Thousands of boxes. 
Source : Information provided by the Nicaraguan authorities. 
(ii) Policy developments 
9. Nicaragua's main objectives in the agricultura l and forestry sector are to enhance its 
competitiveness, to support diversification and agro -ecological crop management.  The Ministry of 
Agriculture, Livestock and Forestry has published the 2003 Strategy3, which sets the general objective 
of promoting the generation of national agricultural,  livestock, forestry and agro-industrial wealth so 
as to raise incomes and distribute them more e quitably, and achieve sustained and incremental 
improvements in the welfare of the rural and ag ricultural population, underpinned by demand, 
markets, profitability, competitiveness, value adde d, the generation of jobs, local and regional 
development and the conservation of the environm ent and natural resources.  Even though this 
strategy document states that sectoral policy takes in to account globalization trends and also reaffirms 
                                                      
3 Ministry of Agriculture, Livestock and Forestry (2003). WT/TPR/S/167 Trade Policy Review 
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that the major challenge facing Nicaragua's economy  in the short and medium term is competitive 
integration into the global economy, trade policies per se  play a secondary role in the Strategy.4 
10. The following are some of the major constrai nts facing Nicaragua's agricultural sector:  low 
levels of organization and integrati on of the sector's vertical chains;  lack of, inadequate, or difficult 
access to marketing resources;  high transaction costs;  partial impact of existing market information 
systems;  limited use of sales procedures;  limite d implementation of quality and sanitary management 
systems and concepts;  high prices for fuel and marketing costs;  and difficulty in procuring 
domestically produced quality packaging materials.5 
11. The World Bank has recommended that Nicar agua focus on the transition towards non-
traditional, value-added agriculture and on ways to  boost exports as the potential engine for future 
agricultural growth.6  Given that Nicaragua's domestic market  is small and relatively poor, only the 
vast demand of external markets can fuel the su stained production growth needed for meaningful 
poverty reduction. 
12. Nicaragua did not make any specific commitments in the Uruguay Round on phasing out 
financial support to agricultural producers;  it thus  abides by the general rules in the WTO Agreement 
on Agriculture on domestic support and export subsidies.7  As part of its structural adjustment and 
trade liberalization process, Nicaragua abolished all domestic support measures that might be the 
subject of reduction commitments.  Since 1995, Ni caragua has been making annual notifications of 
Green Box support for agricultural producers;  this type of support is not included in the reduction 
commitments. 
13. Table IV.2 summarizes the sectoral projects in which Nicaragua gave the agricultural sector 
assistance during the period 1999-2004.  Of the 13 pr ojects mentioned, five related to disasters or 
sanitary or phytosanitary risks;  three to poverty, food security or staple cereals;  and two (including the largest) to the forestry sector. 
14. Law No. 217, the General Law on the Environment and Natural Resources
8, includes 
provisions that require the Ministry of the Environment and Natural Resources (MARENA) to fix 
export quotas for species of fauna, and their hunting a nd capture (Article 71);  other provisions require 
the competent authorities to monitor all processes, machinery and equipment,  inputs, products or 
waste whose import, export, use or handling could degrade the environment or natural resources or 
affect human health (Article 112);  and MARENA is allowed to authorize the export of toxic waste if 
there is no satisfactory procedure in Nicaragua to rend er it harmless or destroy it, but this requires the 
express consent of the receiving country that the waste will be eliminated there (Article 133). 
15. The Nicaraguan authorities believe that organi c products offer good prospects for export to 
niche markets.  In order to draw up the national strategy to promote organic production in Nicaragua, 
                                                      
4 Most of the issues addressed in the document deal with the productivity and welfare of the rural 
population, as well as those steps that can be taken domestically to give them wider opportunities.  The first of 
the specific objectives, for example, is to establish wide ly diversified production structures for products and 
services with high value added making intensive use of high technology and extremely productive and competitive from the farm to the consumer's table.  None of these specific objectives proposes the adoption of 
special measures with respect to the Doha  Development Agenda (DDA), for example. 
5 World Bank (2003), pages 7 and 8. 
6 Ibid., page 2. 
7 Section 1 of Part IV of Schedule XXIX of 15 April 1994;  WTO document G/AG/AGST/Vol.2;  and 
Article 15, Article 9.4 and Article 7.2(b)  of the WTO Agreement on Agriculture. 
8 La Gaceta  No. 105 of 6 June 1996. Nicaragua WT/TPR/S/167 
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surveys were undertaken which identified 54,271 hectar es that were either certified or in the process 
of being certified for organic production, including 17,567 hectares of export crops.  The products are the following:  coffee, sesame, cocoa, soybeans, beans, sorghum, cashew nuts, groundnuts, maize, 
cassava, tobacco, garden produce, car damom, flowers, turmeric, rice, Jamaican sorrel, ginger, annatto, 
basil, lemon grass, aromatic plants, mungo beans, oranges, avocados, chayote, lemons, bananas, 
passion fruit, pineapple, granadillas, honey, and bovine cattle.  In 2002, 2 per cent of Nicaragua's total 
exports were organic products.  Certified organic co ffee is the leading product and covers 83 per cent 
of the total certified acreage under plant producti on and 87 per cent of the transition acreage, it also 
generates 89 per cent of the annual earni ngs from exports of organic products.
9 
16. There is minimal foreign investment in organic products. Some foreign firms have expressed 
concern that Law No. 364 (enacted in October 2000 and published in January 2001) retroactively 
imposes liabilities on foreign companies that manufactu red or used the chemical pesticide DBCP in 
Nicaragua.10 
17. Nicaragua bound all its agricultural tariffs duri ng the Uruguay Round, generally at a ceiling of 
40 per cent.  "Tariffication", that is to say the co nversion of non-tariff measures into customs tariffs, 
has led to some exceptions to this rule (Chapter III(2)(iv)(b)).  The MFN tariffs applied are generally 
below the bound levels (Chapter III(2)(iv)(a)). 
Table IV.2 
Agricultural support programmes, 1999-2004 
(Thousands of US$) 
 Number and type of programme Institutiona Value 
1 Sustainable Forestry Investment Pr ogramme:  research and promotion of 
sustainable forestry and facilitation of access to forestry information MAG-FOR and MHCP 26,749.20 
2 Staple Grains Marketing Programme:  support for small producers by providing 
storage infrastructure, training and techni cal assistance relating to staple grains MAG-FOR and MHCP 12,604.43 
3 Agricultural and Livestock Technology Programme, Phase I, 3371-NI:  linking 
research, technical assistance and training in order to develop a more integrated 
agricultural and livestock technology system , with the participation of universities 
and producers' associations MAG-FOR 8,331.54 
4 Support for Rural Families in Zones A ffected by Drought and Flooding:  support 
for programmes aimed at resolving problems of extreme poverty and environmental degradation, rehabilita tion, restoring the production base, 
diversifying production, enhancing the productivity of natural resources and 
lessening the population's vulnerability  to recurrent natural disasters MAG-FOR 3,105.93 
5 Food Aid for Persons Affected by Di sasters (PMA/OPSR-102121):  food aid to 
persons affected by natural disasters;  rehabilitation of productive farms using 
food for work schemes;  care of vulnera ble groups;  soil and water conservation;  
rebuilding of the production infrastructure, training and food security MAG-FOR 2,299.27 
6 Animal Health Epidemiological Monitoring Programme (PROVESA):  
development of the animal health ep idemiological monitoring service through 
notification and rapid diagnosis of animal  disease, inspection and animal health 
certification of products and by-products of animal origin MAG-FOR 1,579.12 
7 Green Municipalities:  support to gree n municipalities for conversion to and 
diversification of sustainable producti on, increased productivity, rehabilitation, 
reducing vulnerability, and environmental education MAG-FOR 1,086.56 
8 Screw Worm Eradication Programme:  contro l and eradication of the screw worm;  
technical activities in the field, epid emiology, quarantine, quality control, 
dissemination and extension MAG-FOR 1,034.77 
Table IV.2 (cont'd)
                                                      
9 National Strategy for Promoting Organic Production in Nicaragua. 
10 DBCP (1,2-dibromo-3-chloropropane) was banned in the United States in 1979 when the 
Environmental Protection Agency cancelled its certification for most uses. WT/TPR/S/167 Trade Policy Review 
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 Number and type of programme Institutiona Value 
9 Strengthening the Phytosanitary Monitoring Programme (PROVISAVE):  support 
for the strengthening of the national phy tosanitary monitoring programme through 
rapid diagnosis of pests and diseases, in spection and certifica tion, implementation 
of plans to eradicate pests and diseases , quarantine, inspection of agrochemicals 
and seeds MAG-FOR 865.87 
10 Rural Development Initiative:  support for the rural development initiative by 
promoting production techniques to b oost productivity, lower costs, lessen 
climatic and environmental vulnerability;  preventing food supply shortages when 
natural disasters occur MAG-FOR 113.44 
11 MAG-FOR and Factor Development Support Programme:  support for 
programmes aimed at developing community food security factors, building 
capacity for the elaboration and control of  policies, promotion of strategic plans 
for local rural development, conduct of sectoral studies;  study of demand for 
rectification and legalization of agra rian property deeds;  strengthening, 
diversification and promotion of t echnological development in dry zones MAG-FOR and MHCP 102.22 
12 Master Forest Management Plan (INAFOR):   master plan for forest management 
to prevent natural disasters in the northern Pacific zone MAG-FOR, MHCP and 
INAFOR 46.89 
13 Agricultural, Livestock and Forestry Hea lth Services:  modernization of sanitary, 
agricultural, livestock, agrifood and forest ry services;  ensuring that the major 
producers of products of animal, plant and forest origin comply  with the sanitary 
requirements, national and international trade rules and standards by improving 
the quality of supply of phytosanitary and animal health services and food safety 
services;  institutional support;  extension and strengthening of services;  sanitary 
education MAG-FOR and MHCP 3.22 
 Total  57,922.46 
a MAG-FOR:  Ministry of Agriculture, Livestock and Forestry. 
 MHCP:  Ministry of Finance and Public Credit. 
 INAFOR:  National Forestry Institute. 
Source : Information provided by the Nicaraguan authorities. 
18. Average tariff protection in the agricultural sect or (Major Division 1 of the ISIC, Revision 2) 
rose from 6.6 per cent in 1999 to 8.5 per cent in 20 05.  Some agricultural products such as rice and 
poultry cuts face much higher tariffs.  The tari ff on processed rice is 61 per cent (down from a 
maximum of 103.5 per cent in 2002)11, while certain poultry cuts (HS 0207.13 and 0207.14) are 
subject to a tariff of 170 per cent. 
19. The increase in the level of tariff protection in general and for agricultural products in 
particular is partly attributable to the efforts being made to harmonize the CACM's common external 
tariff (CET).  In May 2003, for example, Nicaragua  raised tariffs on cheese and certain other dairy 
products from non-CACM countries to a CET of 40 pe r cent from the previous rate of 15 per cent.  
On the other hand, tariffs on maize, previous ly higher, now range from 10 to 15 per cent. 
20. The World Bank has argued that, although it is tempting to press for higher border protection 
to deal with small farmers' income problems, it may prove to be a counter-productive route.  Among 
the alternatives proposed to help Nicaragua's traditi onal crops are targeted programmes to improve the 
roads, further development in the financial sector, ta rgeted (temporary) income transfers, agricultural 
research and technology transfers, and initiatives to promote non-farm employment opportunities in 
rural areas.12 
                                                      
11 The MFN tariff applied will fall from 61 to 60 per cent pursuant to Ministerial Agreement 022-2006. 
12 World Bank (2003), page 18. Nicaragua WT/TPR/S/167 
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21. Nicaragua has abolished price bands for imports of maize, sorghum and rice 
(Chapter III(2)(ii)).13 
22. During the period 2002-2003, Nicaragua used the special safeguard measure provided in the 
WTO Agreement on Agriculture for four ty pes of rice (Chapter III(2)(vi)(b)). 
23. Nicaragua imposes import quotas for rice in the husk, yellow maize, powdered milk, sugars, 
soybean flour and particular cuts of some types of meat (Chapter III(2)(iv)). 
24. Unprocessed precious woods, as well as lobs ters in the reproductive phase and estuary 
shrimps in the larval phase ar e the subject of specific export bans (Chapter III(3)(iii)(a)). 
(iii) Crops 
25. One key feature of Nicaragua's agricultural economy is the division between those crops 
intended for domestic consumption and those primar ily grown for export.  In general, the latter 
category can be subdivided into tradit ional and non-traditional export crops.14  Both types of crop 
compete for the State's attention and resources and present different perspectives on the challenges and opportunities offered by the global economy.
15 
(b) Crops for domestic consumption 
26. Between 1999 and 2004,  agricultural production for domestic consumption increased by 
10.8 per cent (measured in metric tonnes), while Nicaragua's population grew by 14 per cent over the 
same period.  Imports of agricultural, fisheries and forestry products rose by 14.8 per cent, from 
US$329.3 million in 1999 to US$378 million in 2004.  Rice imports amounted to US$36.3 million in 
2004 (1.6 per cent of total imports of goods and 9.6 pe r cent of imports of agricultural products).  The 
staple commodities imported by Nicaragua in 20 04 included durum wheat (US$19 million), yellow 
maize (US$14 million) and other cereal products  (US$11.6 million), wheat and meslin flour 
(US$5.6 million) and maize flour (US$4.4 million).  Nicaragua does not import beans but exports red and black beans. 
27. The distinction drawn between domestic and e xport crops is not absolute and some products 
have changed from being import subs titution products to being exports to niche markets.  Some of 
Nicaragua's major agricultural exports in 2004 were beans
16;  Adzuki red ("small red") beans 
amounting to US$13.4 million;  black beans (US$3.2 million);  and other beans (US$2.2 million), as well as rolled grains or in flaked oats (US$2.9 million).
17  The authorities consider that Nicaragua has 
                                                      
13 From 1992 to July 1997, Nicaragua imposed variable import duties on certain crops for domestic 
consumption under a price band system, which represente d the major part of the as sistance available to the 
agricultural sector (WTO, 1999). 
14 According to the classification of the Central Bank of Nicaragua (BCN), for export purposes 
traditional products are:  coffee, cotto n, sesame, sugar, molasses, meat, sh rimps, lobsters, bananas, gold and 
silver.  Non-traditional products are:  bovine cattle, t obacco, groundnuts, beans, mangos, quequisque, onions, 
ferns, plantains, pig meat, melons and tomatoes. 
15 The high nominal protection rates for certain importable commodities ma y constrain any export 
strategy for agricultural products by creating price signals  that make production of importables more attractive 
than production of exportables and stand in contrast w ith the negative protection rates shown for exportables.  
World Bank (2003), page 8. 
16 The varieties of beans grown in Nicaragua are:  red (DOR 364, INTA Jinotepe, INTA Masatepe, 
INTA Canela, INTA red) and black (Brunca, Negro Huasteco, Negro Tacana, Jamada, Ita Nueva Guinea and 
Huaymi). 
17 Calculations based on the information provided by the authorities. WT/TPR/S/167 Trade Policy Review 
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viable prospects for export to niche markets and for developing the processing industry with pre-
cooked, canned and packaged products. 
28. Nicaragua also appears to be making the tr ansition to garden produce such as tomatoes, 
onions, sweet peppers and lettuce, inter alia .  The authorities hope that producers of these crops will 
not only continue to substitute imports but also gr adually start to export.  Some of the increased 
production of tomatoes and onions is already being exported to countries such as Guatemala and the United States of America.  The fruit, vegetables a nd garden produce exported by Nicaragua in 2004 
included fresh tannia (US$2.6 million), mangoes (US$2.3 million), okra (US$1.7 million) and melons (US$1.5 million).  The authorities also hope that th e industrial development of canned fruits, juices, 
jams and other fruit-based products will enable them to penetrate international markets. 
(c) Export crops 
29. Coffee is still one of the main engines of growth for Nicaragua.  Some 30,400 households 
grow coffee and around 150,000 to 200,000 househol ds earn part of their income from coffee 
production, processing and marketing.  Nicaragua's  coffee producers have taken several steps to 
improve the image and marketing of their produc t internationally, notably special, organic and 
selected coffees.  These include th e electronic sale of coffee.  In 2004, green coffee was still 
Nicaragua's leading export (US$126.8 million) and accounted for 17.4 per cent of total exports.  In the 
same year, Nicaragua exported US$6 million worth of instant coffee. 
30. The area of land devoted to coffee production has increased in recent year s, but the level of 
production has declined.  The yield in the 20 04-2005 season was far below that during the 
1999-2000 season (Table IV.1).  There are various possi ble explanations for this decline:  (i) during 
the 1990s, especially in 1995-1996, renewal of co ffee plantations was encouraged, backed up by 
funds from the Central American Bank for Econ omic Integration (CABEI), and the area under 
cultivation increased by 25,600 hectares;  (ii) as it is a perennial crop, coffee needs four years to reach 
full maturity, as can be seen from the cyclic tre nds in production;  (iii)  during the 1999-2000 season, 
the area replanted in the early 1990s started to produce, thereby contributing to higher yields during 
this period;  and (iv) in 2001, the III
rd National Agriculture and Liv estock Census (CENAGRO) was 
conducted and provided new da ta for the area under coffee, which became the official figures and are 
higher than the previous ones. 
31. Nicaragua is increasing production of oilseeds for direct consumption and for industry, 
particularly for oils and oilseed cake.  In 2004, it exported groundnut s worth US$39.7 million 
(5.5 per cent of all exports of goods), followe d by crude groundnut oil (US$6.1 million), sesame 
(US$2.6 million) and crude palm oil (US$0.7 million).  Groundnuts have shown a sharp increase, mainly because of the larger volumes sold to the Me xican and European markets.  It is hoped that 
groundnut exports will benefit fro m the Central America-Dominican Republic Free Trade Agreement 
with the United States (CAFTA),  which has a quota for duty-free export to the United States market 
(Chapter II(4)(ii)(c)). 
32. The recent increase in sesame production has a llowed exports to double and has led to an 
increase in their price.  Nevertheless, Nicaragua is s till a net importer of some types of oil:  in 2004, it 
imported US$21.8 million worth of edible palm oil,  followed by crude soybean oil (US$12.1 million), 
and crude palm oil (US$5.7 million). 
33. The decline in the number of producers and hi gher shipping costs have affected banana 
production.  Production decreased by 42 per cent in  2000, mainly because of the ash from the 
San Cristóbal volcano, which had a significant im pact on production and quality and prevented the Nicaragua WT/TPR/S/167 
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export of over 1.5 million boxes.  Production rec overed in 2001, essentially as a result of higher 
productivity.  In 2004, banana exports amounted to US$11.2 million (1.5 per cent of Nicaragua's total 
goods exports). 
34. According to the 2003 Strategy, production of cocoa and spices offers good development 
potential, particularly taking as a basis the initiativ es already under way such as the sale of organic 
cocoa, the manufacture of chocolates and cocoa in po wder form, which for a number of years will be 
buying organic cocoa in unlimited quan tities and at higher international prices.18  In 2004, Nicaragua 
exported raw cocoa beans worth US$0.5 million. 
(iv) Livestock 
35. According to the Nicaraguan authorities, livest ock production is of the extensive type and 
accounted for 7.3 per cent of GDP in 2004 (up from the 6.6 per cent in 1999).  As shown in Table IV.3, production has increased rapidly an d steadily.  During the period 1999-2004, meat 
production increased by 56.3 per cent while poultry production rose by 74.5 per cent. 
Table IV.3 
Livestock, 1999-2005 
(Thousands of metric tonnes) 
 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 1999-05a (%) 
Meat  47.71 52.52 53.98 60.01 65.32 74.71 56.59 
Poultry  36.74 42.22 55.29 56.02 61.42 66.68 81.49 
a Rate of growth. 
Source : Information provided by the Nicaraguan authorities. 
36. The volume of meat going to the domestic market fell from 47 per cent in 2000 to 44 per cent 
in 2004, whereas exports of Nicaraguan bovine me at rose from 43 per cent to 56 per cent over the 
same period.  Almost 100 per cent of poultry meat  production is for the domestic market.  In 2004, 
Nicaragua's chief meat exports c onsisted of bovine meat (US$110.4 million, or 14.6 per cent of 
exports of goods), bovine cattle (U S$35.9 million) and edible offal (US$4.1 million).  One reason for 
the growth in exports of bovine meat has been the problem of bovine spongi form encephalopathy in 
the United States of America.  The restrictions on imports from certain United States sources, coupled 
with an increase in demand caused by the popularity of  low-carbohydrate diets, led to higher prices 
and a "cattle boom" in shipments to the United States.19 
37. Nicaragua's production of cheese and dairy pr oducts has taken advantage of the ethnic 
markets in the United States, as well as the recen t certification of plants in the United States of 
America, Guatemala and El Salvador, and the deve lopment of products such as butter for hotels and 
supermarkets.  Multinational companies such as Pa rmalat and Nestlé now produce in Nicaragua.  
Nicaragua's exports of dairy products in 2004 included cheese (US$22.2 million), whole milk 
(US$6.1 million), ice cream (US$2.7 million) and yoghurt (US$1.5 million). 
38. According to the 2003 Strategy, there are wide  opportunities to engage in the industrial 
processing of meat and livestock products, for ex ample by producing sausages, chemical/medicinal 
                                                      
18 Ministry of Agriculture, Livestock and Forestry (2003), page 16. 
19 In the United States, the value of bovine meat imports from Nicaragua increased from 
US$36.4 million in 2003 to US$57.2 million in 2004, but then slid back slightly in 2005 (US$56.6 million).  Calculations based on the data provided by the United States International Trade Commission. WT/TPR/S/167 Trade Policy Review 
Page 66 
 
 
products, as well as leather and footwear.20  In 2004, Nicaragua exported whole bovine hides 
amounting to US$7.2 million. 
39. It is hoped that the CAFTA will help to promot e exports of agricultural and livestock products 
to the United States market, although the Agreement does not provide for immediate and unrestricted 
free trade in this area.  Meat and dairy products ar e some of the products subject both to tariff quotas 
and special safeguards.  Under the CAFTA, Nicara gua may impose safeguards on certain imports that 
exceed the tariff quotas by specified levels, including  chicken leg quarters, bovine meat and various 
dairy products (liquid dairy pro ducts, powdered milk, butter, che ese, ice cream, etc.).  The United 
States of America, on the other hand, retained th e right to impose safeguard measures on imports of 
certain dairy products (cheese, butter, ice cream, sour cream, etc.).21 
40. The average MFN tariff on meat products is 16.3 per cent, with rates of up to 170 per cent for 
certain poultry cuts, whereas the average ta riff on dairy products is 27.1 per cent. 
(v) Fisheries 
41. Given that Nicaragua has coastlines both on th e Pacific Ocean and the Caribbean and that 
water accounts for 7.8 per cent of its total surface ar ea, it has significant fishing potential.  As can be 
seen from the figures in Table IV.4, both production and efficiency in Nicaragua's fishing industry 
have increased steadily since 2000.  With the excep tion of lobsters, the volume of annual catches has 
grown, as has the volume caught per fisherman.  Nevertheless, according to the authorities, the 
fisheries subsector's contribution to Nicaragua's GDP is still relatively low (2.2 per cent in 2004, 
compared to 1.6 per cent in 1999).  The average MFN tariff on fish is 7.9 per cent, with rates of up to 
15 per cent, mainly on live fish. 
Table IV.4 
Fisheries production, 2000-2004 
(Thousands of metric tonnes) 
 2000  2001  2002  2003  2004  2000-04a 
(%) 
Sea fishing 14.0 14.3 15.4 15.5 15.7 12.2 
   Shrimps 7.9 8.5 8.5 9.4 9.9 25.3 
   Lobsters 2.0 1.3 1.4 1.3 1.4 -30.9 
   Other 4.0 4.5 5.1 4.8 4.3 8.0 
Continental waters 0.4 0.5 0.3 0.3 0.6 62.2 
Total production 14.3 14.8 15.5 15.8 16.3 13.6 
Jobs ('000) 2.9 3.0 3.1 3.1 2.5 -13.8 
Tonnes/fisherman 4.9 4.9 5.0 5.1 6.5 31.8 
a Rate of growth. 
Source : Information provided by the Nicaraguan authorities. 
42. Fisheries provide Nicaragua with growing export opportunities.  Fisheries exports in 2004 
rose by 34.9 per cent compared to 1999.  In 2004, the major products exporte d by Nicaragua were:  
farmed shrimps (US$26.8 million), lobsters (US $21.3 million), sea shrimps (US$9 million), shrimp 
larvae for repopulation (US$2.4 million), and fresh  or chilled fish fillets (US$1.2 million).22  
Nicaragua is nevertheless facing competition in its  major export markets.  Shrimp prices are still 
declining as a result of the oversupply by Asian countries. 
                                                      
20 Ministry of Agriculture, Livestock and Forestry (2003), page 16. 
21 Article 3.17 of the CAFTA provides that the Par ties shall consult on and review the implementation 
and operation of the Agreement as it relates to trade in poultry in the ninth year after its entry into force. 
22 Calculations based on the information provided by the authorities. Nicaragua WT/TPR/S/167 
 Page 67 
 
 
43. According to the authorities, the overall objective in the fisheries subsector is to ensure the 
conservation and sustainable development of hydr obiological resources, making the best use of 
traditional fisheries and promoting diversification of non-traditional fisheries and fish farming.  In this 
context, the policy focuses on the following:  admi nistrative organization of concessions for brackish 
lands for fish farms (particularly shrimps);  decen tralization of the functions of the municipalities 
bordering the Caribbean and the Lake of Nicaragua for the purposes of reorganizing small-scale fishing;  and development of a management plan for the Real Estuary.
23 
44. Law No. 489, Law on Fishing and Fish Farming, enacted in 200424, regulates the fisheries 
subsector.  It gives preference to domestic producers and Article 6 provides that utilization of fisheries 
resources by foreign-registered vessels must co mplement the activities of national vessels, in 
conformity with the conditions and limitations la id down in international agreements and treaties 
ratified by Nicaragua.  Foreign-registered vessels ar e explicitly authorized to carry out scientific or 
leisure fishing or, where appropriate, commercial fishing of freely accessible resources may be authorized, but under no circumstances will an aut horization be given for commercial fishing of 
resources subject to limited access, without prejudice to licences already granted (Article 55).  The 
Law also provides that special licences may be gr anted to Nicaraguan vessels or foreign-registered 
vessels leased or chartered with or without a pur chase option if Nicaraguan natural or legal persons 
are involved or to Nicaraguan companies with forei gn participation (Article 74).  There is also a 
provision in the Law giving exemption until 30 June  2010 for imports and sale of raw materials, 
intermediate goods and capital goods  intended for small-scale fishing and fish farming (Article 111).
25 
45. The subsector is chiefly controlled through a ser ies of concessions and quotas.  The fishing 
concessions include the following:  1,169 hectares of brackish land in the Padre Ramos Estuary;  
18,811 hectares for shrimp farms;  and 30,764 hect ares in the Real Estuary.  The following are the 
current quotas under the annual global catches quota sch eme:  lobsters (2.8 million lbs), Caribbean 
shrimps (4.5 million lbs), Pacific shrimps (0.5 million lbs) and tuna (8,205 cubic metres).  Nicaragua's 
small-scale fishing fleet comprises 268 vessels for the country as a whole and there are 15 processing 
plants (shrimps and lobsters), seven on the Caribbean coast and eight on the Pacific coast, with a 
combined capacity of 342,000 lbs. 
46. Nicaragua still imposes a ban on the export of  lobsters in their reproductive phase or 
spawning lobsters (with eggs), in the shell (with a sperm receptacle) or moulting, and estuary shrimps 
in the larval or juvenile phase (Chapter III(3)(iii)). 
(vi) Forestry 
47. According to the authorities, in 2004 forestry accounted for 1.4 per cent of Nicaragua's GDP, 
compared to 1.1 per cent in 1999.  Of Nicaragua 's 13 million hectares, 5.3 million have forestry 
potential.  In addition, 3.5 million hectares can be us ed for agroforestry or pasture.  Although 73 per 
cent of Nicaragua's territory has considerable agrofo restry potential, currently 5.2 million hectares are 
being used for agriculture and pasture, 2.1 m illion are protected areas and 500,000 hectares are used 
for other purposes.  There are approximately 250,000 agriculture and livestock farms covering an area 
of 6.2 million hectares.  Of this total, some 9 per cent is woodland of some kind and another 12 per 
                                                      
23 A Code of Good Practice for shrimp farming is being developed and a satellite monitoring system is 
being implemented for the Caribbean and the Pacific Ocea n in order to monitor industrial vessels by satellite. 
24 La Gaceta  No. 251 of 27 December 2004. 
25 In relation to tariff exemptions, the Article also provides that the procedure laid down in 
paragraphs 2 and 3 of Article 126 of Law No. 453 (Fiscal Equity Law), published in La Gaceta  No. 82 of 
6 May 2003, shall be followed. WT/TPR/S/167 Trade Policy Review 
Page 68 
 
 
cent is left fallow or is secondary woodland.26  The average MFN tariff on forestry products is 1.8 per 
cent with peaks of up to 15 per cent. 
48. In 2003, Law No. 462, Law on the Conservation, Promotion and Sustainable Development of 
the Forestry Sector, was enacted.27  This Law designates the MIFIC as the State body responsible for 
administering national forests, which may the subject of concessions or rational exploitation 
agreements (Article 41), and also creates a National Forest Management Authority (Article 3) and a 
National Forestry Commission (Article 5).  The speci al tax incentives in this sector include exemption 
from payment of import tax for enterprises engaged in secondary and tertiary processing which import 
machinery, equipment and accessories to impr ove their wood processing technology, but does not 
include sawmills (Article 38).  The Law also allo ws the export of processed wood in the form of 
furniture, doors, windows and handicrafts (Article 64). 
49. According to the 2003 Strategy, Nicaragua can a dvantageously exploit its forests rationally 
and commercially and manage its w oodlands by promoting the devel opment of timber and non-timber 
activities relating to primary, secondary and tertiary processing.  It is also hoped that the creation of 
large-scale commercial plantations linked to th e pulp, paper and furniture industry and the 
manufacture of articles in precious, semi-precious and commercial woods, as well as the expansion of 
environmental and certification services, will enable  a conglomerate of the first order to emerge.28 
50. Table IV.5 shows the volumes authorized fo r commercial forestry during the period 
2000-2004.  Among Nicaragua's exports in 2004 we re the following timber products:  sawn conifer 
wood (US$3.3 million), sawn virola and caoba  wood (US$2.8 million) and other sawn wood 
(US$2 million).  In the case of sawn timber, 82.7 per cent is consumed on the domestic market while 
the remainder is exported; 9.1 per cent of furn iture and other wood produc ts is exported and the 
remainder consumed domestically. 
Table IV.5 
Volume authorized for commercial forestry, 2000-2004 
(Thousands of cubic metres) 
Year Volume 
2000 111.55 
2001 158.88 
2002 199.26 
2003 176.55 
2004 76.55 
Source : Information provided by the Nicaraguan authorities. 
51. A moratorium on the export of precious w oods ended in 1999;  the export of caoba 
roundwood is still prohibited (Chapter III(3)(iii)).  Exported timber must be less than 8 inches thick, 
regardless of its length, and is subject to a fee of 7.5 per cent assessed on the value of the lumber.  Requests for permission to cut timber must be accomp anied by a forest management plan and permits 
are granted on the basis of an operating plan.  Precious woods must be processed in a sawmill duly 
authorized for this purpose. 
                                                     
 
26 FAO, 2004, Informe Nacional Nicaragua , "Situación actual del sector forestal", Rome.  Available at:  
http://www.fao.org/documents/show_cdr.asp? url_file=/docrep/007/j3531s/j3531s02.htm. 
27 La Gaceta  No. 168 of 4 September 2003. 
28 Ministry of Agriculture, Livestock and Forestry (2003), Estrategia 2003 , page 16, Managua. Nicaragua WT/TPR/S/167 
 Page 69 
 
 
(3) MINING AND ENERGY  
(i) Mining 
52. Mining accounted for 1.2 per cent of Nicaragua's GDP in 2004 (compared to 1.25 per cent in 
1999) and generated 3,310 formal jobs  (0.3 per cent of the labour force)  (Table IV.6).  Nicaragua only 
exports gold and silver;  non-metallic mining is  solely for domestic consumption and for 
construction.29  Gold is the leading mineral export and in 2005 exports amounted to US$42.5 million 
(some 6 per cent of exports of goods).  Nicaragua  has geological gold reserves estimated to be 
208,329.7 troy kilograms.  In 2005, US$0.6 million of  unwrought silver was exported (Table IV.7).  
No special permit is required from the Central Ba nk of Nicaragua (BCN) or any other government 
body for the export of gold or silver. 
Table IV.6 
Value added, formal jobs generated and payment of mining royalties, 1999-2004 
Heading  Unit of 
measurement  1999  2000  2001  2002  2003  2004  1999-2004a 
(%) 
Mining and quarrying Millions of current 
córdobas 272.0 369.4 584.7 603.3 585.7 736.2 170.7 
% of mining value added 
in GDP At current prices 0.62 0.74 1.06 1.05 0.93 1.01 62.9 
% of mining value added 
in GDP At constant 1994 
prices 1.25 1.02 1.12 1.18 1.05 1.20 -4.0 
Formal jobs generated Number of  jobs .. 2 750 2 950 3 006 3 268 3 310 20.4b 
Payment of mining 
royalties US$ thousands .. 1,060.4 1,358.9 1,414.9 1,297.6 2,572.1 142.6b 
.. Not available. 
a Rate of growth. b The percentage changes for formal em ployment generated and the payment of mining royalties are on a 2000-2004 basis. 
Source :  Information provided by the Nicaraguan authorities. 
Table IV.7 
Gold and silver production and exports, 2000-2005 
 Gold Silver 
 Productiona Exportsa Exportsb Productiona Exportsa Exportsb 
2000 118.1 104.8 29.3 51.1 53.4 0.2 
2001 123.5 106.0 29.9 81.4 81.1 0.4 
2002 125.5 109.5 35.1 70.7 70.6 0.3 
2003 110.6 96.2 35.0 65.6 64.3 0.3 
2004 138.7 118.9 45.2 94.8 90.3 0.6 
2005 118.1 102.4 42.5 94.4 96.8 0.7 
a Thousands of ounces. 
b Millions of US$. 
Source : Information provided by the authorities. 
53. All Nicaragua's natural resources are owned by the State.30  MARENA is the government 
authority responsible for the mining sector and its overall objective is to create conditions that will 
encourage investors to devote more resources to pros pecting.  More specifically, it aims to enhance 
competitiveness through clear rules for investors;  to provide skilled human resources and relatively inexpensive labour;  and to ensure that mining of Nicaragua's resources leads to equitable distribution 
                                                     
 
29 Some of Nicaragua's other mineral resources are limestone, basalt, tuff (building stone) and sand. 
30 Pursuant to Article 102 of the Constitution, natura l resources form part of the national heritage.  
Protecting and conserving the environment, development and rational exploitation of natural resources are the 
responsibility of the State. WT/TPR/S/167 Trade Policy Review 
Page 70 
 
 
of wealth so as to achieve a better balance betw een economic profitability and society and between 
exploitation and the environment.  Nicaragua is implementing a series of environmental protection 
measures by issuing environmental impact perm its and permits to utilize resources through the 
MARENA. 
54. In 2001, Law No. 387, Special Law on Mining Pros pecting and Exploitation, partly repealed 
the General Law on Exploitation of Natural Resour ces of 1958 and totally repealed the Special Law 
on Prospecting and Exploitation of Mines and Quarries  of 1965.  This new Law and its regulations of 
January 2002 lay down the legal framework for rationa l use of mineral resources.  Its main provisions 
cover rights of access, concessions, licences for small mines, special permits for small-scale mining, 
and authorization for projects with specific pur poses and/or directly administered by regional 
councils, municipalities or the State.  MARENA grants mining concessions on the basis of mining lots with a maximum area of 50,000 hectares for renewable periods of 25 years.
31  Between 1992 and 
2004, 169 concessions were granted covering 11.1 per cent of Nicaragua's surface area.  A further 
15.4 per cent was the subject of concession applica tions and 30.7 per cent of the whole country is 
composed of protected areas. 
55. Law No. 387 provides incentives for Nicaraguan a nd foreign investment in the form of tax 
exemption for inputs, machinery and other effects used by concessionaires, provided that these are directly related to activities in the mining con cession.  Other laws give additional incentives for 
investment, for example, Article 45 of Law No. 217, General Law on the Environment and Natural 
Resources
32, gives exemption from import duty on equipmen t and machinery considered to use clean 
technology, subject to certification by the MARENA, in consultation with the Ministry of Finance. 
56. The applied MFN tariffs in the mining and quarrying sector (Major Division 2 of the ISIC, 
Revision 2) average 2.2 per cent, with a range of 0 to  15 per cent.  Imports of electricity are duty free. 
(ii) Energy 
57. In 2004, energy and drinking water accounted fo r 2.3 per cent of Nicaragua's GDP (above the 
2 per cent in 1999) and employed 0.5 per cent of the labour force.33  Under the General Agreement on 
Trade in Services (GATS), Nicaragua undertook spec ific commitments on energy-distribution-related 
services (Chapter IV(5)). 
58. The overriding principles of Nicaragua's energy policy are set out in Decree No. 13-2004, 
"Establishment of the National Energy Policy", and include the following:34  to guarantee State 
involvement, where needed, in Nicaragua's supply of energy, when the private sector is absent or not 
interested;  to observe the principle of State owne rship of natural resources;  to ensure the economic 
and financial sustainability of investment projects in the energy sector;  and to guarantee the supply and utilization of national fossil fuels always b earing in mind protection of the environment. 
                                                     
 
31 Holders of mining concessions must meet certain requirements, including payment of fees to 
maintain entitlement or surface royalties, as well as th e extraction duty or royalties.  They must also submit 
monthly reports on production and an annual technical report, as well as complying with environmental, 
hygiene, occupational safety and social liability rules. 
32 La Gaceta  No. 105 of 6 June 1996. 
33 Central Bank of Nicaragua (2004), page 25. 
34 La Gaceta  No. 45 of 4 March 2004.  The Decree also provides that energy policy must be in 
conformity with:  the Constitution, international agreem ents, Nicaragua's legislation and its economic, social 
and environmental policies.  The general principles were drawn up on the basis of more specific directions 
regarding:  the regulatory legal framework, energy supplies, renewable energy, the energy market, rural 
electrification, hydrocarbon s and energy efficiency. Nicaragua WT/TPR/S/167 
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59. The Nicaraguan Energy Institute (INE), as the re gulatory authority, controls electricity rates 
and the selling price of butane gas to the public (Chapter III(3)(iii)). 
(b) Crude petroleum and its by-products 
60. Crude petroleum is Nicaragua's largest import and, in 2004, amounted to US$235.7 million 
(10.7 per cent of total imports of goods).  Other imports include:  gas oil (US$79.9 million), gasoline 
with anti-knock properties (US$30 million), lubrif ying oils and greases (US$13.2 million) and bunker 
fuel (US$12.8 million).  The main suppliers of Nicaragua's petroleum imports are the Bolivarian 
Republic of Venezuela35, Ecuador and Mexico.  Nicaragua, on the other hand, also exported some 
refined and petrochemical products in 2004 including mineral solv ents (US$3.8 million), solvents and 
thinners (US$3.3 million), and other oils and dis tilled tar products (US$1.7 million).  Its exports of 
these products go mainly to the rest of Central America. 
61. The main petroleum by-products consumed in Nicar agua are fuel oil (36 per cent of the total 
in 2004), gas oil (31 per cent) and gasoline (16 per cent).   One third of the fuel oil is used to generate 
electricity.  In 2004, crude petroleum accounted for 58 per cent of imports in the subsector, the 
remainder being refined products.  Nicaragua only has one refinery, in operation since 1968, which 
refines imported crude petroleum;  its current refini ng capacity is up to 20,000 barrels a day.  In 2004, 
47 per cent of this refinery's output was fuel oil an d a large part of the remainder was gas oil (25 per 
cent) and gasoline (14 per cent).  The refinery is owned by a United States multinational company 
which, in 2004, was responsible for 52 per cent of the sales of petroleum by products in Nicaragua;  
Nicaraguan companies supply one fifth of the market. 
62. In 1995, the monopoly of petroleum imports was abolished.  In 1999, Decree No. 106-99 on 
liberalization of import parity prices for petroleum by-products was adopted36, although some price 
controls are still in effect, for example, on lique fied petroleum gas.  Law No. 286, Special Law on 
Hydrocarbons Prospecting and Exploitation of 199837, provides that foreign enterprises must set up a 
branch or establish a company under Nicaraguan law;  during the period of the contract they must also 
appoint and maintain a legal attorney with suffici ent powers to enter into commitments on behalf of 
the company.  Foreign companies must specifica lly renounce any claim to immunity and accept the 
jurisdiction of Nicaragua n courts (Article 11). 
63. Law No. 286 also provides production incentives.  According to Article 60, contractors have 
the right to import the goods and inputs needed for the activities authorized under the contract during 
the prospecting phase and for the first four years after declaring commercially viable discoveries 
under each contract, free of import duty, tariffs a nd other levies on imports, including those that 
require special mention.  Article 61 further allows  a maximum period of two years during which they 
may import goods and inputs intended for the ac tivities authorized under the prospecting and 
exploitation contract, free of import dut y, tariffs and other levies on imports. 
64. Nicaragua imposes a selective consumption tax (IS C) on imports of fuel and it is considered 
to be the highest in Central America (Chapter III(2)(iv)(e)). 
                                                      
35 The Bolivarian Republic of Venezuela has offered to  sell Nicaragua gasoline, diesel and fuel oil at 
concessional rates, but no agreemen ts have been finalized to date. 
36 La Gaceta  No. 170 of 6 September 1999.  It repealed Articles 11, 12, 13, 14 and 16 of 
Decree No. 56-94, "Regulations on the Import and Marketing of Hydrocarbons", and amended Article 15 of this 
Decree. 
37 La Gaceta  No. 109 of 12 June 1998. WT/TPR/S/167 Trade Policy Review 
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(c) Electricity 
65. Nicaragua consumes less electricity per capita than the other Central American countries and 
Panama.38  In 2004, 55 per cent of the total population had access to electricity (45-50 per cent in the 
case of the rural population).39  As can be seen from Table IV.8, during the period 1999-2004 net 
generation of electricity increased by 33.3 pe r cent, while overall consumption per capita was 
relatively stable over the period.  Nevertheless,  problems remain and, according to one poll of 
Nicaraguan firms, 5.9 per cent of sales are lost because of electrical outages.40 
Table IV.8 
Relative levels of electricity production and consumption, 1999-2004 
(1999 levels = 100.0) 
 Nominal 
capacity Actual 
capacity Net 
generation Consumption Per capita 
consumption 
1999 100.0 100.0 100.0 100.0 100.0 
2000 106.1 122.6 105.5 101.9 99.1 
2001 105.5 119.1 116.3 105.2 99.8 
2002 110.3 128.3 121.4 106.8 98.7 
2003 113.7 132.6 126.0 118.0 106.2 
2004 124.3 135.3 132.0 124.8 109.5 
Source : Calculations based on the informa tion provided by the authorities. 
66. In 2004, 72 per cent of Nicaragua's electricity came from oil-fired generators;  other energy 
sources are:  hydroelectric stations (11 per cent)41, geothermal stations (8.7 per cent) and 
co-generation (8.2 per cent).  Nicaragua is ma king efforts to utilize its energy resources more 
efficiently.  To achieve the objective of lessening dependency on external sources of energy and using 
renewable energy sources, hydroelectric, geotherm al and wind-power projects are being developed. 
67. Nicaragua's electricity market is based on La w No. 272, Law on the Electricity Industry, of 
1998.  Pursuant to this Law, the main task of th e National Energy Commission (CNE) is to formulate 
the objectives, policies, strategies and general guide lines for the energy sector as a whole and to draw 
up indicative plans to ensure the development and b est possible use of Nicaragua's energy resources.  
It is also responsible for drawing up the indicativ e plan for expanding generation, whose purpose is to 
examine the future balance between  electricity demand and supply. 
68. Until 1997, Nicaragua's electricity system was entirely State-owned.  The State still has a 
monopoly of electricity transmission, but no longer h as direct responsibility for generating electricity.  
In 2005, the National Assembly enacted Law No. 532, Law on the Promotion of Renewable 
Electricity Generation42, which includes a number of incentives for Nicaraguan and foreign 
investment such as exemption from VAT, import ta riffs, income tax for the first seven years, and 
partial exemption from municipal taxes.  This Law al so gives priority to renewable sources of energy 
in distributing companies' activities and fixes a price band of US$0.055 to US$0.065/kWh for buying energy from renewable sources on the domestic market. 
                                                     
 
38 National Energy Commission (2005), page 10. 
39 Ibid., page 5. 
40 Information available at:  http://rru.worldba nk.org/EnterpriseSurveys/ExploreEconomies. 
41 Nicaragua's gross hydroelectricity potential is estimated to be 1,760 MW, but only 5.9 per cent is 
being used (National Energy Commission, 2003, page 4). 
42 La Gaceta  No. 102 of 27 May 2005. Nicaragua WT/TPR/S/167 
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69. In mid-2002, the privatization programme had al most been completed, with the exception of 
the Hidrogesa hydroelectric company and the thermal stations at Managua and Las Brisas, which are 
still owned by the State.  These companies, whic h are subsidiaries of the Nicaraguan Electricity 
Company (ENEL), account for one third of Nicaragua's  installed capacity.  The remainder consists of 
thermal stations belonging to four private co mpanies, geothermal generation under a concession, 
co-generation in two sugar mills, and a number of small thermal stations which supply some 
32 separate systems.  The major distribution assets of Nicaragua's electricity system, which belonged to the ENEL, were privatized in 2000.  Moreover, ENEL was split into seven companies 
(Chapter III(4)(ii)). 
70. Nicaragua participates less in the regional electricity market than most of the other Central 
American countries.
43  The six Central American governments signed the Framework Treaty for the 
American Electricity Market in 1998.  This regulates the regional electricity market (MER) through a Central American regulatory body called the Regiona l Electricity Interconnection Commission, and a 
regional operator.  These bodies are drawing up detaile d regulations to govern the operation of the 
regional market.  One fundamental component of th e regional market is the Interconnection System 
for Countries in the Central American Isthmus, wh ich consists of a transmission system from the 
Veladero substation in Panama to the El Cajón substation in Honduras.
44 
(4) MANUFACTURING SECTOR  
(i) Main features 
71. In 2005, the manufacturing sector accounted for 18.6 per cent of Nicaragua's GDP (compared 
to 17.1 per cent in 1999) and employed 12.9 per cent of the labour force.45  A large part of this sector 
is composed of industries that meet the WTO definition of agriculture.46  Three quarters of 
Nicaraguan exports of manufactures are processed agricultural products made from meat, milk and 
sugar and eight of the ten largest manufacturing industries in Nicaragua make food products and 
beverages (Table IV.9). 
Table IV.9 
Size of the manufacturing sector, 2002 
 Plants Total 
number of 
workers Intermediate 
consumptiona Gross value of 
productiona Value 
addeda Value added
(%) 
Food and beverages       
Meat processing and meat 
products 395 6,442 3,228,884.2 4,085,498.1 856,613.8 13.2 
Manufacture of sugar 4 1,233 1,138,840.0 1,710,721.4 571,881.4 8.8 
Non-alcoholic beverages;  
mineral waters 34 2,101 722,417.7 1,252,763.3 530,345.6 8.2 
Malt liquors and malt 1 823 327,041.2 792,830.6 465,789.4 7.2 
Table IV.9 (cont'd)
                                                      
43 In 2004, Nicaragua only accounted for 2.5 per cent of the electricity exported among Central 
American countries and Panama and 1.4 per cent of imports.  Calculations based on the data provided by the 
National Energy Commission (2005), page 10. 
44 This line will allow 300 MW to be interchanged compared to the 50 to 100 MW allowed by the 
existing interconnections. 
45 Central Bank of Nicaragua (2004), Informe Anual , page 25, Managua. 
46 According to Article 2 of the WTO Agreement on  Agriculture, processed agricultural products are 
deemed to be agricultural products. WT/TPR/S/167 Trade Policy Review 
Page 74 
 
 
 Plants Total 
number of 
workers Intermediate 
consumptiona Gross value of 
productiona Value 
addeda Value added
(%) 
Manufacture of dairy products 37 798 316,578.8 769,379.5 452,800.8 7.0 
Manufacture of bakery products 654 5,242 345,409.5 638,433.1 293,023.6 4.5 
Manufacture of grain mill products 86 1,241 1,310,162.1 1,599,764.3 289,602.2 4.5 
Other food products  53 1,070 206,357.4 402,959.8 196,602.4 3.0 
Fish processing and fish products 11 1,735 821,714.1 971,175.9 149,461.8 2.3 
Vegetable and animal oils and fats 5 487 338,386.5 448,083.7 109,697.2 1.7 
Spirits;  ethyl alcohol  3 486 265,562.4 370,539.9 104,977.5 1.6 
Animal feed 8 568 243,189.1 317,896.0 74,706.8 1.1 
Other products       
Manufacture of other chemical 
products 34 297 2,499,008.8 2,992,796.0 493,787.2 7.6 
Manufacture of cement, lime and 
plaster 2 650 600,529.3 844,086.2 243,556.9 3.7 
Pharmaceuticals, chemicals and 
botanical products 17 925 96,442.1 224,027.9 127,585.8 2.0 
Manufacture of plastics products 11 1,608 275,932.0 388,244.8 112,312.8 1.7 
Manufacture of furniture 413 2,541 119,186.3 225,311.7 106,125.4 1.6 
Publishing of newspapers, magazines, etc. 10 794 130,409.7 235,496.8 105,087.1 1.6 
Printing 115 1,306 75,521.1 174,704.8 99,183.7 1.5 
Manufacture of footwear 212 2,199 131,805.6 214,534.7 82,729.1 1.3 
Manufacture of metal products 
for structural use 112 1,044 150,361.8 232,918.7 82,556.8 1.3 
Clothing, except leather clothing 204 1,504 90,791.1 162,248.5 71,457.4 1.1 
Soaps and detergents, etc. 24 508 152,374.6 218,514.3 66,139.6 1.0 
Ceramic products  41 638 112,010.8 174,377.4 62,366.6 1.0 
Articles of concrete, cement and 
plaster 167 1,354 99,427.7 161,122.6 61,695.0 0.9 
Other paper and paperboard articles 2 253 78,758.4 136,181.7 57,423.3 0.9 
Glass and glass products 46 437 39,162.6 95,812.3 56,649.6 0.9 
Paints, printing inks and putty 2 153 86,839.7 134,736.6 47,897.0 0.7 
Parts, spare parts and accessories for vehicles  80 751 18,663.3 60,408.6 41,745.3 0.6 
All other manufacturing  686 7,081 565,094.8 1,054,997.1 489,903.2 7.5 
Total  3,467 46,270.6 14,586,861.9 21,090,566.3 6,503,704.3 100.0 
a Thousands of córdobas. 
Source : Calculations based on the information provided by the Nicaraguan authorities. 
72. The average applied MFN tariff on manufactures (Major Division 3 of the ISIC, Revision 2) 
is 5.7 per cent, with rates ranging from 0 to 170 per cent (Chart IV.1).47  If food processing is not 
taken into account, the average tariff on manufactures falls from 5.7 to 4.7 per cent with rates ranging 
from 0 to 15 per cent (Table AIV.1). 
                                                      
47 The 170 per cent tariff applies to certain poultry cuts (HS 0207.13 and 0207.14). Nicaragua WT/TPR/S/167 
 Page 75 
 
 
73. In 2004, Nicaragua's principal agricultura l exports were:  ci gars and cigarettes 
(US$9.9 million), bakery products (US$7.5 million) and flavoured aerated waters (US$4 million).  
The most important non-agricultural manufactures e xported include:  kitchen sinks, wash basins, 
ceramic toilet bowls (US$10.9 million);  soap  in bars (US$2.5 million);  carbon dioxide 
(US$1.7 million);  and transmitters with receivers (US$1.7 million). WT/TPR/S/167 Trade Policy Review 
Page 76 
 
 
0.010.020.030.040.050.060.070.080.0
1111222102303113133213233313413513533553613693723823843900.010.020.030.040.050.0160.0170.0180.0
Calculations by the WTO Secretariat based on the data provided by the Nicaraguan authorities.International Standard Industrial Classification, Revision 2
Source :111 
121 
122
130210220
230
290311312313
314
321322323
324
331
332
341342Description 
Agricultural and livestock production
Forestry
Logging 
FishingCoal miningCrude petroleum and natural gas production
Metal ore mining
Other miningFood manufacturingOther food products and prepared animal feedsBeverage industries
Tobacco manufactures
Manufacture of textilesManufacture of wearing apparel, except footwearManufacture of leather and products of leather, except footwear 
and wearing apparel
Manufacture of footwear, except vulcanized or moulded rubber or plastic footwearManufacture of wood and wood products, except furniture
Manufacture of furniture and fixtures, except primarily of metal
Manufacture of paper productsPrinting, publishing and allied industriesDescription 
Manufacture of industrial chemicals
Manufacture of other chemical products, including 
pharmaceuticals 
Petroleum refineriesManufacture of miscellaneous products of petroleum and coal
Manufacture of rubber products, n.e.s.
Manufacture of plastic products, n.e.s.Manufacture of pottery, china and earthenwareManufacture of glass and glass productsManufacture of other non-metallic mineral products
Iron and steel basic industries
Non-ferrous metal basic industriesManufacture of fabricated metal products, except machinery and equipment
Manufacture of machinery, except electrical, including 
computersManufacture of electrical machinery, apparatus, appliances and supplies
Manufacture of transport equipment
Manufacture of professional and scientific equipmentOther manufacturing industriesElectricity351
352
353
354
355
356361362369
371
372381
382
383
384
385390410Chart IV.1
Nicaragua's MFN tariffs by ISIC heading, 2005
Percentage
AverageMaximum
Minimum 
 Nicaragua WT/TPR/S/167 
 Page 77 
 
 
(ii) Selected industries 
(a) Textiles and wearing apparel 
74. Nicaragua currently has 41 companies that gene rate some 45,000 direct jobs and over 
US$400 million in exports.  Clothing is made using standardized methods and little labour skills or 
technology are required.  The clothing is mainly trousers, knitted or plain weave shirts, blouses and 
underwear. 
75. The Nicaraguan textiles and wearing apparel sector , like its counterparts in most developing 
countries, has been challenged by the elimination of the Multifibre Arrangement (MFA).  Like other 
Central American countries, Nicaragua now has duty -free access to the United States market for those 
textiles and wearing apparel exports that meet th e rules of origin of the Caribbean Basin Trade 
Partnership Act (CBTPA) (to be replaced by the CA FTA), but as of 2005 it has been subject to the 
same conditions as regards quotas.  Nevertheless, the Nicaraguan authorities are confident that the 
country's textiles and wearing apparel subsector can compete successfully at the international level in 
the post-MFA environment.48 
76. Table IV.10 shows the cost structure for certain  cotton trousers imported by the United States 
from Nicaragua in 2005 and the other nine top s uppliers of this item.  Of these 10 suppliers, 
Nicaragua offered the lowest f.o.b. price at the United States border (US$76.87 per dozen).  This was 4.8 per cent less than the f.o.b. cost of trousers from the second-cheapest source (Pakistan), despite the 
fact that the unit value of the Nicaraguan produc t was higher.  Nicaragua's advantages are its low 
shipping costs (only Mexico and the Dominican Republic have lower costs and Honduras has the 
same), as well as the tariff preferences app licable to some imports under the CBPTA.
49  In 2005, 
45.6 per cent of United States imports of cotton trousers from Nicaragua entered duty free under the 
CBTPA;  the remainder were subject to the MFN ta riff of 16.6 per cent.  Consequently, Nicaragua 
increased its exports of cotton trousers to th e United States by 64.8 per cent during the 
period 2004-2005 and its share of the United States market rose from 2.1 per cent in 2004 to 3.6 per cent in 2005. 
77. Although not all Nicaraguan clot hing exporters have been as successful as the trouser 
manufacturers, this branch of industry as a whol e performed well in 2005 as regards shipment to the 
new post-MFA market in the United States.  Comparing data for 2004 (the last year in which the MFA quotas remained in place) and 2005 shows that the value of United States imports of all wearing apparel from Nicaragua rose from US$594.9 million (0.89 per cent of all United States wearing 
apparel imports) to US$715.7 million (1 per cent), a 20.3 per cent increase.  Nicaragua was the only 
Central American country to increase its share of th e United States market for imports of textiles and 
wearing apparel during the first year after the MFA expired.
50 
                                                      
48 Labour costs in Nicaragua (US$0.67/hour on average) are higher than in Asian countries but 
shipping costs are lower than those from Asia. 
49 The word "some" is significant in the sense that not all Nicaraguan producers of trousers decide to 
ship their goods on CBTPA terms (in other words, duty-free access in exchan ge for relatively stringent rules of 
origin). 
50 Calculations based on the data provided by the United States International Trade Commission. WT/TPR/S/167 Trade Policy Review 
Page 78 
 
 
Table IV.10 
Cost structure for cotton trousers imported into the United States, 2005a 
 Percentage of United States 
imports  Average cost per 
dozen pairs 
 United States imports 
(US$ million)  Unit value Shipping Tariffs Total cost 
Mexico 268.8 17.95 91.02 0.58 0.04 91.63 
Dominican Republic 232.6 15.53 99.09 1.18 0.62 100.88 
China 115.8 7.73 69.68 4.45 11.56 85.69 
Hong Kong, China 84.9 5.67 142.08 7.52 23.59 173.19 
Honduras 62.3 4.16 86.55 1.62 0.11 88.29 
Bangladesh 61.2 4.08 69.28 3.33 11.50 84.11 
India 56.7 3.79 105.64 5.17 17.54 128.34 
Pakistan 55.5 3.71 65.85 3.94 10.93 80.73 
Nicaragua 53.6 3.58 69.02 1.62 6.23 76.87 
Indonesia 47.4 3.16 102.06 3.80 16.94 122.81 
a Imports of articles of HS headi ng 6203.42.40.15:  men's l ong trousers and shorts, of  cotton, not knitted. 
Source : Calculations based on the data  provided by the United States International Trade Commission. 
78. Nicaragua has reserved the right to use the tr ansitional safeguard measure provided in the 
WTO Agreement on Textiles and Clothing (Chapter III(2)(vi)(b)). 
(b) Beverages 
79. Some of Nicaragua's main exports include cer tain beverages such as rum (US$4.1 million in 
2004) and other spirits (US$1.5 million).  The value of  beer imports in 2004 was similar to that for 
rum exports.  Tariffs in this segment are rela tively high and give domes tic production additional 
protection.  For example, whereas the tariffs on beer and gin are 15 per cent, the tariff on rum is 40 per cent.  Nicaragua also imposes the selec tive consumption tax (ISC) on certain products, 
including some alcoholic products, for example:  beer  in cans (36 per cent);  beer in other containers 
(33 per cent);  rum (36 per cent);  whisky, gin and vodka (37 per cent).  The amount of the ISC is the 
same for domestic and imported products, but for imported products  it is applied at the border 
whereas for domestic products it is imposed at the wholesale level. 
80. All brands of alcoholic beverages must be regi stered annually with the Ministry of Public 
Health.  Nicaragua and the other four Central American countries are in the process of developing 
common standards for distilled spirits.
51  Under the CAFTA, Nicaragua undertook to recognize 
Bourbon and Tennessee whiskey as distinctive products of the United States. 
(5) SERVICES  
(i) Main features 
81. Services are the most important sector as far as  their share of GDP (54.2 per cent in 2005, 
compared to 49.1 per cent in 1999) and jobs (68.4 pe r cent in 2004) is concerned.  Nicaragua is a net 
importer of services with an average annua l deficit of around US$116.5 million over the 
period 2000-2005 (Chapter I(3)(i)).  Trade is the pr incipal activity in Nicaragua's services sector;  
                                                      
51 The regional labelling standard for distilled alcoho lic beverages is currently being negotiated and, 
according to the Nicaraguan authorities, 95 per cent of the work has already been done. Nicaragua WT/TPR/S/167 
 Page 79 
 
 
other important activities are:  government services,  transport, hotels and restaurants, financial 
services and telecommunications (Table IV.11). 
Table IV.11 
Services and central government, 2004 
 Value added 
(Millions of córdobas)  Share 
(%) 
Services: 13,183.8 87.7 
   Trade 4,238.0 28.2 
  Personal and businessa 2,301.1 15.3 
   Real estate 1,963.2 13.1 
   Transport 1,279.2 8.5 
   Hotels and restaurants 1,007.7 6.7 
   Financial intermediati on and related services 997.1 6.6 
   Communications 717.5 4.8 
   Electricity 553.0 3.7 
   Water and sanitation 127.0 0.8 
Central government: 1,841.3 12.3 
   Public administration 969.5 6.5 
   Education 587.5 3.9 
   Social and health 284.3 1.9 
Total  15,025.1 100.0 
a Includes market-led education and health serv ices, community, business and domestic services. 
Source : Calculations based on data from the Cent ral Bank of Nicaragua (Table AE-II-13). 
82. Nicaragua made commitments under the GATS in almost all the major services categories in 
order to promote investment, develop an appropriate  services infrastructure and improve the sector's 
trade balance (Table AIV.2).52  In August 2005, Nicaragua submit ted its initial offer in the current 
negotiations on services.53 
83. Pursuant to its obligations in the CACM, Ni caragua has registered an MFN exemption on 
financial services, in accordance with Article II of the GATS, as regards the free transfer of capital.54  
As a participant in regional agreements on audiovisual services, Nicaragua gives preferential 
treatment to the other signatories;  the latter, w ith the exception of Nicaragua, included this treatment 
in their lists of GATS exemptions.55  Nicaragua participated in th e negotiations on financial services 
in the WTO and the Fifth Protocol to the GATS came into force on 21 September 199956;  it 
maintained its observer status in the WTO ne gotiations on basic telecommunications services. 
84. Nicaragua's freedom to undertake commitments  in some services subsectors may be limited 
by the terms of its Constitution.  Article 105 specifies, inter alia , that it is the State's duty to promote, 
facilitate and regulate the supply of basic public en ergy, communications, water, transport, highway 
                                                      
52 As a general rule, Nicaragua made most of its commitments on market access in modes 3 
(commercial presence) and 1 (cross-bord er trade) and made no commitments  at all (apart from those made 
horizontally) in mode 4 (presence of natural persons).  In the subsectors in which Nicaragua made 
commitments, these were generally more extensive in communications and transport services and less so in 
computer and related services.  Nicaragua did not make any commitments in subsectors such as legal services;  
accounting services;  architectur al services;  engineering services;  adve rtising services;  construction services;  
distribution services;  educational services;  or health and social services (WTO, 1999). 
53 WTO document TN/S/O/NIC of 8 August 2005. 
54 WTO document GATS/EL/63 of 26 February 1998. 
55 WTO (1999). 
56 WTO document WT/LET/309 of 30 September 1999. WT/TPR/S/167 Trade Policy Review 
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infrastructure, port and airport services to the population, and it is the latter's inalienable right to have 
access to these services.  Private investment and the relevant criteria, as well as concessions to private 
individuals to exploit such services, shall be regulat ed by the law in each case.  The State retains 
exclusive control over water and sanitation systems, and the transmission of electricity (Chapter II(5) 
and section (3)(ii)(b) above). 
(ii) Financial services 
85. Financial intermediation and related services acc ounted for 3.3 per cent of Nicaragua's GDP 
in 2004, a notable increase over the 1999 level (2.5 pe r cent).  In 2004, 3.4 per cent of the labour force 
was employed in financial or insurance establishments.57  At the end of 2005, the average return on 
assets in Nicaragua's financial system was 2.6 per cent (0.21 percentage points below the figure for 
2004, partly because of the lower financial earnings  during the year); capital adequacy was 13.6 per 
cent (higher than the 10 per cent required under Nicar agua's banking legislati on);  and all banking and 
financial establishments recorded a legal reserve of 18.64 per cent compared to total deposits, thus 
meeting the minimum legal reserve requirement laid down (16.25 per cent).58 
86. Since 1991, when the subsector was privatized , various financial in stitutions have been 
authorized to operate and this has helped to in crease the confidence of depositors and reduce the size 
of State-owned banks.59  Nevertheless, Nicaragua is facing ex tensive dollarization of its economy and 
needs to build up an efficient financial system that will allow lower intermediation margins and 
promote a higher level of economic activity.60 
87. The Superintendency of Banks and other Fina ncial Institutions (SBIF), created by Law 
No. 125 of 1991, is currently governed by Law No. 316 of 1999, Law on the Superintendency of 
Banks and other Financial Institutions.61  Pursuant to Law No. 31462, the SBIF regulates and/or 
supervises and grants licences for banks, non- banking finance companies, financial leasing 
companies, insurance companies, general deposit warehouses, the Nicaraguan Stock Exchange (BVN) 
and the Tourist Investment Capital Fund (FONCITUR).   The SBIF is an autonomous State institution 
with full legal powers to acquire rights and enter into commitments.63 
88. In Nicaragua, foreign currencies are freely ava ilable through a legal parallel exchange market 
operated by local financial institu tions.  Although they are monitored by the BCN, private exchanges 
operate free of government controls. 
89. Under the CAFTA, United States suppliers of fi nancial services are fully entitled to set up 
branches, joint ventures or subsidiaries provided that they meet the legal requirements and are 
authorized by the SBIF. 
                                                      
57 Central Bank of Nicaragua (2004), page 25. 
58 Superintendency of Banks and other Financial Institutions (2006). 
59 In the 1980s and early 1990s, only nationalized or  State-owned financial institutions were operating 
in Nicaragua.  In 1995, Nicaragua's Constitution was amended and Article 99 provides that the State shall guarantee freedom to set up businesses and establish banks and other private or State-owned financial 
institutions, which shall be governed by the relevant legislation. 
60 At the end of 2005, for example,  the average borrowing rate was 3.1 per cent, whereas the average 
lending rate was some 15.8 per cent (Superintendency of Banks and other Financial Institutions, 2006). 
61 La Gaceta  No. 196 of 14 October 1999. 
62 La Gaceta  No. 198-200 of 18-20 October 1999. 
63 Information available at:  http://w ww.siboif.gob.ni/rhistorica.php. Nicaragua WT/TPR/S/167 
 Page 81 
 
 
(b) Banking services 
90. Nicaragua's banking subsector is the smallest in Central America.  There are currently six 
commercial banks and two financial enterprises;  some 5,000 permanent employees;  and a national 
network of 208 branches and subsidia ries.  Nicaragua's banking system is highly concentrated, at least 
as measured by the Herfindahl-Hirschman (HHI) index.64  In the case of Nicaragua's banking market, 
at the end of 2004 the HHI was 1,918 points65, partly because one single ba nk owned 25 per cent of 
the financial system's total assets and the banking cr isis of 2000-2001 had led to the merger of some 
banks. 
91. The main objectives of Law No. 561, Ge neral Law on Banks, N on-Banking Financial 
Institutions and Financial Groups (General Banking Law)66, which came into force at the end of 2005, 
are to ensure that the legal frame work allows and facilitates risk-b ased monitoring by the SBIF;  to 
create the legal framework for implementing the ne w capital agreement, known as Basel II;  and to 
concentrate the SBIF's resources on supervision of banks and finance companies.  The following are 
some of the changes introduced by Law No. 561:  more stringent solvency and integrity requirements 
to be met by shareholders in financial institutions before receiving authorization to set up a bank or 
transfer shares of banks already authorized;  the solvency requirements must not only cover loan risks 
but the capital required must also cover notional risk  assets (operational and other risks);  and transfer 
of intervention and liquida tion responsibilities to the Deposit Guarantee Fund (FOGADE).67 
(c) Insurance and securities services 
92. In 2005, Nicaragua's insurance market took in net premiums of C$1,301 million (8.4 per cent 
higher than in 2004), partly attributable to the incr ease in personal and fire in surance taken out and the 
compulsory automobile insurance.68  In 1996, the public sector  monopoly was abolished and the 
insurance market opened up to competition, includi ng the establishment of foreign companies;  
private insurance companies may now offer in surance, reinsurance and capital investment.69  
Although the State-owned enterprise Nicaraguan Insurance and Reinsurance Institute (INISER) 
continues to be the leading insurance compan y, private companies are swiftly expanding. 
93. Since it was set up in 1993, the Nicaraguan Stock Exchange (BVN) has grown rapidly and 
has expanded its range of products both in primary and secondary markets;  it gives private companies 
the possibility of obtaining short- and medium-term financing at lower rates than those offered by 
local banks.  In 2005, the amount traded in the BVN was C$9,560.3 million, a 23.3 per cent increase 
on 2004.70 
                                                      
64 The Herfindahl-Hirschman index is calculated by summing the squares of the individual market 
shares of the firms in question.  For the purposes of re gulating monopolies, in the United States it is considered 
that an HHI in excess of 1,800 points shows a concentr ated market, in which case mergers are examined very 
closely. 
65 Central Bank of Nicaragua (2004), page 155. 
66 La Gaceta  No. 232 of 30 November 2005. 
67 Information available at:  http://www.siboif.gob.ni/.php. 
68 Superintendency of Banks and other Financial Institutions (2006). 
69 WTO (1999). 
70 In 2005, 49.9 per cent of the volume traded in the BVN was in United States dollars and 50.1 per 
cent in córdobas (Superintendency of Banks  and other Financial Institutions, 2006). WT/TPR/S/167 Trade Policy Review 
Page 82 
 
 
(iii) Telecommunications and postal services 
94. Since the previous review, Nicaragua's teleco mmunications network has continued to grow, 
especially the mobile telephony market, where th e number of users increased from 45,023 in 1999 to 
1.1 million in 2005, corresponding to 20.4 users per 100 inhabitants (compared to 0.91 in 1999) 
(Table IV.12).  In 2005, there were some 235,0 00 basic (fixed) telephony subscribers, corresponding 
to a density of 4.3 subscribers per 100 inhabita nts (higher than the figure of 3.03 in 1999).  
Nicaragua's telecommunications system is, however, facing a number of problems.  According to one 
poll of Nicaraguan firms, 37.4 per cent of  potential sales are lost to telephone outages.71  In contrast to 
the growth of such services in the urban sector, tele communications services in rural areas still need to 
be developed. 
Table IV.12 
Selected teleco mmunications indicators, 1999-2005 
 Basic telephony 
subscribers Basic telephone 
density (subscribers 
per 100 inh.) Mobile telephone 
users Mobile telephone 
density (users per 
100 inh.) Number of public 
telephones in 
operation 
1999 150,258 3.03 45,023 0.91 .. 
2000 162,484 3.28 102,860 2.08 1,181 
2001 157,753 3.12 164,509 3.25 2,773 
2002 171,632 3.32 237,248 4.60 2,911 
2003 205,004 3.89 466,706 8.86 2,755 
2004 214,480 3.99 739,000 13.75 6,577 
2005 235,000 4.29 1,120,000 20.43 7,442 
.. Not available. 
Source : Information provided by the authorities. 
95. The Nicaraguan Institute of Telecommunica tions and Postal Services (TELCOR) is 
responsible, inter alia , for regulating the sector and granting licences to operate services.  The major 
companies are the Nicaraguan Telecommunicati ons Company (ENITEL), which was gradually 
privatized between 1998 and 200572 (Chapter III(4)(ii)), and Nicaraguan Postal Services, which is still 
a government-owned body managed by the State.  Some telecommunications companies have complained that TELCOR appears to exhibit a bias in favour of ENITEL.
73 
96. Article 68 of the Constitution provides, inter alia , that the State shall ensure that the mass 
media do not become subject to foreign interests or the economic monopoly of a particular group and 
that the law shall regulate this question.  In 200 4, the Government of Nicaragua published Decree 
No. 136-2004 on the sectoral policy and guidelines fo r opening up the telecommunications market.  
This is the latest in a series of reform efforts to restructure the Nicaraguan telecommunications sector 
launched a decade ago.  The first step ca me in 1995 with the enactment of two laws74 that began to 
introduce more market principles into the operati on of the State monopoly.  Following the enactment 
                                                      
71 Information available at:  
http://rru.worldbank.org/Enter priseSurveys/ExploreEconomies/ Default.aspx?economyid=141. 
72 In the initial phase, 51 per cent  of ENITEL was sold and the remain ing 49 per cent was sold in 2005. 
73 For example, it has been claimed that, in 2004, ENITEL unilaterally raised termination rates for calls 
to wireless networks and blocked traffic to such netw orks when the telephone companies refused to pay the 
100 per cent increase in these rates and the measure wa s applied with little or no intervention by TELCOR to 
require ENITEL to justify such rate increases (USTR, 2005, page 439).  A ccording to the authorities, however, 
TELCOR served as a mediat or in order to resolve the tariff-setting issue. 
74 Law No. 200, General Law on Telecommunications and Postal Services;  Law No. 210, Law on 
Incorporating Private Parties in the Operation and Expansion of Public Telecommunications Services. Nicaragua WT/TPR/S/167 
 Page 83 
 
 
of these Laws, TELCOR was given regulatory responsibilities and the supply of the 
telecommunications services provided by the State (for example, basic telephony) was given to ENITEL.  These Laws still restricted foreign investment in this sector
75 and amendments were 
therefore made in 1999.76  Pursuant to Law No. 210 and the amendments thereto77, 40 per cent of the 
shares in ENITEL could be sold to a private company. 
97. The following are some of th e other instruments recently enacted as part of the reform 
process:  Decree No. 1053, Basic Law on the Nicaragua n Institute of Telecommunications and Postal 
Services (TELCOR) and its regulations (Decree  No. 128 of 7 December 2004);  Law No. 200, 
General Law on Telecommunications and Post al Services, amended by Law No. 326 of 
17 December 1999 and its regulati ons (amended by Decree No. 131 of 20 December 2004);  and Law 
No. 210, Law on Incorporating Private Parties in the Operation and Expansion of Public Telecommunications Services (amended by Law No . 293 of 2 July 1998; and Law No. 389 of 
17 April 2001). 
98. The 2004 sectoral policy and guidelines for ope ning up the telecommunications market 
outline a strategy based on the conviction that te lecommunications, technolog y and services will lead 
to sustainable development in which the economy gr ows and diversifies, attract greater investment, 
enhance productivity and lessen the economic and social marginalization of rural areas and 
populations of social concern. 
99. Four overriding development prin ciples apply in the telecommunications sector, namely, free 
competition in all services and areas of telecommunications, preventing monopolies and inefficient 
structures and investments;  competitive markets, ev en if regulated, do not  guarantee universal access 
so it is necessary to have sufficient resources to give all Nicaragua's inhabitants universal access to 
basic services within a prudential time-frame;  ther e must be a legal and regulatory system and a 
proper institutional structure to implement it.  Competition must be regulated to ensure that it leads to the greatest possible efficiency and benefits;  and ad ministrative procedures must be transparent so as 
to ensure that all decisions relating to the sector, especially to regulation, are taken in a climate of 
trust and impartiality. 
100. The strategy specifically provides that there shall be no limits on the number of concessions 
granted to provide public telecommunications service s and that any natural or legal person requesting 
a concession and meeting the requirements and obligations laid down in the regulations on 
concessionaires shall be given a concession provided that it does not require the use of a scarce 
resource.  It also sets a number of targets to be met by 2009, including national density for fixed and 
mobile telephony of 35 lines per 100 inhabitants and public telephone and internet access services in 
25 per cent of towns with a population of over 500.
78 
101. Since 1996, no monopoly of postal services ha s been allowed, with the exception of 
operations such as pre-paid mail, the installation of mail boxes, and the issue of stamps, which are 
                                                      
75 Article 79 of Law No. 200 of 8 August 1995 (General Law on Telecommunications and Postal 
Services) provides that licences may only be given to Nicaraguan natural or legal persons.  In the case of public 
limited companies, at least 51 per cent of the capital must be held by Nicaraguan nationals. 
76 Law No. 326 of 17 December 1999  provides that licences may be granted to Nicaraguan or foreign 
natural or legal persons in accordance with the Law's provisions. 
77 These include the following:  Law No. 293, Law containing amendments to Law No. 210, Law on 
Incorporating Private Parties in the Operation and Expansion of Public Telecommunications Services, published 
in La Gaceta  No. 123 of 2 July 1998. 
78 In the strategy, it is estimated that achieving these targets will require investment of some 
US$400 million. WT/TPR/S/167 Trade Policy Review 
Page 84 
 
 
reserved to the State postal administration, Nicaragua n Postal Services.  Private mail service operators 
may be granted five-year (renewable) concessions di rectly by TELCOR and universal or international 
postal services (i.e. compulsory services but without exclusive rights) are guaranteed by Nicaraguan Postal Services in accordance with  relevant international undertak ings.  Foreign postal companies 
must be established in Nicaragua and renounce rights of appeal to dispute settlement bodies abroad.  
All State agencies are obliged to use the postal services supplied by Nicaraguan Postal Services. 
(iv) Transport 
102. In 2004, the combined transport and communi cations services sectors accounted for 6.6 per 
cent of Nicaragua's GDP (down from 6.7 per cent in  1999), while 4.3 per cent of the labour force 
worked in transport, storage and communications services.  Some of the priority sectors are the 
rehabilitation of the major highways, repair of rura l roads and expansion of the highway network, as 
well as improvement of port facilities, modernizat ion of Managua airport and the improvement of 
smaller airfields. 
(b) Maritime transport 
103. Nicaragua has three seaports on the Pacific coast  (Corinto, Sandino and San Juan del Sur), 
two on the Atlantic coast (Puerto Cabezas and El Bluff), and also a river port (El Rama).  The 
majority of Nicaragua's traffic goes through the tw o Pacific ports that remain in operation;  since 
1999, Puerto Corinto has overtaken Puerto Sandino  (Table IV.13).  Although the number of ships 
handled in these ports has declined, the amount of  cargo per ship has increased substantially. 
Table IV.13 
Port traffic in Nicaragua, 1999-2004 
(Metric tonnes) 
 1999 2000 2001 2002 2003 2004 2004 share 
(%) 1999-2004a 
(%) 
Pacific coast 2,089,507 2,156,182 2,308,980 2,040,106 2,087,482 2,274,172 97.7 8.8 
   Corinto 914,039 1,074,524 1,114,788 1,106,731 1,087,475 1,296,221 55.7 41.8 
   Sandino 1,166,978 1,073,059 1,184,522 933,375 1,000,007 977,951 42.0 -16.2 
   San Juan del Sur 8,490 8,599 9,670 0 0 0 0.0 -100.0 
Caribbean coast 56,996 59,760 54,038 54,124 54,806 53,864 2.3 -5.5 
   El Bluff 24,801 24,839 21,441 27,361 25,656 25,704 1.1 3.6 
   Puerto Cabezas 19,649 22, 571 18,748 11,261 17,294 18,597 0.8 -5.4 
   El Rama 12,546 12,350 13,849 15,502 11,856 9,563 0.4 -23.8 
Total 2,146,503 2,215,942 2,363,018 2,094,230 2,142,288 2,328,036 100.0 8.5 
   Imports 1,941,315 1,940,976 2,030,694 1,890,557 1,947,799 2,041,356 87.7 5.2 
   Exports 205,188 274,966 332,324 203,673 194,489 286,680 12.3 39.7 
Number of ships 489 493 515 410 409 402 .. -17.8 
Cargo/ships 4,390 4,495 4,588 5,108 5,238 5,791 .. 31.9 
.. Not available. 
a Rate of growth. 
Source : Information provided by the Nicaraguan authorities. 
104. Nicaragua faces major constraints in this sector.  The main port of Corinto on the Pacific 
coast is ill-placed to serve destinations in Europe and the east coast of the United States, but there is 
no deep-water port on the Atlantic coast.  Moreover,  the current state of the port infrastructure and 
management puts Nicaragua at a disadvantage.  Some  Nicaraguan exporters have therefore decided to 
use facilities in neighbouring countries, as in th e case of coffee shipments through Puerto Cortés Nicaragua WT/TPR/S/167 
 Page 85 
 
 
(Honduras).  Similarly, most maritime cargo and fresh  fruit in containers are shipped by highway to 
Puerto Cortés (Honduras) or Puerto Limón (Costa Rica). 
105. The wide disparity between the volumes of impor ts and exports in Nicaraguan ports gives an 
idea of the extent to which shippers have been oblig ed to use ports in neighbouring countries.  Imports 
from Asia come directly to Nicaragua, whereas e xports to the United States and Europe must go 
through neighbouring countries.  It is hoped that the current situati on will soon improve, however, as 
a result of recent investments in po rt infrastructure, changes in port management, and adjustments in 
the provision of port services.79  Some US$4 million has been invested in building a multi-purpose 
wharf in El Rama and on equipping the port, and th e port at El Bluff is being dredged to allow the 
entry of ships with deeper draught. 
106. The extent of Nicaragua's disadvantage in comp arison with other Central American countries 
as regards the cost of shipping certain goods to the United States can be seen from Table IV.14.  In 
2005, it cost eight times as much to ship a metric t onne of sugar to the east coast of the United States 
from Nicaragua than from Honduras.  There is no basis for comparison for traffic to the west coast of 
the United States as Honduras did not ship to that part of the world, but Nicaragua's shipping costs on 
this route were roughly comparable to those of the other three Central American countries.  As far as 
coffee is concerned, Nicaragua was also at a disadvantage compared to Honduras, whether the 
destination was the east coast (28.6 per cent more ex pensive) or the west coast of the United States 
(9 per cent more expensive). 
Table IV.14 
Comparative costs of shipping goods to th e United States from Central America, 2005 
(US$ per metric tonne) 
 Raw sugar 
United States coast Unroasted coffee 
United States coast 
 East West East West 
Nicaragua 45.71 23.29 93.91 127.19 
Honduras 5.70 0a 73.05 116.74 
Guatemala 12.94 21.67 80.73 128.59 
El Salvador 7.35 20.67 81.25 117.68 
Costa Rica 51.11 26.18 72.67 115.04 
a Honduras did not make any shipments.  
Source : Calculations based on the data  provided by the United States International Trade Commission. 
107. As an incentive for maritime transport compan ies to use Nicaraguan ports, the National Port 
Enterprise (EPN) departed from the policy in all other Central American ports of imposing port 
service charges.  In Nicaragua, only container load ing/offloading services are charged and tariffs are 
negotiated on a product-by-product basis.  This ne w policy was credited for th e increase in the total 
volume of goods handled at Nicaraguan maritime ports between 1996 and 2000.80  Since then, 
Nicaragua has implemented a preferential tariff policy for container vessels and containerized cargo;  
other Central American countries with ports on the Pacific coast have implemented similar policies, 
but not Central American ports which handle larg e volumes of containers on the Atlantic coast.81 
                                                      
79 World Bank (2003), Agriculture in Nicaragua:  Promoting Competitiveness and Stimulating Broad-
Based Growth , Washington D.C. 
80 World Bank (2003). 
81 The reduction in port charges for container ships and/or containerized cargo has to a certain extent 
had an impact in that a larger volume of containers is being handled in Central American ports on the Pacific coast, but containerized cargo continues to go predominantly to the east coast of the United States and Europe. WT/TPR/S/167 Trade Policy Review 
Page 86 
 
 
108. Although Law No. 399, Law on Water Transport82, allows foreign investment in some 
segments of maritime transport (for example, the registration of vessels and the setting up of a shipping company), Nicaragua reserves domestic and cabotage traffic to Nicaraguan-registered 
vessels operated by Nicaraguan shippers.  Neverthele ss, if no Nicaraguan or Central American vessel 
is available, foreign vessels may be authorized. 
(c) Air transport 
109. The international airlines providing services to Nicaragua are:  American Airlines, 
Continental Airlines, Copa Airlines, the Taca Group, Aerocaribbean and Delta (since 
December 2005).  The national airlines include La Cost eña, specializing in domestic air transport of 
passengers, and Atlantic Airlines, which fly to Blue fields, Corn Island and Puerto Cabezas.  Atlantic 
Airlines also has charter flights, and transports freight and parcels. 
110. The 1956 Civil Aviation Code regulates aviation activities in Nicaragua and lays down the 
general requirements for operating certificates in th e subsector.  Article 75 provides that at least 
51 per cent of the capital of airlines must be held by  Nicaraguan nationals and the effective control of 
the company and its management must also be in  Nicaraguan hands.  An authorization from the 
Directorate General of Civil Aviation is required to provide specialized air services and aircraft repair 
services in Nicaragua.  Private air services can onl y be provided by Nicar aguan nationals or a 
company set up under Nicaraguan law.  Flight crew  engaged in aviation for agricultural purposes 
must be of Nicaraguan nationality.  Only Nicar aguan technical personnel may provide remunerated 
services for the repair and maintenance of aircraft or specialized air services. 
111. According to the authorities, it is expected that a new general civil aviation law will be 
adopted within the next few months and, inter alia , this will lay specific obligations on the authorities 
responsible for administering the sector and determin e the punitive measures to be taken in the case of 
violations of the law, safety or insurance.  Th e current draft of this law still imposes a 51 per cent 
restriction on foreign investment. 
(d) Roads 
112. Nicaragua has a road network of 19,036 km (2, 299 km of sealed roads and 16,737 of unsealed 
roads).  The majority of the seal ed roads are in the western part of Nicaragua.  The Panamerican 
Highway runs through Nicaragua from north to south along the Pacific coast and carries the major part of overland cargo.  There is an all-weather east-west road from the Pa cific to the Atlantic.
83  
Some of the major road projects ar e the following:  the Nu eva Guinea-Bluefields road in the south of 
Nicaragua, for which environmenta l and feasibility studies are being conducted;  and a sealed road 
from El Rama to Kukrahill, which will link the South A tlantic to the Pacific.  Roads are particularly 
important for Nicaragua because there are no railways84, but also because of shortcomings in the ports 
and the widespread practice of shipping products through Honduran ports. 
113. In 1997, Nicaragua and Honduras signed a declara tion of intent to build an inter-oceanic 
corridor linking Puerto Corinto to Puerto Cortés with a view to developing the former as Central 
America's major Pacific coast port.  The project in cludes plans for possible improvements to the road 
                                                      
82 La Gaceta  No. 166 of 3 September 2001. 
83 This road is currently sealed up to Río Blanco.  From there to Puerto Cabezas, the road is very 
difficult.  Nevertheless, with a donation from the Government of Denmark and a loan from the Central 
American Bank for Economic Integration (CABEI), improvements have been made at certain points on the 
highway and vehicles can use the road in all weathers. 
84 In December 1993, the railways ceased  activities and the lines were sold. Nicaragua WT/TPR/S/167 
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linking the two ports.  Inter-American Development Bank (IDB) funds are being used to implement a 
competitiveness plan to rehabilitate certain roads.85 
114. The regulations of the General La nd Transport Law (Decree No. 42-2005)86 lay down the 
administrative and technical provisions for bette r understanding and implemen tation of Law No. 524, 
General Land Transport Law.87  The requirements for providing services state that 51 per cent of the 
capital of a company to be established to provide na tional and international public passenger transport 
or national and international frei ght transport services must belong to Nicaraguan nationals.  Within 
Nicaragua, services may only be provided by Nicar aguan natural or legal persons.  International 
freight transport is regulated by reciprocal agreements. 
115. Law No. 524 lays down the rules, guidelines a nd regulations for public land transport of 
persons and goods within Nicaragua and specifies th e administrative requirements and procedures for 
obtaining, renewing or annulling concessions or licences to operate land transport services.  Article 24 
stipulates that only Nicaraguan transporters can tran sfer any kind of freight within Nicaragua.  Under 
Article 95, for all foreign vehicles entering Nicaragua  accident and third-party liability insurance must 
be purchased, as required by the Law on the Traffic Regime and Traffic Offences.  According to 
Article 97, vehicles that are up to ten years old may only be imported for private use. 
(v) Tourism 
116. Tourism is the main source of foreign currency in Nicaragua's services subsectors.  In 2005, 
earnings were US$183.5 million (3.7 per cent of GDP) , US$16.8 million more than in 2004.  In 2005, 
visitors from Central America accounted for 62.5 per cent of tourists, followed by North America 
(24.8 per cent) and Europe (8.1 per cent) (Table IV.15).  In 2005, the main countries of origin for 
visitors to Nicaragua were the United States ( 20.7 per cent), Honduras (19.5 per cent), Costa Rica 
(15.2 per cent), El Salvador (14.1 per cent) and Guatemala (8.1 per cent). 
117. Nicaragua has considerable potential for suppl ying tourist services as it has a number of 
tourist attractions including lakes, volcanoes, beaches and colonial cities.  Despite the efforts made in 
recent years to improve its tourist infrastructure, Nicaragua still needs more investment in hotels, 
restaurants and maintenance services, and must also improve transport and communications in 
general. 
Table IV.15 
Tourist arrivals in Nicaragua by geographical region, 2001-2005 
Region 2001 2002 2003 2004 2005 % change 
2001-2005 
North America 107,255 115,536 139,137 157,782 176,949 64.98 
Central America 301,584 287,245 310,239 377,674 444,956 47.54 
South America 19,724 12,139 12,437 14,922 15,689 -20.46 
Caribbean 3,911 2,306 2,364 2,472 2,357 -39.73 
Europe 39,476 43,832 48,066 51,262 57,838 46.51 
Asia 9,306 8,887 11,183 8,006 11,409 22.60 
Table IV.15 (cont'd) 
                                                      
85 These are:  Chinandega-Corinto, Chinandega-El Congo-Potosí, Empalme Cosiguina-Punta Ñata, 
El Viejo-Tonalá-Puerto Morazán. 
86 La Gaceta  No. 113 of 13 June 2005. 
87 La Gaceta  No. 72 of 14 April 2005. WT/TPR/S/167 Trade Policy Review 
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Region 2001 2002 2003 2004 2005 % change 
2001-2005 
Africa 644 341 416 537 668 3.73 
Pacific 969 1,336 1,933 2,127 2,578 166.05 
Total 482,869 471,622 525,775 614,782 712,444 47.54 
Source : Information provided by the authorities. 
118. The Nicaraguan Tourism Institute (INTUR), an  independent body, is responsible for 
formulating and implementing policies in the subsect or.  In its institutional strategic plan for 2005 
2009, the INTUR identifies the challenges and stra tegic objectives for tourism in the short and 
medium term in order to enhance competitiveness,  strengthen and diversify tourism opportunities, 
increase the number of visitors to Nicaragua, and promote Nicaraguan and foreign investment.  The 
National Development Plan (PND) also proposes measur es for competing profitably in tourism at the 
international level;  making rational use of the scarce resources available;  overcoming Nicaragua's 
disadvantages as a tourism destination;  and creating a network of tourism facilities to create jobs and 
overall benefits.88 
119. In its 2003 Strategy, the Ministry of Agricultu re, Livestock and Forestry indicated that the 
agritourism and ecotourism industry and environmen tal services represented a sustainable option for 
vast zones and regions in Nicaragua and genera ted non-agricultural income, foreign currency and 
jobs.  With a focus on flows of tourists from count ries such as Costa Rica, th e United States, Canada 
and Europe and also Nicaraguans resident abroad, th e Strategy suggests that the tourism, agritourism 
and ecotourism industry and environmental services be consolidated.89 
120. Law No. 495, General Tourism Law90, and Law No. 306, Law on Incentives for the Tourism 
Industry91, are two of the principal laws regulating tour ism services in Nicaragua.  Article 21 of Law 
No. 495 determines a number of taxes to finan ce INTUR's operations.  These include US$3 per 
passenger leaving Nicaragua through the national airport;  US$5 for each tourism card92, and each 
vehicle entering Nicaragua;  US$10 per minibus a nd US$15 per bus entering Nicaragua;  and 5 per 
cent on the cost of air tickets for any type of interna tional travel or tickets sold abroad but issued in 
Nicaragua.93 
121. Law No. 306 determines a number of tax and tari ff exemptions.  Unlike the tax exemptions in 
other sectoral laws, this Law gives the Government  more opportunity to impose conditions and more 
discretionary authority to grant incentives.  For example, it allows exemption from import duties and 
taxes and VAT for local purchase of building materials and fixtures (Article 5.1.1).94  The exemptions 
provided in the Law include exemption from import duties and taxes and/or VAT on local purchase of 
articles, furniture, equipment, boats, automobiles ca rrying 12 or more passengers, and freight declared 
by the INTUR to be necessary for setting up or ope rating tourist activities, and on the purchase of 
equipment that helps to save water or energy, as well as equipment needed for the project's security, 
for a period of 10 years as of the date on which INTUR declares that the company in question has 
                                                      
88 Republic of Nicaragua (2005). 
89 Ministry of Agriculture, Livestock and Forestry (2003), page 18. 
90 La Gaceta  No. 184 of 22 September 2004. 
91 La Gaceta  No. 117 of 21 June 1999. 
92 Law No. 495 also provides that some foreign nationals of countries with which Nicaragua has signed 
visa waiver agreements are exempt. 
93 Some of these taxes do not apply to the crews of aircraft, ships, buses carry ing international tourists, 
diplomats or citizens of other Central American countries. 
94 Nevertheless, this Article specifies that such ex emption only applies if the articles are not produced 
in Nicaragua or their quantity or quality does not suffice. Nicaragua WT/TPR/S/167 
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commenced operations (Article 5.1.2).  In D ecember 2005, amendments to Law No. 306 were 
approved, extending the benefits and incentives to small and medium enterprises (SMEs) engaged in 
tourism, and also creating a Tourism Developmen t Fund to promote investment in tourism SMEs. 
122. Nicaragua lacks a scheme for financing tourism projects.95  In December 2004, however, the 
Legislature approved the general outline of a draft Special Law on the Creation of Tourism 
Investment Bonds (BIT Law), which authorizes the St ate to use future taxes on a project (VAT and 
income tax) to fund bonds to be issued by th e owner of the project and placed on the securities 
exchange within a period of less than 15 years.  National or foreign investors may finance up to 70 per 
cent of a project through the BIT mechanism.  The BI T Law will only remain in effect for seven years 
in order to attract investment.  Approval of th is Law is pending, particularly by the National 
Assembly, although it is hoped to complete the approval procedure some time in 2006. 
123. Nicaragua has been a member of the World Tourism Organization since 1990. 
 
                                                      
95 Following approval of the Fiscal Equity Law in 2003, the direct investment mechanism was 
abolished (tax credit certificates), which had been provided under Law No. 306 and remained in effect for 
approximately three years. Nicaragua WT/TPR/S/167 
 Page 91 
 
 
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