WORLD TRADE  
ORGANIZATION  WT/TPR/M/167 
6 September 2006 
 (06-4278) 
Trade Policy Review Body 
  
 
 
 
TRADE POLICY REVIEW 
 
NICARAGUA 
 
Minutes of Meeting  
 
Chairperson:  HE Ms Claudia Uribe (Colombia) 
 
   Page 
 
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 3 
II. OPENING STATEMENT BY THE REPRESENTATIVE OF NICARAGUA 4 
III. STATEMENT BY THE DISCUSSANT 6 
IV. STATEMENTS BY MEMBERS 8 V. REPLIES BY THE REPRESENTATIVE OF NICARAGUA AND ADDITIONAL 
COMMENTS 19 
VI. CONCLUDING REMARKS BY THE CHAIRPERSON 23 
 
Note:   Advance written statements by WTO Memb ers and the replies provided by the Government 
of Nicaragua are reproduced in document WT/ TPR/M/167/Add.1 and will be available online 
at http://www.wto.org/english/tratop_e/tpr_e/tp_rep_e.htm.  WT/TPR/M/167 
 Page 3 
 
 
  I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 
1. The second Trade Policy Review of Nicaragua  was held on 24 and 26 July 2006.  The 
Chairperson (HE Ms Claudia Uribe) welcomed the delegation of Nicaragua, headed by HE Mr Alejandro Argüello, Minister of Develo pment, Industry and Trade, and the discussant, 
HE Mr Juan Antonio March (Spain).  As usual, th e discussant would speak in a personal capacity and, 
in accordance with the established procedures, he had made available in advance a summary of the 
main issues he intended to raise (document WT/TPR/D/143). 
2. The Chairperson recalled the purpose of trad e policy reviews and the main points of 
procedure for the meeting.  The report by Nicara gua and the WTO Secretariat Report were contained 
in documents WT/TPR/G/167 and WT/TPR/S/167,  respectively.  As stated in document 
WT/TPR/6/Rev.1, the Member under review was requi red to reply in writing, before the review 
meeting, to written questions submitted at least tw o weeks before the meeting.  Questions submitted 
subsequently should be answered, to the extent possi ble, before the start of the second session of the 
meeting.  Questions left unanswered at the end of the second session should be answered in writing no 
later than one month after the meeting.  Questions  from the following delegations had been submitted 
at least two weeks before the meeting and had b een forwarded to the delegation of Nicaragua:  
Colombia;  Chile;  and the European Communities.  Copies of those questions and the replies by the 
delegation of Nicaragua were available in the room .  The United States;  Mexico;  Japan;  Brazil;  
Argentina;  and Canada had subm itted written questions after the two week deadline.  All the written 
questions submitted in advance and all the repli es provided by the delegation by Nicaragua were 
reproduced in document WT/TPR/M/167/Add.1. 
3. The Chairperson noted the favourable devel opment of the Nicaraguan economy in recent 
years.  Although faced with a difficult political context, Nicaragua had achieved moderate GDP growth and succeeded in containing inflation,  controlling its fiscal deficit and reducing its 
external debt.  Nevertheless, Nicaragua still faced a number of serious challenges:  in particular it 
needed a more efficient and diversified economy in order to reduce poverty among its population, 
largely rural. 
4. She further observed that Nicaragua attached great importance to its participation in the 
multilateral trading system.  However, since the firs t review of its trade policy in 1999, it had been 
very active in negotiating preferential trade agreemen ts, in particular the Central America-Dominican 
Republic-United States Free Trade Agreement (CAFTA ), which had entered into force for Nicaragua 
on 1 April 2006.  She accordingly noted that Nicaragua  was prepared to consider further liberalization 
of its trade regime in the context of the Doha  Development Agenda, which would strengthen the 
multilateral trading system and contribute to achie ving sustainable and balanced growth in the 
country. WT/TPR/M/167 
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  II. OPENING STATEMENT BY THE RE PRESENTATIVE OF NICARAGUA 
5. The representative of Nicaragua
 said that in 1990 Nicaragua had embarked on a process of 
economic change, which in the last few years had focussed on deep structural reforms that would 
strengthen its outward-looking market economy. 
6. Nicaragua had pursued its efforts to open up tr ade in order to overcome the fragility of the 
economy's external sector, through measures to crea te new supply capacity, remove barriers to trade 
and engage more effectively in the international economy. 
7. In 2002, a National Development Plan had be en drawn up in a process in which the 
population had been consulted.  Designed for the medium and long term, the Plan aimed to raise 
income and reduce poverty, generate employment and increase exports and investment.  It provided 
for economic and social policy measures as well as th e structural reforms needed to transform the 
Nicaraguan economy with the aim of improving comp etitiveness in the private sector, on the basis of 
public investment oriented more towards fixed capital formation and human capital, supported by 
policies to give incentives to production and trade. 
8. In the period under review, Nicaragua had ma intained positive and broadly based growth 
rates averaging 3.2 per cent per year, despite lowe r prices obtained for its main agricultural export 
products.  On the supply side, most economic ac tivities had posted growth rates above the annual 
average.  Factors boosting the demand side had been consumer spending and the expansion of 
external demand. 
9. Inflation had been kept at single-digit levels  in 1999-2005, despite price hikes in oil and 
several consumer goods, as a result of fiscal discipline and sound monetary policy;  the fiscal deficit 
as a percentage of GDP had dropped by slightly more than half since 2001 (4.3 per cent in 2005). 
10. Nicaragua was a beneficiary of the heavily in debted poor countries (HIPC) initiative, which 
had enabled it to reduce foreign debt as a pe rcentage of GDP from 175 per cent in 1999 to 109 per 
cent in 2005.  Customs formalities and documentation had been improved, price controls had been 
eliminated other than for hydrocarbons and pharmac euticals;  the business climate had improved and 
privatization had been accelerated, as had the phasi ng out of state monopolies, except in a handful of 
services which needed State management because of thei r nature and size.  It could thus be said that 
virtually all sectors of the economy were open to foreign direct investment. 
11. In the context of opening up tr ade, Nicaragua had deepened its trade agreements with Mexico 
and the Dominican Republic and had recently beco me a party to the Central America-Dominican 
Republic-United States Free Trade Agreement (CAFTA -DR) and concluded a trade agreement with 
the Separate Customs Territory of Taiwan, Penghu , Kinmen and Matsu (Chinese Taipei).  It was 
negotiating other free trade agreements  with Panama, Canada and Chile. 
12. In general, Nicaragua had eliminated import and export prohibitions, except for those which 
legitimately safeguarded human, animal or plant he alth, the environment, and national security.  It 
applied no subsidies that distorted trade, production or exports. 
13. Structural reforms were still being pursued so as to facilitate economic and social growth.  
They included administrative decentralization, strengthening of the financial system and the modernization of tax administration.  Furthermore, numerous laws had been enacted covering a range 
of subjects (exports, free zones, foreign investme nt, self-clearance, financial services, intellectual 
property, taxation, environment, natural resource s, health, tourism, etc.) which had helped to 
strengthen the country's econom ic and institutional base.  WT/TPR/M/167 
 Page 5 
 
 
  14. The Central American integration process had ma de considerable headway with the lowering 
of virtually all barriers to intra-regional trade.  Substantial progress had also been made to date on 
tariff, migration and health issues.  There had lik ewise been progress in adapting customs regulations 
to the new requirements of international trade, a nd there were Central American regulations on the 
customs valuations of goods, in keeping with Ar ticle VII of the GATT 1994.  Legislation of various 
kinds had been enacted with a view to meeting th e demands of the international market.  All the 
foregoing had contributed to maintaining political and economic stability, enhancing the climate of 
confidence for domestic and foreign investors, and stepping up trade. 
15. Although there had been economic and social progress and an improvement in the 
implementation of trade policy, some major imbala nces remained:  a large and growing trade deficit 
due to a deterioration in the terms of trade, hi gh public debt, and shortc omings in production, 
economic and social infrastructure, so that economic growth rates during the period had been insufficient to attain Nicaragua's economic de velopment objectives and actually reduce poverty. 
16. In seeking to overcome those imbalances and create new production capacity, and as part of 
the national development strategy, Nicaragua ha d focused on implementing sectoral programmes to 
boost the rural economy, small and medium-sized enterprises, and the environment and natural 
resources:  Prorural, Promypime and  Proambiental.  Work had also been done on the formulation of 
an industrial policy and the National Competitiven ess Programme, which included the cluster strategy 
for productive growth.  That sector focus had been supplemented with a territorial approach, to make 
the most of the potential of the various areas and achieve harmonized and integrated development between them. 
17. On joining the GATT in May 1950, and the World Trade Organization (WTO) in September 
1995, Nicaragua was convinced that it was essential to develop a fair and just multilateral trading 
system that would enhance the growth of trade, strengthen the world economy and help to increase 
production, trade in goods and services and real income with a view to attaining economic 
development allowing poverty to be overcome, part icularly in countries with small and vulnerable 
economies, such as Nicaragua. 
18. As a predominately agricultural economy, Nicaragua had great expectations of fulfilment of 
the Doha development commitments through subs tantial improvements in market access, the 
elimination of all forms of export subsidies and a substantial reduction in trade-distorting domestic 
support in the agricultural sector, where special and differential treatment for the developing countries 
should be an integral part of a ll elements of the negotiations. 
19. The Government of Nicaragua welcomed the decision taken – for the first time in a 
negotiating round – regarding the need to allocate additional resources to "Aid for Trade" for the 
building of supply capacity and infrastructure.  Nicaragua hoped that that decision would be so implemented as to take account of the needs of small and vulnerable economies such as its own which 
were making all-out efforts to meet commitmen ts under the WTO Agreements, and the Millennium 
Development Goals. WT/TPR/M/167 
Page 6  
 
  III. STATEMENT BY THE DISCUSSANT 
20. The discussant
 welcomed the delegation of Nicaragua and thanked the Secretariat for its 
report.  He said that everyone realized the signifi cance of trade policy reviews:  they allowed an 
overall – and at the same time detailed – view and evaluation of a country's trade policy in the context 
of the multilateral trading system.  That allowed Members to convey to the country under review, 
which was represented at high level in the review m eeting, such observations, concerns and queries as 
they saw fit. 
21. The expected outcome of the exercise - and experience confirmed expectations - was a 
reaffirmation that the trade policies of the country under review were consis tent with the multilateral 
system, together with encouragement and guida nce to strengthen integration in the system. 
Economic environment 
 
22. In the first review of its trade policy in 1999, Nicaragua was commended on the steps it had 
taken to rebuild its economy on a market-oriented basis with closer integration in the multilateral 
trading system in the context of the WTO, and the strengthening of its legal framework.  Since then, 
Nicaragua had taken new steps to open up its economy  to the market, such as the elimination of the 
temporary import tariff introduced in 1994 and the a doption of a series of appropriate legislative 
measures.  It had persevered along the same pa th and its macroeconomic performance had been 
broadly positive.  There had been growth with m acroeconomic stability and a significant reduction in 
the debt. 
23. Real GDP growth had averaged 3.7 per cent in  the 1997-2007 period (up from -0.1 per cent in 
the period 1987-1996), but it had been hampered by the impact of higher oil prices and sluggish 
external demand.  Inflation had been contained to  some extent, posting single-digit levels, though it 
had been higher in 2005 than in the two previous years, taking account of the effects of the oil price 
increase.  The fiscal deficit had dropped, with a significant increase in incomes, as had the current 
account deficit as a percentage of GDP. 
24. The trade deficit, however, had been a source of macroeconomic imbalance.  Merchandise 
trade had shown a growing deficit.  Nicaragua ought  therefore to focus on specializing in sectors 
where export potential was the greatest.  It should also persevere with effo rts to tackle the most 
vulnerable aspects of the economy, creating the righ t internal environment for economic growth and 
improved standards of living. 
Trade policies 
 
25. Nicaragua was a founding Member of the WT O.  Committed to th e multilateral trading 
system, it was an active participant in the Organi zation, as it had been in the GATT, which it had 
joined in 1950. 
26. The simple average of Nicaragua's tariff had b een 5.8 per cent in 2005, which was higher than 
the figure for 1999 following the liberalization meas ures of previous years.  The increase was in a 
large measure due to the ongoing harmonization of the common external tariff of the Central American Common Market.  However, Nicaragua ha d bound its tariffs, with a few exceptions, at a 
ceiling rate of 40 per cent, though it was necessary to await the outcome of the Doha Round negotiations, in which Nicaragua was an active par ticipant both individually and in the context of 
certain common positions, including that of the Small and Vulnerable Economies.  WT/TPR/M/167 
 Page 7 
 
 
  Sectoral policies 
 
27. Agriculture remained a key sector for Nicaragua , accounting for approximately one fifth of 
GDP, one third of the labour force and 80 per cent of exports, though there was little diversification 
(five agricultural products accounted for nearly half of merchandise exports), a situation that 
Nicaragua was trying to remedy.  Since the previ ous review, exports of ag ricultural products had 
grown more rapidly than imports.  As a resu lt, the agricultural trade surplus had risen. 
28. In 2004, mining had accounted for 1.2 per cent of GDP, gold being the leading mineral 
export.  Its production had doubled in the last ten year s thanks in part to the modernization of plant. 
29. In 2005, manufactures had risen to more than 18.6 per cent of GDP and had been composed 
largely of processed agricultural products (three quarters of exports of manufactures). 
30. The services sector had accounted for the largest  share of GDP (54.2 per cent).  Tourist 
services were growing in importance as a sector to be promoted in Nicaragua's development strategy, 
as they were the main source of foreign currency in  the country's services subsectors.  They offered 
considerable potential and their growth was envisaged  as part of Nicaragua's development strategy.  
In the current global competitive environment, Nicara gua would need to continue investing in tourism 
infrastructure and improving the legal framework. 
31. In the context of the General Agreement on Trade in Services, Nicaragua had made 
commitments in nearly all service categories, and particularly in communications and transport.  In the context of the current Doha Round negotiations , Nicaragua had made a conditional initial offer 
which added to the opportunities for opening its market to the provision of services from abroad. 
32. In the view of the WTO Secretariat, pros pects for the Nicaraguan economy depended, inter 
alia, on a major inflow of resources from abroad, main ly in the form of foreign direct investment 
(FDI), and Nicaragua needed to take further steps to exploit its full structural potential for attracting 
FDI.  Nicaragua intended also to establish a str ong institutional and legal fra mework, and to improve 
economic infrastructure and the standard of technolog y.  It would therefore be interesting to know 
what its plans were for attracting new investment  in key sectors such as those mentioned by the 
Secretariat:  water, sewage, and energy, where th e private sector was up against major difficulties due 
to the current regulatory framework, rising o il prices and a deficit in power generation. 
33. Since its last review, Nicaragua had pressed ahead with structural reforms despite an 
environment that had on occasion complicated and discouraged investment, and had remained committed to the multilateral trading system.  Pursuit of that path should contribute to sustaining and 
enhancing stable growth and achieving an adequa te level of diversification of its economy. WT/TPR/M/167 
Page 8  
 
  IV. STATEMENTS BY MEMBERS 
34. Members welcomed the delegation of Nicaragua , headed by HE Mr Alejandro Argüello.  
Many of them noted the growth rate achieved by Nicaragua and commended the authorities on having 
incorporated trade liberalization in the national development strategy. 
35. The representative of Colombia
 referred to Law No. 325 of 6 December 1999, entitled "Law 
establishing a tax on goods and services from, or originating in, Honduras and Colombia" and its 
implementing regulations, Decree 129-99 and Decree 30- 2000.  The Law established a 35 per cent tax 
on "all goods and services definitively imported or  entering from Honduras or Colombia, including 
those set out in Annex A of the General Treaty on Central American Economic Integration currently 
in force."  The tax applied to the total of the c.i.f. value plus import duties plus the temporary 
protection tariff.  Law No. 449 of 11 March 2003 had subsequently suspended application of the tax 
on manufactured or assembled goods or services import ed from or originating in Honduras.  That had 
made the discrimination of Nicaragua's trade polic y against Colombia much more obvious.  Since 
1999 Nicaragua had applied a trade policy that discriminated against Colombia. 
36. It could not be denied that the application of  a surcharge to Colombian exports to Nicaragua 
amounted to discrimination against Colombia.  He as ked to have that trade practice put on record in 
the conclusions of the trade policy review. 
37. The representative of Chile  said that according to the Secretariat Report, Nicaragua had made 
great strides towards a more market-based economy, enacting or amending legislation in areas such as intellectual property, government  procurement and competition. 
38. In terms of liberalization and the predictab ility of its trade regime, Nicaragua had made 
significant progress, binding all but 64 of its tariff lines and repealing the temporary import tariff 
imposed in 1994.  However, the growing numbe r of sanitary and phytosanitary measures and 
technical regulations could undermine, at least in part, Nicaragua's efforts to improve the 
predictability of its trade regime. 
39. Chile would like to know more about Nicaragua 's trade policy and regional trade agreements.  
He asked what Nicaragua's policies, criteria a nd objectives were in negotiating a regional trade 
agreement. 
40. According to the Secretariat Report, in the last few years Nicaragua had increased its 
MFN tariff, owing largely to the ongoing harmonizat ion of the common external tariff of the Central 
American Common Market.  Chile wished to know how Nicaragua reconciled the increase in 
MFN tariffs with the drop in its preferential tariffs.  It also wished to know how Nicaragua had treated 
the agricultural sector in its b ilateral negotiations, which accounted for approximately 80 per cent of 
its merchandise trade.  He asked what problems had been encountered in implementing the trade 
agreements concluded and what Ni caragua had done in terms of disse mination in order to promote the 
benefits of the FTAs among the sectors affected by them, and what the results had been. 
41. The representative of the European Communities
 observed that while Nicaragua's trading 
relations took place against an improving macroeconom ic environment, further sustained efforts were 
necessary to ensure that Nicaragua pursued the track  of development and reform, which would lead to 
a systematic reduction in poverty and the improvement  of the lives of all Nicaraguans.  Trade policy 
had an important role to play in this;  in this c ontext, the EC wished to learn more about how trade 
policy measures were being linked to Ni caragua's poverty reduction strategy. 
42. To reap the most possible benefits fro m WTO membership and increased trading 
opportunities, domestic reform in Ni caragua should continue  and be reinforced.  This would include  WT/TPR/M/167 
 Page 9 
 
 
  maintaining the ongoing efforts to introduce a compet ition policy as well as private sector reforms, for 
sectors such as transport, finance, and telecommunica tions;  these were all core sectors in terms of 
development.  Energy generation and distributio n was also of crucial importance for economic 
development.  In this context, the EC representa tive asked whether the delegation of Nicaragua could 
explain any measures foreseen to guarantee the supply and distribution of electricity to consumers in 
Nicaragua in the long-run. 
43. These reforms could be flanked by measures to facilitate and increase direct investment as 
well as market opening towards foreign services provi ders.  This would assist Nicaragua's economic 
development directly, and indirectly assist Nicara gua in further diversifying its export base from 
agricultural activities.  The EC wa s interested in learning what kind of measures the Government of 
Nicaragua was pursuing to attract and keep foreign direct investment, including in the energy sector. 
44. Regarding how the trade policies of Nicaragua  could best contribute to ensuring further 
sustainable development, the EC welcomed Nicara gua's commitment to the WTO, as stated in its 
trade policy objectives.  Like many other Memb ers, Nicaragua pursued bilateral and regional 
liberalization in parallel to the multilateral sphere, including with the EC.  Complementarity between 
the two was crucial. 
45. Nicaragua was engaged in an ambitious inte gration project with its Central American 
neighbours, and many of the ongoing domestic refo rms were linked to this process.  The EC was 
interested in hearing Nicaragua's assessment of the potential for further regional integration, in 
particular with regard to the principles of free move ment of persons, services, capital, and payments.  
She asked whether Nicaragua foresaw the ha rmonization and/or mutual recognition of non-
discriminatory measures regulating investment and trade in services, in particular with regard to the 
recently ratified Central American Treaty on Services and Investment.  She asked whether there were plans to negotiate the Annexes to that Treaty soon. 
46. The EC and Nicaragua were building a strong partnership, not least through development 
programmes and trade arrangements, also within the context of the planned negotiations for a 
comprehensive WTO-plus EU-Central American Association Agreement. 
47. In terms of how trade policy could best contribute to Nicaragua's further development, the 
EC stressed the importance of high standards of protection for intellectual property rights as well as a transparent and open government procurement system , providing for stronger participation of foreign 
companies.  She asked whether Nicaragua planned to  allow the participation of foreign companies in 
tenders without local representation requirements. 
48. Many WTO Members placed great emphasis on the need to address the link between trade 
and sustainable development;  all three pillars of sustainable development – the economic, social, and 
environmental components – needed to be fully inte grated in any national strategy.  She requested 
more information on how Nicaragua assessed the potential for ensuring strong synergies between 
trade and sustainable development, and how some of the social effects of trade liberalization could 
best be addressed. 
49. The EC was ready to support Nicaragua in its development, including via its trade policies.  
The DDA needed to be brought to a successful conc lusion.  The EC expected substantial results by 
the end of 2006 on the three pillars of market access and in the area of rules, coupled with a 
substantial development package,  and was confident that Nicara gua shared this ambition and 
encouraged it to contribute  according to its means. 
50. The representative of Mexico
 said that Nicaragua still had little trade with Mexico, although 
there had been a steady increase in the last few y ears.  Since the FTA had been concluded, Mexico WT/TPR/M/167 
Page 10  
 
  had tripled its exports to Nicaragua and increased its imports from Nicaragua by 161 per cent.  In 
2005, total trade had amounted to some US$268 milli on, an increase of about 40 per cent over 2004.  
Mexico now ranked third among Ni caragua's trading partners. 
51. There were clearly plenty of opportunities fo r more trade between the two countries, as was 
plain from the fact that Mexico was now third among Nicaragua's trading partners whereas in 2005 
only 0.6 per cent of the total value of Mexico's trad e had been with Nicaragua.  The participation of 
Mexican investors in Nicaragua was growing a nd was to a large extent linked to Mexico's 
merchandise exports to Nicaragua. 
52. While bilateral trade was important, progress in Members' trade liberalization in the 
multilateral context was very necessary and a sine qua non  for promoting more and deeper 
liberalization at bilateral level.  He commende d Nicaragua for its active participation in and 
commitment to the multilateral trading system, and particularly the current Round of negotiations. 
53. Applied tariffs were low, although they had increased since 1999.  Since 1999, Nicaragua had 
pursued its transition towards a more market-based economy.  In the period under review, Nicaragua 
had notified to the WTO a considerable number of new sanitary and phytosanitary measures and 
technical regulations.  Other than safeguards for a few agricultural products, Nicaragua had taken no 
special trade measures since 1999 and non-tariff barriers to  trade appeared to be limited.  International 
trade in goods and services had increased.  The balance of payments on current account had 
traditionally recorded a deficit, which had largel y been financed by foreign direct investment. 
54. Nicaragua's export base consisted largely of  agricultural goods, which accounted for more 
than 80 per cent of merchandise exports, although the share of manufactures had grown.  Since 1999, 
Nicaragua had made relatively little use of the WT O dispute settlement mechanism.  The services 
sector accounted for the largest share of GDP (52. 4 per cent in 2005) and employment (68.4 per cent 
in 2004). 
55. The representative of the United States of America
 noted that since its first Trade Policy 
Review in 1999, Nicaragua had experienced sust ained economy recovery, with an average real 
GDP rate of growth of 3.7 per cent.  This growth  reflected several steps taken by the Government, 
often in a difficult political environment, to cont inue the transition to a more market-oriented 
economy.  The Secretariat Report pointed to accomplishments in the areas of customs regulation, intellectual property rights, government procurem ent, and reforms to the free zone regime. 
56. The United States applauded Nicaragua for ente ring into the Dominican Republic-Central 
America-United States Free Trade Agreement (CAFTA -DR) and for putting the agreement into force 
as of 1 April.  The CAFTA-DR was a comprehensive free trade agreement covering trade in goods 
and services, intellectual property ri ghts, investment, telecommunica tions, labour and environment, 
and was expected to promote economic integration within Central America and with the Dominican 
Republic.  To implement its CAFTA-DR commitments , Nicaragua had adopted a series of significant 
legislative and regulatory measures that would cont ribute to the accomplishments it had already made 
autonomously and within the multilateral framework. 
57. The trade and commercial relationship between the United Status and Nicaragua was strong, 
positive, and growing:  total two-way goods trade had been US$1.8 billion during 2005.  
United States goods exports to Nicaragua in 20 05 had amounted to US$626 million, up 5.6 per cent 
from 2004, and 237 per cent from 1994.  United Stat es goods imports from Nicaragua had totalled 
US$1.2 billion in 2005, a 19.3 per cent increase from 2004.  Even greater growth was expected from 
the implementation of the CAFTA-DR.  The United States was by far the largest source of foreign 
direct investment to Nicaragua, w ith a total of US$220 million in 2004.  WT/TPR/M/167 
 Page 11 
 
 
  58. Through the CAFTA-DR Trade Capacity Buildi ng Committee, the United States was working 
to coordinate capacity building in itiatives in priority areas identified by Nicaragua, including training 
and technical assistance in IPR, rural development,  and science-based standards in agriculture.  The 
United States was also pleased to be working w ith Nicaragua, through the Millennium Challenge 
Corporation (MCC), to address Nicaragua's devel opment and trade priorities.  Nicaragua had 
identified a regional development strategy to be  funded by the MCC that would address insecure 
property rights, under-developed infrastructure, and low-value agricultural production.  The 
US$175 million MCC Compact with Nicaragua was focused on creating an engine for economic 
growth in the northwestern part of the country, a po or region with significant growth potential due to 
its fertile land and connection to ma rkets in Honduras and El Salvador. 
59. In order to continue on this successful path and improve its economic competitiveness, 
Nicaragua needed to strengthen policies and practices to improve its transport and telecommunications infrastructure, and to continue it s efforts to promote transparency and the rule of 
law.  The United States hoped to hear more in this  review about Nicaragua's plans to address these 
critical areas. 
60. The United States commended Nicaragua for its success in strengthening its legal framework 
for protection of intellectual property rights and its  commitment to improving enforcement.  Effective 
IPR protection provided necessary security for forei gn investors and was an important element for 
sustainable economic development.  The United Stat es asked for an update on Nicaragua's progress in 
the area of civil and criminal enforcement of intellectual property rights.  The implementation of CAFTA-DR obligations should further strengthen Nicara gua's IPR protection regime.  In addition, the 
U.S. Government and industry were working with  the Nicaraguan Government to provide capacity 
building assistance for effective enforcement. 
61. Nicaragua had demonstrated its commitment to the multilateral trading system and had been 
an active participant in the Doha Development Agenda negotiations.  The United States welcomed 
Nicaragua's reiteration of its confidence in the globa l trading system, and shared the high hopes for a 
substantial Doha outcome.  Nicara gua had contributed proposals in many areas of the negotiations, 
including trade facilitation and services.  The econom ic changes under way in Nicaragua as a result of 
its autonomous and regional policies would position Nicaragua to continue as a strong advocate of 
multilateral trade liberalization. 
62. The representative of Argentina
 said that the Secretariat Report highlighted two points that 
deserved mention.  One was the positive results  achieved by the Nicaraguan economy during the 
period 1997-2005:  an annual growth  rate of 3.5 per cent;  an increase in per capita GDP and a 
reduction in poverty;  an increase in manufactures' share of GDP;  and a reduction of the external debt 
to sustainable levels.  The other was the incr ease in foreign trade between 2000 and 2005, and in 
merchandise exports, which had risen from US$890 m illion to some US$1,600 million in that period. 
63. Both the IMF and the World Bank, in its Nicaragua country brief for 2006, had noted 
Nicaragua's ability to overcome internal conflicts and natural disasters, such as hurricane Mitch, and 
to consolidate its economic grow th and social development. 
64. The Secretariat had reported a substantial reduc tion in the formalities and documents required 
for importation, and had noted the progress made in th is area thanks to the server centralization plan 
implemented by the Directorate-General of Customs.   There were neverthel ess two questions.  The 
first concerned the outline draft General Custom s Law that would replace the Automatic Clearance 
Law:  what were the main amendments and how  might they affect imports?  The second, which 
concerned customs valuation, was whether minimu m values for the valuation of certain products 
(tyres, textile articles etc.) had already been eliminated. WT/TPR/M/167 
Page 12  
 
  65. Argentina and Nicaragua had close bilateral ties and in the area of trade in particular had 
made gradual but sustained progress, which could still be much enhanced.  In 2005, the volume of 
overall trade had amounted to only US$50 million.  Argentina's exports had largely consisted of 
goods transport vehicles, gasoline and soya oil.  Te xtile articles and cigarettes had been Nicaragua's 
main exports.  In Argentina's view , expansion and diversification of Nicaragua's trade with Argentina 
would benefit both countries. 
66. Argentina and Nicaragua agreed that it was po ssible to have a Round with development as its 
core.  Tariff cuts did not per se  fully ensure the achievement of such an objective.  Market opening 
without non-tariff barriers and transparency  for commercial operators were necessary. 
67. It should be possible for Nicaragua and othe r Members from the Latin American region to 
enjoy the benefits that Aid for Trade offered.  Those Members should receive aid both from regional 
and multilateral institutions and cooperation from other developing  countries channelled through Aid 
for Trade. 
68. The representative of Japan
 observed that Japan had announced "A Vision for a New Japan - 
Latin America Partnership" in 2004 to reactivate the economic relationship.  In 2005, Japan and 
Central American countries, including Nicaragua, had announced the "Tokyo Declaration", in order to 
enhance friendship and cooperation.  Both policy packages addressed the importance of the Doha 
Development Agenda as a means of enhancing the multilateral trading system and of aiming towards 
prosperity in the international community.  In this context, Japan had contributed to the DDA by 
supporting economic structural reform  as well as democratization in Nicaragua right after the end of 
the civil war in 1990. 
69. Nicaragua had implemented economic reforms si nce 1994, such as trade liberalization, the 
privatization of most state enterprises, the reductio n of external debt and the transition to a more 
market-oriented economy.  Since 2002, Nicaragua  had carried out economic policies aimed at 
improving competitiveness in the private sector , based on the National Development Plan. 
70. Despite the difficult political environment, Nicar agua had improved the fiscal balance and 
reduced external debt to sustainable levels th rough single-digit inflation and control of public 
expenditure.  Regarding participation in the WTO,  the Nicaraguan Government viewed exports as one 
of the key factors for further GDP growth and Ni caragua's poverty reduction programme, and attached 
the utmost importance to the DDA, including the services sector. 
71. Nevertheless, according to the Secretariat Re port the economy remained vulnerable because 
of the high public debt and fiscal  deficit, while over 25 per cent of Nicaragua's population remained 
below the poverty line.  In addition, economic grow th had not translated into lower unemployment.  
Japan hoped that Nicaragua would continue to take measures to tackle such problems. 
72. He requested some clarifications regarding Nicaragua's economic and trade policies:  he 
requested specific views on the conformity with  the WTO treaties of the new Foreign Investment 
Promotion Law, a draft foreign trade law, a new cu stoms law, and a law on competition.  He was also 
interested in the time required for import and expor t procedures in Nicaragua, and the possibility that 
Nicaragua would become a party to the WTO Agr eement on Government Procurement.  He asked 
Nicaragua to clarify policies in the services se ctor such as the service-related article of the 
Constitution, financial services, postal services, and audiovisual services. 
73. The representative of Canada  noted the assistance that Canada provided to the long-term OAS 
electoral mission for the upcoming November 2006 elections. Canada hoped that Nicaragua's 
electoral process would be conducted in accordance with the principles established by the Inter- WT/TPR/M/167 
 Page 13 
 
 
  American Democratic Charter.  The consolidation of Nicaragua's democracy and sustained anti-
corruption efforts were essential ingredients in providing the right conditions for economic growth. 
74. Canada and Nicaragua enjoyed a stable bilatera l commercial relationship.  In 2005, two-way 
trade had amounted to C$76.88 million. 
75. Nicaragua was one of the 25 countries of world concentration for the Canadian International 
Development Agency (CIDA).  In the 2004-05 fiscal year, Canadian official development assistance 
to Nicaragua – including bilateral, multilateral and partnership programmes – had amounted to 
approximately $16.5 million. 
76. Canada was interested in the progress of the Central American Common Market towards a 
full common tariff policy.  Canada was currently negotiating a free trade agreement with Nicaragua, 
one of the Central America Four (CA4) group of c ountries. Canada hoped that bilateral negotiations 
would conclude on a successful note in the near term. 
77. Nicaragua provided foreign investment guarantees through bilateral investment treaties, free 
trade agreements and GATS commitments.  Cana da congratulated Nicaragua for introducing the 
Foreign Investment Promotion Law, which enc ouraged foreign investment by assuring equal 
treatment for foreign and domestic investment. 
78. Since its last review, Nicaragua had also take n measures to modernize and simplify its trade 
regime.  Canada followed with interest Nicaragua 's progress in the modernization process and in the 
national programme of trade and investment polic ies, aimed at fostering economic integration, 
reaching new export markets, promoting investment , and building public a nd private partnerships. 
79. Canada fully appreciated the difficulties created  by the sharp increases in oil prices over the 
last year in terms of macroeconomic, external, and fiscal balances, as well as the hardship it imposed 
on the most vulnerable classes of society.  Mainta ining fiscal discipline was difficult in a country 
where poverty and unemployment levels remained high.  Governments committed to maintaining a 
liberal and transparent trade regime would be bette r placed to fully enjoy the benefits of increased 
international trade and global economic growth. 
80. Canada encouraged Nicaragua to pursue its e fforts towards political stability and improve the 
conditions for economic growth, which should benefit all segments of Nicaraguan society. 
81. The representative of Brazil  congratulated Nicaragua on its positive macroeconomic 
performance, which had enabled it to contain infla tion (despite the increase in oil prices), control the 
fiscal deficit and reduce the current account defi cit as a percentage of GDP.  Nicaragua was 
consolidating its reforms, anchoring its macroe conomic stability on a sound basis and improving its 
social indicators. 
82. Brazil welcomed the fact that Nicaragua's re cent macroeconomic results had been positive, as 
noted in the Secretariat Report, with an average a nnual GDP growth rate of 3.7 per cent in the period 
1997-2005. 
83. In Brazil's view, without economic stability, sustained growth in production and fairer 
distribution of the fruits of growth, there could be  no lasting improvement in  standards of living and 
poverty reduction. 
84. Brazil shared with Nicaragua and other Members the view that it was important to strengthen 
the multilateral trading system as a vital guarantee against discrimination and the use of unilateral 
trade measures.  Brazil congratulated Nicaragua on its active participation in the DDA and for its WT/TPR/M/167 
Page 14  
 
  commitments in nearly all categories of services under the GATS with a view to promoting 
investment and developing the infrastructure of the sector. 
85. As well as its membership of the CACM and CAFTA, Nicaragua was in the process of 
extending trade arrangements that would contribute to the liberalization of trade and enable it to step 
up internal and external trade flows and promote i nvestment.  The opening up to private capital under 
the investment regime established by law in 2000, and the programme for privatization of key sectors 
such as electricity and telecommunications, were to be highlighted as important features of that process. 
86. The representative of the Dominican Republic
 said that since 1999, the Nicaraguan economy 
had seen sound management of macroeconomic polic y and consolidation of the structural reform 
process, enabling it to achieve significant growth – 5.1 per cent in 2004 and an average of 3 per cent 
over the period 1999-2004 - and to control inflation a nd maintain it at single digit level.  All that had 
been despite an increase in oil pr ices, high international interest rates and a drop in the prices of 
Nicaragua's main agricultural exports. 
87. The Nicaraguan authorities had implemented a major programme of structural reforms, 
including a reduction in the number of ministries, priv atization of the electric ity supply, a reduction of 
import tariffs and adoption of the banking law. 
88. Nicaragua had deepened its integration in Ce ntral America, harmonized 94 per cent of the 
tariff universe with the countries of the Centra l American Common Market and made significant 
progress in the area of customs regulations.  Nicaragua was also a participant in the Agreement concluded by Central America and the Dominican Re public with the United States, which envisaged 
further opening of the economies involved.  Thanks to its trade liberalization policy, Nicaragua had 
succeeded in increasing its exports by an annual average of over 7 per cent between 1999 and 2004. 
89. During the period under review, Nicaragua had attached great importance to the amendment 
of foreign investment law, the conclusion of num erous agreements on the promotion and reciprocal 
protection of investment, the modernization of la ws on the central bank, commercial banks and the 
Banking Superintendency, and the strengthening of prudential regulations in  the national financial 
system. 
90. Nicaragua was to be commended on its Nati onal Development Plan, which sought to 
reactivate the industrial sector in order to  make it more competitive, support programmes 
implemented under Promipyme, Proambiente and the National Competitiveness Programme, thanks 
to which Nicaragua would presumably increase bo th production and exports, through successful 
integration in regional a nd international markets. 
91. The representative of Costa Rica
 said that his country and Nicaragua maintained significant 
trade and investment flows.  Cost Rica ranke d third among markets for Nicaraguan merchandise 
exports, with a share of 7 per cent in 2004.  Nicaragua  was the recipient of 25 per cent of Costa Rica's 
goods exports to Central America, which acc ounted for 3.8 per cent of total exports. 
92. He pointed out the importance of interna tional trade to Nicaragua's economy and its 
integration in the world economy, the importance of improving economic and development indicators 
and the significant role of Nicaragua's National Development Plan in combating poverty.  The 
opening up of trade had played an important part in Nicaragua's economic growth.  An increase in exports of some 7.8 per cent had secured positive growth rates in the Ni caraguan economy which had 
reached an annual average of 3.1 per cent of real GDP in the period 1997-2005.  WT/TPR/M/167 
 Page 15 
 
 
  93. The representative of the Separate Customs Te rritory of Taiwan, Penghu, Kinmen and Matsu  
(Chinese Taipei) observed that Nicaragua's macroe conomic performance had been broadly positive, 
with annual average GDP growth of 3.7 per cent over the review period, and reductions in its fiscal 
and current account deficits.  Although the current a ccount had traditionally recorded a deficit, this 
had been financed by growing inflows of foreign direct investment and international assistance.  
Substantial efforts had been made by the Govern ment to stabilize the economy and strengthen its 
trade regime through further liberalization.  These ef forts appeared to have brought its trade regime 
more into conformity with WTO rules, and a step closer to integration with the Central American 
Common Market. 
94. International trade in goods and services was generally becoming an increasingly important 
factor in Nicaragua's economy.  Further domestic policy reform was going to be required if future 
growth was to be sustained.  Priorities were likely to be the reduction of poverty and the external debt, 
further liberalization of trade and investment, plus  other structural reforms to improve productivity 
and economic governance, to make Nicaragua more  competitive in the Central American region. 
95. Chinese Taipei enjoyed close, long-standing economic ties with Nicaragua.  A free trade 
agreement had been completed and approved by the two governments on 16 June 2006.  The total 
value of two-way trade in 2005 had been just US$46.3 million. 
96. The representative of Bolivia  said that the figures in Nicaragua's second trade policy review 
were evidence of growth in the country's exports  and although traditional goods still accounted for 
more than 50 per cent of total me rchandise exports, there had been dy namic growth in non-traditional 
products. 
97. Nicaragua attached importance to open trade pr actices, which, together with the measures 
implemented under its National Deve lopment Plan for 2002, had enabled it to enhance its presence in 
the external sector and post growth rates of up to 5.1 per cent, which showed that Nicaragua 
encouraged private investment and economic expansion. 
98. Nicaragua's export base was chiefly concentr ated in agricultural goods, sales of which on 
world market in recent years amounted to approximately 0.01 per cent.  That level of participation in 
trade allowed Members of the Organization to unde rstand the proposals and contributions Nicaragua 
had made during the current Round of negotiations in its quest for closer integration in world trade. 
99. The representative of Honduras  took note of the reforms implemented by Nicaragua, 
including further decentralization of administration,  the strengthening of the financial system and the 
modernization of tax administration, which was growing in importance as income from tariffs 
decreased.  As the report by Nicaragua said, as a result of its trade policies, particularly the 
liberalization of trade, Nicaragua had been able to improve its economic performance, thanks mainly 
to goods and services exports and pr ivate consumption and investment. 
100. Like Nicaragua and the other countries of Cent ral America, Honduras had been a member of 
the Central American Common Market since 1961.  It  had also negotiated a free trade agreement with 
the United States and the Dominican Republic an d negotiations were under way with Panama, 
Chinese Taipei, Chile and Canada.  There would possibly be negotiations with the European 
Communities as well. 
101. The initiatives implemented jointly with other Ce ntral American countries were interesting, 
despite budgetary limitations faced by those count ries.  One such initiative was the customs 
facilitation measures in place at border posts wi th Honduras:  simplified procedures had been 
introduced for the movement of goods and persons, with the establishment of joint windows attended WT/TPR/M/167 
Page 16  
 
  by staff from both countries, enabling users to make  a single stop.  The aim was to reduce the time 
taken to process migration and customs operations. 
102. Nicaragua used the facilities of Puerto Cortés in Honduras to ship exports of coffee, fresh 
fruit, extra.  On 25 March 2006, Puerto Cortés ha d become a secure part on joining the Secure 
Container Initiative of the United States Customs a nd Border Service.  Under the initiative, any 
maritime freight leaving Puerto Cortés for the Un ited States market could be examined and scanned 
before departure.  Worldwide, there were 44 port s operating under the initiative, only four of which 
were in the Americas:  in Cana da, Brazil, Argentina and Honduras. 
103. As to Aid for Trade, for it to be effective it would need to focus on creating supply capacity 
and in some cases the infrastructure needed to step up trade.  Such aid should also be channelled to 
Members with small and vulnerable economies, partic ularly low-income countries, and should include 
countries that received financing from the In ternational Development Association (IDA). 
104. The representative of Paraguay
 said that Nicaragua was work ing intensively and advancing 
with resolve to occupy the place it deserved in the trade community.  It was to be commended on the 
sustained growth of its economy, clear evidence that the Government was serious and willing to 
pursue the necessary adjustments to cope with the current difficulties facing the world economy. 
105. The representative of India  noted that Nicaragua had progressed towards macroeconomic 
stability in the past few years.  This had resulte d in a broadly positive GDP growth and improvement 
in the fiscal situation.  During the last five years, exports had increased by 15 per cent annually.  However, a few areas of concern on account of domes tic and external factors could have an adverse 
impact on its future economic growth. 
106. India and Nicaragua enjoyed cordial and friendl y relations, and India had extended economic 
and technical assistance to Nicaragua.  The present level of India's trade with Nicaragua was very 
small:  India hoped that in the years ahead there would be an increased demand for Indian goods and 
services. 
107. The representative of Korea
 noted that Nicaragua's overall economic performance had been 
broadly positive in 1999 with rapid gr owth of real GDP and foreign di rect investment.  Nicaragua had 
achieved this despite a difficult political environmen t.  This economic success was mainly as a result 
of Nicaragua's efficient economic management, i nvolving tight monetary policy and fiscal discipline 
along with proactive trade liberalization, includi ng measures to improve competitiveness, and active 
participation in regional and multilateral trading agreements. 
108. Although Nicaragua still faced political and economic  challenges, including high public debt 
and a large current-account deficit, Korea encouraged  Nicaragua to further accelerate the momentum 
of economic reform and trade liberalization, which would lead to a more sustained economic growth 
and development. 
109. Korea and Nicaragua had good trade and investme nt relations.  Bilateral trade had reached 
about US$134 million in 2005.  Also, Korea had become  the third largest investor in Nicaragua over 
2000-04.  Nicaragua had taken various steps to impr ove the investment climate, including adoption of 
a new foreign investment law in 2000, and the deepening of the privatization process.  Korea 
encouraged Nicaragua to further consolidate its re forms to attract and protect foreign investment. 
110. Nicaragua's infrastructure needed substantial improvement, particularly roads and ports.  
Korea was interested to hear wh ether Nicaragua's mid- and long- term National Development Plan 
contained such elements.  WT/TPR/M/167 
 Page 17 
 
 
  111. The representative of Guatemala  observed that Nicaragua was an important trading partner in 
both the Central American integration process a nd the WTO.  Since 1999, the Nicaraguan economy 
had seen continuous growth based on a free market system introduced in 1990.  In its opening up 
process, Nicaragua was implementing a strategy to secure closer economic integration in the region 
and the creation of a customs union, by means of the guarantees afforded by a stable regulatory 
framework for both domestic and foreign investment. 
112. A believer in the multilateral system, Nicara gua was firmly supporting the commitments 
undertaken in the Doha Development Agenda, whic h focused on pursuing the process of reform and 
liberalization of trade policies so that the developi ng and least developed countries might participate 
more effectively in the multilateral trading system and achieve meaningful and beneficial integration 
into the world economy.  Guatemala and Nicaragua were working together in the Group of Small, 
Vulnerable Economies with a view to their diffi culties and needs being accommodated in the Doha 
Round negotiations, so that positive results coul d be achieved as soon as possible enabling their 
economies to be integrated into the global economy.  Both countries were active participants in the 
G-33, where they were working together in the quest for recognition of mechanisms enabling their 
farmers to earn a living and become competitive in  agricultural trade.  Guatemala agreed with 
Nicaragua that in order to comply in full with the Doha mandate, agriculture would have to be 
incorporated in multilateral disciplines, and the results would have to include as a fundamental 
component special and differential treatment that addressed the development needs of the developing 
countries and maintained the right proportionality vis-à-vis the more substantive commitments to be 
made by the developed countries. 
113. The representative of El Salvador  said that the Nicaraguan economy continued to move along 
the free-market growth path it had embarked on in 1990.  The trade regime was predictable and 
transparent, with efficient macro-economic management involving tight monetary policy and fiscal discipline, supported by an expansion of economic  liberalization, open trade practices and the 
attraction of foreign investment. 
114. The Government of Nicaragua had launched a National Developm ent Plan, the aim of which 
was to lay the foundations for economic growth, sustainable employment generation, export and 
investment growth, and increased income in order to  reduce poverty.  As a result of the Plan, there 
had been positive changes in the areas of intellect ual property, agriculture, competitiveness, export 
promotion and the promotion of foreign investment, inter alia . 
115. The Intellectual Property Office had performed th e arduous task of modernizing the sphere of 
intellectual property rights and aligning it with international quality mana gement parameters.  
Nicaragua was to be congratulated on its effi cient implementation of improved and strengthened 
legislation on intellectual property in the current year.  The improvements included extended terms of 
protection for authors and their works, strengthe ned provisions on enforcement and border measures 
to prevent the movement of infringing matter. 
116. In the setting up of the Central American Cust oms Union, Nicaragua had made major efforts 
to align itself, concentrating on integration inter alia  through coordination, harmonization and the 
convergence of economic policies, in the belief th at the expansion of national markets through the 
integration process was a sine qua non  for encouraging the development of the region.  The aim was 
fair and sustainable economic and social developm ent enabling the countries of Central America to 
secure both the well-being of their peoples and growth. 
117. Nicaragua had met with difficulties in complying with its multilateral commitments, but had 
maintained its belief in the multilateral system and th e benefits of negotiation, and particularly in the 
need to expand Aid for Trade, the goal of which wa s to create supply capacity and the infrastructure 
needed to build on and benefit from agreements with in the WTO, since trade liberalization, even if WT/TPR/M/167 
Page 18  
 
  gradual, would require wholesale modernization in a number of sectors.  The costs would be 
particularly high in traditional agriculture, and sm all and medium-sized enterprises would meet with 
growing competition as markets were opened. 
118. Nicaragua was playing an active and constructiv e role in the current Round of negotiations.  
In particular, it was participating within the vari ous negotiating groups in important initiatives, such 
as the one for small economies, where it deemed th at they would afford the necessary room and 
flexibility to implement development plans and saf eguard the sensitivities protected in the various 
trade instruments to which El Salvador was a party.  WT/TPR/M/167 
 Page 19 
 
 
  V. REPLIES BY THE REPRESENTATIVE OF NICARAGUA AND ADDITIONAL 
COMMENTS 
119. The representative of Nicaragua  thanked Members for their valuable comments and questions 
on Nicaragua's trade policies.  He would answ er the questions under three main headings:  
(a) economic and institutional setting;  (b) trad e policy by measure;  and (c) sectoral policies. 
Economic setting 
 
120. A National Development Plan had been introdu ced in 2002 for the medium and long term, the 
aim of which was to increase income and reduce po verty, generate more and better jobs, increase 
exports and attract investment.  The plan pro posed economic and social policy measures and the 
structural reforms needed to transform the Nicaraguan economy. 
121. Nicaragua had maintained positive growth rates, with an annual average of 3.2 per cent, in 
which exports and consumption stood out as the ma in drivers of demand.  Dynamic responses had 
come mainly from agriculture, industry, energy and potable water, financial services and other services, in spite of lower international prices fo r the main export products.  Inflation had been 
brought down to single digit level, although there ha d been latent inflationary pressure due to the 
impact of the increase in international oil prices.  A tight fiscal policy had been applied, consistent 
with open trade practices and increased domestic produc tion, together with a responsible monetary 
policy consistent with economic growth, in orde r to avoid pressure on international reserves. 
122. The overall fiscal public sector deficit had dropped to just over a half in 2005 (9.6 per cent in 
2001).  The same was not true of the trade deficit, which was still rising, having increased from 24 per 
cent in 2000 to 30.4 per cent in 2005 under the influence of various factors such as open trade 
practices, economic growth and, above all, rising o il prices, the relative weight of which had increased 
by ten percentage points in total imports during the reference period. 
123. Although Nicaragua was a beneficiary of the h eavily indebted poor countries initiative, its 
public debt rates were still hi gh, and had amounted to 109 per cent of GDP in 2005.  Thanks to 
additional efforts with structural reforms, the ins titutional and legal basis had been strengthened, but 
Nicaragua would persevere with structural and legal reforms in order to maintain a modern 
environment that was attractive in all aspects to  business, and particularly to foreign direct 
investment, financial, transport and telecommunications services, electric power, government procurement, intellectual property, etc. 
124. Under the National Development Plan, trade liber alization was coherently linked to poverty 
reduction thanks to the implementation of sectoral programmes such as Prorural, Promipyme, 
Proambiental and the National Competitiveness Progr amme, as well as the recently devised industrial 
policy.  Their aims were to support small and medi um-sized businesses in rural and urban areas with a 
view to improving their competitive and business ma nagement capacity and so make use of the 
advantages afforded by trade agreements negotiated by Nicaragua.  Small and medium-sized 
enterprises were thus expected to become more comp etitive and able to integrate in both the internal 
and the external market, genera ting more and better quality jobs. 
125. As could be seen from the National Development Plan, Nicaragua set great store by the 
linkage of trade policy and sustainable development.   It was accordingly taking steps to develop a 
legal framework for trade-relate d aspects, that would ensure the conservation, protection and 
sustainable use of natural resources and the e nvironment and improve competitiveness and human 
resource development without impairing or obst ructing production and trade.  The National 
Development Plan was comprehensive and designed to ensure the economic and social development 
of Nicaragua.  It had wide public  approval and indicated not only the ecological worth of resources WT/TPR/M/167 
Page 20  
 
  but also their contribution to the national economy.  The Plan thus reflected a significant effort to 
guide the country towards new strategies that were  in keeping with global and regional trends 
regarding the reversal of environmental damage. 
126. Turning to the suggestions from Chinese Taipei , Japan, Canada and Korea concerning the role 
of foreign direct investment, he said that Nicaragua  set great store by such investment, which was an 
important part of trade policy instruments.  The country had made significant progress and it could be 
said fairly confidently that virtually all economic se ctors were open to foreign direct investment.  The 
legal framework was being adjusted in order to a void any inconsistencies between investment law and 
the business climate.  The Economic Committee of th e National Assembly was currently examining a 
competition bill that was expected to become law in  2007.  Its aim was to promote and safeguard free 
competition between economic agents in order to en sure market efficiency and consumer welfare by 
developing a competition culture and preven ting, prohibiting and punishing anti-competitive 
practices. 
127. Nicaragua had given priority to the problems of basic infrastructure, competitiveness in small 
and medium-sized enterprises, health and educa tion, as they were fundamental to transforming 
production.  Aware that the development of tec hnology and human capital was essential to economic 
growth and development and to combating poverty effectively, Nicaragua welcomed the decisions 
taken within the WTO to consider additiona l aid to supplement countries' own efforts. 
128. Nicaragua was an active particip ant in negotiations under the Doha Development Agenda and 
hoped that the deadlock would be broken and that  an Agreement would be reached, enabling small 
and vulnerable economies like that of Nicaragua to  enjoy the benefits of free trade.  As a 
predominantly agricultural country, Nicaragua reitera ted its trust in the multilateral trading system and 
hoped that the current negotiations would result in substantial improvements in market access, the 
complete elimination of all forms of export subsid ies and substantial reducti ons in domestic support. 
129. In the area of services, Nicaragua was preparing to submit offers on the basis of a balance in 
concessions between offers and requests, recognizi ng that the services sector was fundamental to 
attracting investment to countries such as Nicaragua. 
130. Since 1999, Nicaragua had been endeavouring to meet its WTO notification commitments.  It 
had notified some 72 technical standards and 35 san itary and phytosanitary measures, all of which 
were based on international and re gional standards.  It had likewise notified measures pertaining to 
export subsidies, domestic support, customs valua tion, tariff quotas and special safeguards, among 
others, and was engaged in updating notification of other measures. 
131. He took note of Colombia's concern regarding the tax imposed on goods and services from 
Colombia, adopted by parliament in order to pr otect Nicaragua's essential security interests, and 
which was applied in conformity with Article XXI of the GATT 1994. 
132. Regarding regional trade agreem ents, Nicaragua had put into effect trade agreements 
concluded with Mexico, the Dominican Republic and the United States.  It was in the process of 
completing the negotiation of other free trade agreem ents, with Panama, Canada and Chile.  It had 
recently finalized a free trade agreement with Chinese  Taipei;  and together with Central America was 
engaged in talks to start negotiations with the European Union. 
Trade policies 
 
133. Nicaragua had made significant progress with customs procedures.  It had succeeded in 
substantially cutting back such procedures and reduc ing the number of documents and signatures, as 
well as the time and cost of export and import form alities.  A single window had been established for  WT/TPR/M/167 
 Page 21 
 
 
  exports, the aim being to centralize all export pr ocedures into one entity.  Formalities had been 
effectively modernized for the benefit of expor ters, and import formaliti es were now conducted by 
means of an automated system with  self-clearance.  In the context of Central American integration, 
clearance could be carried out at the border by means of pre-payment;  customs declaration was electronic;  and regulations had been adopted on the customs valuation of goods. 
134. One of the main instruments of Nicaragua's trade policy was the common external tariff, 
established in the context of the commitments made to Central American integration.  For Nicaragua, 
it had meant increasing tariff rates on a variety of pro ducts that had been reduced in the 1990s in the 
interests of maintaining a common external tariff.  The result had been an increase in average tariff 
rates from 4.2 per cent in 1999 to 5.8 per cent in 2005, an adjustment that had been necessary in order 
to strengthen Central American regional integrat ion and to avoid any distortions in view of 
negotiations with other trading partners. 
135. Despite the increase in applied tariffs for certain products, Nicaragua was committed to 
working for trade liberalization.  For the most part, applied rates we re much lower than bound rates.  
At present, 15 per cent was the highest rate applie d, except for a few agricultural products for which 
there was a rate of 20 to 60 per cent, and one pou ltry product subject to a rate of over 100 per cent. 
136. As to other import charges, Nicaragua applie d a selective consumption tax (ISC), which was 
non-discriminatory and a part of its income redistri bution and tax policy.  The other charge was the 
import services tax (TSIM), the purpose of which was to cover the costs incurred by Customs in providing clearance services to importers.  It was a pplied under the provisions of Article VIII of the 
GATT. 
137. Nicaragua did not apply import licensing other than for reasons of public and/or national 
interest, in which case it was unrestricted and in so me instances non-automatic,  in the administration 
of tariff quotas established under the WTO and free trade agreements. 
138. Nicaragua had had a free zone regime sin ce 1967, which had enabled it to speed up the 
development of new enterprises.  The legislation on which it was based was in the process of being 
updated.  Nicaragua hoped that the application of su ch a system would lead to an industry that 
generated more value added a nd could be integrated with the local productive sectors. 
139. With regard to government procurement, Nicara gua had started to design an electronic system 
and was stepping up efforts to make it available in th e next few years.  It hoped to complete the first 
phase by the end of 2006.  For the time being, th erefore, it was unable to become a member or 
observer of the Agreement on Government Procurem ent because it was in the process of pursuing 
other, related objectives such as the strengthening of its institutions and the building of capacity 
allowing it to fulfil commitments. 
140. In the area of intellectual property, Nicaragua  was making great strides in enforcement, as 
was evidenced by the reform of four of its main laws, which had been enacted, published and put into 
effect from 24 March 2006.  The new laws provide d for civil and criminal proceedings, extended the 
courts' authority to impose custodial sentences  and monetary compensation, suspend trading 
activities, seize any assets related to the illicit ac tivities, including documentary evidence, and 
confiscate and destroy of the infringing material with no compensation whatever for the defendant. 
141. The Prosecutor for Intellectual Property had the authority to prosecute offences without the 
need for a formal complaint by a private person or right holder or by an interested party.  Although 
significant progress had been made in implemen ting these provisions, there was still room for 
improvement and for work on promoting the subject as an important asset for companies. WT/TPR/M/167 
Page 22  
 
  142. Nicaragua was committed to the multilateral tr ading system and saw the WTO as the best 
forum for standardizing international trade rul es, which were essential for all countries. 
143. The representative of Colombia
 thanked Nicaragua for its reply on the measures applied 
solely to imports of goods and services from Colo mbia and Honduras.  He observed that there was no 
reply consistent with Nicaragua's multila teral commitments under the GATT 1994 and the 
GATT 1947 that could explain or justify, on gr ounds of defending a country's essential security 
interests, any discrimination against exports of goods and services from another Member.  Colombia 
urged the Nicaraguan authorities to reflect on the need  to separate the legal solutions that Nicaragua 
alleged and that deprived Nicaragua n consumers of imports from Colomb ia, from solutions to its trade 
problems. 
144. The representative of Chile  said that he might ask an additional question about intellectual 
property rights.  He underlined the importance of  the trade policy review mechanism as a means of 
promoting the goals of the WTO and an open trading system.  WT/TPR/M/167 
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  VI. CONCLUDING REMARKS BY THE CHAIRPERSON 
145. This second Trade Policy Review of Nicaragua has been both thorough and informative;  it 
has allowed us a better understanding of Nicaragua's trade policies and practices, of their evolution 
since 1999, and of their outlook.  The reports by Ni caragua and the Secretariat, and the responses of 
the delegation of Nicaragua to the questions by Me mbers, have served as a valuable resource and have 
made a significant contribution to transparency.  We owe the high quality of this review to the 
participation of the Nicaraguan delegation, le d by HE Mr Alejandro Argüello, Minister of 
Development, Industry and Trade, and to the active involvement of Members.  Our thanks are also 
due to our discussant, HE Mr Juan Antonio March,  for his insightful contribution to our meeting. 
146. Members welcomed Nicaragua's positive overa ll economic performance over the last few 
years, with moderate GDP growth, and improvements in the fiscal and current account deficits.  They 
noticed that the ongoing reforms are contributing to the establishment of a competitive market 
economy, and encouraged Nicaragua to continue its structural reforms, so as to reduce widespread 
poverty and achieve social progress.  The reform s, together with increased investment in 
infrastructure and in human capital, woul d help to further stabilize the economy. 
147. Members appreciated Nicaragua's firm commi tment to the multilateral trading system, 
including the Doha Development Agenda.  They noted , however, that an increasing part of its trade 
was taking place under preferential regimes.  While Members congratulated Nicaragua for the steps 
taken to further liberalize its trade and investment regimes, they encouraged it to reverse the increase 
in its applied MFN tariff of the last few years, pa rtly as a result of Nicaragua's commitments under its 
regional trade arrangements.  Members also encour aged Nicaragua to reduce the gap between applied 
and bound tariff rates.  One Member raised a c oncern regarding a tax imposed by Nicaragua on goods 
and services coming from or originating in that Member. 
148. On sectoral issues, Members noted Nicaragua's high dependen ce on exports of agricultural 
and agricultural-processed products.  They also commended Nicaragua for the steps being taken to 
address inefficiencies, particularly in mining, energy, and manufacturing, including through the 
enactment of new laws.  Members noted that further liberalization of services may improve the 
efficiency of Nicaragua's economy and the competitiv eness of its exports, especially by reducing costs 
related to financial services, te lecommunications and transport. 
149. Members sought clarification on a number of issues, notably:  customs procedures and 
valuation;  internal taxation;  import and export li censing;  contingency trade remedies;  standards and 
SPS measures;  free zones;  public enterprises and privatization;  government procurement;  and 
protection of intellectual property rights. 
150. Members expressed their appreciation for the co mprehensive responses to their questions as 
provided by the Nicaraguan delegation. 
151. In conclusion, Members value Nicaragua's effort s to improve its economic  environment.  As a 
small economy that is highly dependent on foreign tr ade, Nicaragua has a lot to gain from a free and 
open trade environment.  I encourage Nicaragua to continue improving its multilateral commitments, 
both on goods and services, with a view to further improving its transparency and predictability.  I 
urge Members to support Nicaragua's reforms by providing greater market access to its goods and 
services. 
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