RESTRICTED  WORLD  TRADE  
ORGANIZATION  WT/TPR/S/167 
19 June 2006  
 
(06-2809) 
Trade Policy Review Body  
   
 
  
 
TRADE POLICY REVIEW 
 
Report by the Secretariat 
 
NICARAGUA 
 
  
 
This report, prepared for the second Trad e Policy Review of Nicaragua, has been 
drawn up by the WTO Secretariat on its own responsibility.  The Secretariat has, 
as required by the Agreement establishing the Trade Policy Review Mechanism 
(Annex 3 of the Marrakesh Agreement Establishing the World Trade 
Organization), sought clarification from Nicaragua on its trade policies and 
practices. 
 
Any technical questions arising from this  report may be addressed to Mr Ricardo 
Barba (tel. 022.739.50.88). 
 
Document WT/TPR/G/167  contains the policy statement submitted by 
Nicaragua. 
 
 
 
Note: This report is subject to restricted circ ulation and press embargo until the end of the first 
session of the meeting of the Trade Policy Review Body on Nicaragua. Nicaragua WT/TPR/S/167 
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CONTENTS 
 
  Page 
SUMMARY OBSERVATIONS vii 
 (1) I NTRODUCTION  vii 
 (2) E CONOMIC ENVIRONMENT  vii 
 (3) T RADE POLICY AND INVESTMENT FRAMEWORK  viii 
 (4) M ARKET ACCESS FOR GOODS  ix 
 (5) O THER MEASURES AFFECTING TRADE  ix 
 (6) S ECTORAL POLICIES  x 
I. ECONOMIC ENVIRONMENT 1 
 (1) M AIN FEATURES OF THE ECONOMY  1 
 (2) R ECENT ECONOMIC RESULTS  2 
 (3) T RADE AND INVESTMENT RESULTS  4 
 (i) Trade in goods and services 4 
 (ii) Foreign direct investment 10 
 (4) P ROSPECTS  11 
II. TRADE AND INVESTMENT REGIME 13 
 (1) G ENERAL FRAMEWORK  13 
 (2) T RADE POLICY GOALS  14 
 (3) T RADE LAWS AND REGULATIONS  14 
 (4) I NTERNATIONAL TRADE RELATIONS  15 
 (i) World Trade Organization (WTO) 15 
 (ii) Preferentia l agreements 18 
 (iii) Other preferentia l trade agreements 22 
 (5) I NVESTMENT FRAMEWORK  23 
 (6) T RADE -RELATED TECHNICAL ASSISTANCE  24 
III. TRADE POLICIES BY MEASURE 25 
 (1) O VERVIEW  25 
 (2) M EASURES DIRECTLY AFFECTING IMPORTS  25 
 (i) Registration and documentation 25 
 (ii) Customs procedures, clearance and customs valuation 27 
 (iii) Rules of origin 28  (iv) Tariffs, other duties and taxes 29 
 (v) Import prohibitions, restrictions and licensing 41 
 (vi) Contingency measures 42  (vii) Standards and other technical requirements 43 
 (viii) Government procurement 45 
 (ix) Local content requirements 46 WT/TPR/S/167 Trade Policy Review 
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 (3) M EASURES DIRECTLY AFFECTING EXPORTS  47 
 (i) Registration and documentation 47 
 (ii) Export taxes and minimum prices 47 
 (iii) Export prohibitions, restrictions, licensing and quotas 47  (iv) Export subsidies, financing, support and promotion 48 
 (v) Free zones 48 
 (4) M
EASURES AFFECTING PRODUCTION AND TRADE  49 
 (i) Incentives 49 
 (ii) State-owned enterprises and privatization 50 
 (iii) Competition policy and price controls 51  (iv) Intellectual property rights 52 
IV. TRADE POLICIES BY SECTOR 57 
 (1) O
VERVIEW  57 
 (2) A GRICULTURE AND RELATED ACTIVITIES  57 
 (i) Main features 57 
 (ii) Policy developments 59  (iii) Crops 63 
 (iv) Livestock 65 
 (v) Fisheries 66 
 (vi) Forestry 67 
 (3) M
INING AND ENERGY  69 
 (i) Mining 69 
 (ii) Energy 70 
 (4) M ANUFACTURING SECTOR  73 
 (i) Main features 73 
 (ii) Selected industries 77 
 (5) S ERVICES  78 
 (i) Main features 78 
 (ii) Financial services 80 
 (iii) Telecommunications and postal services 82  (iv) Transport 84 
 (v) Tourism 87 
 REFERENCES   91 
 
APPENDIX TABLES  93 
 Nicaragua WT/TPR/S/167 
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CHARTS 
 
  Page 
I. ECONOMIC ENVIRONMENT 
I.1 Nicaragua:  exports,  1997-2005 6 
I.2 Structure  of merchandise exports and imports,  1995-2004 8 
I.3 Direction of merchandise trade, 1995-2004 9 
III. TRADE POLICIES BY MEASURE 
III.1 Breakdown of applied MFN tariffs, 2005 32 
III.2 Breakdown of MFN tariffs by ISIC sector, 2005 33 III.3 Tariff escalation at the ISIC 2-digit level, 2005 34 
IV. TRADE POLICIES BY SECTOR 
IV.1 Nicaragua's MFN tariffs by ISIC heading, 2005 76 
 
 
TABLES 
 
I. ECONOMIC ENVIRONMENT 
I.1 Main economic indicators, 2000-2005 2 
I.2 Balance of payments, 2000-2005 4 
I.3 Foreign direct investment, 2000-2004 10 I.4 Nicaragua:  economic prospects, 2006-2010 11 
II. TRADE AND INVESTMENT REGIME 
II.1 Nicaragua's main trade legislation, 2006 15 
II.2 Main notifications made by Nicaragua  to the WTO, as at 30 April 2006 16 
III. TRADE POLICIES BY MEASURE 
III.1 Import documentation requirements accord ing to the origin of  the goods, 2006 26 
III.2 Comparison of documentation requirements for exports and imports, 2005 27 
III.3 Structure of MFN tariffs in Nicaragua, 1999-2005 29 
III.4 Summary analysis of Nicaragua's MFN tariffs, 2005 30 III.5 Exceptions to the bound ceiling of 40% 35 
III.6 Tariff quotas determined by Nicaragua, 2001-2005 37 
III.7 Breakdown of MFN and preferen tial rates in Nicaragua's tariff 39 
III.8 Main intellectual property legislation 52 
IV. TRADE POLICIES BY SECTOR 
IV.1 Agriculture:  area, production and yields, 1999-2004 58 
IV.2 Agricultural support programmes, 1999-2004 61 
IV.3 Livestock,
 1999-2005 65 
IV.4 Fisheries  production,  2000-2004 66 
IV.5 Volume authorized for commercial forestry,  2000-2004 68 
IV.6 Value added, formal jobs generated and payment of mining royalties,  1999-2004 69 
IV.7 Gold and silver production and exports,  2000-2005 69 
IV.8 Relative levels of electricity production and consumption,  1999-2004 72 
IV.9 Size of the manufacturing sector,  2002 73 
IV.10 Cost structure for cotton trousers imported into the United States,  2005 78 WT/TPR/S/167 Trade Policy Review 
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  Page 
 
 
IV.11 Services and central government, 2004 79 IV.12 Selected telecommunicati ons indicators, 1999-2005 82 
IV.13 Port traffic in Nicaragua, 1999-2004 84 
IV.14 Comparative costs of shipping goods to the United States from Central America, 2005 85 IV.15 Tourist arrivals in Nicaragua by geographical region, 2001-2005 87 
 
 
APPENDIX TABLES 
 
I. ECONOMIC ENVIRONMENT 
AI.1 Structure of exports, 1995-2004 95 
AI.2 Destination of exports, 1995-2004 96 
AI.3 Structure of imports, 1995-2004 97 AI.4 Origin of imports, 1995-2004 99 
III. TRADE POLICIES BY MEASURE 
AIII.1 Applied MFN tariff averages by HS chapter, 2005 100 
IV. TRADE POLICIES BY SECTOR 
AIV.1 Applied MFN tariffs, by ISIC Rev.2 category, 2005 104 
AIV.2 Summary of Nicaragua's sector sp ecific commitments un der the GATS 108 
 
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SUMMARY OBSERVATIONS 
 
(1) INTRODUCTION  
1. Since its first Trade Policy Review in 
1999, Nicaragua has continued its transition 
to a more market-oriented economy.  It eliminated the temporary import tariff introduced in 1994, and redrafted or amended its legislation in many areas, including the 
adoption of the Central American Regulations 
on Customs Valuation, the enactment of a new government procurement law, the approval of several laws and agreements relating to intellectual property rights, and the reform of the free zone regime.  Moreover, a draft 
foreign trade law reorganizing the existing 
legislation, a new customs law and a law on competition are in preparation or ready for approval.  With the exception of safeguards on certain agricultural products, Nicaragua has 
not resorted to any contingency measures 
since 1999, and non-tariff trade barriers appear to be limited.  But although the average MFN tariff is relatively low, it has increased over the past years owing largely to the continued harmonization of the Common 
External Tariff (CET) of the Central American 
Common Market (CACM).  Within the framework of the CACM, Nicaragua has also been active in negotiating a number of preferential trade agreements.  In this respect 
it is particularly important, for the sake of 
efficiency and economic diversification, for Nicaragua to continue liberalizing its economy on an MFN basis and to anchor these efforts in multilateral commitments. 
(2) E
CONOMIC ENVIRONMENT  
2. Nicaragua's recent macroeconomic 
performance has been broadly positive:  the average annual real GDP growth rate was 3.7 per cent during the 1997-2005 period (up from -0.1 per cent for the period 1987-1996);  
inflation has been contained to some extent 
despite the increase in o il prices (9.6 per cent 
in 2005);  its fiscal deficit (before foreign grants) went from 8.9 per cent of GDP in 2000 to 4.9 per cent in 2005;  and the current 
account deficit as a percentage of GDP decreased from 20.1 per cen t to 16 per cent in 
the same period.  Nevertheless, about 40 per cent of Nicaragua's population lives below the poverty line, and the economy remains 
vulnerable, particularly because of the high 
public debt, extensive dollarization, and the weakness of the financial system.  Furthermore, the difficult political environment in Nicaragua has complicated the 
steady implementation of its economic 
reforms, discouraging investment. 
3. International trade in goods and 
services is increasingly important to the Nicaraguan economy, reaching 102.9 per cent of GDP in 2005 (as compared to 82.4 per cent 
in 2000), while the ratio of exports to imports 
of goods and services rose from 51.4 per cent to 56.5 per cent during the same period.  The current account has traditionally recorded a deficit, but this has been financed by growing 
inflows of foreign direct investment and 
international assistance. 
4. Since its previous Trade Policy 
Review, trade in goods in Nicaragua has recorded a growing deficit:  from US$1.01 billion in 2000 (25.6 per cent of 
GDP), it rose to US$1.52 billion (30.4 per cent 
of GDP) chiefly as a result of the increase in fuel prices and the expansion of private consumption and investment. 
5. Goods exports from Nicaragua 
increased from US$880.6 million in 2000 to 
US$1.552 billion in 2005.  Meanwhile, exports under the special free zone regime grew from US$231 million in 2000 to US$682 million in 
2005 while their share in total exports rose 
from 26.2 per cent to 43.9 per cent.  This is 
partly the result of the increase in incentives granted under the free zone regime. 
6. Nicaragua's export base is chiefly 
concentrated in agricultural goods (in particular coffee, peanuts, meat and 
crustaceans), which represent more than 
80 per cent of total goods exports.  Approximately one third of Nicaraguan goods exports go to the United States, a figure which is expected to increase with the entry into WT/TPR/S/167 Trade Policy Review 
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force for Nicaragua of the Central America–
Dominican Republic Free Trade Agreement with the United States (CAFTA) on 1 April 2006.  Practically two thirds of total goods 
imports are manufactures, chiefly machinery 
and transport equipment, and chemical products.  Goods imports come mainly from the United States, which accounts for almost one fifth of the total. 
(3) T
RADE POLICY AND INVESTMENT 
FRAMEWORK  
7. Nicaragua is an original Member of 
the WTO, and attaches considerable importance to its participation in the multilateral trading system.  It considers the 
multilateral trading system to be a vital 
guarantee against discrimination and the use of unilateral trade measures.  Nicaragua accords at least MFN treatment to all WTO Members.  It has been an active participant in 
the Doha Development Agenda (DDA), having 
submitted numerous propos als individually or 
together with other WTO Members.  Its main focus in the DDA has been on agricultural issues. 
8. Under the GATS, Nicaragua has made 
commitments in practically all of the major 
services categories for the purpose of promoting investment, developing an appropriate services infrastructure, and improving the sector's trade balance.  
However, in line with its CACM obligations, 
Nicaragua listed in relation to financial services an MFN exemption under Article II of the GATS, as regards the free transfer of capital.  Nicaragua participated in the 
WTO negotiations on financial services and 
the Fifth Protocol to the GATS;  it maintained its observer status in the negotiations on basic telecommunications services.  Nicaragua submitted an initial offer on services in the context of the DDA. 
9. Nicaragua maintains an active 
programme of notifications to the WTO, but there have been some delays in areas such as agriculture, subsidies and countervailing measures, and State trading enterprises.  It has made relatively little use of the WTO 
dispute settlement mechanism since its last Trade Policy Review, having participated in only four disputes:  two as respondent (with 
respect to a tax on goods and services from 
Honduras and Colombia), and two as claimant. 
10. Nicaragua pursues an autonomous 
trade policy which, however, must be 
compatible with its me mbership in the CACM.  
In addition to the CACM and CAFTA, Nicaragua has a bilateral trade agreement with Mexico that dates back to 1998.  Moreover, together with the other member countries of the CACM (Costa Rica, 
El Salvador, Guatemala and Honduras), over 
the past few years Nicaragua has initiated or completed the following negotiations:  an FTA with the Dominican Republic which is already in force;  an FTA which has been completed 
but has not yet been approved with 
Chinese Taipei;  and three that are currently being negotiated with Canada, Chile and Panama.  CACM members are also holding talks on possible extra-regional FTAs, inter alia with the EC and CARICOM.  Preferential 
agreements have become an important 
component of trade liberalization in Nicaragua, but their growing number raises concerns as to their adm inistrative cost, their 
impact on market access transparency, and the 
risk of trade diversion. 
11. Through its Law on the Promotion of 
Foreign Investment, which entered into force in 2000, Nicaragua opened up its investment regime to private investment, including foreign 
investment, except in areas of activity that are 
reserved for the State (for example electric power transmission and the water and sewerage system) or that are subject to certain restrictions, such as the pension fund, border zones, and certain specific transport areas.  
Nicaragua accords national treatment in the 
granting of investment incentives.  It has signed bilateral investment agreements with several countries which complement the general principles of non-discrimination and 
investment guarantees laid down in its 
Constitution. Nicaragua WT/TPR/S/167 
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(4) MARKET ACCESS FOR GOODS  
12. The simple average of Nicaragua's 
MFN tariff rose from 4.2 per cent in 1999 to 5.8 per cent in 2005, owing largely to the 
continued harmonization of the CACM's 
Common External Tariff. According to the WTO definition, the average applied MFN tariff on agricultural products was 11.4 per cent in 2005 (7.9 per cent in 1999) 
compared to 4.8 per cent for non-agricultural 
products (3.4 per cent in 1999).  Nicaragua has bound all its tariffs, most of them (with 64 exceptions) at a ceiling rate of 40 per cent.  This creates a considerable discrepancy between the applied and the bound rates, 
generating uncertainty as to the applied rates.  All applied and bound tariffs are ad valorem . 
13. In addition to customs tariffs, 
Nicaragua levies certain additional taxes on imports.  These include a selective 
consumption tax (ISC) that applies to a limited 
number of non-essential goods, whether domestic or imported;  a goods import services tax (TSIM) consisting of a customs commission of US$0.50 or the local currency equivalent on each gross tonne or fraction 
thereof;  and VAT at a standard rate of 15 per 
cent. 
14. Nicaragua has legislation that allows 
the use of contingency measures to restrict imports, and activated the special safeguard 
provisions of the WTO Agreement on 
Agriculture for four types of rice during the period 2002-2003.  It has not used any special safeguards for those products since 2004.  Nicaragua has not had recourse to anti-
dumping or countervailing measures since 
1999. 
15. Nicaragua applies import prohibitions 
to protect human health, animal and plant life, the environment, or essential security or military interests, in conformity with its 
legislation or international commitments.  
Imports of certain categories of product are subject to non-restrictive licensing in the form of prior authorization, which is imposed to protect the public and/or national interest.  During the period under review, Nicaragua 
notified the WTO of a significant number of new sanitary and phytosanitary measures as well as technical regulations. 
16. Nicaragua has adopted measures to 
streamline import procedures and adjust its import regime to multilateral rules, in particular by adopting the WTO Customs Valuation Agreement's transaction value 
definition and eliminating minimum import 
prices. 
(5) O
THER MEASURES AFFECTING 
TRADE  
17. Nicaragua grants fiscal incentives to 
exports essentially under the free zone regime.  
Enterprises operating under that regime are 
exempted from the following taxes:  tariffs, levies and sales tax on imports of machinery, equipment (including transport equipment for in-zone use) and inputs;  export taxes on 
goods produced in the zone;  VAT;  income 
tax, 100 per cent for the first 10 years and 60 per cent thereafter;  capital gains tax on real estate in free zones;  taxes on the establishment, transformation, merger or reorganization of a company as well as stamp 
duty;  municipal taxes;  and indirect, sales or 
selective consumption taxes. 
18. Between 1990 and 1995, most of 
Nicaragua's State-run firms were privatized, leased, returned to former owners or 
liquidated by the General National Public 
Sector Corporations Board (CORNAP).  However, some activities that were traditionally administered by the State were not privatized until recently:  the Northern 
Electricity Distribution Company 
(DISNORTE) and the Southern Electricity Distribution Company (DISSUR) were privatized in 2000, and the privatization of the Nicaraguan Telecommunications Company (ENITEL) was completed in 2005. 
19. Since 1999, Nicaragua has introduced 
a series of initiatives to boost competition in its domestic markets, including the approval in 2005 of the Agreement on the Promotion and WT/TPR/S/167 Trade Policy Review 
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Protection of Competition in the 
Telecommunications Market;  and at the beginning of 2006, the General Assembly was examining a draft law on competition.  This 
effort to boost competition is important, since, 
the Nicaraguan economy, partly owing to its small size, tends to generate market concentration as, for example, in the case of financial services. 
20. Prices in Nicaragua are generally 
market-determined, although there are a certain number of administered prices such as electricity rates, profit margins for pharmaceuticals for human consumption, and the retail selling price of butane gas. 
21. Nicaragua is not party to the WTO 
Plurilateral Agreement on Government Procurement.  However, in January 2000 it replaced its former legislation with the Law on Government Procurement, which enhances the 
transparency of the procurement process.  
Nicaraguan law provides for procurement to take place chiefly through open public tendering.  According to the authorities, no price preferences are given to Nicaraguan suppliers over foreign suppliers. 
22. Nicaragua has significantly updated 
its intellectual property legislation in recent years.  A number of laws have been adopted with a view to bringing the country's domestic regulations into conformity with the TRIPS 
Agreement.  At the same time, as a 
prerequisite for the entry into force of CAFTA, in March 2006 Nicaragua strengthened its legislation on patents, copyright, marks and other distinctive signs, and industrial designs.  
But although Nicaragua has consolidated the 
legal framework for the protection of intellectual property rights, some concern has been expressed as to the enforcement of those rights. 
(6) S
ECTORAL POLICIES  
23. Agriculture remains a key sector, 
accounting for more than 80 per cent of goods exports and employing a third of the labour force.  In recent years, producers of export-oriented crops (for example coffee, peanuts 
and sesame) have improved their productivity more than the producers of traditional crops such as maize, beans, sorghum and rice.  The 
output and efficiency of  Nicaraguan fishing 
has also been steadily on the rise.  Average tariff protection in the agricultural sector (Major Division 1 of the ISIC, Revision 2) increased from 6.6 per cent in 1999 to 8.5 in 
2005.  However, in the case of certain poultry 
cuts, tariffs were as high as 170 per cent. 
24. All of Nicaragua's natural resources 
are owned by the State, which grants concessions for their exploitation.  Crude petroleum is Nicaragua's largest import, 
accounting for about 10 per cent of total 
goods imports.  Slightly more than half the population has access to electricity.  The mining industry, whose basic legal framework dates back to the 1950s and 1960s, is currently 
being restructured.  MFN applied tariffs 
average 2.2 per cent in the mining and quarrying sector (Major Division 2 of the ISIC, Revision 2) as opposed to 2 per cent in 1999. 
25. Most of Nicaragua's manufacturing 
sector produces food and beverages.  
Generally speaking, the country's textiles and clothing industry has competed successfully at the international level since the expiry of the Multifibre Arrangement.  The expansion of 
Nicaragua's free zones over the past few years 
has benefited the manu facturing industries 
through tariff concessions and tax credits.  The average applied MFN tariff on manufactures (Major Division 3 of the ISIC, 
Revision 2) is 5.7 per cent, or excluding food 
processing, 4.7 per cent. 
26. Services are the most important sector 
in terms of their share of GDP (54.2 per cent in 2005) and employment (68.4 per cent in 2004).  Among the services subsectors, 
tourism is the main source of foreign 
exchange, with earnings from tourism accounting for 3.7 per cent of GDP in 2005.  Nicaragua has taken step s to overcome some 
of the structural problems in specific areas of 
services activity:  the financial services Nicaragua WT/TPR/S/167 
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supervisory framework has been strengthened, 
and the telecommunications sector is being opened up.  Nevertheless, Nicaragua needs to substantially improve its infrastructure 
(particularly roads and ports);  build up an 
efficient financial system with  reduced intermediation margins that would 
foster increased economic activity;  and reduce telecommunications and transport costs in order to impr ove the competitiveness 
of its exports.