Nicaragua WT/TPR/S/167 
 Page 13 
 
 
II. TRADE AND INVESTMENT REGIME 
(1) GENERAL FRAMEWORK  
1. The general institutional framework for trade po licy formulation in Nicaragua remains largely 
unchanged since the previous review of the country's trade policy in 1999.1  The Constitution dates 
from 1987 but was amended in 1995 and again in 2005, mainly to restrict the powers of the Executive 
Branch by shifting responsibilities to the National Assembly. 
2. Executive power is vested in the President, w ho is elected by universal adult suffrage for a 
five-year term.  Since 1995, the re-election of a s itting president has been pr ohibited.  A second round 
of voting is held if no candidate obtains 45 per ce nt of the votes in the first round.  The President 
appoints a cabinet of 15 members;  ministers do not have to be members of the Legislature nor of the 
President's political party.  According to Article 144 of the Constitution, the President is Head of 
State, Head of Government, and Supreme Head of the Nicaraguan Army.  The powers of the President are enumerated in Article 150 and include:  proposi ng legislation and exercising the right to veto;  
issuing executive decrees on administrative matters;  directing the nation's international relations 
(i.e. negotiating, entering into and signing treaties, c onventions or agreements and other instruments);  
regulating laws as required;  organizing and leadi ng the Government;  and directing the country's 
economy, determining its policy a nd economic-social programme.  The next presidential election is 
scheduled for 5 November 2006. 
3. The legislative branch consists of a single-ch amber National Assembly of 90 members, plus 
any presidential or vice-presidential candidates who gain over 1.1 per cent of the national vote (three 
at the present time).  Deputies are elected by proportional representation for five-year terms (20 are 
elected nationally and 70 by district).
2  Article 138 of the Constitution states that the powers of the 
National Assembly include "drafting and approvin g laws and decrees, and reforming and repealing 
existing ones", and "creating, approving, modifying, or eliminating taxes".  With regard to treaties, the 
same Article provides that "such international inst ruments may be certified, debated, approved, or 
rejected in their entirety only, without textual cha nges or additions.  Legislative approval gives such 
instruments legal force both in Nicaragua and elsewhere, once they have entered into force 
internationally, through the deposit or exchange of ratifications, or fulfilment of the requirements or 
deadlines provided for in the text of treaty or international instrument in question." 
4. The judiciary comprises the Supreme Court, whic h consists of 12 members, and lower courts 
(appeal courts, district and local courts).  Si nce 1995, the National Assembly has elected Supreme 
Court judges for seven-year terms from governme nt-proposed candidates.  The Supreme Court 
appoints its own president as well as judges for the lower courts. 
5. Regional and municipal authorities are elected for five-year terms.  There are 15 Regional 
Departments, two Autonomous Regi onal Councils of the Atlantic Co ast, and 131 Municipal Councils.  
These authorities are administratively and financiall y autonomous, and have po wer to impose various 
types of local taxes, in particular those levied on income, construction, municipal services, leisure 
activities and commercial licences. 
6. The Ministry of Development, Industry and Tr ade (MIFIC) is tasked with negotiating and 
administering international and regi onal agreements on trade and investme nt.  It is also responsible for 
promotion of competition, natural resource use, export-related investment, and issues relating to intellectual property rights and regulations.  MI FIC coordinates trade policy formulation and 
                                                     
 
1 Nicaragua's constitutional and general legal framework is described in detail in WTO (1999). 
2 Article 132 of the Constitution. WT/TPR/S/167 Trade Policy Review 
Page 14 
 
 
implementation with the corresponding ministries (e.g . the Ministry of Agriculture and Forestry, the 
Ministry of Finance and Public Credit, and the Mini stry of the Environment and Natural Resources).  
The Ministry of Foreign Relations represents Ni caragua in international organizations, and in 
negotiations held on all issues except those entruste d to MIFIC and to the Ministry of Finance and 
Public Credit; the latter is in charge of public fi nance, including the collection of taxes and customs 
duties. 
7. The private sector, civil society and NGOs c ontribute to trade policy formulation by 
expressing their opinions either directly to MIFI C or through industry and trade chambers and 
associations.  Private-sector opinions are usually taken into account during the process. 
8. The National Economic and Social Planning Council (CONPES) was created in 1999, and 
consists of members of civil society organizati ons, political parties and government representatives 
(including MIFIC).  Its functions include assisting the President of the Republic in formulating and evaluating economic and social plans and pr ogrammes, including the Doha Development 
Agenda (DDA);  and advising th e Government on the negotiation of free trade agreements.  The 
National Export Promotion Commission (CNPE), chaired by the Minister of Development, Industry 
and Trade, has five representatives drawn from the business sector and five from the public sector.  Its 
role is to propose new policy measures that contri bute to the development of export enterprises. 
(2) T
RADE POLICY GOALS  
9. The general aim of Nicaragua's trade policy is to  engage more effectively in the international 
economy, in keeping with the country's growth strategy, through trade liberalization, export 
promotion, and a stable legal framework for attrac ting investment, both domestic and foreign.  This 
strategy also includes an autonomous liberaliza tion process, participation and strengthening of 
multilateral and bilateral trade rela tions, and expansion of the Cent ral American integration process.3  
More specifically, the country's trade policy seeks to reduce anti-export bias, and improve access for 
its exports and encourage their diversification. 
10. Trade policy goals at the sector level have fo cused on protecting certain agricultural and 
industrial activities, promoting the use of raw mate rials and capital goods originating in the Central 
American Common Market (CACM), and conservi ng natural resources, through tariffs and tax 
breaks.  In the case of services, the objectives have  been to expand supply, increase competition and 
lower consumer prices by curtailing State i nvolvement and steadily eliminating monopolies. 
11. The key objectives of the new National Devel opment Plan (PND) include modernizing the 
State to take advantage of global trade and regi onal trade agreements, and to provide incentives for 
private-sector participation, including foreign inv estment.  The PND also seeks to promote greater 
competition, guarantee property rights, and establis h a more effective regulatory framework.  The 
strategic products and activities to be developed by the plan include coffee, meat and dairy products, 
shrimp farming, forestry, horticulture, tour ism, light manufacturing and power generation.4 
(3) TRADE LAWS AND REGULATIONS  
12. While the Constitution has precedence over all ot her legislation, a number of its provisions 
deal with the relationship between obligations that stem from treaties and those arising under 
                                                      
3 Several articles of the Constitution recognize the speci al nature of Nicaragua's relations with the other 
four Central American countries.  For example, the fina l sentence of Article 5 states that Nicaragua prioritizes 
regional integration and strives for the reconstruction of the Great Central American Nation. 
4 Republic of Nicaragua (2005). Nicaragua WT/TPR/S/167 
 Page 15 
 
 
domestic law.  Article 10 states that Nicaragua  only recognizes international obligations on its 
territory that have been freely consented to and are in accordance with the Political Constitution of the 
Republic and the rules of international law.  Nicaragua does not accept treaties signed by other 
countries to which it is not a contracting party.  Moreover, Article 182 states that the Constitution 
represents the country's fundamental charter, and an y law, treaty, order or provision that opposes or 
alters its provisions shall be null and void. 
13. The provisions of international agreements fo rm part of the country's law upon ratification 
and publication in the official gazette (La Gaceta).   Provisions that require enabling regulations follow 
domestic legislative procedures and become nationa l laws, any alteration be ing made through legal 
amendments to the instruments in question.  The provisions of WTO Agreements that are 
incorporated into Nicaragua's domestic legi slation become national law once the established 
legislative procedures have been completed;  and they enjoy the same protection and legal remedies as 
other national laws.  A similar le gal regime applies to CACM deci sions and regulations, although in 
certain circumstances approval by the domestic legislature is not required.5 
14. At the present time, a draft foreign trade law is being prepared which aims to reorganize 
current legislation on the subject.6  Nicaragua's main trade laws are set out in Table II.1. 
Table II.1 
Nicaragua's main trade legislation, 2006 
Area Legislation 
Foreign trade Central American Uniform Customs Code (CAUCA) 
Customs Reforms and additions to Decree No. 88- 2000, Regulation of the Law Establishing the 
Customs Directorate, and Reform to th e Law Establishing the General Revenue 
Directorate, Law No. 339. 
Customs exemptions Law No. 382 on Temporary Admi ssion for Inward Processi ng and Export Facilitation 
Anti-dumping and countervailing meas ures Central American Regula tion on Unfair Trade Practices 
Taxation Law No. 453 on Tax Equity 
Public procurement Law No. 323 on Governme nt Procurement (amended by Law No. 349). 
Foreign investment Law No. 344 on Foreign Investment Promotion 
Free zones Decree No. 46-91:  Law on Export Processing Zones 
Decree No. 21-2003:  Reform of Decree No. 31-92, "Regulation of the Decree on Export 
Processing Zones 
Regulations and other technical requirements Law No. 219 on Technical Standardization and Quality 
Law No. 225 on Metrology Law No. 291:  Basic Law on Animal and Plant Health 
Intellectual property rights Law No. 312 on Copyright and Related Rights 
Law No. 354 on Patents, Utility M odels and Industrial Designs 
Law No. 380 on Trademarks and Other Distinctive Signs 
Source:   Information provided by the Nicaraguan authorities. 
 
(4) INTERNATIONAL TRADE RELATIONS  
(i) World Trade Organization (WTO) 
15. Nicaragua became a contracting party to the General Agreement on Tariffs and 
Trade (GATT) on 28 May 1950.  It participated fu lly in the Uruguay Round, ratified the Marrakesh 
                                                      
5 Some CACM regulations are adopted by law, decree or resolution and enter into force upon 
publication in La Gaceta . 
6 MIFIC has set up an ad hoc group to draw up the draft Foreign Trade Law. WT/TPR/S/167 Trade Policy Review 
Page 16 
 
 
Agreement on 27 July 1995, made all commitme nts under the single undertaking, and became a 
founding member of WTO on 3 September 1995.  Nicar agua grants at least most-favoured-nation 
(MFN) treatment to all WTO Members, but does not extend such treatment to rice from non-WTO 
Members. 
16. Nicaragua's most recent notifications  to the WTO are listed in Table II.2.7 
Table II.2 
Main notifications made by Nicaragua to the WTO, as at 30 April 2006 
Legal basis, instrument or 
provision Topic WTO document and  
publication date Periodicity 
Agreement on Implementation of 
Article VI of the GATT 1994 
(Article 16.4) Anti-dumping measures 
 G/ADP/N/65/NIC 
11 October 2000 Semi-annual  
Agreement on Implementation of 
Article VI of the GATT 1994 
(Article 18.5) Laws and regulations G/ADP/N/1/NIC/1/Suppl.1 
26 July 2002 Once only, subsequent 
amendments 
Agreement on Implementation of 
Article VI of the GATT 1994 
(Article 16.4) Authorities and internal 
procedures for initiating and 
conducting investigations G/ADP/N/14/Add.8, 
27 April 1999  
Agreement on Implementation of 
Article VII of the GATT 1994 
(Article 20.1) Implementation/non-
implementation of the Agreement 
on Customs Valuation  WT/LET/29, 
23 August 1995 Once only 
Agreement on Preshipment 
Inspection (Article 5) Laws and regulations G/PSI/N/1/Add.4, 
9 October 1996  Once only, subsequent 
amendments  
Agreement on Rules of Origin 
(Article 5.1) Regulations on rules of origin G/RO/N/10, 
16 August 1996 Once only 
Agreement on Rules of Origin 
(Annex II (4)) Preferential Rules G/RO/N/10, 
16 August 1996 Once only, subsequent 
amendments 
Agreement on Subsidies and 
Countervailing Measures 
(Article 25.1 - 25.6) Subsidies G/SCM/N/3/NIC, 
24 July 1995; 
G/SCM/N/3/Add.1, 27 February 1996 Yearly 
Agreement on Subsidies and 
Countervailing Measures 
(Article 32.6) Laws and regulations  G/SCM/N/1/NIC/1/Suppl.1 
26 July 2002 Once only, subsequent 
amendments 
Agreement on Subsidies and Countervailing Measures (Article 25.11) Countervailing measures; 
countervailing duties  G/SCM/N/4/Add.1, 
14 July 1995 Semi-annual 
Agreement on Subsidies and 
Countervailing Measures 
(Article 25.12) Authorities and the internal 
procedures for initiating and 
conducting investigations G/SCM/N/18/Add.8, 
27 April 1999  
Agreement on Safeguards 
(Article 12.6) Laws and regulations 
 G/SG/N/1/NIC/1, 
29 March 1995 Once only, subsequent 
amendments 
Agreement on Import Licensing 
Procedures 
(Article 1.4(a)) Publication of rules and 
information relating to procedures 
for submitting applications G/LIC/N/1/NIC/1, 
5 August 1996 Ad hoc 
Agreement on Import Licensing 
Procedures 
(Article 8.2(b)) Amendments to laws and 
regulations and implementation 
thereof G/LIC/N/1/NIC/1, 
5 August 1996 Ad hoc 
Agreement on Textiles and 
Clothing 
(Article 2.8(b) and 2.11) Stage three integration 
programmes G/TMB/N/361/Rev.1, 
27 November 2001 Once only 
Agreement on Technical Barriers 
to Trade (Article 10.6) Notifications on measures G/TBT/N/NIC/62, 
27 June 2005  
Agreement on Technical Barriers 
to Trade (Article 10.1 and 10.3). National enquiry points G/TBT/ENQ/26, 
7 March 2005 Once only, subsequent 
amendments 
Agreement on Agriculture (Article 18.2) Imports subject to tariff quotas 
(MA.2) G/AG/N/NIC/19, 
11 October 2005 Yearly 
Table II.2 (cont'd)
                                                      
7 WTO document G/L/223/Rev.13, 28  February 2006, indicates the mo st recent status of Nicaragua's 
notifications. Nicaragua WT/TPR/S/167 
 Page 17 
 
 
Legal basis, instrument or 
provision Topic WTO document and  
publication date Periodicity 
Agreement on Agriculture 
(Article 5.7 and 18.2) Special safeguard provisions 
(MA.5) G/AG/N/NIC/20, 
11 October 2005 Yearly 
Agreement on Agriculture  
(Articles 10 and 18.2) Export subsidies (Table ES.1) G/AG/N/NIC/17, 
26 August 2005 Yearly 
Agreement on Sanitary and 
Phytosanitary Measures (Annex B) National enquiry points G/SPS/ENQ/18, 
20 December 2004 Once only, subsequent 
amendments 
Agreement on the Application of Sanitary and Phytosanitary Measures (Annex B) Enquiry point and notification 
authority G/SPS/GEN/27/Rev.14, 
24 June 2005  
Agreement on Trade-Related 
Investment Measures (Article 6.2) Publications in which TRIMs 
may be found G/TRIMS/N/2/Rev.9, 
28 September 2001  
Agreement on Trade-Related 
Intellectual Property Rights 
(Article 69) Contact points IP/N/3/Rev.9, 
8 November 2005 Once only, subsequent 
amendments 
Agreement on Trade-Related 
Intellectual Property Rights  Responses to questions on 
enforcement IP/N/6/NIC/1, 
30 May 2001  
Agreement on Trade-Related 
Intellectual Property Rights  
(Article 6.2) Laws and regulations IP/N/1/NIC/1, 
19 April 2002 
IP/N/1/NIC/C/9, IP/N/1/NIC/I/5, 
18 April 2002 Once only, subsequent 
amendments 
GATT 1994 (Article XXVIII) Certification of modifications and 
amendments to the schedule of 
concessions WT/LET/460, 29 March 2004   
Source:  WTO documents. 
 
17. The Ministry of Development, Industry and Tr ade coordinates nine workgroups on the DDA 
(including agriculture, market access for non-agricu ltural products, services, rules, trade and the 
environment, and trade facilitation).  Nicaragua att aches the utmost importance to the DDA, and is 
chiefly interested in improving market access for its agricultural products.  It is also seeking to ensure 
that the critical issues of food security, conditions of  life in rural areas and rural development form an 
integral part of the negotiations on agriculture.8  Nicaragua has joined with various other developing 
country groups to put forward proposals in the ag riculture negotiations, on issues such as negotiating 
modalities on market access9, special and differential treatment and the "development box"10, and 
"green box" subsidies.11 
18. Other DDA issues of special interest to Nicaragua  are the trade concerns of small, vulnerable 
economies, and services.  In June 2005, it subm itted its initial offer on services, which includes 
gradual liberalization in some subs ectors of interest, such as telecommunications, financial services, 
and tourism, together with specific stipulations regarding horizontal commitments.  Nicaragua has 
also asked developed countries for openness with resp ect to Mode 4 (Movement of natural persons) in 
services. 
19. Since the last review, Nicaragua has been involved in four cases under the WTO dispute 
settlement mechanism.12  On 17 March 2003, it requested cons ultations with Mexico on certain 
measures imposed by that country on the importation of black beans from Nicaragua13;  but on 
                                                      
8 Press statement issued by the G-33, 11 October 2005. 
9 WTO document WT/MIN(03)/W/10, 5 September 2003. 
10 WTO document G/AG/NG/W/13, 23 June 2000. 
11 WTO document G/AG/NG/W/14, 23 June 2000. 
12 Information on cases involving Nicaragua under the WTO dispute settlement mechanism up to late 
1999 can be found in WTO (1999),  Trade Policy Review Nicaragua, Geneva. 
13 WTO document, WT/DS284/1, 20 March 2003. WT/TPR/S/167 Trade Policy Review 
Page 18 
 
 
8 March 2004 it informed the Dispute Settlement Body  that it was formally withdrawing its request 
since its claims had been satisfied in negotiations with Mexico.14 
20. On 17 January 2000, Colombia requested c onsultations with Nicaragua concerning 
Nicaraguan Law No. 325 of 1999, establishing a tax on goods and services coming from or 
originating in Honduras and Colombia, and also in respect of implementing Decree No. 129-99.15  On 
18 May 2000, an ad hoc group was established,  but this has not yet been constituted.16 
21. In 2000, Honduras presented Nicaragua with a clai m substantially similar to that submitted by 
Colombia, and on 6 June 2000, it requested consultations.17  At the time of writing, no ad hoc group 
has been established, so consulta tions are currently inconclusive. 
22. On 30 November 2005, Nicaragua requested consultations with the European 
Communities (EC) concerning the regime fo r the importation of bananas adopted on 
29 November 2005 by the EC (the "New Regulation").18 
(ii) Preferential agreements 
23. At the time of the first review of its trade policy, Nicaragua already had a free trade 
agreement (FTA) with Mexico, and since then pref erential agreements have played an increasingly 
important role in its trade relations.  Since 1999 , Nicaragua has initiated or completed the following 
negotiations in conjunction with other CACM me mber countries:  an FTA with the Dominican 
Republic which is already in force;  an FTA with  the United States that h as entered into force for 
several Central American countries;  another that has been completed but has not yet been approved 
with Chinese Taipei;  and three th at are currently being negotiated with Canada, Chile and Panama.  
The CACM member countries (Costa Rica, El Sa lvador, Guatemala, Honduras and Nicaragua) are 
holding talks on possible extra-regional FTAs, incl uding with the EC and CARICOM.  Preferential 
agreements have become an important component of trade liberalization in Nicaragua, but their 
increasing number raises concerns as to the administrative cost involved, their impact on the transparency of market access and the risk of trade diversion. 
24. According to the Nicaraguan authorities, the key elements of all their FTAs are strict 
compliance with the constitutions of the countri es involved;  consistency with WTO rights and 
obligations;  and respect for the principle of recipr ocity of rights and obligations.  The FTAs to which 
Nicaragua is party also recognize differences of size and development levels  between the parties, 
which promotes asymmetric treatment in favour of  Central American countries when applied, 
depending on the nature of the different disciplines in each FTA. 
(a) Central American Common Market (CACM) 
25. The Central American Common Market, of whic h Nicaragua has been a member since 1961, 
is founded on three key instruments.  Central Amer ican countries agreed to develop a free trade zone 
and adopt a common external tariff through th e General Treaty on Central American Economic 
Integration (1960).  A free trade regime was establishe d for all products originating in their respective 
territories, with the only restrictions contained in A nnex A (coffee, roasted or otherwise;  sugar cane;  
petroleum products, ethyl alcohol, and distilled alc oholic beverages).  In 1991, the Tegucigalpa 
                                                     
 
14 WTO document, WT/DS284/4, 11 March 2004. 
15 WTO document WT/DS188/1, 20 January 2000. 
16 WTO document WT/DSB/M/80, 26 June 2000. 
17 WTO document WT/DS201/1-G/L/387-S/L/85, 13 June 2000. 
18 WTO document WT/DS27/64-WT/L/607/Add.18, 7 December 2005. Nicaragua WT/TPR/S/167 
 Page 19 
 
 
Protocol to the Charter of the Organization of Central American States (ODECA) was signed by the 
five Central American countries and Panama.  This establishes and consolidates the Central American Integration System (SICA) as the region's institu tional framework, which aims "to bring about the 
integration of Central America as a region of p eace, freedom, democracy and development".  The 
Protocol to the General Treaty on Central Amer ican Economic Integration (1993) establishes and 
consolidates the Economic Integration Subsyste m, adapting it to the new SICA institutional 
framework and the new needs of the region's countries. 
26. To date the CACM has succeeded in unifyi ng tariffs on 94.6 per cent of the headings 
contained in the Central American Tariff System , encompassing 5,846 products;  and a strategy has 
been defined for tariff harmonization on the remain ing 5.4 per cent.  These are mostly agricultural 
products (188 agricultural categories) classified as sensitive by each of the region's economies.  In 
addition, 97 per cent of the rules of origin ag reed upon in the various trade agreements signed 
between Central American countries and Mexico ha ve now been standardized for presentation in a 
future renegotiation with that country.  A mechan ism was also defined for charging customs duties 
throughout the region.  With the aim of streamlining trade in agricultural products, a list of 469 plant 
products and by-products was harmonized, whic h are exempt from procedures to obtain import 
authorization and the phytosanitary certificate for export.  A standard sanitary and phytosanitary 
transit instrument is being prepared for approval at the present time. 
27. In mid-2004, a process of customs facilitation began at the border posts with Honduras by 
simplifying procedures for movements of both merchandise and people.  This involved the 
establishment of joint windows attended by staff from both countries, thereby enabling the user to 
make just a single stop.  This procedure aims to substantially reduce th e time taken to process 
migratory and customs operations executed electroni cally between the countries;  and it facilitates 
electronic transmission of the Central American Uniform Customs Form (FAUCA) in intra-regional operations. 
28. Also in 2004 an agreement was reached to minimize physical checks on merchandise coming 
from Central American countries, using a single- digit selection mechanism and applying intelligent 
controls through risk management (before, during a nd after execution of the operation).  Given that 
establishment of the Central American customs union requires intra-border posts to be eliminated, it is 
hoped in the medium-term to strengthen the outlying customs offices of the common customs area.  A 
key element involves dismantling barriers to intra-regi onal trade.  Sixty barriers identified in 2002 had 
already been eliminated by 2005. 
29. The main instruments adopted since 1999 to strengthen the CACM include the following: 
 - Regulations on the Interna tional Customs Transit Regime
19, which aim mainly to 
facilitate, harmonize and simplify procedures used in international customs overland 
transit operations for merchandise arriving fro m or originating in signatory countries, 
and/or third countries provided the transit operation starts in a State party.  These 
regulations are also applicable in transit between Panama and the five countries of the 
region. 
  - Central American Uniform Customs Code (CAUCA III) and its regulations
20, which 
aim to establish basic customs legislation for the countries of the region in accordance 
with CACM requirements and those of other re gional integration instruments.  This is 
applied throughout the customs territory to all persons, merchandise and means of 
                                                      
19 Resolution No. 65-2001. 
20 Resolution No. 85-2002 and Resolution No. 101-2002, respectively. WT/TPR/S/167 Trade Policy Review 
Page 20 
 
 
transport crossing the customs boundaries of the signatory countries.  The regulation 
develops the provisions of CAUCA (Chapter III(2)(i)). 
  - Central American Regulations on the Valuation of Goods for Customs Purposes
21, 
which develop the provisions of the Agreem ent on Implementation of Article VII of 
the GATT 1994, and provisions arising fro m regional laws (Chapter III(2)(ii)). 
  - Mechanism for the Settlement of Trade Disputes in Central America
22, which applies 
to the prevention or settlement of all disputes between members arising from the 
implementation or interpretation of econom ic integration instruments exclusively 
relating to their intra-regional trade relations;  or when a member considers that a measure of another member, either currently in force or projected, is incompatible with the obligations of those instruments,  or nullifies or diminishes the gains from 
trade between their territories that might reasonably have been expected from their 
implementation. 
 
30. Intra-regional trade within the Central Ameri can Free Trade Zone grew by an average of 
11.4 per cent per year between 1960 and 2004, risi ng from US$30.3 million to US$3,560.4 million in 
that period.  Exports to other markets of the worl d during the same period increased by an average of 
7.3 per cent per year.  Nicaragua has not participat ed in the expansion of inter-regional trade to the 
same extent as some of its neighbours;  in 2004 it accounted for 7 per cent of inter-regional exports 
and 16.1 per cent of inter-regional imports.
23  Seen from another angle, in 2005 the Central American 
region received 8 per cent of Nicaragua's expor ts and provided 17 per cent of its imports. 
31. The Central American countries have stepped up th eir efforts to negotiate joint trade and/or 
investment agreements with other regional groupi ngs or with individual countries.  Panama and 
Belize were admitted as States members of SICA in  1991 and December 2000 respectively, and the 
Dominican Republic joined as an associate State in December 2003. 
(b) FTA between Nicaragua and Mexico 
32. The FTA between Nicaragua and Mexico, which ente red into force in July 1998, covers trade 
in goods and services, as well as investment and inte llectual property issues.  Up to 76 per cent of 
Nicaragua's exports to Mexico benefited from imme diate tariff reductions, while the remaining duties 
are being eliminated progressively over periods of 5,  10 and 15 years.  Quotas have gradually been 
widened for Mexican imports of bovine meat, b eans, cheese and powdered milk from Nicaragua.  For 
Nicaragua, this FTA seeks to reduce domestic production costs through lower import duties on raw 
materials, capital goods, and finished products.24 
(c) FTA between Costa Rica, El Salvador, Gu atemala, Honduras and Nicaragua, and the 
Dominican Republic 
33. The regulatory part of the FTA between these Central American countries and the Dominican 
Republic was signed in 1998;  and the complement ary protocols containing the annexes were signed 
as follows:  Costa Rica in 1998, El Salvador and Guatemala in 1998, and Honduras and Nicaragua in 
2000.  Nicaragua's ratification of the treaty had been  held up because of concerns over the provisions 
on agriculture.  Nonetheless, most of these were renegotiated in the Protocol of Accession of 
                                                      
21 Resolution No. 115-2004. 
22 Resolution No. 111-2003. 
23 Calculated on the basis of data from the Central American Economic Integration System (SIECA). 
24 WTO (1999). Nicaragua WT/TPR/S/167 
 Page 21 
 
 
Nicaragua to the Central America-Dominican Re public FTA, which was signed on 13 March 2001, 
thereby enabling the FTA to enter into force on 3 September 2002.  Apart from establishing closer 
relations between Nicaragua and the Dominican Republic, this bilateral protocol facilitated 
negotiation of the FTA between Central America, the Dominican Republic and the United States 
(CAFTA).25 
(d) FTA between Central America, the Domini can Republic and the United States (CAFTA) 
34. CAFTA marks a significant change in the nature of  preferential trade relations.  Instead of an 
autonomous programme functioning in  one direction only, CAFTA is a reciprocal instrument, the 
fulfilment of which can be demanded between member s.  CAFTA covers the vast majority of goods 
traded between the United States and its Central American partners, alt hough some sensitive products 
are excluded and others are subject to restricti ons (e.g. through tariff quotas).  In the case of 
Nicaragua, the sensitive products are rice, yellow maize, white maize, sorghum, bovine meat, onions, 
red beans, chicken and powdered milk.  Nicaragua n products entering the United States market under 
quota arrangements are as follows:  peanuts, peanut bu tter, sugar, bovine meat and four types of dairy 
product. 
35. Negotiations on CAFTA began in January 2003  and ended in December that year for 
Nicaragua and three of the other Central American countries;  negotiations with Costa Rica continued 
until January 2004.  CAFTA was signed on 28 May 2 004, and the Dominican Republic was admitted 
on 5 August.  The final accords were submitted for ratification by the legislatures of most of the 
parties only in 2005.  The Congress of the United States approved implementing legislation for 
CAFTA in June-July 2005, and the National Asse mbly of Nicaragua approved its implementing 
legislation by 49 votes to 37 on 10 October 2005.  Costa Rica is the only member country that has not 
yet ratified the treaty.  CAFTA entered in to force for Nicaragua on 1 April 2006.26 
(e) FTA between Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua, and 
Chinese Taipei 
36. The Economic Complementarity Agreement between the Republics of Costa Rica, 
El Salvador, Guatemala, Honduras, Nicaragua an d Chinese Taipei was signed by the respective 
Ministers for Economic Affairs and/or Foreign Trade in  1997.  This agreement contains provisions to 
guide commercial relations in the medium term.  Article 1 requires members to develop a wide-
ranging and consistent plan of action which, as im plementation proceeds, will serve as a basis for 
mutual determination of the existence of conditions needed to initiate negotiations to move gradually 
and progressively towards signing an FTA.  In 2004,  Nicaragua inaugurated the first of four FTA 
negotiating rounds with Chinese Taipei, which defi ned general proposals on th e scope and coverage 
of the future treaty.  Like other FTAs in which Ni caragua has been involved, this one is based on the 
principle of respect for the Constitutions of the countries involved and recognition of their relative 
levels of development.  Duty free status is extende d to 87 per cent of bilateral trade, leaving a number 
of exclusions mainly among agricultural products. 
                                                      
25 Once CAFTA enters into force fo r all its members, it will replace the FTA between Central America 
and the Dominican Republic. 
26 Clearly it was intended that CAFTA would enter into force for all its members on 1 January 2006.  
Nonetheless, as a result of various legislative delays , implementation of CAFTA between the United States and 
El Salvador began on 1 March 2006, and between the United States and Honduras on 1 April 2006.  At the present time, CAFTA has not yet entered into  force in the other member countries. WT/TPR/S/167 Trade Policy Review 
Page 22 
 
 
(f) FTA between Costa Rica, El Salvador, Gu atemala, Honduras and Nicaragua, and Chile 
37. The FTA signed on 18 October 1999 between Central America and Chile27 can be thought of 
as a trade treaty that is "legally separable" for each Central American tr ade partner.  The first part of 
the agreement contains common rules governing rela tions between Chile and each Central American 
country on administrative, trade, goods, services and i nvestment issues.  The s econd part consists of 
bilateral protocols between Chile and each Central American country on issues such as tariff 
elimination programmes, specific rules of origin , cross-border trade in services, and customs 
valuation.  The FTA between Costa Rica and Chile entered into force in February 2002, while the 
agreement between El Salvador and Chile came into  effect in March 2002.  In the case of Nicaragua, 
access schedules have already been negotiated, bu t the agreement has not yet entered into force 
because access for sugar re mains to be agreed upon. 
(g) FTA between Costa Rica, El Salvador, Guat emala, Honduras and Nicaragua, and Canada 
38. The Central American countries signed a Memorandum of Understanding on Trade and 
Investment with Canada on 19 March 1998;  a nd Costa Rica signed an FTA with Canada on 
23 April 2001, which has been in force since 1 November 2002.  The other Central American 
countries have started joint negotiations for an FTA,  which are currently at the final stages.  On 
21 November 2001, the parties announced the start of free trade negotiations, together with negotiations on side agreements for cooperation on labour and envir onmental issues.  Agreement has 
already been reached on most of the general pr ovisions;  negotiations have not yet concluded, 
however.
28 
(h) FTA between Costa Rica, El Salvador, Guat emala, Honduras and Nicaragua, and Panama 
39. The FTA with Panama is being negotiated jo intly between the five Central American 
countries but considered individually;  i.e. they  apply FTA rules and procedures bilaterally with 
Panama.  The FTA aims to create a free trade zone within 15 years, through a gradual and reciprocal 
tariff reduction programme with di fferent periods (immediate, 5, 10 and 15 years), albeit with a 
number of exceptions.  Although negotiations betwee n Central America and Panama were held under 
the principle of reciprocity, there is asymmetry in what has been negotiated so far, since Panama, in 
its market access offer, proposed either a long-term tariff reduction period (10 to 15 years) or exclusion for products of interest to Nicaragua (m eat, prepared sauces, onions, sugar, biscuits, etc.) 
which are already freely traded under the Partial Scope Agreement that has been operating between 
the two countries since 1974.
29 
(iii) Other preferential trade agreements 
40. Nicaragua is also participating in negotiations for the Free Trade Area of the 
Americas (FTAA), an initiative launched in December  1994 aimed at progressively removing barriers 
                                                      
27 This is not a treaty between Chile and Central America as such;  instead Chile has five different trade 
treaties with each of the Central American countries. 
28 The 10th round of formal negotiations was held in Ottawa from 16-20 February 2004. 
29 Trade relations between Central America and Panama have been developed through FTAs and 
preferential trade agreements signed by Panama with e ach of the countries of the region, including tariff 
preferences for a group of products negotiated on a bilateral basis.  Formal negotiations with Panama aimed at 
modernizing trade relations began on 21 March 2000, with  the Joint Declaration by the Foreign Trade Ministers 
of Central America and Panama.  Negotiation of the regula tory part of the FTA was concluded on 16 May 2001, 
and negotiation of the annexes continued on a bilateral basis. Nicaragua WT/TPR/S/167 
 Page 23 
 
 
to trade in goods and services throughout the West ern Hemisphere.  Althoug h the negotiations were 
scheduled for conclusion in 2005, they are currently at a standstill. 
41. Nicaragua is party to various schemes under the Generalized System of Preferences (GSP), 
including those of the EC, Canada, Japan and Switzerland. 
42. Since 1989, it has also been participating in the Global System of Trade Preferences Among 
Developing Countries (GSTP). 
(5) INVESTMENT FRAMEWORK  
43. The Foreign Investment Law of 1991 was rendered obsolete on 24 May 2000 when the 
National Assembly passed the Foreign Investment  Promotion Law (Law No. 344).  Among other 
things, the new law:30  (a) assures equal treatment to foreign and domestic investment;  (b) abolishes 
the need to sign an investment contract;  (c) pr ovides for the abolition of the Foreign Investment 
Committee;  (d) lifts restrictions on the conditions  under which foreign capital may enter the country;  
and (e) recognizes the right of investors to freely dispose of their property and, in the event of declaration of public utility, to receive appropriate compensation.  In general, the Law also suppressed 
the requirement to sign a foreign investment cont ract as a condition for receiving benefits, most of 
which investors were enjoying anyway. 
44. In general, investors are not required to fulfil performance criteria, such as achieving specific 
export levels or incorporating a minimum local content percentage.  Both domestic and foreign 
private entities may establish and own profit-making enterprises and activities.  National legislation 
recognizes the right to establish, acquire and freely di spose of practically any type of enterprise and 
asset, except activities reserved for the State (e.g . electric power transmission and the water supply 
and sewerage system), or those that are subject to  specific restrictions such as pension funds, border 
zones and a number of transport services (Chapter IV(5)(iv)). 
45. Foreign persons investing more than US$30,0 00 may register in the Foreign Investment 
Statistical Register on a voluntary basis, for which th ey have to complete a form entitled "Notification 
for Registration of Foreign Investments".  Law No. 344 allows free currency convertibility;  transfers 
abroad in relation to the capital inv ested;  remittance of any profit, dividend or gain generated in the 
country;  and payments arising from compensation in respect of expropriation.  Foreign investors may 
also take out insurance under international conventions .  This also forms part of the requirements for 
application for permanent residence in Nicaragua with the General Migration and Foreign Residency 
Office.  There are a number of differences in the documents investors are required to submit, 
depending on the following, among other items:  whether the investor is a private individual or a legal 
entity;  the sector receiving the investment;  and whether or not the investment exceeds US$30,000. 
46. The Ministry of Development, Industry and Trade is tasked with enforcing the Foreign 
Investment Promotion Law.  Investments registered  under this or any other law remain valid unless 
the investor decides voluntarily to  renounce the respective contracts.  Banks may repatriate profits 
without restriction.  Foreign investors receive na tional treatment with respect to import and export 
policies. 
47. In August 2002, a specialist investment prom otion agency was created (ProNicaragua), 
attached to the Office of the President of the Repub lic.  The aim of this agency is to collaborate with 
                                                     
 
30 Article 100 of the Constitution requires the State to  promulgate the Foreign Investment Law for the 
purpose of contributing to the country's economic and social development, without prejudice to national sovereignty. WT/TPR/S/167 Trade Policy Review 
Page 24 
 
 
the public and private sectors in directing the establishment of a national promotion system capable of 
attracting large direct investments from international firms. 
48. In 1999 Nicaragua had already signed bilate ral investment agreements with 12 economies 
(Argentina, Chile, Denmark, El Salvador, Fr ance, Germany, Spain, Sweden, Switzerland, 
Chinese Taipei, the United Kingdom, and the United States31).  Since then it has signed similar 
agreements with the Republic of Korea, Ecuador and the Netherlands (in 2000), the Czech Republic 
(2002), Finland (2003), Italy (2004) and Belgium-Luxembourg (2005). 
49. On 25 July 2003, the National Assembly of Nicaragua approved the New York Convention of 
10 June 1958;  and on 4 February 2003 it approved the Inter-Ameri can Convention on International 
Commercial Arbitration.  Nicaragua has also signe d international agreements on investment-related 
issues with the Multilateral Investment Guarantee Agency (MIGA) of the World Bank (signed on 
28 September 1990);  the Overseas Private Investme nt Corporation (OPIC) (this agreement was 
updated on 4 July 2004);  the European Investment  Bank (2000);  and the International Centre for 
Settlement of Investment Disputes (ICSID) of the International Bank for Reconstruction and 
Development (IBRD) (signed on 4 February 1994, a nd ratified on 7 May 1995).  Nicaragua is also 
party to the Inter-American Conven tion on International Commercial Arbitration and a member of the 
International Centre for Settlement of Investment Disputes (ICSID). 
(6) TRADE -RELATED TECHNICAL ASSISTANCE  
50. Since its previous review, Nicaragua has rece ived trade-related technical assistance from 
several international organizations, including the WTO.  The technical assistance provided by the 
WTO to Nicaragua has mainly focused on impr oving knowledge among Nicaraguan government 
officials and other economic agents involved in trade activities, on issues relating to the WTO Agreements, such as anti-dumping, subsidi es and countervailing measures, sanitary and 
phytosanitary measures, trade and the en vironment, and notifications generally. 
51. Nicaragua has also benefited from technical assistance and training programmes provided by 
multilateral agencies, such as the World Bank, the International Monetary Fund (IMF), the 
International Trade Centre (ITC) and the Unite d Nations Conference on Trade and Development 
(UNCTAD), and from bilateral donor programmes. 
                                                     
 
31 Although this agreement has been ratified by Nicaragua, the United States Senate has not yet given 
its approval for ratification.