Nicaragua’s economy set pace in 2011

Nicaragua has gone from being the region’s economic basket case to a leader in foreign-direct investment. In Central America, only Costa Rica attracted more foreign investment than Nicaragua last year. Part I of a two-part series on Nicaragua’s investment climate.

Over the past five years of President Daniel Ortega’s government, Nicaragua’s economy has gone from being Central America’s perennial basket case to the region’s rising star.

Not only is Nicaragua the fastest-growing economy in Central America in terms of exports and foreign-direct investment, it’s also becoming a heavyweight contender in a neighborhood where it used to be the skinniest kid on the block. In 2011, Nicaragua exported $4.3 billion in goods and services (including free-trade zone exports) and attracted $967.8 million in foreign-direct investment—up a whopping 91% from 2010. 

 Indeed, Nicaragua is not longer just “doing well for Nicaragua.” Now it’s doing well for Central America—a distinction the country hasn’t had since the antebellum days of the 1970s.

“Six years ago, we were generating 5% of the total investment in the region. But in 2011, we represented 20% of the foreign-direct investment in the region, based on the preliminary numbers for Costa Rica and El Salvador,” says Javier Chamorro, executive director of investment-promotion agency ProNicaragua.

By comparison, Costa Rica, the region’s leading economy, represents 32% of the total foreign-direct investment in Central America per annum. Panama, which has an on-again-off-again relationship with Central America, is not included in the comparative data.

Some of Nicaragua’s regional surge is due to other countries falling behind, namely Honduras and El Salvador, which have yet to return to their “pre-economic crisis” investment or growth levels. But that only makes Nicaragua’s growth during a time of global stagnation even more impressive.

Javier Chamorro, ProNicaragua

ProNicaragua's Javier Chamorro (photo/ Tim Rogers)

“In absolute values, Nicaragua is positioning itself as the second-ranked country in the region in terms of dollars coming into the country,” Chamorro told The Nicaragua Dispatch. “Costa Rica, which has not yet closed out its 2011 numbers, is already No. 1. But El Salvador (which has only presented third quarter numbers for 2011) would have to really pick up its final numbers to surpass Nicaragua. We will probably see Nicaragua finish No. 2 in the region in terms of attracting foreign investment in 2011.”

Guatemala finished close behind Nicaragua with $910.8 million in foreign-direct investment last year, followed by Honduras and El Salvador.

While Nicaragua’s growth is impressive under any circumstances, it’s amazing considering the country’s political context and the uncertainty caused by the Sandinistas’ return to power five years ago.  Though President Ortega’s erstwhile revolutionary government in the 1980s captained the Nicaraguan economy to the bottom of the sea (something Sandinista economic planners seemed determined to do even without the crippling U.S. embargo), the Sandinistas have bucked the odds the second time around by managing the economy within the framework of the neoliberal model.

Since Ortega returned to power in 2007, banking deposits have increased steadily, foreign reserves have more than doubled to $2.6 billion, exports have more than doubled and foreign-direct investment has grown five-fold.

Critics argue the macroeconomic growth is not benefitting the middleclass or the majority of the country’s impoverished population, rather creating a new class of Sandinista nouveau riche. Still, all that growth—even if concreted in the hands of some—certainly hasn’t hurt the economy. Indeed some data suggests the economic growth and Sandinista social handouts have helped reduce extreme poverty in Nicaragua.

Nicaragua’s economy is growing, diversifying

Not only is Nicaragua’s economy growing faster than the rest of Central America (Nicaragua last year grew 4.7%, well above the Central American average of 3.4%), it’s also spreading in multiple directions as the nascent economy diversifies and matures.

The diversity can be seen in Nicaragua’s growing number of trade partners, and also in the growing number of foreign countries investing here.

“In 2007, which was a record year at that time for foreign-direct investment, there were 22 countries investing in eight sectors of the economy.  And the top three sectors of the economy— energy, telecom and free zones—constituted 88% of the total investment in the economy,” Chamorro explained. “Now, if you look at 2011, the top three sectors represent 52% of the total investment pie, and now there are 41 countries of origin investing here.”

“There are all positive tendencies,” Chamorro said.

Last year, Nicaragua registered impressive foreign-direct investment growth in each of its top three sectors: investment in energy grew 37% ($158.8 million to $217 million); telecom by 35% ($118.7 million to $160 million); and free-zones by 35% ($96.6 million to $130.2 million). The country also saw impressive growth in foreign-direct investment in the following sectors: commerce and services (up 1,467%), mining (352%), industry (751%), agriculture (11,541% —from $400,000 to $47.7 million), construction (1,311%) and transportation (1,250%).

The only sectors that saw a dip in foreign investment were tourism (down 48%), forestry (down 97%), and fisheries, which dipped 61%.

In the case of tourism investment, which in dollar terms dropped from $51.24 million in 2010 to $26.5 million in 2011, the dip in foreign investment is not worrisome, Chamorro says. That’s because overall the tourism industry continued to grow, and the difference in foreign investment from one year to the next could be made up with the construction of a single new hotel.

Plus, Chamorro notes, the foreign-direct investment numbers for tourism don’t take into account all the new Nicaraguan investment in the tourism sector. The Grupo Pellas project at Guacalito de la Isla alone invested some $20 million in Nicaragua last year, making up for the dip in foreign-direct investment, Chamorro said.

“We hope to continue to bring more and more foreign investment into the country each year, but if you see a shift with local business groups picking up the pace and investing more in Nicaragua themselves, I think that is very positive too,” Chamorro said. “For local business groups to be investing heavily in the tourism sector is a sign of confidence.”

41 countries and counting

 Canada was the leading country of origin for foreign-direct investment in Nicaragua last year, investing $255.52 million, mostly in mining and energy. In second place was the United States, with $158.8 million, followed by Spain, with $115.6 million. Those three countries alone represented 55% of the foreign-direct investment in Nicaragua last year.

Venezuela was in fifth place, with $45 million in foreign-direct investment.

The diversification of countries and projects investing in Nicaragua helped the country get close to meeting last year’s investment goals, but really by accident. When President Daniel Ortega boldly projected $1 billion in foreign-direct investment last year—100% growth from 2010—many critics scoffed. Then, when the first semester investment numbers came in showing Nicaragua had attracted only $284 million in foreign-direct investment in the first half of 2011, critics scoffed even louder; the goal of $1 billion seemed to slip from unlikely to absurd.

Ortega, apparently, had been basing his initial projections on the insider knowledge that the Tumarín hydroelectric project and his own ALBANISA investment group were going to invest $500 million in Nicaragua last year. But when both those long-term projects under-executed in 2011—investing about $100 million combined—Ortega’s projections were thrown way off mark.

However, Chamorro notes, a lot of other smaller investment projects that the government didn’t plan on—such as a $54 million investment by Walmart—ended up picking up the slack in the second half of the year. So in the end, Ortega’s original estimate was close to accurate, even though the way Nicaragua ended up reaching that goal was much different from what the president was expecting.

“The gap was picked up by a lot of smaller projects we weren’t planning on,” Chamorro said. “So in the end, the difference was offset by many new projects.”

Chamorro says that happened because Nicaragua is good, not lucky. The country has been working hard to attract new investment and create a series of incentives for various sectors of the economy.

As a result of that hard work, this year’s investment projections are similar to last year’s. If those goals are met again in 2011, Nicaragua will prove that last year wasn’t a fluke, rather the beginning of a new chapter in the country’s economic history.

Read part II of the series here.



  • Roger Sosa

    That is strange. When you talk to people in Nicargua they tell you a different story.. Everyone says that the situation is getting worse and worse and that there is lack of jobs everywhere….This is another form of stating…..”The richer are getting richer and the poor and gettin poorer”.

  • George

    I have seen spectacular improvement in infastructure over the past 6 years. Life on Ometepe has changed dramatically. Roads, ferries, power, internet, etc., etc., etc. Then last month the school kids all got laptops. It is all a little hard to believe.

  • car

    foreign direct investment and foreign direct withdrawal. the way i see it not much has really changed in the lives of nicas. big foreign investment, new low paying jobs and a huge profit pulled out by the investors. some of the biggest investments were made in the energy sector, which while good for the country, doesn’t really mean much in the short to mid term for struggling people. grupo pellas is very charitable in many ways. but guacalito will create a bunch of menial labor, low paying jobs. until there is a BIG change to the minimum wage, not much will change for the average poor nica. big talk, little action.

  • Gerd Schnepel

    Dear Tim, what happened? Such a lot of mistakes or wrong kind of presenting realities. Don’t you really not read the analyses of Adolfo Acevedo, a serious economist, using available official numbers in first place? If you want to talk about Nicaraguan economy, reading Adolfo’s contributions are a must. This article of yours is just sort of annoying.

    • Christian

      Hi Gerd, would you care to elaborate on where Tim went wrong? I highly respect Acevedo and agree with other comments that it is pretty hard to understand that the positive image painted reflects the same Nicaragua that I live in. But the numbers speak for themselves, don’t they? Enlighten us, please – and thanks for keeping the way too traditional ‘I like/I don’t like the Sandinistas’ out of the debate.

      • Gerd Schnepel

        Hello, Christian, I saw this pretty late, therefore no answer. In the meantime I had made two more remarks, maybe you saw them, which touch some of the issues. Only very short: the foreign investment maybe, but what does it help, when it happens because of Nicaragua’s competitivity, as described below? Canadian gold firms for example: Politicians are doing everything to make them come (see the website of the energy and mining ministry, where they practically offer 49% of Nicaragua to be given away as concessions). 3% of the sale goes to Nicaragua, and not even the full 25 years of the concession, but a lot less, if I know well the mining law. So what makes politicians move so dramatically? Normally there is only one answer to that …

        Nicaragua keeps the immense environmental damage of the open pit mining, the health consequences etc., and the future generations will have nothing to mine themselves. Economical growth happens also because of immense gold prices right now, not of better productivity or more export. The same with cattle: cattle is a mayor factor of Nicaragua’s economy, but it is also completely unprofitable, because the costs of environmental damage and to soil, forests, biodiversity and WATER are paid by the society, the people, and not the few rich cattle people. Etc. etc. Unhealthy growth, not sustainable. Foreign investment to get as much money out of Nicaragua – which is easy because of the mentioned circumstances. Please read Adolfo carefully: he finds the weak parts of all the success stories about Nic. development and about the famous care for the poor. Both do not exist.

  • El Macho Raton Rivense

    Wow… so misleading. First off: the fact that Panama is not included in this “study” says it all. According to FUNIDES the country’s leading economic think tank…. Between between Panama and Costa rica, 52% of total FDI fror C.A. Inflation has averaged over 10% every year and growing… the basic food basket for a typical familiy of 4 is over 500 $$ USD yet the average Nica make only 141 dollars a month. Ortega’s government has consecutively for 5 years reduced the budget for Education and Health services while increasing the budget (salaries and fringe benefits) for state oficials, (it takes 10.3 yrs for the avrg kid to finish 6 yrs of schooling and only 1 in 3 actually make it the 6th grade… despite being in Alba, we have the highest energy and oil prices…. while his croonies builind several 2- 3 millon dollar vacation homes…. Ortega and the FSLN elite has made themselves multi-millonaires through the Venezuelan “aid” that totals more 1 billion over the last 5 yrs in unchecked funds that go dircetly to Ortega personally controlled piggy bank Bank of ALBA… all of his social policies are extreely exclusive and as a very recent study sponsored by FUNIDES shows… poverty has actually increased in the last 5yrs!!! Moreover, the VOLUMEN of exports has shrunken while the profit of EXPORT has increased (no real wealth creation or povery reducing effects there)… even more importantly… ProNicargua is controlled by Ortega himself through one of his sons who magically sits on the board while studying music in Costa Rica driving a yellow H2 Hummer and mercedes benz’s…. this article should not post opinons like this unless it wishes to become a mouth-piece to Ortegas populist policies.

    We continue to be LAtin America 2nd poorest country by far!!!

    All this “growth” is financed by Chavez petro-dollars… it’s all a house of cards!

    not to mention ortega has already confiscated too many foreigners property/tourist bussiness and local Nicas as well.

  • El Macho Raton Rivense

    “Indeed some data suggests the economic growth and Sandinista social handouts have helped reduce extreme poverty in Nicaragua.” —- This is just flat out a lie! what data?? show proof, citation, etc…. The handouts have gone to less than 10% of the population, ALL Orteguistas!! not to mention, if you know ANYTHING about socio-econmic development hand outs do not REDUCE poverty…. they make the impoverished dependent on further hands-outs — creating clientilism.

    “We will probably see Nicaragua finish No. 2 in the region in terms of attracting foreign investment in 2011.” — only because Panama is not included for convinience, to say we will be number 2. And if we dont include Costa Rica, then we will be number 1 !!! and only if Salvador and Guatemala stay static as mentioned… they have not presented their 4th qtr yets, whereas Nicaragua pretty much has.

    • Nero

      Was in San Juan del Sur last weekend, I will admit a bit rum soaked. Stumbled into a seedy casino near the port originally named Atlantic City. Walked around the very unimpressive slots collection when I was led to a disco in the back. In an enclosed dance floor was a group of hoochie dressed young women. Someone told me the girls gave lap dances and the place was owned by ALBA. Didn’t stay to find out but does this mean ALBA is also in the sex industry? Can someone shed some light into this or did I just have one too many?

      • Gerd Schnepel

        It would not surprise me. Their leading TV station channel 4 for example makes the same use of female bodies, “models”, dancers etc. for entertainment and excitement as any other commercial private channel. It seems that the feministas of the Party never heard about the corresponding protests of the whole women’s movement in the last 4 decades. Sex everywhere is part of their “panem et circenses”, or like a Nicaraguan writer recently said: Mucho circo, poco pan. The same with booze, by the way (see the JS mass gatherings!).

  • Gerd Schnepel

    Again, Tim, about your article’s main tendency: today we read in El Nuevo Diario and

    It seems you were describing that the 1% is doing well with the “socialists” in power. Pellas and Ortiz and Canadian gold companies feel happy in a regulated Nicaragua without labour conflicts, with low wages, non application of the environmental laws etc., all what makes Nicaragua’s “competitividad” so interesting. The Old Rich have no problem therefore to share the resources with the New Rich; both try to keep conditions nice and easy and healthy … for them.

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