Nicaragua’s investment-promotion agency is downplaying concerns that the country is losing its business edge in the region.
If anything, says ProNicaragua, the opposite is true.
“The best indicator of a country’s business climate is the results it obtains in promoting and attracting investments,” says Javier Chamorro, executive director of ProNicaragua, noting that Nicaragua’s foreign direct investment grew 91% last year. “Nicaragua has already demonstrated that it is one of the most dynamic economies in terms of attracting investment in Latin America and the Caribbean.”
The group’s defensive posture comes in response to the 2013 Doing Business Report, which highlights exceptional improvements to the business climates in Costa Rica, Panama and Guatemala, but no remarkable progress made by Nicaragua. The annual report, published this week by the World Bank and the International Finance Corporation (IFC), evaluates the ease of doing business in each country and is considered a barometer for the world’s business climates.
Overall, Nicaragua ranks 119 of 185 participating countries, representing a one-notch gain from last year. That’s good enough for second-to-last place in Central America, behind Panama (63), Guatemala (93), Belize (105), Costa Rica (110) and El Salvador (113). Bringing up the rear is Honduras, which ranks 125 in the world.
The report extols the 15 Latin American countries that implemented regulatory reforms making it easier for local entrepreneurs to do business. In Central America, the report notes that Guatemala passed legislation to ease construction permits, Panama passed three reforms related to registration and permitting, and Costa Rica approved a slew of reforms related to licensing, financial transparency and tax collection.
“We are very content with the progress made by Costa Rica, where authorities showed that by concentrating efforts they can make a difference in the business climate, even in a short amount of time,” said Augusto López-Claros, director of the World Bank’s Department of Analysis and Global Indicators.
Nicaragua made no reforms during the last year and didn’t receive any special mention in the report, despite working with World Bank representatives to improve the country’s standing this year.
ProNicaragua defends economic advances
At quick glance, Nicaragua appears to have lost ground. In the 2012 Doing Business report, Nicaragua was initially ranked 118 and highlighted as one of 30 countries that that made notable improvements to its business climate—an accolade not repeated in this year’s report.
The opposition daily La Prensa took the findings of the new report as an opportunity to pounce, stressing Nicaragua’s apparent slide in competitiveness with the headline “Doing Business is more difficult.” Several private sector leaders speculated that Sandinista politics are causing the country’s business climate to cool.
ProNicaragua, however, insists the calamity howlers are wrong. Chamorro notes that the apparent backwards step is due to the change in the methodology used by the World Bank, not due to any actual loss of ground. In fact, with index adjustments made for new methodology, Nicaragua climbed a rung in the overall world ranking and showed notable progress in the categories of Trading Across Borders and Resolving Insolvency, Chamorro notes.
“This is the third consecutive year the country has improved its position within the report, which demonstrates a positive impact of the various efforts carried out to improve the country’s investment climate,” ProNicaragua said in a release.
The only country in Central America that lost ground this year was El Salvador, ProNicaragua notes.
Though Nicaragua is still near the back of the pack in Central America in terms of overall performance, the country outranked its neighbors in the categories of Protecting Investors, Enforcing Contracts and Resolving Insolvency.
As for the government’s efforts to work with the World Bank consultants to improve the country’s business climate, those fruits will be harvested next year, ProNicaragua says.
“The Government of Nicaragua has continued implementing measures this year that will have a positive effect on the country’s business climate and ultimately in next year’s ranking,” the investment agency says.
Though Nicaragua’s levels of foreign direct investment are down 20% during the first half of the year, ProNicaragua says the country is still on track to make up lost ground in the second semester and finish 2012 by meeting its $1 billion investment goal.