DoingBusiness

in NicaraguaJanuary 2015

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CONTENT

 

I.  CENTRAL  LAW  .........................................................................................................................................................  5  

II.  OVERVIEW  OF  NICARAGUA  ...................................................................................................................................  5  

1.   Territory  ........................................................................................................................................................  5  

2.   Business  Geography  ......................................................................................................................................  6  

3.   Government  ..................................................................................................................................................  7  

3.1.  Executive  Branch  ........................................................................................................................................  7  

3.2.  Legislative  Branch  .......................................................................................................................................  7  

3.3.  Electoral  Branch  .........................................................................................................................................  8  

3.4.  Judiciary  Branch  ..........................................................................................................................................  8  

4.   Population  .....................................................................................................................................................  9  

5.   Public  Safety  ................................................................................................................................................  10  

6.   Foreign  Direct  Investment  ...........................................................................................................................  11  

7.   Exports  .........................................................................................................................................................  14  

8.   Gross  Domestic  Product  ..............................................................................................................................  15  

9.   Diplomatic  Relations  ...................................................................................................................................  16  

10.   Power  Grid  and  Telecommunications  .....................................................................................................  18  

11.   Telecommunications  ...............................................................................................................................  19  

12.   Labor  Market  ...........................................................................................................................................  20  

III.  WHY  INVEST  IN  NICARAGUA  ..............................................................................................................................  20  

1.   Stable  Developing  Economy  ........................................................................................................................  20  

2.   Solid  and  Harmonized  Legal  System  ............................................................................................................  21  

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3.   Attractive  Tax  Incentives  .............................................................................................................................  22  

3.1.   Tax  Benefits  to  Exports  ........................................................................................................................  22  

3.2.   Tax  Benefits  to  Producers  ....................................................................................................................  22  

3.3.   Tax  Benefits  to  the  Forestry  Sector  .....................................................................................................  23  

3.4.   Temporary  Admission  Regime  .............................................................................................................  23  

3.5.   Benefits  to  Industrial  Free  Trade  Zones  ..............................................................................................  24  

3.6.   Benefits  to  Power  Generation  using  Renewable  Energy  Sources  .......................................................  25  

3.7.   Benefits  to  the  Mining  Sector  ..............................................................................................................  26  

3.8.   Benefits  to  Tourism  .............................................................................................................................  26  

3.9.   Benefits  to  Port  Constructions  ............................................................................................................  27  

3.10.   Benefits  to  Social  Housing  Construction  ..........................................................................................  27  

3.11.   Benefits  to  Fishing  and  Aquaculture  ................................................................................................  28  

3.12.   Non-­‐Tax  Incentives  ..........................................................................................................................  28  

3.13.   Benefits  to  the  Hydrocarbon  Sector  ................................................................................................  28  

4.   Preferential  introduction  to  international  markets  .....................................................................................  29  

5.   Ease  of  Access  To  and  From  Nicaragua  .......................................................................................................  30  

5.1.   Land  Connection  ..................................................................................................................................  31  

5.2.   Customs  Offices  ...................................................................................................................................  31  

IV.  LEGAL  FRAMEWORK  OF  INTEREST  TO  INVESTORS  .............................................................................................  32  

1.   Legislation  promoting  and  protecting  investments  ....................................................................................  32  

2.   Social  Security  and  Labor  Laws  ....................................................................................................................  33  

2.1.   Work  Day  .............................................................................................................................................  34  

2.2.   Salaries  ................................................................................................................................................  34  

2.3.   Minimum  Wage  ...................................................................................................................................  35  

2.4.   Vacation  ...............................................................................................................................................  36  

2.5.   Thirteenth  Month  ................................................................................................................................  36  

2.6.   Termination  of  Employment  ...............................................................................................................  37  

2.7.   Unions  and  Collective  Agreements  .....................................................................................................  37  

2.7.1.   Collective  Agreement  ..................................................................................................................  38  

2.8.   Occupational  Health  and  Safety  ..........................................................................................................  38  

2.9.   Social  Security  ......................................................................................................................................  39  

3.   Tax  System  ...................................................................................................................................................  39  

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3.1.   Tax  Year  ...............................................................................................................................................  39  

3.2.   Income  Tax  ..........................................................................................................................................  40  

a)   Work  Income  .......................................................................................................................................  40  

b)   Income  from  economic  activities  ........................................................................................................  40  

c)   Capital  revenue  and  capital  profits  and  losses  ....................................................................................  41  

3.3.   Value  Added  Tax  ..................................................................................................................................  42  

3.4.   Selective  Consumer  Tax  (ISC)  ..............................................................................................................  42  

3.5.   Tax  Stamps  ..........................................................................................................................................  43  

3.6.   Municipal  Income  Tax  .........................................................................................................................  43  

3.7.   License  Tax  ..........................................................................................................................................  43  

4.   Intellectual  Property  Laws  ...........................................................................................................................  43  

4.1.   Copyrights  and  Neighboring  Rights  .....................................................................................................  44  

4.2.   Brands  and  Other  Distinctive  Signs  .....................................................................................................  45  

4.3.   Patents,  Utility  Models  and  Industrial  Design  .....................................................................................  45  

4.4.   Protection  of  Programme-­‐Carrying  Satellite  Signals  ...........................................................................  46  

5.   Imports  and  Exports  Standards  ...................................................................................................................  47  

5.1.   Imports  ................................................................................................................................................  47  

5.2.   Exports  .................................................................................................................................................  47  

6.   Immigration  Rules  .......................................................................................................................................  48  

7.   Consumer  and  User  Rights  ..........................................................................................................................  49  

8.   Mediation  and  Arbitration  ..........................................................................................................................  49  

V.  EASE  OF  DOING  BUSINESS  ...................................................................................................................................  51  

1.   Types  of  Entities  ..........................................................................................................................................  51  

1.1.   Individuals  ...........................................................................................................................................  51  

1.2.   Collective  or  social  ...............................................................................................................................  51  

1.2.1.    General  Aspects  ................................................................................................................................  51  

1.2.2.    Types  of  Companies  ..........................................................................................................................  52  

a)   Collective  Liability  Company  ............................................................................................................  52  

b)   Limited  Partnership  .........................................................................................................................  53  

c)   Public  Limited  Liability  Company  ...................................................................................................  53  

d)   Partnership  Limited  by  Shares  ........................................................................................................  54  

2.   Forming  a  Company  ....................................................................................................................................  54  

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2.1.   One-­‐Stop  Window  ...............................................................................................................................  54  

2.2.   Processes  at  the  One-­‐Stop  Business  Service  Window  .........................................................................  55  

2.3.   Clarifications  on  the  DGI  Process  .........................................................................................................  56  

2.4.   Fees  from  the  Mayor’s  Office  in  Managua  ..........................................................................................  56  

2.5.   Processing  at  MIFIC  .............................................................................................................................  56  

2.5.1.   Foreign  Investor  Certificate  .........................................................................................................  56  

VI.  INSTITUTIONS  PROMOTING  INVESTMENT  IN  NICARAGUA  ................................................................................  57  

1.   PRONicaragua  ..............................................................................................................................................  57  

2.   Ministry  of  Industry,  Development  and  Trade  (MIFIC)  ................................................................................  57  

3.   AMCHAM  .....................................................................................................................................................  57  

4.   CETREX  .........................................................................................................................................................  58  

   

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 DOING BUSINESS IN NICARAGUA

I. CENTRAL LAW

CENTRAL LAW is a leading regional law firm advising clients on corporate law in Central America and the Caribbean. With 11 offices in the countries of Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Panama and the Dominican Republic, CENTRAL LAW has helped develop domestic and foreign corporations as well as financial institutions in the countries where the offices of the firm are located. International directories such as Chambers & Partners, Legal 500, IFLR 1000, among others, have recognized the lawyers of CENTRAL LAW as prominent professionals in the fields of Corporate Commercial, Dispute Resolution, Corporate Finance and Corporate M&A law. The firm also ranks among the leading law firms in Latin America in the areas of Banking & Finance, Energy & Infrastructure, Energy and Natural Resources, Insurance, Intellectual Property, Labor & Employment, Real Estate and Tourism and Shipping.

II. OVERVIEW OF NICARAGUA

1. Territory Nicaragua is located in the center of the American continent. It has a territorial landmass of 130,373.4 Km2 and it is the largest country in Central America. Its geography includes approximately 800 Km of coastline in the Pacific Ocean and the Caribbean Sea, 28 volcanic formations, 22,000 Km2 of natural reserves, over 10,400 Km2 of lakes, lagoons and rivers and 7% of the world’s biodiversity. The country also has three Biosphere Reserves declared by the United Nations Educational, Scientific and Cultural Organization (UNESCO): Bosawás, Ometepe Island and San Juan River Biosphere Reserves1.

                                                                                                                         1  Biosphere  Reserves  Around  the  World,  [online]  [consulted  on  March  26,  2015],  available  at  http://www.unesco.org  

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Geophysically, Nicaragua is divided into three large zones: the Pacific lowlands, north-central highlands, and the Caribbean lowlands. Administratively, it is divided into 15 departments, 2 autonomous regions in the Caribbean coast and 153 municipalities. Land borders are 1,146 Km long: 833 Km bordering Honduras to the north, and 312 Km bordering Costa Rica to the south. If measured in a straight line, Nicaragua has 350 Km of Pacific coastal line and 450 Km of Caribbean coastal line. In November 2012, the International Court of Justice (ICJ) ruled in favor of Nicaragua on the case versus Colombia in regards to the continental shelf pertaining to Nicaragua. ICJ recognized 200 nautical miles of territorial waters from the coast to the Atlantic Ocean as Nicaraguan territory. This sea territorial portion of Nicaragua represents an important investment opportunity due to its natural wealth.

2. Business Geography Due to the geographical location and tropical climate of Nicaragua, the country has very fertile lands. Therefore, agriculture is one of the main economic activities. The main crops are cotton, sesame, bananas, coffee, cocoa, sugar cane, peanuts, beans and sorghum. Agriculture currently represents 60% of the total exports and bring approximately 300 million US dollars into the country. Nicaragua has around 800 kilometers of coastal line in the Pacific Ocean and the Caribbean Sea, 28 volcanic formations, more than 10,000 km2 of lakes, lagoons and rivers and it has the second largest lake of Latin America. This lake also has the largest island in a lake in the world. It has colonial cities with a rich culture, such as Granada - one of the oldest cities founded in the American continent-, and Leon, home to the last cathedral built in colonial times and which, due to its artistic, cultural and historical value, was declared a world heritage site by UNESCO in 20112. The combination of these characteristics along with the high citizen safety levels, make Nicaragua an attractive tourist destination. Therefore, the tourism industry is constantly progressing and it has become one of the most dynamic economic sectors in Nicaragua. It has become one of the first sources of hard currency in the country. According to the data provided by the Nicaraguan Institute of Tourism (INTUR), over 1.23 million tourists were recorded in Nicaragua in 2013, which represented a 4% growth. Tourism generated a revenue of $417 million US dollars.

                                                                                                                         2  List  of  World  Heritage  Sites,  [online],  [consulted  on  March  26,  2015],  available  at  http://portal.unesco.org    

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In 2014, 1,329,600 tourists visited Nicaragua (data prior to December 2014). This figure represents approximately an 8.1% growth in the arrival of tourists. This is a significant increase in the main markets compared to 2013: United States 10%; Germany 15.9%; Spain 10.4% and England 47.1%. According to the Nicaraguan Institute of Tourism (INTUR), the sites preferred by tourists are: the colonial cities of Granada and Leon; Masaya City and Rivas City, and definitely the beach of San Juan del Sur, Ometepe Island, the Mombacho volcano, Corn Islands (Corn Island y Little Corn Island), and other destinations. Ecotourism and the growing interest in surfing also attract many tourists to the country. In the July 2014 edition of the Central American Forbes magazine, Gildan, a Canadian clothing manufacturer that expanded to Nicaragua in 2004, , commented on the value of the country’s strategic location, which facilitates a prompt response to the markets and also commented on the quality of the Nicaraguan workforce.

3. Government Nicaragua is a democratic republic. Democracy is exercised in a direct, participatory and representative manner. The functions delegated by the Sovereign Power are expressed through the Legislature, the Executive, the Judiciary and the Electoral Branch. Each Branch has specialized and separate functions. They collaborate harmonically with each other to achieve their goals.3

3.1. Executive Branch The President of the Republic is the Head of State and the Commander in Chief of the Defense and Security Forces of the Nation.4 The current President of the Republic is Mr. Daniel Ortega Saavedra, who was elected in November 2006 and re-elected in November 2011.

3.2. Legislative Branch It is exercised by the National Assembly and formed by 92 members elected by equal, direct and secret universal vote5 for a five-year term.

                                                                                                                         3  Article  7  Political  Constitution  with  incorporated  reforms.  4  Article  144  Political  Constitution  with  incorporated  reforms.  5  Article  132  and  133  Political  Constitution  with  incorporated  reforms.  

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3.3. Electoral Branch It is constituted by the Supreme Electoral Council and formed by Magistrates appointed by the National Assembly from separate lists proposed for each position by the President of the Republic and by the Members of the National Assembly in consultation with the relevant civil organizations,6 for a five-year term. This branch is exclusively in charge of the organization, management and vigilance of elections, plebiscites and referendums.

3.4. Judiciary Branch The Judiciary is formed by justice tribunals established by law, which upper-level body is the Supreme Court of Justice. This court is formed by sixteen magistrates appointed by the National Assembly, from separate lists proposed for each position by the President of the Republic and the Members of the National Assembly in consultation with the relevant civil organizations.7

Source: National Institute of Information Development (INIDE) The judiciary is a unitary system for the entire country and it is organized into specific divisions to resolve disputes according to the nature of each case, whether it is constitutional, civil, labor, criminal or administrative. It is also a system that permits alternative conflict resolution methods such as mediation, conciliation and arbitration, as established by the law of the matter. This helps reduce the number of judicial cases and expedites the administration of justice.                                                                                                                          6  Article  138  item  8    Political  Constitution  with  incorporated  reforms.  7  Article  138  item  7  Political  Constitution  with  reforms  incorporated.  

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4. Population According to the National Institute of Information Development (INIDE in Spanish), the estimated population of Nicaragua for 2015 is 6.17 million, 51% female and 49% male. The following graph shows the population distribution per age group for 2015:

Department Population % of Total

Managua 1,480,270 24.00% Matagalpa 547,500 8.88% RAAN 476,298 7.72% Jinotega 438,412 7.11% Chinandega 419,753 6.81% León 399,879 6.48% RAAS 380,121 6.16% Masaya 361,914 5.87% Nueva Segovia 249,376 4.04% Estelí 223,356 3.62% Granada 201,993 3.28% Chontales 191,127 3.10% Carazo 186,438 3.02% Rivas 172,289 2.79% Boaco 160,711 2.61% Madriz 158,705 2.57% Río San Juan 119,095 1.93% Total 6,167,237 100.00% Source: National Institute of Information Development (INIDE).

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Source: PRONicaragua. http://www.pronicaragua.org/es/por-que-invertir-en-nicaragua/excelente-calidad-de-vida Other important demographic indicators for 2010-2015 include:

§ Average annual growth: 1.22% § Life expectancy: 74.5 years § Gross birth rate: 23.2 per one thousand inhabitants § Gross mortality rate: 4.6 per one thousand inhabitants § Infant mortality rate: 18.1 per one thousand births § Overall fertility rate: 2.5 per woman

5. Public Safety Nicaragua is world known for the high level of public safety. In the last few years, it has become one of the safest countries in the western hemisphere. Homicide rates in Nicaragua in 2013 were 9 persons per 100,000 inhabitants.

Similarly, the Economist Intelligence Unit (EIU) confirms the high safety level of Nicaragua in its country risk evaluation, placing it as one of the safest countries in Central and Latin America. Indicators such as: armed conflicts, demonstrations, organized crime and kidnappings in different countries around the world are measured in the report.

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Source: PRONicaragua. http://www.pronicaragua.org/es/por-que-invertir-en-nicaragua/excelente-calidad-de-vida

6. Foreign Direct Investment According to the Presidential Delegation for the Investment and Export Promotion Agency (PRONicaragua), revenue from foreign direct investment (FDI) was $1,388 million USD in 2013, which represented an 8 % increase compared to 2012. In 2004-2013, the FDI flow to Nicaragua recorded a 20% average growth rate annually, which reflects a safe and stable environment supported by a solid legal framework for investments. In 2013, FDI revenue was recorded in 11 economic sectors in the country. The top five sectors were: industry, mines, trade, financial services and telecommunications. These sectors represented 88% of the total foreign direct investment revenue. In the first semester of 2014, FDI in Nicaragua was more than $762 million USD, which represented a 8% growth compared to the same period in 2013. Over the last five years, Nicaragua has been at the top of the IEB/GDP index in Central America. This rate provides an objective measure of the FDI flow in relation to the size of the economy of every country. Specifically in 2013, Direct Foreign Investment/GDP in Nicaragua was 12.2%. The excellent business environment in the country has allowed not only an important growth in the FDI growth but also in local investment8.

                                                                                                                         8  Descubriendo  Nicaragua,  Economía  [online]  [consulted  on  March  12,  2015].  Available  at  www.pronicaragua.org    

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Source: MIFIC, BCN and PRONicaragua. *Estimated data. According to data from the Ministry of Industry, Development and Trade, the country has signed 19 Bilateral Investment Promotion and Protection Agreements, as part of the policy to encourage investment and ease the establishment of foreign investment in the country.

Name of legal document Place and date of signing

Agreement on investment guarantees between Nicaragua and the Republic of China (Taiwan). (1)

Managua, Nicaragua, July 29, 1992

Agreement for the mutual promotion and protection of investments between Nicaragua and the Kingdom of Spain

Managua, Nicaragua, March 16, 1994

Agreement on mutual promotion and protection of investments between Nicaragua and the United States of America.

Denver, Colorado, U.S.A., January 7, 1995

Agreement for the mutual promotion and protection of investments between Nicaragua and The Kingdom of Denmark

Copenhagen, Denmark, March 12, 1995

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Treaty for the mutual promotion and protection of capital investments between Nicaragua and the Federal Republic of Germany

Managua, Nicaragua, May 6, 1996

Agreement for the mutual promotion and protection of investments between Nicaragua and United Kingdom of Great Britain

Managua, Nicaragua, December 4, 1996

Agreement for the mutual promotion and protection of investments between Nicaragua and France

Managua, Nicaragua, February 13, 1998

Agreement for the mutual promotion and protection of investments between Nicaragua and Argentina

Buenos Aires, Argentina, October 8, 1998

Agreement for the mutual promotion and protection of investments between Nicaragua and Chile

Santiago de Chile, November 8, 1998

Agreement for the mutual promotion and protection of investments between Nicaragua and the Swiss Confederation

Managua, Nicaragua, November 30, 1998

Agreement for the mutual promotion and protection of investments between Nicaragua and El Salvador

Managua, Nicaragua, January 23, 1999

Agreement for the mutual promotion and protection of investments between Nicaragua and the Kingdom of Sweden

Stockholm, Sweden, May 27, 1999

Agreement for the mutual promotion and protection of investments between Nicaragua and the Republic of Korea

Seoul, Korea, May 15, 2000

Agreement for the mutual promotion and Managua, Nicaragua, June 2, 2000

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protection of investments Nicaragua and Ecuador (2)

Agreement on the mutual promotion and protection of investments between Nicaragua and the Kingdom of the Netherlands

Managua, Nicaragua, August 28, 2000

Agreement on the mutual promotion and protection of investments between Nicaragua and the Czech Republic

Managua, Nicaragua, April 2, 2002

Agreement on mutual promotion and protection of investments between Nicaragua and the Republic of Finland

Managua, Nicaragua, September 17, 2003

Agreement on promotion and protection of investments between Nicaragua and the Italian Republic

Managua, Nicaragua, April 20, 2004

Agreement on the promotion and protection of investments between Nicaragua the Belgium-Luxembourg

Luxembourg, May 27, 2005

Source: http://www.mific.gob.ni/INICIO/INVERSIONEXTRANJERA/ACUERDOSDEINVERSION

7. Exports In 2013, Nicaragua had a 2% growth in the volume of exports. In the third quarter of 2014, total exports grew almost 10%; and total trade grew almost 6% compared to the same period in 2013. The main FOB export products of Nicaragua in 2013 were: raw gold, beef, coffee, gold, sugar and peanuts, which represented approximately 64% of the total value. The main export destination countries in that year were the United States of America, Venezuela, Canada, El Salvador and Costa Rica. Within the same period and within the free-trade zones, the main exporting sectors were clothing and manufacturing, automotive harnesses, tobacco, agricultural industry and third-party services.9

                                                                                                                         9  Discover  Nicaragua,  Economy  [online]  [consulted  on  March  12,  2015].  Available  at  www.pronicaragua.org  

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Total exports in Nicaragua in 2014 were $5,125.7 million USD, out of which $4,273.5 million USD came from exports of the manufacturing industry (including agricultural industry, processing of fishing products, mining, tobacco, etc.). Sales in the international market of this International Standard Industrial Classification group had a 5 % growth in 2014 compared to 2013 where S$4,071.7 million USD were exported. In 2014, the main destinations of Nicaraguan exports were USA, including Puerto Rico and the USA Virgin Islands, (46.9%); Mexico (12.0%), Venezuela (7.6%), Canada (4.9%), El Salvador (4.5%), Honduras (3.0%), Costa Rica (3.0%). As economic regions, the European Union had a 6.3% participation, Central America (12.3%), and Asia (3.3%). The main destinations for Nicaraguan exports in 2014, and the most dynamic compared to 2013, were Italy, which increased imports from Nicaragua in 39.8%; China, 34.6%; Panama, 31.2%, Costa Rica, 21.9%; Spain, 18.1%; Honduras, 17.9%; USA, 15.7%; Taiwan, 10.8%; counterbalancing the drop in exports to Belgium (-0.3%), Germany (-6.8%), Dominican Rep. (-7.3%), France (-9.6%) and Canada (-23.4%)10.

Source: Banco Central de Nicaragua and the National Free-Trade Zone Committee. *Estimated data.

8. Gross Domestic Product In 2013, Nicaragua had a gross domestic product (GDP) of $11,255.6 million US dollars. This represents a 4.6% growth, above the 3.3% regional average and the highest in Central America in the last three years. At the same time, the per capita GDP increased to $1,831.3 USD, experiencing a 4.25% growth. The top five GDP sectors in Nicaragua in 2013 were:

                                                                                                                         10   Executive   Report   on   Nicaragua   Foreign   Trade,   2014,   MIFIC,   [Online]   [consulted   on   March   19,   2015].   Available   at  www.rpi.mific.gob.ni  

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Manufacturing Industry 17.5%

Agriculture, Cattle, Silviculture and Fishing

15.3%

Shops, Hotels and Restaurants 12.6%

Personal and Business Services 9.9 %

General Government Services 8.9%

Source: Banco Central de Nicaragua: ‘’Nicaragua in Numbers 2013’’. ** At the end of 2014, the Nicaraguan economy had maintained a positive growth rate mainly driven by the recovery in exports. The Gross Domestic Product had a recorded 4.3% accumulated growth in the second quarter of 2014. This was the highest rate in Central America. Based on the above, it was forecasted that Nicaragua would achieve a gross domestic product (GPD) of $11,843 million US dollars and an actual growth of 4.0 - 4.5% in 2014. At the same time, the GPD would increase to $1,903 US dollars per capita.

2010 2011 2012 2013 2014*

GPD ($ Million USD) 8,938 9,899 10,645 11,256 11,843 GPD Growth 3.3% 5.7% 5.0% 4.6% 4 - 4.5%

Source: Banco Central de Nicaragua.*Estimated Data

9. Diplomatic Relations Nicaragua has diplomatic relations with most countries in the world; therefore, it has embassies and consular offices in several countries. International relations are based on friendship, complementarity and solidarity among nations and reciprocity between States, respect, cooperation and mutual assistance to achieve important goals, not only for the country but also for the region and the entire international community. The Ministry of Foreign Affairs is the institution responsible for formulating, proposing and executing the foreign policy of the State of Nicaragua. Foreign Affairs Services in Nicaragua depend on the Executive, which directs it and administers it through the Ministry of Foreign Affairs. The Executive, through the Ministry of Foreign Affairs, determines the number of

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Diplomatic Missions, Permanent Representations and Consular Offices as well as the position, rank and number of officials required to integrate the Foreign Affair Services, taking into consideration foreign policy objectives.

Embassies of Nicaragua in the World

EUROPE

GERMANY

AUSTRIA

BELGIUM

SPAIN

FINLAND

FRANCE

SWITZERLAND

NETHERLANDS

UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND

ITALY

PERMANENT MISSION UNESCO – FRANCE

RUSSIAN FEDERATION

SWEDEN

VATICAN

SOUTH AMERICA

ARGENTINA

BOLIVIA

BRAZIL

CHILE

COLOMBIA

ECUADOR

PERU

URUGUAY

VENEZUELA

CENTRAL AMERICA

BELICE

COSTA RICA

CUBA

EL SALVADOR

GUATEMALA

HONDURAS

JAMAICA

PANAMA

DOMINICAN REPUBLIC

NORTH AMERICA

MEXICO

UNITED STATES OF AMERICA

ASIA

KOREA

INDIA

IRAN

JAPAN

TAIWAN (CHINA)

AFRICA

EGYPT

SENEGAL

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(HOLLY SEE)

Source: http://www.cancilleria.gob.ni/embajadas/

10. Power Grid and Telecommunications The energy sector in Nicaragua has been developing dynamically in the last five years with important public and private investments at a national level. As a result of these efforts, there has been an important improvement in the coverage of electrical services for the population and the capacity installed has increased. This has permitted to supply the national market demand and aim at exporting energy in the future via the Central American Electrical Interconnection System (SIEPAC) project.

Source: PRONicaragua http://www.pronicaragua.org/es/descubrenicaragua/infraestructura By June 2014, power generation in the country had a 5.7% accumulated growth. The renewable component was the main source of generation (53.0%) in the semester. At present, renewable sources are 51% of the matrix while they were 36% in 2007. The goal of the Nicaraguan Government for 2017 is to have 79% of the matrix in renewable power sources.

Source: Ministry of Energy and Mines (MEM)

2007 2008 2009 2010 2011 2012

Coverage 60.4% 63.4% 66.0% 70.0% 72.4% 75.0% Installed Capacity (MW) 832 891 982 1,073 1,109 1,286

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Source: Ministry of Energy and Mines (MEM)

11. Telecommunications The telecommunication sector in Nicaragua is completely private and it is considered to be one of the most modern in Central America. The telecommunication regulatory entity is the Nicaraguan Institute for Telecommunications and Mail (TELCOR in Spanish). Nicaragua provides high-quality redundant fiber-optic connections through three international submarine cable systems (ARCOS-1, MAYA-1, Emergia). Some of the largest telecommunication suppliers in Nicaragua are: Tigo Business, Claro, IBW, Ideay, Telefónica, Yota. The following services are available in Nicaragua:

§ Internet: From fractional to full DS3 service. § Voice connection: Analogue and digital lines. § 4G: Fiber optic and wireless (microwaves) WiMAX technology for Internet and mobile

phones. Additionally, the most well-known brands in technology are available through authorized local distributors. Some of them are: HP, Dell, IBM, Cisco, Microsoft, Oracle, Avaya and Nortel.11

                                                                                                                         11  Discover  Nicaragua,  Infrastructure  [Online]  [consulted  on  March  17,  2015].  Available  at  www.pronicaragua.org  

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12. Labor Market Nicaraguan labor is young and dynamic. 76% of the population is younger than 39 and the workforce is 3.2 million people. It is known for being flexible and highly productive, with good work habits and the capacity to learn at a fast pace. These qualities have positioned Nicaragua as one of the most competitive and productive countries in the region in terms of human capital. According to statistics from the Nicaraguan Institute of Social Security (INSS in Spanish), in 2013, the economic activities that generated the most employment were community, social and personal services, manufacturing industry, retail, hotels and restaurants. The official unemployment figure for the third quarter of 2013 was 5.3%, while approximately 48.3% of the economically active population was underemployed. The number of active members insured by the INSS has substantially increased in the last few years. It has increased from 471,856 insured members in 2007 to 673,466 in 2013, which represented a 43% increase. In November 2014, 731,774 workers were recorded as being registered with social security, reaching a 5.6% average annual growth rate equivalent to 37,193 new members. By September 2014, some of the economic activities that created the most employment in the last twelve months were retail, services and industry with an employment rate of 43.2%, 24.1% and 8%, respectively. The average INSS salary was 8,335.6 Cordoba in September 2014.

III. WHY INVEST IN NICARAGUA

1. Stable Developing Economy Nicaragua has experienced a sustained economic growth as a result of the disciplined management of financial, tax, monetary and currency exchange policies. The excellent economic performance of Nicaragua has been recognized by the International Monetary Fund (IMF) through a series of reviews over the last few years. In 2013, the IMF stated that “The recent economic performance of Nicaragua has been favorable". It also indicated that "Prudent management of macroeconomic policies will turn into favorable short and long term prospects". In March 2015, during its latest visit, the IMF indicated that the economic policies implemented by the Government of Nicaragua are very positive and they should serve as an example to the

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rest of the Latin American countries. It also indicated that the macroeconomic situation in the country is “fairly robust”, considering that the tax deficit is 1.6% (well below most countries in Latin America), while the total government debt decreased from 49 to 42% and foreign debt is 46%. This was assessed as being excellent. The constant and stable economic growth of Nicaragua was featured in the July 2014 edition of Forbes Central America, which recognized the country as “one of the big protagonists of the next decade.” According to the article, titled “The Nicaraguan Miracle”, the economic dynamism of Nicaragua increased five years ago with the increment of construction, energy and tourism projects driven by government investment promotion policies. Forbes also highlighted the high level of safety in the country, decrease in poverty, preferential access to markets, transformation of power matrix into renewable sources, and diversity of investment opportunities.12

2. Solid and Harmonized Legal System The Political Constitution is the fundamental norm of the Nicaraguan legal system and all other norms are subordinated to it. Therefore, the norms regulating the legal framework for investments in Nicaragua such as civil and commercial codes and other special laws, harmonically and appropriately complement each other to create a safe business environment of legal certainty. The Political Constitution expressly recognizes a group of rights that form the necessary fabric of an economic democracy, characterized by free enterprise, contractual freedom, respect for human rights and private property, prohibition of confiscation of goods and disruption of legal ownership and possession of any form of property recognized by the mixed economic model established in the Constitution. Principles such as the equality of companies before the law, tax legality and reserve of law to create taxes, protection of intellectual property and consensus among government, the private sector and workers, with the purpose of achieving productive stability and peace in business activities, constitute the fundamental basis of the social-economic order established in the Nicaraguan Political Constitution.

                                                                                                                         12   Discover   Nicaragua,   Newsroom,   Press   Releases   [Online]   [consulted   on   March   18,   2015].   Available   at    www.pronicaragua.org  

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It is worth noting the pertinent recognition, also at a constitutional level, of the responsibility of the State to protect, foster and promote diverse forms of property and private economic and business management to guarantee social and economic democracy. It also safeguards and guarantees free competition, consumer rights, public-private national and foreign investments, and the leading role of the private initiative in order to contribute to the economic social development of the country. The foregoing is completed by specific valid standards that have been in force for over 15 years. These legal standards put into practice these constitutional precepts that constitute the pillars of the business climate in the country. They regulate matters such as: contracts, loans, incentives for investments and exports, banking, real estate, market actions and others.

3. Attractive Tax Incentives Through specific laws, Nicaragua offers generous tax incentives to a wide variety of sectors of great importance for investment, production and commercialization of goods and services, such as: production of national goods, free - trade zones, energy, tourism, agriculture, forestry sector, mining, fishing and agriculture, etc. That is why investors choose Nicaragua to conduct business and expand their opportunities. Tax incentives and legal background per sector are as follows: Law N° 822 “Tax Harmonization Law” and its reforms (LCT in Spanish), this legal standard establishes diverse tax benefits for certain economic production sectors with the objective of supporting their growth and development. Exemptions and exceptions awarded by this law are established without prejudice of those awarded by the legal provisions in article 287 of said law.

3.1. Tax Benefits to Exports In accordance with article 109, Law N°822, exports of national goods or services provided outside the country are applied a 0% Added Value Tax. Exports of goods are taxed at 0% of the Selective Consumer Tax and tax credits to advances or annual income tax with prior validation by the tax administration, at a figure equivalent to 1.5% of the FOB value of the exports (Art.151 and 273 Law N°822).

3.2. Tax Benefits to Producers Article 127 of Law N°822 establishes a transfer list exempted from carrying the Value Added Tax, some of them related to the agricultural sector. In addition, transfers of raw materials, intermediate products, capital assets, spare parts, parts and accessories for machinery and equipment for agricultural producers as well as producers from micro, small and medium

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industrial and fishing companies are exempted from the Value Added Tax, Selective Consumption Tax and Import Duties through a taxation list (article 274 of said law).

3.3. Tax Benefits to the Forestry Sector Article 283 of Law N°822 extends the benefits to the forestry sector in Law N° 462, Forestry Conservation and Sustainable Development Law, until December 31, 2023. The benefits are the followings:

a) Exemption of payment of 50% of the Municipal Sales Tax and 50% on utilities used in those forestry plantations registered with the regulatory entity.

b) Exemption of payment of Real Estate Property Tax for the property areas where forestry plantations are established and the areas where forestry management is performed through a Forestry Management Plan.

c) Companies of any business nature investing in forestry plantations may claim 50% of the amount invested as expenses for income tax purposes.

d) Exemption of payment of import duties and taxes for companies of secondary and tertiary processing that import machinery, equipment and accessories that will improve their technological level in wood processing, excluding sawmills.

All individuals and corporations natural persons and legal entities may claim up to 100% of their income tax payment as long as it is to advancing reforestation or creating forestry plantations. For the purposes of such deduction, the taxpayer must submit the forestry initiative to the National Forestry Institute in advance. Furthermore, all State institutions must prioritize the acquisition of goods manufactured with wood in their contracting process. Such goods must carry the proper forestry certificate issued by the National Forestry Institute. They may identify up to a 5% pricing difference in the bid or tender.

3.4. Temporary Admission Regime Law N° 382, Law on Temporary Admission for and Facilitation of Exports establishes a temporary admission regime for active improvement. This is a Customs system that permits importing merchandise without any payment of fees, import duties or any other taxes on the condition that they need to be completed, that is, they need to undergo a subsequent process. This tax system allows goods to enter the national customs territory as well as purchasing them locally without payment of duties and taxes. Companies exporting directly or indirectly may avail themselves of this regime for at least 25% of their total sales and with a minimum exported value of $50,000 US dollars annually.

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The merchandise that may be covered under this regime is the following:

a) Intermediate goods and raw material such as: consumable goods, semi-processed products, containers, packaging, any merchandise to be incorporated to the final product to be exported, samples, models and patterns required for production and staff training.

b) Capital goods directly involved in the production process, spare parts and accessories, such as: machinery, equipment, parts, molds, dies and utensils that complement such capital goods.

c) Materials and equipment that will become an integral and indispensable part of the facilities required for the production process.

3.5. Benefits to Industrial Free Trade Zones By Decree 46-91 on Industrial Free Trade Zones, Nicaragua offers important tax incentives to companies interested in setting up free trade zone operations to export from the textile and clothing manufacturing industries, the manufacturing and the agricultural industry. These benefits are awarded to all exports of international services under the free trade zone regime, such as Business Process Outsourcing (BPO), Knowledge Process Outsourcing (KPO), and Information and Technology Outsourcing (ITO), etc. Article 20 of the decree cited above, establishes the following tax benefits for Companies using Free Trade Zones:

a) 100% exemption during the first ten years and 60% from the eleventh year onwards from payment of taxes on the revenue generated by their operations in the Zone. This exemption does not include taxes on personal income, salary or remuneration paid to the Nicaraguan or foreign personnel working at the Company established in the Zone. However, it does include payment to non-resident foreign nationals for interests on loans, or for commissions, fees and remittances for legal services abroad or in Nicaragua, and promotion, marketing, consulting, payments from which those companies will not need to withhold any amounts.

b) Tax payment exemption on property transfers of real estate under any title including capital gain taxes, as applicable, provided that the company is closing operations in the Zone and the real estate asset remains attached to the Free Trade Zone.

c) Tax payment exemption for constitution, transformation, merger and change of the company, as well as the Stamp Duty.

d) Exemption from all consumer Customs duties and taxes related to the introduction into the country of raw materials, materials, equipment, machinery, dies, parts or spare parts, samples, molds and accessories destined to outfit the Company for operating in the Zone.

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e) Exemption from Customs duties on transportation equipment, whether they are cargo, passenger or service vehicles, for the regular use of the Company in the Zone.

f) Full exemption from indirect taxes, sales or selective consumer taxes. g) Full exemption from municipal taxes. h) Full exemption from exports duties on products manufactured in the Zone.

3.6. Benefits to Power Generation using Renewable Energy Sources According to the provisions of Law N°532, Law on the Promotion of Electricity Generation from Renewable Sources, Nicaragua provides important tax and duty benefits to electrical power generation projects using renewable sources of energy performed by natural persons or legal entities with private, public or mixed investments. This is applicable to new projects and to those expanding the installed capacity. Article 7, Law N°532, outlines the following tax benefits:

a) Exemption of payment of Import Tax (DAI) for machinery, equipment, materials and consumables exclusively allocated to pre-investment work and construction work including construction of the sub transmission line required for transporting energy from the generation station to the National Interconnected System (SIN).

b) Exemption of payment of Value Added Tax on machinery, equipment, materials and consumables exclusively allocated to pre-investment work and construction work including construction of the sub transmission line required for transporting energy from the generation station to the National Interconnected System (SIN).

c) Exemption of payment of Income Tax and the minimum income tax payment for a maximum period of 7 years from the start of the Project commercial or business operation. Similarly, income from the sale of carbon credits will be exempted from payment of income tax during the same period.

d) Exemption from all existing municipal taxes on real estate property, sales, fees for the project build phase for a period of 10 years from the start of the project commercial operation, which will be applied as follows: 75% exemption during the first three years; 50% in the following five years and 25% in the last two years. Fixed investments on machinery, equipment and hydroelectric dams will be exempt of all taxes, charges, municipal rates, for a period of 10 years from the start of commercial operation.

e) Exemption from all taxes that may exist for the use of natural resources for a maximum period of 5 years after commencing operations.

f) Exemption from Stamp Tax (ITF)] that may result from the project construction, operation or expansion for a period of 10 years.

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3.7. Benefits to the Mining Sector The exploration and exploitation of mineral resources is regulated by Law N° 387, Special Law on Mining Exploration and Exploitation and its Regulations, Decree 11-2001. Given the importance of the mining sector for the economic development of the country, the State of Nicaragua guarantees tax stability to national and foreign investment in this industry by applying the following benefits:

a) Temporary Admission Regime, in accordance with Law 382 Law of Temporary Admission for Active Improvement and Facilitation of Exports, permitting the entry of merchandise into the national Customs territory, the local purchase of goods or raw material without payment of any type of taxes or fees, provided that the merchandise is re-exported or exempted, as the case may be, after being subject to a process of transformation, preparation, repair or any other under applicable law.

b) According to this law, if it is not possible to suspend of duties and taxes in advance due to tax administration issues, the benefit will be applied as a subsequently as a return of taxes paid.

c) Tax payment exemption for real estate property within the perimeter of the mining concession.

d) 0% rate for exports, applicable to exports in general.

3.8. Benefits to Tourism

Law N° 306, the Law on Tourism Incentives of Nicaragua, provides a series of tax incentives to investments in this sector and it is considered to be the most generous and competitive in the region. This law provides incentives to investments on accommodation, food and beverages, travel agencies, tourism transportation, airlines, among others:

a) Exemption from import duty and the Value Added Tax on the local purchase of construction materials and permanent building fittings.

b) Exemption from import duties and taxes and/or the Value Added Tax on the local purchase of fittings, furniture, equipment, buildings, automotive vehicles of 12 passengers or more, cargo vehicles, that have been declared by INTUR as necessary for establishing and operating the tourist activity, and in the purchase of equipment that contributes to saving water and energy, and those required for project security for a term of 10 years from the date when INTUR declares that such company has started operations.

c) Exemption from Property Tax (IBI in Spanish) for a ten-year term from the date when INTUR declares that the tourist activity has initiated operations.

d) Value Added Tax Exemption applicable to design/engineering and construction services.

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e) Partial exemption of 80% Income tax for a ten-year term from the date when INTUR declares that such Company has commenced operations. The exemption is 90% should the project be situated in a Special Tourist Planning and Development Zone. If the project qualifies and it is also approved under the Inn Program, the exemption will be 100%. For three years, the Company will have the option of annually deferring the implementation and application of the ten-year exemption on such tax.

f) Within the exemption period awarded, should the Company decide to expand and/or substantially renew the project, the exemption period will be extended for another 10 years from the date when INTUR declares that the company has completed such investment and expansion.

g) Income tax exemption on profit from a tourist activity authorized by INTUR or a lease to a third party of refurbished properties in the Historical Properties, for 10 years from the date when INTUR certifies that the work has been completed and project conditions and standards have been met.

3.9. Benefits to Port Constructions In May 2013, Nicaragua approved Law N°838, General Law of Ports among others with the purpose of providing an incentive to the construction of new ports in the country. According to article 128 of this law: “Investment projects approved, during the port construction, improvement expansion or development of infrastructure, will be considered as exempted from import taxes and duties, local purchases and municipal taxes and will enjoy the following tax benefit on the following: imports of machinery, equipment, materials, spare parts and tools required for port construction, improvement, expansion or development of infrastructures, of state, public-use ports and terminals, under public administration or through concessions, outfitted for internal and external trade”.

3.10. Benefits to Social Housing Construction The Government of Nicaragua has had the goal of fostering and promoting the construction of housing, with emphasis on social housing; therefore, the approval of Law N° 428, Urban and Rural Housing Organic Law granted the Government the powers to set rules and standards to facilitate and encourage maximizing investment on housing and building lands. Furthermore, article 39 of this Law provides for direct incentives to people investing in building social housing. The incentives for this type of investment are the following:

a) Exemption of tax payment for operations, acts, construction permits, formalization and registration of acts, contracts, deeds, processing and authorization of drawings.

b) Exemption of all tax payments for the purchase of construction materials, tools and minor equipment related to social housing and residential civil works, qualified and approved by INVUR.

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Certification to access these benefits will be issued by INVUR and the Ministry of Finance and Public Credit and they may be used for Added Value tax exemptions on the purchase of construction materials, tools and minor equipment.

3.11. Benefits to Fishing and Aquaculture In addition to the benefits in the Tax Harmonization Law, Law N° 489, Law on Fisheries and Aquaculture grants the right of advance cancellation of taxes on diesel for fishing and industrial aquaculture for individuals or corporate entities, when such consumable is used in capturing products for the domestic and exports market. Similarly, this law stipulates that in the case of traditional aquaculture and fishing, taxes on diesel and gasoline may be suspended when such supplies are used for catching products for exports. It also considers that aquaculture and fishing fees may be offset by the tax credits in favor of aquaculture and fishing taxpayers.

3.12. Non-Tax Incentives Should the results of scientific fishing justify the use of the researched species, preference will be given to the individual or corporate entity, whether private or public, national or foreign, that caught it to have the right to use the hydro biological resource.

3.13. Benefits to the Hydrocarbon Sector Companies in a line of business related to Hydrocarbons enjoy tax benefits with respect exports and the tax system, as a result of the major social-economic impact that Hydrocarbons have on the country. Law N° 277, Hydrocarbon Supply Law, establishes a special tax regime for this type of companies. First, it stipulates an exception of Import Duties (DAI) and the Temporary Protection Duties (ATP), which are governed by the Convention on the Central American tariff and Customs Regime. These duties are the highest for importing products. Imports exemptions apply to crude, refined or reconstituted oil and by-products. In Nicaragua, there is a Specific Fuel Tax (IECC). The specific purpose of this tax is to have a single tax applicable to crude, partially refined or reconstituted oil, and by-products. This tax is regulated by Title IV of Law N° 822 on the specific fuel tax. The IECC taxes the transfer, import or admission of oil by-products . Law 822 prohibits any other type of taxation on them, including any regional, local or municipal taxes.

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4. Preferential introduction to international markets Nicaragua is a country that continues to seek opportunities to successfully position itself in the international trade and global economy. For this purpose, it has signed several Free Trade Agreements and bilateral, regional agreements or agreements as part of the Central American Common Market (CACM). These have opened economic growth opportunities for Nicaragua through trade exchanges under preferential conditions by eliminating obstacles to trade and facilitating the circulation of products across borders; as well as establishing standards that promote fair competition and will contribute to a higher flow of investments. These agreements are the following:

Agreements Countries

Free Trade Agreements U.S.A, Mexico, Panama, Taiwan, Dominican Republic, Chile & the European Union

Central American Common Market

Nicaragua, Guatemala, El Salvador, Honduras & Costa Rica. In addition, free movement of capital, services and human resources among CA-4 countries.

Preferential Access Agreements

Japan (SGP), Norway (SGP), Canada (SGP), Russia (SGP), Switzerland (SGP) and ALADI

Solidarity Union Agreements (ALBA)

Venezuela, Ecuador, Bolivia, Cuba, Antigua & Barbuda, Dominica & St. Vincent and the Grenadines

Recent Agreements ALADI (Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay, Venezuela and Cuba)

Agreements under negotiation

Canada, CARICOM

Source: Ministry of Development, Industry and Trade Some of the products exported in 2014 to destinations where Nicaragua has preferential duties were the following:

a) Electrical conductors (harnesses) with exports around $562.1 million US dollars in 2014. They are produced in Free Trade Zones and they are mainly exported to Mexico and USA.

b) Beef with a volume increase from 88,683.9 MT in 2013 to 94,364.9 MT in 2014; that is, 6.4%; while value increased in 16.7%, from $383.8 million USD to $448.0 million USD. The main destinations were USA, Venezuela, Central America and Taiwan. Outside the Free Trade Zone regime, beef was the main export product.

c) Coffee had an exported value of $395.5 million US dollars in 2014, exceeding $349.5 million US dollars in 2013 by 13.2%. This was the result of higher export volumes, which

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increased by 15.8%, from 97,173.8 T.M. in 2013 to 112,483.0 T.M. in 2014; coffee exports were 7.7% in 2014, and they were primarily sent to USA, Venezuela and the European Union.

d) Gold exports generated $387.0 million US dollars in 2014. The main buyers of Nicaraguan gold are Canada and USA.

e) Shrimp exports had a 29.6% increase in value during 2014 with respect to 2013. This was determined by a 32.0% growth in exports volumes. Exported volumes of shrimp went from $171.2 million US dollars in 2013 to $221.8 million US dollars in 2014, and volumes from 26,144.1 MT to 34,514.7 MT. It was exported to markets such as Mexico, the European Union, USA, Taiwan, Japan, among others.

f) On the other hand, sugar exports grew from $186.8 million US dollars in 2013 to $220.9 million US dollars in 2014. This represented an 18.3% increase; while exported volumes increased from 388,157.2 MT to 496,077.3 MT, i.e. 27.8%. It is worth mentioning that sugar is one of our most diversified goods in terms of destination markets. In 2014, the main buyers were Venezuela, USA, Ghana, Taiwan, Spain, Chile, Canada and Haiti.

In 2014, the main destinations of Nicaraguan exports were USA, including Puerto Rico and the USA Virgin Islands, (46.9%); Mexico (12.0%), Venezuela (7.6%), Canada (4.9%), El Salvador (4.5%), Honduras (3.0%), Costa Rica (3.0%). In terms of economic regions, the European Union had a participation of 6.3%, Central America (12.3%), Asia (3.3%)13.

5. Ease of Access To and From Nicaragua Nicaragua has an international airport located in the capital city, Managua, and three national airports located in Bluefields, Puerto Cabezas and Corn Island. There are also rural airports in Nueva Guinea, San Carlos, Siuna, Waspan, Rosita and Bonanza. The International Airport Augusto C. Sandino was classified as one of the safest in Latin America. Airlines flying to Nicaragua have connections to destinations in the North, Central and South America, as well as Asia and Europe. The airport serves the following international Airlines: American Airlines, United Airlines, Delta, Spirit, Copa and AVIANCA. There are direct flights from Nicaragua to 9 destinations, 4 of them to cities in the United States of America.

                                                                                                                         13   Executive   Report   on   Nicaraguan   Foreign   Trade,   2014,   MIFIC,   [Online]   [consulted   on   March   19,   2015].   Available   at  www.rpi.mific.gob.ni  

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DIRECT FLIGHTS FROM NICARAGUA TO CITIES IN THE UNITED STATES OF AMERICA

City Duration Airline Atlanta, USA 3 h

40 m Delta Airlines

Fort Lauderdale, USA

2 h 25 m

Spirit Airlines Houston, USA 3 h

25 m United Airlines

Miami, USA 2 h 35 m

American Airlines, AVIANCA TO CITIES IN CENTRAL AMERICA

Guatemala 1 h 15 m

Copa Airlines Panama 1 h

35 m Copa Airlines

San Jose, Costa Rica 1 h 5 m

Copa Airlines, Lacsa, Nature Air San Salvador, El

Salvador 1 h 0

m AVIANCA and Lacsa

Tegucigalpa, Honduras

1 h 0 m

La Costeña The International Airport Augusto C. Sandino also has a cargo terminal that provides services to four cargo carrier airlines. Cargo airlines handle and transport cargo from and to North, Central and South America and Europe. They have their own warehouses to store the cargo they transport. Air cargo transport services are provided by American Airlines Cargo, Copa Airlines Cargo, Avianca Cargo, UPS Air Cargo and Arrow Air.

5.1. Land Connection Nicaragua can be reached by land in approximately 9 hours: from Tegucigalpa (Honduras) or San Salvador, El Salvador in the North and from San Jose (Costa Rica) in the South. International Land Transport Companies are: KING-QUALITY, NICABUS INTERNACIONAL, TICABUS and TRANSNICA.

5.2. Customs Offices Nicaragua has several land and maritime customs offices throughout the national territory. The main customs offices in the country are outlined below:

Office location Observation International Airport Managua, Managua Air Terminal Guasaule Somotillo, Chinandega Border with Honduras El Espino Somoto, Madriz Border with Honduras Las Manos Ocotal, Nueva Segovia Border with Honduras Peñas Blancas Sapoá, Rivas Border with Costa Rica Puerto Corinto Corinto, Chinandega Exit to the Pacific Ocean Puerto Arlen Siú El Rama, RAAS Exit to the Atlantic Ocean

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IV. LEGAL FRAMEWORK OF INTEREST TO INVESTORS

1. Legislation promoting and protecting investments The Constitution of Nicaragua guarantees the principle of legality, legal safety, constitutional supremacy, publicity of norms, non-retroactive laws and interdiction of public powers. In this sense, it established that: Every person has the right to have legal capacity and personality, the law is not retroactive, except in penal matters when it favors the accused; no position awards the person performing it, other functions than those conferred by the Constitution and the laws; the administration of justice guarantees the principle of legality and access to justice through the implementation of the law in pertinent matters or processes; the Political Constitution is the fundamental charter of the Republic, all other laws are subordinated to it; and no Power of the State, government body or official will have other opportunities, powers or jurisdiction than those conferred by the Political Constitution and the laws of the Republic. Nicaragua has achieved a proper socio-economic climate for investments as a result of the opening and globalization of markets, standards and laws consistent with the Constitution that provide legal certainty to the foreign investor. In this line of action, Law N° 344 on Foreign Investment was approved. It is based on the Political Constitution, article 100 that establishes the obligation of the State of Nicaragua to approve foreign investment laws. The purpose of this law is to establish standards that will generate trust and credibility for the investment climate, will eliminate discretionary powers and will simplify and expedite processes to benefit the investor’s legal certainty. Similarly, this Law establishes that foreign investors will have the same rights and means to exercise those rights under conditions equal to those of national investors. It also recognizes that foreign investors have full rights to enjoy, use and own the property related to their investment without any other limitations than those established by the Political Constitution. They may have free access to purchase and sell available foreign currency and free Currency; that is, there are no restrictions with respect to conversion or transfer of funds related to investments. There is freedom of transfer of profits, dividends, and revenue, with prior payment of taxes and freedom to pay and send overseas payment for debts contracted abroad, interests: royalties; income and technical assistance.

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Foreign investment interested in the benefits contained in such law, must be registered at the Foreign Investment Registry managed by the Ministry of Industry, Development and Trade for such purpose. For another part, institutions involved in investment development have the applicable administrative resources for affected parties to file claims and enforce their rights. Similarly, there is an Appeal for Legal Protection as a constitutional control mechanism established in the Political Constitution which may be used by any national citizen or foreign national who perceives a deterioration or detriment of his constitutional rights as a result of an act, resolution, order, action or omission of a public administration agent or official. In addition, Nicaragua is positioned in the world market through several bodies of which it is a member such as the World Trade Organization (WTO), the Central America Integration System (SICA), institution of which Nicaragua is a member and its Council of Ministers of Economy and Trade of Central America (COMIECO), the Secretariat for Central American Economic Integration (SIECA), the Executive Committee of Economic Integration (CEIE) and the Central American Bank for Economic Integration (BCIE). It is also part of the International Centre for Settlement of Investment Disputes (ICSID), Multilateral Investment Guarantee Agency (MIGA), the Overseas Private Investment Corporation (OPIC), the United Nations Commission on International Trade Law (UNCITRAL), of the New York Convention and the Inter-American Convention on International Commercial Arbitration, and agreements signed with the Multilateral Investment Guarantee Agency of the World Bank (MIGA). This ample international set of standards regulates the commercial relations of Nicaragua with the world, becoming a favorable destination for investment and economic development.

2. Social Security and Labor Laws Labor and social security laws are an important part of Nicaraguan legal structure since they are based on the Political Constitution. The Constitution establishes working rights and conditions to ensure: the participation of workers in Company management; equal salaries in identical conditions; physical integrity, health, safety and decrease of professional risks; eight-hour work day, work stability in accordance with the law; and social security for special protection. Labor relations are regulated by Law N°185 Labor Code, which is a public policy legal instrument establishing the minimum rights and obligations of employers and workers.

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2.1. Work Day A work day is the time during which a worker is at the disposal of the employer, fulfilling his labor obligations. A work day may be: a day shift, to be performed during the day from six o’clock in the morning to eight o’clock at night on the same day; a night shift, to be performed from eight o’clock at night to six o’clock in the morning the next day; and mixed shift, to be performed in a period of time that is partially during the day and partially at night. Notwithstanding the foregoing, a work day will be considered a night shift and not a mixed shift when more than three and a half hours are worked at night. The effective day shift is 8 hours per day and 48 hours a week; an effective regular night shift is 7 hours a day and 42 hours a week; and a regular mixed shift is 7 hours and a half a day and 45 hours a week. Work performed outside regular work shifts constitutes overtime. Overtime will be paid as 100% more than what the employee receives for a regular work day. The maximum time is 3 hours a day in addition to regular hours and it cannot exceed 9 hours a week.

2.2. Salaries Salaries will be paid in the legal currency, on a work day, at the place where the service is provided within the term and amount set in the contract arising from the working relation. Default in payment of salaries within the time agreed or ordered by law, as the case may be, forces the employer to pay the worker for the following two working weeks, a tenth above the due amount for each week of default, except in case the default is due to Force Majeure or an Act of God. The seventh day will be remunerated; if the salary is paid bi-weekly, it is understood that they are included in the remuneration. All legal deductions will be made from the salary.

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2.3. Minimum Wage Minimum salary in the various economic sectors in Nicaragua, ranges from $0.74 to $1.36 per hour, including social benefits. Social benefits represent 47% in addition to the minimum salary and they include: social security, contribution to the National Technological Institute (INATEC), vacation payment and bonus, among others. The minimum salary does not include meals.

2014 Minimum Wages per Sector by Law Monthly in US$ Hourly US$ Agriculture 153.18 0.74 Fishing 234.57 1.13 Mines and quarries 277.06 1.33 Manufacturing Industry 207.43 1.00 Free Trade Zone Industry 226.77 1.09 Micro and small traditional and tourism industry 169.62 0.82 Electricity, gas and water, stores, restaurants and hotels, transportation, storage and communications

282.96 1.36

Construction, financial and insurance businesses 345.24 1.66 Community Services, Social, Domestic and Personal Services

216.27 1.04

Central and Municipal Government 192.38 0.92

Source: Ministry of Labor, valid since March 2014. Valid in Free Trade Zones since January 2014. Minimum wages at companies in the free trade zone are the most competitive at a regional level; which makes Nicaragua an ideal place for setting up labor intensive operations. Exchange rate: 25.96, 2014 average including social benefits

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Note: It includes social benefits, Nicaragua base 100.

Source: Ministry of Labor of every country, 2014.

2.4. Vacation All workers have the right to fifteen days of continuous paid vacation every six months of uninterrupted work at the service of the same employer. It is the obligation of the employer to prepare a vacation calendar and disclose it to the employees. As a result of the interest of the employer or the employee or due to field seasonal work or services that should not be interrupted due to their nature, vacation time can be agreed to be taken at a different time than when it is due. Vacations will be paid calculating as per the last regular salary accrued by the worker. In the case of variable salary, they will be calculated according to the average of the regular salary accrued in the last six months.

2.5. Thirteenth Month The thirteenth month is an additional salary received by the worker as a regular salary. All workers have the right to be paid one month of additional salary after one year of continuous work, or the proportion applicable to the worked period. It will be more than one month and less than one year.

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The thirteenth month will be paid according to the last salary received, except when a different salary has been accrued through a different model. In that case, it will be paid according to the highest salary received during the last six months. The thirteenth month shall be paid within the first ten days of December of each year, or within the first ten days upon completion of the work contract. Should the employer fail to do so, it will pay the worker compensation equivalent to the value of one working day for every day of delay.

2.6. Termination of Employment Individual work contracts may be for a limited or unlimited period of time. The work contract or relationship will be for an unlimited period of time when there is no set term or when the contract for a limited period of time has expired and the worker continues to provide services for another thirty days or, when the term of the second contract extension has expired and the worker continues working or when it is extended again. The individual contract or working relation may end:

a) Due to the expiry of the agreed term or completion of the work or service that originated the contract; in case of death or permanent incapacitation of the employer that specifically results in the termination of the company; or due to the death or permanent incapacitation of the employee; due to conviction or incarceration of the employee; cessation of industry, store or service for economic reasons; by firm legal ruling that entails the final disappearance of the company; by termination of contract according to the law; due the retirement of the employee; due to Force Majeure or an Act of God that precisely results in closing the company.

b) Regardless the cause of the work contract termination, the employer is obligated to pay the employee, or to whom it may concern, the proportional part of benefits such as: vacations and the thirteenth month.

c) Where the contract is for an indefinite period of time, the worker may terminate it by notifying the employer verbally or in writing fifteen days in advance.

d) Should the work contract for an indefinite period of time be rescinded by the employer without justification, the employer shall pay the worker compensation equivalent to: one month of wages for each of the first three years of work; twenty days of salary for every year of work from the fourth year onward. In no case the compensation will be less than a month or more than five months. Fractions of years worked will be settled proportionally.

2.7. Unions and Collective Agreements Unions are formed in accordance with the Labor Code. For the purposes of obtaining legal personality, they must be registered in the Registration Book of Trade Union Organizations of the

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Ministry of Labor. Workers' Unions shall be formed with a minimum of 20 members, while employers' unions require a minimum of 5 members.

2.7.1. Collective Agreement A Collective Agreement is the agreement agreed in writing between an employer, a group of employers and one or several organizations of workers with a legal personality. The objectives of a collective agreement are, among others, to establish general working conditions, develop the right of participation of workers in the management of the company and dispose on the improvement and fulfillment of mutual rights and obligations. The stipulations of a collective agreement become mandatory clauses or integral parts of individual work contracts signed during their term of validity between the employer and any employee hired after has been signed. Having expired the term set in the collective agreement without a review being requested, it will be deemed to be extended for another period of time equal to its validity.

2.8. Occupational Health and Safety Occupational health and safety is governed by the provisions of the Labor Code and by Law N° 618, Law of General Occupational Health and Safety. The Code establishes that every employer has the obligation to adopt the necessary and proper preventive measures to efficiently protect the life and health of its workers by conditioning physical facilities and providing the required work team to reduce and eliminate professional risk in the work site. Law N°618 establishes a set of minimum provisions on labor health and safety that the State, employers and employees shall develop at the work centers through promotion, intervention, vigilance and implementation of actions to protect employees at work. Some of those are: the company obligation to issue an internal regulation on occupation health and safety; that the workers adopt preventive measures to ensure the health and safety of the workers; designation of a person trained on occupational health; ensure that workers undergo periodical occupational health examinations; prevent risks; assess unavoidable risk; fight risk at their root cause and adapt the job to the person.

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2.9. Social Security Employment Insurance covers social contingencies of incapacitation, old age, death, financial benefits for professional risk, family subsidies and it may provide the social services required for the wellbeing of those insured. Insurance is mandatory for the following:

a) Persons related to another; whether it is a natural person or a corporate entity, regardless of the type of working or service relation they may have, or the legal personality or commercial nature of the employer, company or public institution whether private or mixed, using its services

b) Social security contribution of employers are as follows: c) 17% of the total monthly payroll. Starting on January 1, 2014. d) 18% starting on January 1, 2015 e) 18.50% starting on January 1, 2016. f) 19% starting on January 1, 2017. g) The employee's contribution is 6.25% of the monthly salary earned h) The salary that will provide the maximum contribution is: i) Starting on January 2014, it will be C$54,964.00 Cordoba on a monthly basis j) Starting on January 1, 2015, it will be C$72,410.00 Cordoba on a monthly basis k) Starting in 2016, on January 1 every year, the Social Security Institute will adjust the salary

figure that will make the maximum contributions by applying the annual variance of the average salary of those insured.

3. Tax System In Nicaragua, the tax system is regulated by Law N° 822 Tax Harmonization Law and reforms, regulations and amendments to the regulation. Law N°822 is based on the principles of legality, generality, equity, sufficiency, neutrality, simplicity and it has the purpose of creating and amending internal domestic tax and regulate its application.

3.1. Tax Year The tax year for all taxpayers is January 1 to December 31, every year. As a result, and in accordance with article 22 of Law N° 822, each taxpayer must settle the balance pertaining to December 31 of the tax year. They must also file a tax return and pay income tax by March 31 of the following year at the latest. In the case of taxpayers with a special tax year, the term to file a return and pay taxes will be within three months of the end of their closing period.

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3.2. Income Tax Income Tax is a direct and personal tax on the following Nicaraguan sources of revenue obtained by taxpayers, residents and non-residents:

a) Revenue from work; b) Revenue from economic activities; and c) Capital gains and capital profits and losses.

Income tax also applies to any unjustified increase of wealth and income that is not expressly exempted by law.

a) Work Income Income tax applies to revenue from work earned or received by the taxpayers, resident and non-resident natural persons who habitually or occasionally earn or receive work income. Resident taxpayers will determine the income tax amount to be paid for the work income based on the net income according to the following progressive rate:

Annual Net Income Base Tax C$

Applicable percentage

%

On excess C$ From To

C$ C$ 0.01 100,000.00 0.00 0% 0.00

100,000.01 200,000.00 0.00 15% 100,000.00 200,000.01 350,000.00 15,000.00 20% 200,000.00 350,000.01 500,000.00 45,000.00 25% 350,000.00 500,000.01 More 82,500.00 30% 500,000.00

The taxable income from work income is the net revenue. The net income is the result of deducting the amount of deductions authorized by law from the non-exempted gross income or taxable income.

b) Income from economic activities The income tax aliquot to be paid for income from economic activities is 30%. Taxpayers, natural persons or corporate entities with a gross annual income below or equal to twelve million Cordoba (C$12.000.000.00), will settle and pay income tax applying the following fee to the net income:

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From C$ To C$ Applicable on the income

0.01 100,000.00 10%

100,000.01 200,000.00 15%

200,000.01 350,000.00 20%

350,000.01 500,000.00 25%

500,000.01 More 30%

Resident taxpayers with income from economic activities will be subject to a final minimum payment. This payment will be determined by calculating 1% of the annual gross income. Income that has already be subject to withholdings will not be part of the taxable base for minimum payment purposes. Income tax payment will be the highest figure resulting from comparing the minimum payment to the annual income tax.

c) Capital revenue and capital profits and losses The law considers as capital revenue, the income obtained or received in cash or in kind from the use of assets or the transfer of rights; that is, where it originates from wealth per se, more than from any type of specific production or direct work. Profits and losses of capital are changes in the value of the assets of the taxpayer as a result of the sale of goods or cession or transfer of rights, as well as revenue from gambling, betting, donations, inheritance, legacy and any other similar revenue. However, capital revenue and profit and losses of capital that are taxed separately, will be added as revenue from economic activities if together they exceed an amount equivalent to 40% of taxable income from economic activities. The income tax aliquot to be paid on capital revenue and profits and losses of capital is:

§ 5% for transmission of assets provided in Chapter I, Title IX of Law N° 741, “Law on Trust Agreements”, this is when a trust ends by the acquisition of the property with the trustee or a third party.

§ 10% for residents and non-residents In the transmission of goods subject to registration at a public office, the following aliquot withholdings will be applied as income tax to the capital revenue and profits and losses of capital:

Equivalent in Cordoba of the Applicable

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asset value in US$ Percentage

From To

0.01 50,000.00 1.00%

50,000.01 100,000.00 2.00%

100,000.01 200.000.00 3.00%

200,000.01 More 4.00%

The income tax to be paid for capital revenue and profits and losses of capital is the amount resulting from applying tax aliquots to the taxable base.

3.3. Value Added Tax The Value Added Tax (IVA) is an indirect tax on the general consumption of goods or merchandise, services and the use or enjoyment of goods, through the value added technique. Acts taxed by the value added tax must be performed in the national territory. The value added tax applies to acts performed in the Nicaraguan territory on the following:

§ Transfer of goods; § Imports and admission of goods; § Exports of goods and services; and § Provision and use or enjoyment of goods.

The aliquot of the value added tax is 15%, except on exports of goods of national production and services provided abroad. In that case, the tax rate will be 0%. The value added tax will be applied in such a manner that it will tax the added value of the various operations that a good, service, or the use or enjoyment of taxed goods may undergo through transfer and credit of the same as established by Law and the regulations.

3.4. Selective Consumer Tax (ISC) Selective Consumer Tax (ISC) on acts performed in the Nicaraguan territory: Transfer of goods; Imports and Admission of Goods; and Exports of Goods. ISC will not be considered revenue for the purposes of income tax or municipal taxation. However, it will be part of the taxable base of the value added tax. Aliquots on goods taxed by ISC, are included in Annexes I, II and III, goods taxed by ISC, which are part of Law N° 822 Tax Harmonization Law. Exports of goods are taxed at 0%.

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3.5. Tax Stamps The Tax Stamp (ITF) is an indirect tax on the use of certain legal acts for documents issued in Nicaragua, or abroad, when such documents must be valid in the country. The stamp tax fees are established in article 240 of Law N° 822.

3.6. Municipal Income Tax This tax (IMI) applies to the gross revenue obtained from the sale of goods or the provision of services. It must be paid by natural persons and corporate entities. It must be paid in the municipality where the physical transfer of the goods or the provision of the services takes place and not in the municipality where the invoice is issued. The tax aliquot is 1% on a monthly basis on the gross revenue and it must be declared and paid in the applicable Mayor's Office by the 15th day of the following month after having commenced operations of having registered at the Municipality. The declaration must be filed whether there is a monthly revenue or not.

3.7. License Tax When opening a business, the license tax is calculated as 1% of the corporate or individual capital. The license is a Municipal Tax that shall be renewed annually within the first to the thirtieth day of January every year. Those who fail to comply with this provision will be fined accordingly. The license renewal value is calculated as 2% of the average monthly gross revenue obtained from the sale of goods or provision of services in the three months of the previous year or the months elapsed from the start date, should they be less than three. Should the calculation procedure in the paragraph above fail to apply, the license will be determined based on the average months where revenue was obtained from sales or the provisions of services.

4. Intellectual Property Laws The legislation governing intellectual property in Nicaragua represents the clear will of adapting Nicaragua law to international standards. Its main purpose is to protect property of an exclusive nature that the State recognizes for a determined time to natural persons and corporate entities

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that make artistic creations, inventions or innovations and who adopt commercial indications that may be products and creations for commercial purposes such as brands and other distinctive signs. Intellectual property in Nicaragua comprises industrial property, copyrights and related rights. Each sector is regulated by specific laws. Industrial property: includes inventions, patents, brands, industrial models and drawings, name of origin and geographical indications. Copyrights and related rights: includes artistic and literary work such as novels, poems, plays, movies, musicals, art, drawings, paintings, photographs, sculptures and architectural design. The Intellectual Property Registry is the administrative body responsible for safeguarding the use, protection, development and respect to the intellectual property system in our country. Nicaragua is a signatory and a State member of several international intellectual property instruments, such as:

a) General Inter American Convention for Trademark and Commercial Protection b) Paris Convention for the Protection of Industrial Property c) Patent Cooperation Treaty (PCT) d) Trademark Law Treaty (TLT) e) WIPO Copyright Treaty (WCT). f) Berne Convention for the Protection of Literary and Artistic Works g) Rome Convention for the Protection of Performers, Producers of Phonograms and

Broadcasting Organizations h) WIPO Performances and Phonograms Treaty (WPPT) i) Brussels Convention Relating to the Distribution of Programme-Carrying Signals

Transmitted by Satellite j) International Convention for the Protection of New Varieties of Plants (UPOV) k) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)

4.1. Copyrights and Neighboring Rights This field is regulated by Law N° 312 "Law on Copyright and Neighboring Rights" and its reforms; and Decree Law N° 22-200 "Regulation on Copyrights and Neighboring Rights" and reforms. According to article 55 of the regulation of the law, registration and services will be subject to the following:

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a) Information services US$ 10.00 b) Registration of literary work US$ 40.00 c) Registration of phonograms US$ 70.00 d) Registration of computer software US$ 100.00 e) Registration of contract and amendments US$ 20.00 f) Registration of audiovisual or radio phonic work US$ 70.00 g) Registration of photographs US$ 20.00 h) Other artistic or scientific work US$ 20.00

4.2. Brands and Other Distinctive Signs This aspect of intellectual property is regulated by Law N° 380 "on Trademarks and Other Distinctive Signs" and its reforms; and Decree Law N° 83-2001 "Regulation to the Law on Trademarks and Other Distinctive Signs" and its reforms. The rates to be charged by the Registry will be as follows:

a) For the request of registration of a brand: § Basic US$ 100.00 § Supplementary for each class of Classification of Products and Services US$ 50.00 § For brand registration renewal: - For each class US$ 100.00

b) Charge for renewal within the grace period: an additional 50% For each fractional request in case of division of a request of a brand registration US$ 50.00

c) For a request to register a modification, correction, change in the regulation of the brand, transfer, user license, change of name or address US$ 40.00

d) For each fractional registration in case of division of a brand registration U$ 40.00 e) For registration background search per brand:

§ In each class US$ 15.00 § Per holder US$ 20.00 § Per figurative elements US$ 20.00

Brands are valid for 10 years from the date of issue and they may be renewed indefinitely for consecutive ten-year periods.

4.3. Patents, Utility Models and Industrial Design This area is regulated by Law Nº 354 Law on Patents, Utility Models and Industrial Design; and its reforms; and Decree Law N° 88-2001 "Regulation on Patents, Utility Models and Industrial Designs and its reforms". The duties that the Intellectual Property Registry will charge according to each concept are established in article 128 of Law N° 354. The most important are:

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a) Invention patent request US$ 200.00 b) Patent request of utility model US$ 100.00 c) Registration request of industrial design: d) For each subclass US$ 50.00 e) For each design within the subclass US$ 50.00 f) Renewal of an industrial design registration: g) For each subclass US$ 50.00 h) For each design within the subclass US$ 50.00 i) Background search US$ 70.00 j) In-depth review conducted by internal experts at the Registry:

§ Invention Patents US$ 300.00 § Utility Model Patent US$ 200.00 § Industrial Design US$ 150.00

k) - Request for an extension US$ 10.00 l) - Reinstatement of parents according to the Paris Convention for the safeguard of industrial

property US$ 200.00

4.4. Protection of Programme-Carrying Satellite Signals This field is regulated by Law N° 322 "Law on Protection of Programme-Carrying Satellite Signals" and reforms; y Decree N° 44-2000 "Regulations of Law on the Protection of Programme-Carrying Satellite Signals". Registration fees to be charged are established in article 27 of Law N°322 and they are the following:

a) Registration request US $100.00. Request of modifications, changes, corrections, deposits of assignments and licenses US $70.00

b) Registration of other acts or documents according to Article 26 of this Law. $70,00. c) Annual Fees US$70.00 d) Issuance of copies US$30.00 e) Information Services US$ 30.00

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5. Imports and Exports Standards

5.1. Imports Nicaragua is a member of several agreements related to customs, duties and trade. Some of the most important are: General Agreement on Tariffs and Trade (GATT); Free Trade Agreement among the Dominican Republic, Central America and the United States of America; Unified Central American Customs Code (CAUCA) and its Regulations (RECAUCA); Central American Tariff System (SAC). The Customs Authority of Nicaragua is responsible for assessing the value of the goods, but the interested parties are also authorized to present their own assessment of merchandise through their private customs agents by using an official computing system, subject to a higher control by the Customs Authority. These assessments are made by applying the corresponding fees established in the applicable agreements or documents according to the nature of the products and their origin. Article 316 of Law N°822 establishes that Import Tax Duties (DAI) will be governed by the “Agreement on Central American Customs and Tariff System” (CAUCA), and its Protocols, provisions from international and regional trade treaties, agreements and the provisions of the World Trade Organization (WTO). According to articles 19 and 321 of CAUCA, importers must be registered in the registration system of the Customs Authority in order to conduct import activities and their declarations of imported merchandise must contain relevant licenses, permits and certificates, among others

5.2. Exports General imports requirements are: to be registered at the Center for Exports (CETREX); complete the applicable documentation according to the legal and tax system of the exporter whether it is Free Trade Zone, a Corporation, a Cooperative, etc. In some cases, especial licenses are also required to export goods that may be under a specific control regime such as dairy products, controlled pharmaceuticals and some others that may be controlled for a certain period of time; certificates of origin, permits from the authorities involved in each case (Ministry of Health, Ministry of Energy and Mines, Ministry of Agriculture and Forestry, among others); and payment of applicable rates. Some of the Nicaraguan laws promoting exports are the following:

§ Law N° 265, Law establishing self-clearance for imports, exports and other regimes

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§ Law N° 382, Law on temporary admission and active improvement of imports § Law N° 421 Law on Customs Valuation amending Law N° 265, "law establishing the

system of self-clearance for imports, exports and other ".

6. Immigration Rules In Nicaragua, foreign nationals enjoy the same individual and social rights and guarantees recognized for Nicaraguans in the Political Constitution, international migration and human rights instruments duly ratified by Nicaragua, except for the limitations established by the Political Constitution and the laws of the Republic. However, specific immigration aspects are regulated by Law N°761, General Law of Migration and Foreigners, which regulates all that relates to admission of nationals and foreign nationals to the territory of the Republic of Nicaragua. One of the most important aspects regulated by this law is the admission of foreign nationals into the national territory. Admission is performed according to the reason for entry and under the following visa categories:

a) Diplomats; b) Guests; c) Residents; and d) Non Residents

Visas for Diplomats and Guests are issued by the Ministry of Foreign Affairs. No foreign national may have two or more immigration categories simultaneously nor can they perform activities different to those that were specifically authorized, under penalty of losing his/her residence status or permit to remain in the country and being expelled from the national territory. Another topic of interest is the Central American Visa, which according to the Central America Border Control Agreement for the free movement of foreign nationals across the Republics of El Salvador, Guatemala, Honduras and Nicaragua, was established for visa exemptions in three categories according to the origin and nature of the travel document.

§ Category “A” Visa Exempt § Category “B” Consular Visa or Border Visa § Category “C” Consulted Visa

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Another law of interest is Law N° 694, Law on Promotion of Resident Pensioners and Retirees that establishes the legal regime, standards and procedures applicable to nationals or foreign nationals who request to reside in Nicaragua indefinitely within the immigration category of Resident Pensioner or Retiree. According to this law, a Resident Pensioner is a natural national or foreign Person who has a steady permanent income generated abroad of a minimum monthly amount equivalent in national currency to Seven Hundred Fifty dollars of the United States of America (US$750.00) and who wishes to live permanently in Nicaragua.

7. Consumer and User Rights The legal framework for the protection of rights of natural persons or corporate entities who are user or consumer of goods or services, is defined in Law N°842, Law on Protection of the Rights of Consumers and Users and its Regulations. Through these norms, the State of Nicaragua ensures, among others: equity, certainty and legal safety in consumption relations with persons providing public, private, mixed, individual or collective goods and services; guarantee that consumers and users may acquire good or services of the highest quality; promote and spread a responsible and respectful consumer culture and education on the rights of consumers ad users. All legal acts in a consumer relation or in a preliminary stage within the national territory are subject to the provisions of Law N°842. It is also applicable to providers, whether they are national or foreign natural persons or corporate entities. This law is of public order and social interest. The rights awarded by this law are unwaiverable and it recognizes the human rights nature of the rights of consumers and users.

8. Mediation and Arbitration In Nicaragua, Commercial arbitration is governed by law N°. 540, Law of Mediation and Arbitration. According to article 21, the Law of Mediation and Arbitration applies to national and international arbitration regardless of any multilateral or bilateral treaties in force where the Republic of Nicaragua is a signatory party. Also, these provisions related to arbitration will only apply if the place of arbitration is located in the territory of the Republic of Nicaragua.

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In the Arbitration process, the Tribunal is formed by professionals highly trained on the matter and freely elected by the parties according to the procedure previously agreed by them. Their nationality will not prevent them to act as such unless otherwise agreed by the parties. In accordance with Law N° 540, the Arbitration Tribunal must make a final decision within 6 months from the date it was formed. Both the agreement reached by the parties in a Mediation process and the Arbitration Award resulting from an Arbitration process are final and immediately enforceable under the rules established by the Civil Procedural Code of Nicaragua for procedural enforcement. However, the arbitration award may be appealed before the Civil Court of the Supreme Court of Justice through an appeal within fifteen days from notification of award or resolution of correction or interpretation of the award in the following cases: where one of the parties in the arbitration agreement was affected by incapacity that restricted his ability; where one of the parties was not duly notified of the appointment of an arbitrator or arbitrational proceedings; when the award refers to a controversy not considered in the arbitration agreement; when the composition of the arbitration tribunal or procedure has not been in accordance to the agreement between the parties; when according to the law of this State, the object of the controversy is not susceptible to arbitration; when the award is contrary to the public order of the Nicaraguan State; when the award has not been issued within the term established by the parties or as established by law. With respect to international arbitration, the law grants the power to be subject to internationally recognized venues such as the arbitration procedure of the International Chamber of Commerce (ICC). The country has also signed international instruments containing the necessary enforcement mechanisms such as the New York Convention of June 10, 1958 and the Inter-American Convention on Commercial Arbitration of Panama. Nicaragua has also signed and ratified the Convention of International Center for Settlement of Investment Disputes (ICSID) of the International Bank for Reconstruction and Development, to resolve disputes between states and nationals from other states. This dispute resolution mechanism provides guarantees to investors according to a dispute resolution forum should disputes arise with the investment receiver state. This helps mitigate political risks for the investors. As a supplement to the above, article 8 of Law of Promotion and Foreign Investment establishes that all differences, controversy or claims arising or relating to foreign investment regulated by this Law, may be subject to international arbitration according to regulatory provisions, without prejudice of the application of valid national legal standards and agreements where the Republic of Nicaragua is a party.

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V. EASE OF DOING BUSINESS

1. Types of Entities Nicaraguan legislation permits business development whether it is as an individual entrepreneur or as a collective entrepreneur. Therefore, organized trade can be conducted at a company level, whether it is individually as a natural person or collectively as a corporate entity. In this last case, we are talking about business companies according to article 118 of the Code of Commerce: Partnership, Limited Partnership; Public Limited Company; and Partnership Limited by Shares. Without prejudice to the foregoing, Joint Venture contracts and others for temporary companies or partnerships may be made.

1.1. Individuals Individual entrepreneur: they are natural persons who meet requirements to qualify as an entrepreneur, that is: an individual, legal capacity, performing business on its own as a habitual profession. The individual entrepreneur is the most common legal figure in companies in Nicaragua. This type of company is easy to form and operate since it only needs to meet the following requirements:

a) Register at the Business Registry of the applicable department requesting registration of the person as an entrepreneur and presenting the daily accounting books y ledger to be sealed by the Public Registry;

b) Obtain s number at the Unique Taxpayer Registry (RUC in Spanish) and be included in the closest Income Administration System to his domicile or business office.

c) Maintain a Book of Inventory and annual balance that opens with the initial detail of each period established by the company, per semester, quarterly, etc.

d) Municipal License. e) Special licenses according to the line of business of the company.

1.2. Collective or social

1.2.1. General Aspects Every company contract must be recorded in a public document. It will have no legal effect if made between partners in any other form.

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The obligations of the partners are basically the registration of the entity at the Business Registry, at the General Revenue Authority and the applicable Municipality. The tax obligations of the entity are the following:

a) Annual Revenue Income Tax (IR in Spanish) b) Advance Income Tax (Gross Revenue) c) Income Tax Deductions (Others) d) Income Tax Deductions (Salaries) e) Value Added Tax f) Contribution to INSS, when there are employees under contract for an indefinite period of

time. g) Contribution to INATEC, when there are employees under contract for an indefinite period

of time.

1.2.2. Types of Companies

Article 118 of the current Code of Commerce in force defines the different classes of business companies that may be constituted in Nicaragua according to this legal body14. They are the following:

a) Collective Liability Company

It is a company where the partners conduct business under a corporate name and they are personally and jointly responsible for company debts. Each and every one of the partners is responsible for the administration of the Company, except where it has been expressly delegated to one or some specific partners. It is a company based on people's trust. Therefore, the death of partner, bankruptcy or insolvency of the same leads to dissolution. No partner may assign his corporate part without consent from the others; otherwise, the partner always remains responsible and not the assignee.

                                                                                                                         14   It   is  worth  noting   that  based  on   the  principle  of   free  will   (contractual   freedom)  established   in  article  2437  of   the  Civil  Code  of  the  Republic  of  Nicaragua,  which  provides  that:  “The  contracting  parties  may  establish  the  covenants,  clauses  and  conditions  they  deem  to  be  appropriate,  provided  these  are  not  contrary  to  the  law,  moral  or  public  order";  and  based  on  the   powers   of   the   State   to   protect,   foster   and   promote   diverse   forms   of   property   and   private   commercial   business  management   to   guarantee   the   economic   and   social   democracy   established   in   article   99   of   the   Political   Constitution,   all  types  of  business  contracts  that  imply  other  forms  of  partnership  may  be  made.      

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The Company shall be formed by a minimum of two partners, whether individuals or corporate entities, without a nationality requirement. The name of the entity must include the names of the partners or at least one of them, adding the words "and company”. For the purpose of limiting the liability of the partners to the value of their contributions, the word "limited" will be added at the end of the company name.

b) Limited Partnership

It takes place with one or various persons unlimited and jointly responsible for the company obligations, with one or various persons who are not responsible of the debts and losses of the company, only up to the capital they agree to introduce in it. The first are called managing partners and the second ones are called silent partners. Usually, the silent partners emerge when the company needs more capital, but the collective partners do not wish to share the management responsibilities. Then the silent partners contribute the necessary capital and obtain a yield from their investment. They do not participate in management decisions and they are not personally responsible for the company debts. Only the collective partners, that is those who are unlimitedly liable, appear in the corporate name. The word "and company" should appear next to the names of the managing partners that form the corporate name where not all the names of all the partners appear in the company name. In all cases, the words “partnership” shall appear.

c) Public Limited Liability Company It is a company of shares, with a capital unrelated to the personal capital of the partners. The partners are not responsible whatsoever for the corporate debts of the entity. Therefore, creditors cannot take any actions against the partners. A partner participates through paid and subscribed stocks that represent the capital of the Company. The governance and management structure is formed by:

§ A board of owners responsible for making company decisions § An Executive that executes the decisions of the board of owners and manages the entity.

executive positions may be revoked. § A control body that is autonomous from the executive and it is responsible of controlling

its management.

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In most cases, companies incorporated in Nicaragua operate under this type of legal structure, since it provides these advantages: limited liability for the owner of the company; continuity of partnership; division of capital in shares that can be easily transferred; flexibility of management; capacity to raise capital; ease of profit sharing.

d) Partnership Limited by Shares It is formed with one or various managing partners who are unlimited and jointly liable for corporate obligations with silent partners whose responsibility is limited to the value of their shares. The incorporation of this company is similar to the public limited company. However, the document of incorporation must indicate who and how many are the managing partners and the silent partners.

2. Forming a Company

2.1. One-Stop Window The Ministry of Industry, Development and Trade has created a One-Stop Investment Window especially dedicated to provide legalization services to investors in the country. Four basic services required to set up a company in the country are centralized at this One-Stop Investment Window:

a) The Business and Real Estate Property Public Registry, where the incorporation of the Company, business category and the General Power of Attorney for Administration for the legal representative of the company are registered.

b) The Office of the Mayor of Managua where the municipal license is obtained. This process only applies to the department of Managua.

c) The Department of Revenue (DGI in Spanish) where the Unique Taxpayer Registration Number is obtained and the Unique Registration Document (DUR in Spanish) is registered.

d) Ministry of Industry, Development and Trade where the foreign investment statistical registration or Foreign Investor Certificate may be obtained.

Integration of these four entities into a one-stop business service window has significantly reduced cost and time to legalize a company in the country. This process takes approximately 13 days.

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2.2. Processes at the One-Stop Business Service Window The following documents must be presented at the Business and Real Estate Property Public Registry:

a) Present the stamped Certificate of Incorporation. b) Original and stamped business registration request, signed by the president and photocopy

of identity card. c) Company ledger: If it is a Public Company, Accounting Journal, General Ledger, Book of

Minutes and Shares and if it is a Limited Company, the Accounting Journal, General Ledger and Book of Minutes.

FEES AT THE PUBLIC REGISTRY OF REAL ESTATE AND COMMERCIAL PROPERTY

Registration of Incorporation Capital less than or equal to C$ 100,000

Minimum C$1,000.00

Capital above C$ 100,000 1 % of capital

Maximum C$ 30,000

Business Application C$ 300.00

Sealing of Books Books with 200 pages C$ 100.00 per/book

More than 200 pages C$ 0.50 c/page

Registration of Power of Attorney C$ 300.00

The following documents must be submitted to the General Revenue Authority for registration of the Unique Registration Document (DUR):

a) 1 certified photocopy and 2 non-certified photocopies of the Articles of Incorporation of the Company, registered at the Business Registry.

b) 1 certified photocopy and 2 non-certified photocopies of the General Power of Attorney for Administration, registered at the Business Registry.

c) 3 Photocopies of the entity card of the Nicaraguan Legal Representative. Nicaraguan residency card in the case of foreign nationals.

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d) 3 Photocopies of the identity card of each partner (passport in the case of foreign nationals) or copy of the Unique Taxpayer Registration Number (in the case of a Legal Entity).

e) 3 Photocopies of utility bills (water, lights, telephone or leasing agreement), to confirm the address of the president of the entity.

f) 3 Photocopies of the leasing agreement to confirm the Company office address. g) 3 Photocopies of Special Power of Attorney with C$ 50.00 on tax stamps and identity card

(If the processing is not performed by the president of the entity).

2.3. Clarifications on the DGI Process Should the Company President or Representative not have proof of residence under his/her name, s/he must submit a NOTARIAL STATEMENT, under warning of penalties for false testimony in penal and civil matters. If the Company office address is in the house of one of the partners, a notarial statement must be submitted to confirm the company address. The same treatment will apply if the leasing agreement is under the name of one of the partners.

2.4. Fees from the Mayor’s Office in Managua

§ Municipal License for Capital equal to or less than C$ 50,000, C$ 500 § Capital higher than C$50,000 1 % of capital § Certificate of Registration 1 % of Registration

2.5. Processing at MIFIC

2.5.1. Foreign Investor Certificate Foreign investors investing more than $30,000 US dollars may register at the Ministry of Industry, Development and Trade to obtain a foreign investment certificate, which is useful when applying for Nicaraguan permanent residency status and to validate the investment made in the country. Documents to be submitted:

a) Investment equal to or higher than U$ 30,000. b) Photocopy of the Company Incorporation documents, registered at the Commercial

Registry. c) Photocopy of General Administration Power registered at the Commercial Registry.

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d) Photocopy of the Unique Taxpayer Registration number. e) Photocopy of the Nicaraguan identity card of the Legal Representative, Nicaraguan

permanent resident card or Passport (in the case of a foreign national). f) Photocopy of Police Clearance Certificate (in Spanish). g) A recent photo, ID Card size. h) Photocopy of Municipal License.

VI. INSTITUTIONS PROMOTING INVESTMENT IN NICARAGUA

1. PRONicaragua There is a constitutional framework in Nicaragua to foster and facilitate investment in the country. In 2002, the special Commission for promoting investment was created directly under the responsibility of the President of the Republic. It was named PRONICARAGUA (Decree 75-2002). This agency was transformed into a Presidential Delegation for Promoting Investment and Facilitating Foreign Trade and its functions were expanded by Decree N° 12/2011. PRONicaragua leads the efforts of our nation to develop investments and facilitate foreign trade. This has a direct impact on the economic growth of the country and the human development of our population. It is important to note that PRONicaragua, in order to fulfill the presidential mandate, offers the investor information on business opportunities in the country, assistance during the investment process, consultancy for joint investments, identification of suppliers and business matchmaking, assistance in the identification of real estate, services after the company has been established, etc.

2. Ministry of Industry, Development and Trade (MIFIC) The Ministry of Industry, Development and Trade was created by Law N° 290 Law on the Organization, Jurisdiction and Procedures of the Executive Branch. It has, among its functions, the responsibility of promoting access to foreign markets, negotiating and managing international conventions, particularly in regards to trade and investment, supporting the private sector in the utilization of international markets, fostering and facilitating investment in the country’s economy.

3. AMCHAM AMCHAM is governed by essential values that become the foundation of the mission and furtherance of trade and investment in Nicaragua; particularly, in its privileged relation with its main partner for trade and direct foreign investment: the United States of America.

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The main goal of AMCHAM is to foster trade and investment between the United States of America and Nicaragua through free trade, free market and free enterprise. The increase in exports and direct foreign investment from the United States in more than 70%, since CAFTA-DR came into force supports the relevance of the mission of AMCHAM and the work performed. One of the great added values of AMCHAM is that it has a direct relation with the US Chamber of Commerce (more than 3 million members in the United States) and its affiliation with the American Association of Chambers of Commerce in Latin America (AACCLA), which represents over 20,000 companies in the American continent through 24 AMCHAMS in the hemisphere15.

4. CETREX The Center for Exports (CETREX in Spanish), is a Public Entity that provides services to the export sector. It was created by Presidential Decree 30-94, on June 28, 1994. It was established for the purpose of centralizing the specific functions of the public entities addressing the processing required by exporters. It is affiliated to the National Committee for the Promotions of Exports (CNPE in Spanish). This Committee is responsible for proposing new policies to foster the development of export companies. It is presided by the Minister of Industry, Development and Trade, and it is formed by five representatives from the business sector and five representatives from the public sector.

The main functions of CETREX are:

a) To consolidate the activities of the departments involved in exports. b) To simplify the export process by reducing financial and human costs for the private

sector. c) Overall control of the system and generation of the internal statistics required. d) To address information and advice requests related to exports. e) To process documentation expeditiously and in a timely manner.

                                                                                                                         15  Taken  from  PUBLICACIONES,  Doing  Business  in  Nicaragua  2014,  [online][consulted  on  March  25,  2015]  available  at  www.  amcham.org.ni  

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f) To set up CETREX offices in border locations or where required by the system, in order to expedite, organize and verify exports procedures for products that are leaving the country.

g) To verify and control the prices declared in exports (under-invoicing and over-invoicing), following the export process and to report to the National Committee for the Promotion of Exports and the General Customs Authority.