A few years back, Nicaragua was hailed by the international media as one of the world’s best kept secrets, but the country might not be so secret anymore due to its ever-increasing popularity. The country has become a very attractive investment and export platform due to its high productivity rates, coupled with the most competitive labor costs in the region, speed-to-market leading to ‘speed to profit’, significant improvements in the nation’s infrastructure and business climate, and the implementation of DR-CAFTA and its benefits, in addition to the government´s generous investment incentives and the country’s high levels of personal safety.
Nicaragua’s textile and apparel industry is an important development engine for the national economy, accounting for nearly 59% of total free-zone exports in 2012 with US$1,368 million, and employing nearly 70,000 people by the end of 2012. That same year, the country exported 408.9 million square meter equivalents (SMEs) to the United States.
So don’t be surprised if you find “Made in Nicaragua” on various products on the shelves abroad. Apparel manufacturers operating in Nicaragua service major retail chains such as Target, JC Penney, Wal-Mart, and Kohl’s. Also, world-renowned international brands like Adidas, Under Armour, Liz Claiborne, Wilson, Wrangler, GAP, North Face, Lee Jeans, Patagonia, Levi’s, Docker’s and Dickies, have placed their trust in the country and have no plans on leaving.
Is Nicaragua competitive enough?
You bet.The study titled “Benchmarking the Competitiveness of Nicaragua’s Apparel Industry”, conducted by O’Rourke Group Partners, found Nicaragua to be the single most competitive option for sourcing numerous apparel products, and not just in this hemisphere, but in some cases also compared to China, Vietnam and Bangladesh. It’s no wonder Nicaragua was ranked among the 11th largest apparel-supplying countries to the USA in terms of volume in 2012 by the Office of Textiles and Apparel (OTEXA) in the US Department of Commerce.
Furthermore, Nicaragua offers some of the most competitive labor costs in the region, making it an ideal investment destination for labor-intensive operations. The following table shows the region’s minimum wage in the free-zones regime for 2013:
High levels of personal safety
Nicaragua has become one of the safest countries in the western hemisphere, an advantage recognized internationally by tourists and investors who have relocated to the country. The Economist Intelligence Unit (EIU) confirms Nicaragua’s high security levels in its 2012 country-risk evaluation, ranking the country as the second safest in Central America and the third in Latin America. This report measures indicators such as armed conflict, demonstrations, organized crime and kidnappings in different countries around the world.
So, where in the world is Nicaragua?
Nicaragua is located in Central America, between Costa Rica and Honduras, which is considered a privileged geographic location. Flight time to the USA is two-and-a half hours and only three days by ship. Its proximity to North and South America makes Nicaragua an attractive destination for companies looking to export to those markets. The country’s access to the Pacific Ocean and the Caribbean Sea also facilitates exports towards destinations in Europe and Asia.
Nicaragua has access to over 1.5 billion people!
In recent years, Nicaragua has actively engaged in multilateral, regional and bilateral negotiations, to become better integrated into the global economy. As a result of these efforts, the country has gained preferential access to key markets such as the USA, Mexico and Europe. Still, the country continues to seek opportunities to further assure its successful engagement in world trade. Additionally, Nicaragua’s strategic location in the heart of the Americas has allowed the country to position itself as a very competitive export platform to markets worldwide. Nicaragua is part of the Central American Common Market (MCCA, from its acronym in Spanish) and has established free-trade agreements with Mexico, Dominican Republic, the United States, Panama, Chile, the European Union and Taiwan. The country also benefits from the Generalized System of Preferences (GSP) with countries such as Canada, Norway, Russia, Switzerland and Japan and has signed bilateral investment treaties with a series of countries to promote and protect investments. In total, Nicaragua has earned preferential access to a world market of over 1.5 billion people.
Qualified Labor Force
Nicaragua’s population is young and dynamic, with 77% of its total population under the age of 39. The country’s labor force of 3.2 million is known to be flexible, with good working habits, a fast learning curve and low absenteeism and attrition rates, all of which have allowed this workforce to become quickly recognized as one of the most competitive and productive in the region. The country also has a large availability of English-speaking professionals that have been educated and trained abroad.
What about the government?
The Government of Nicaragua has focused its efforts on improving the country’s business climate. A clear example is the labor agreement signed with private-sector representatives and labor unions that establishes labor benefits in the free-zone sector and salary increases through 2017, with the purpose of granting further stability to employees and predictability to investors. Also, it has created an Advisory Board, whose responsibility is implementing policies, structures and programs for investment and export promotion with the purpose of fostering the country’s economic growth.
Besides apparel, what else does Nicaragua export?
Nicaragua is also known for its fertile land and great biodiversity, so it’s no surprise that the country is considered an agricultural expert. Nicaragua’s main export products include coffee (19.5%), sold in Starbucks under the name Nicaragua Diamond; meat (16.9%), mostly exported to Venezuela and the USA; gold (15.8%), one of Canada’s main investments in the country; sugar (7.3%), dairy products (6.4%), and peanuts (4.9%), some of which are even used in M&Ms.
The country is also tapping into capital-intensive and value-added processes ranging from knowledge-process outsourcing services to the USA to high-end auto part manufacturing. Within the free zone, business-process outsourcing (BPO) services represent 3.3% of exports, while auto wire-harnesses exports already represent 20.3%.
Now that all secrets have been revealed, it might be time consider Nicaragua under the scope of competitive sourcing destinations.
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PRONicaragua is the Official Investment and Export Promotion Agency of the Government of Nicaragua. The agency offers complimentary support services to qualified investors interested in exploring business opportunities in Nicaragua:
- Complete Information on business and trade opportunities in Nicaragua and key investment information.
- Organization of customized site visits with tailor-made information packages.
- Facilitation Services including advisory and advocacy for foreign investors and buyers, by providing referrals, government contacts and general start-up facilitation services.
- Assistance in finding local companies for possible joint ventures and identifying suppliers and other forms of business and trade alliances.
- Aftercare Services to identify main problems affecting trade and investment in the country,