Is it safe to invest in Nicaragua?

Invest in Nicaragua / Is Nicaragua a good investment?

The first idea that comes to mind when someone thinks about Nicaragua as a tourist destination is typically to come for a few days as part of a quick trip to see the region of Central America. However, many foreigners who came to Nicaragua in the early 1990s fell in love with it and wanted to stay, or at least decided to invest in Nicaragua to have a lasting connection with this place. Nicaragua now has several “ex-pat” communities, which can be found on the country’s coastlines, in colonial cities, and in mountain villages.

People all over the world are becoming aware of the opportunity to invest in Nicaragua and are attempting to seize this opportunity by purchasing property in the area. However, some people still wonder, “Is it safe to invest in Nicaragua?” at times. It is important to remember that you are investing in a foreign nation and that you should do a little more research than you would typically do when investing in your own country.

It can be intimidating to purchase property or make an investment in a foreign country if you have never done it before. It is easy for someone to convince you that this is indeed the wise thing to do, but putting that plan into action may be challenging, and it may put you in an uncomfortable position if you do not do a thorough study beforehand.

Nevertheless, the growing amount of trust that people have in the country has encouraged them to invest in Nicaragua, stimulating the development of new local projects and improving infrastructure for both investors and visitors. Such faith has been credited with a legal system that encourages foreign investment while protecting the rights of foreign investors. This comprehensive overview will set your mind at ease and provide you with an answer to the question, “Is it safe to invest in Nicaragua?”

Many people wonder whether it is possible for a foreigner to buy real estate in Nicaragua. As a general principle, foreigners can purchase real estate in Nicaragua either directly or via local or international corporations. They have the same constitutionally protected property rights as any other citizen. There are, however, restrictions on foreigners’ ability to purchase property in border areas, coastlines, and protected areas, which are governed by particular laws.

Aside from that, real estate titles must be registered with an official registry. In Nicaragua, all titles that establish, modify, or transfer actual rights must be registered in the Public Registry of Property. If the parties sign a public deed to transfer property, only its registration in the Public Registry provides protection against third parties in the event of a dispute. A valuable feature of this registry is its ability to ensure that the property’s title is valid at any given moment.

Is Nicaragua a Good Investment?

Analyze the economic situation in Nicaragua, shall we? As the second poorest country in the Western Hemisphere, Nicaragua’s GDP grew at an impressive rate under Ortega’s leadership. However, the protests and sanctions that followed in 2018 slowed the positive trend. Ortega is better at handling the Nicaraguan government’s finances than most Western leaders. Until the protests and sanctions in 2018, the deficits had consistently remained below GDP growth rates.

In the end, the country’s debt was reduced to a sustainable level, allowing it to avoid international creditors for the time being. With ever-increasing sanctions suffocating the economy, it’s hard to get things moving.

Unfortunately, Nicaragua imports more than it exports, and its economy is underdeveloped. Agricultural goods are the primary exports. Although wires and textiles are major export categories, the local value-added is not substantial. Fortunately, the inflows of money have been steadily increasing.

What averted the disaster during the 2018 crisis were the government’s relatively sizeable foreign exchange reserves, which were utilized as a buffer and had lately resumed growth. Immigrants are the true heroes of the Nicaraguan economy. Nicaragua’s economy depends on remittances from workers, primarily in the United States. The numbers are pretty staggering. As a consequence of all of these reasons, the Nicaraguan Cordoba has gradually depreciated.

So, is Nicaragua a good investment? When you look at the big picture, you won’t find a nation governed by a free-spending socialist, but rather a case of sensible macroeconomic management interrupted by political upheaval and Western sanctions. Remittances from migrants working in the United States have proved a lifesaver. Nicaragua is thus highly vulnerable to foreign shocks, owing to its complex reliance on the same nation imposing sanctions.

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Things to Know Before Investing in Nicaragua

Minimal restrictions

Generally, foreigners are not limited in what they may purchase or how they can do it, which may surprise some. The only real limitation is border security. Foreigners can not purchase within 5 km of any international boundary and must get permission to buy between 5 km and 15 km. There are many more locations to purchase in Nicaragua, whether in the forest or by the sea, that are not within 15 km of any border. This little limitation is considered useless compared to the rest of the country’s offerings and the cost of beachfront property.

Nicaragua sold most of its monopolies in the past decade, reducing government involvement for international investors. The legislation allows for 100% ownership in every economic sector, and it’s obvious that the government’s policies are made to encourage foreign investment.

The government seeks foreign investment

In other nations, the government frowns upon buying property as a foreigner, while Nicaragua encourages it since they recognize its benefits to the country. The Nicaraguan government passed Law No. 344, the Foreign Investment Promotion Law, in April 2000. This legislation acknowledges foreign investors’ right to possess and utilize property without restriction.

Law No. 344 ensures that foreign investors will get the following:

• When investing, there is no minimum or maximum amount required to qualify.
• Convertible in all currencies.
• Financing is available from Nicaraguan banks.
• Complete international ownership is given.
• There will be no discrimination against your investment.
• Intellectual property rights, patents, and trademarks are fully protected.
• Expatriation of all capital and profits is allowed.

Find an agent or consultant to help you with the process

In Nicaragua, unless you know about Nicaraguan real estate and can speak Spanish well, it would be a good idea to use a real estate agent. It’s important to find someone you can rely on and who has been relied upon by others before.

Make sure you hire the appropriate lawyer

In Nicaragua, there are situations when individuals try to sell properties that they do not really possess the title rights to. Having an attorney on your side is important. You must understand who you are dealing with. Even if you approach them directly, a lawyer that you have engaged for yourself may also act for the seller. If you are going to invest anywhere on the globe, you must do your research and be careful.

General fees after finalizing

Legal expenses

• 1% to 1.50% of the buying price.

Cost of title registration

• 1% of the cadastral valuation, with the highest sum being $870 USD.

The tax on transferring or receiving property gains.

• 1% if the property is less than $50,000.
• 2% if the property is between $50,000 and $100,000.
• 3% of the total if the property is between $100,000 and $200,000.
• 3% of the total if the property is over $200,000.

Direct and indirect legal obligations of owning property as a foreigner

Direct:

• Real estate taxes (approximately 0.80% of the property) and municipal expenses.
• Residents who own condominium units in a condo project must follow the rules set forth in the project’s Administration Regulations and pay regular building maintenance fees.

Indirect:

• National taxes are declared and paid on a monthly basis.
• Declaration and payment of municipal taxes on a monthly basis.
• Boards of Directives and Legal Representatives are updated on a regular basis.
• Declaration in the Transparency Register of Final Beneficiaries.

Nicaragua’s business environment

Around the world, education expenditure amounts to 4.24% of GDP, while Nicaragua is at 4.35%. These numbers represent the efforts made by the government to improve its human capital rather than the overall quality of education.

Healthcare takes up about 8% of Nicaragua’s GDP, placing the country in the 40th place in the world. It is important to point out that healthcare is provided to everyone without charge in Nicaragua. You must pay only for the cost of the medication. The quality of treatment is indeed inferior to that of Singapore, yet the government’s healthcare expenditure is rather efficient.

According to the World Bank, the country’s road quality is equal to that of Hungary and Poland. Finally, the murder rate in Central America is the lowest of all countries in the region. According to other rankings, such as the World Bank’s Ease of Doing Business and Transparency International’s Corruption Perception, Nicaragua has failing ratings. There are allegations of widespread corruption, and conducting business here is very difficult.

But, behind closed doors, a majority of ex-pats have confirmed that they very seldom experience unethical business practices. On the contrary, not one of them could find anything bad to say about it. Even Europe and North America agreed that conducting business in Nicaragua was simpler than “back home”.

Tourist business tax

This legislation is the most appealing and aggressive tourist incentive law in Latin America, according to Nicaragua’s Law 306. When it comes to starting a B & B, a tour company, or an arts and crafts store, Nicaragua is the place to be.

Investors that take advantage of the system will be duly rewarded. If your company qualifies, you will not have to pay any income taxes or real estate taxes for up to ten years, and you will be able to bring in all of the goods you need without having to pay any taxes.

Furthermore, the application and approval processes are simple and quick. Moreover, the agency is allowed to accept your application within 60 days, so you won’t have to wait for months or even years before getting your approval. In addition, depending on the kind of project, payment of as little as $30,000 may qualify you for incentives.

The following are the advantages that investors get from Law 306:

• Up to ten years of no income tax.
• Up to ten years of free real estate taxes.
• Import all of the goods you’ll need to support your business into the country-TAX-FREE.

Conclusion

You have the chance to take advantage of two developing trends in Nicaragua if you invest in Nicaragua. Many foreigners are moving to Nicaragua to retire there, and they have discovered that it is very inexpensive to live while still enjoying a good standard of living. The country’s biggest earner is tourism, which previously did not exist long ago.

No doubt, after surviving a tumultuous history, Nicaragua has developed into one of the most desirable investment locations in the world. Nicaragua offers an early-in investment real estate market for investors.

Real estate investing is about finding the market in which you have a good opportunity to invest at the appropriate moment and in the right location. Before the rest of the world catches on, you must seize the chance. It will be an excellent chance to get the most out of your investment. Nicaragua is a great place to begin investing with cheap property prices and a lack of competition.