Quite contrary to the anti-imperialist discourse of Daniel Ortega, it is the United States that is at the forefront of Foreign Direct Investment in Nicaragua.
Joe Biden, US President; Justin Trudeau, Prime Minister of Canada and Andrés Obrador, President of Mexico.
Last year the income from Foreign Direct Investment (FDI) totaled “1,842.3 million dollars”, according to a recent report from the Central Bank of Nicaragua (BCN), most of them coming mainly from 4 American nations.
In the “Report on the Evolution of Foreign Direct Investment (FDI)” of 2022, the BCN details that the net flows of last year ($1,293.8 million) exceeded the amount of 2021 by 6% ($1,220.1 million). However, when taking this figure to the contributions of income to the Gross Domestic Product (GDP) of the country, there was a fall of 0.3 percentage points.
“FDI income represented 11.8 percent of GDP, being 1.4 percent higher than the indicator for 2021 (10.4%); while the net flow of FDI as a percentage of GDP was 8.3 percent, less than 8.6 percent in 2021,” the report indicates.
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Revenues fell in the second semester
But this was not the only negative data, when comparing the results of YoY revenue of the first and last semester of 2022 with those of the previous year, a drop of more than 50% is observed in the second period.
“In terms of its evolution, in the first semester of the year 61.0 percent (US$ 1,122.9 million) of the total revenues were registered, which increased year-on-year by 32.9 percent, while the revenues of the second semester (US$ 719.4 million) showed an interannual growth of 15.0 percent”, details the Central Bank of Nicaragua.
What is remarkable is what are the sources of financing. The institution points out that most of these are the product of the “reinvestment of profits” ($946.3 million), that is, businessmen are using a large part of their profits to finance themselves. The rest of the investment comes from “capital contributions with 308.2 million dollars” and in third place from “external debt with related companies (related debt instruments) totaled 39.3 million dollars.”
As for the economic sectors that have absorbed the most these investment flows, the following stand out:
- energy and mines. Although it absorbed an amount of 464.0 million dollars (35.9% of the net FDI flow), it was 0.5% lower than what was registered in 2021 (US$466.5 million).
- Industrial. It was the second in highest acquisition, registering an FDI flow of 346.4 million dollars, representing 26.8% of the total, with an interannual growth of 31.5 percent (US$ 263.4 million in 2021).
- Trade. It raised $310.1 million, representing 24% of the total, and was 117.3 percent higher than what was observed in 2021 (US$142.7 million).
After these are: the financial sector with 136.4 million dollars, agriculture ($33.7 million) and fishing with $32.3 million.
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Who are the main investors?
Regarding the origin of the Foreign Direct Investment funds, very contrary to the anti-imperialist discourse of Daniel Ortega and his officials, it is the United States that is in the lead, followed by Canada, Mexico and Panama.
- USA contributed 399.9 million dollars (30.9% of the total), said investment was directed mainly to the Energy and Mining (52.9%) and Industry (28.3%) sectors.
- Canada ranked second in order of importance, with $200.5 million (15.5% of the total), these funds were very representative in the Energy and Mining sector (94.1%).
- MexicoFor its part, it invested 171.1 million dollars (13.2% of the total), said funds were channeled to the Communications (52.2%), Industry (29.0%) and Commerce and Services (13.9%) sectors.
- In fourth place was Panamawho added 104.8 million dollars (8.1% of the total), directed mainly to the financial sector (85.9%) and industry (7.8%).
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They do not want to invest in Nicaragua
Although positive data was shown in terms of reinvestment of profits and capital contributions, depending less and less on external debt, the truth is that credits are not bad if they know how to use them properly and, on the contrary, not being able to access them It is limiting the development of many sectors that need leverage through loans, but in the face of an uncertain political, social and economic situation, businessmen prefer to refrain from investing.
A sample of the fear of investing in Nicaragua is reflected in the data provided in the report by the Central Bank of Nicaragua itself. These show that the net flows of FDI in Central America are absorbed mainly by the Dominican Republic (30.3%), Costa Rica (23.0%) and Panama (20.9%), well below these is Nicaragua with just “9.8 percent of the total entered in the region”.
