The aim is to open markets in Europe and Asia in order to offset the decline projected in tobacco exports to the US because of new FDA regulations.
The goal of the Nicaraguan Cigar Association is to gain a "... 20% increase in sales to Europe, where a little less than 10% of the product is consumed, as the rest currently goes to the United States."
From August 8 premium handmade tobacco leaf cigars will be subject to the same regulation as cigarettes manufactured with additives.
A group of tobacco companies in Nicaragua will be holding meetings in the US with local companies who have invested in tobacco plantations and cigar factories in order to assess the impact of the entry into force of the new regulation.
The FDA is analysing changing the rules in order to apply the same rules for cigarettes manufactured with additives to premium handmade cigars and tobacco leaves.
Tobacco industry entrepreneurs from Nicaragua and Honduras, as well as the ambassadors of both countries to the United States, have expressed concern over the announcement that the FDA is preparing changes in regulation in order to treat cigars in the same way as cigarettes. If the measure is applied, the impact on the Central American tobacco industry would be felt significantly, because Nicaragua only exports 75% of its tobacco production to the northern country.
In order to finance the pension increases a new law will increases taxes on gambling and winnings from those games, and on non-metallic mining, and drinks and products derived from tobacco.
From a statement issued by the National Assembly:
The full National Assembly approved on its third reading, Bill 197, which establishes the legal framework to strengthen, preserve and sustain the finances of the Fund for Disability, Old Age and Death of the Social Security Department (CSS), allowing for pension increases.
At the end of 2014, exports from free zones totaled $5,242 million, equivalent to 53% of total exports from the country.
The sectors that reported the most exports are medical and pharmaceutical products with 25%, textiles 24%; electrical products, with 14%; tobacco and derivatives, with 11%; footwear and components, with 9%.
Preparations are being made for a trip by a group of companies traveling from April 20th to 24th to the South American country to explore business opportunities under the trade agreement which has been in force since 2012.
In an attempt to increase tax revenues, the executive announced that it is now considering taxing the distribution of soft drinks such as juices, isotonics and sodas.
It is expected that in the first week of February analysis will be presented of modifications to the tax on the distribution of beverages and on tobacco and tobacco products, with the aim of obtaining more resources to finance the national budget for this year.
Increasing the amount of land planted, consolidating markets where there is already a presence and exporting cigars to China are part of the tobacco industry's goals for 2015.
It is expected that in 2015 tobacco exports will grow by 5% and reach new markets such as those in China, Morocco and other Middle Eastern countries, where it is estimated that cigars would be very well received. These new destinations would join the 79 countries where sales are already being made. In 2013 total exports amounted to $227 million.
The main export market for Nicaraguan cigars could change after the eventual reopening of trade between Cuba and the United States.
Nicaraguan cigars are consumed in over 70 countries worldwide, where they already faces competition from Cuban tobacco. Nicaraguan tobacco manufacturers believe that if the trade embargo is lifted and Cuban tobacco starts to enter the US market, increased competition will open up opportunities for increasing productivity in the sector and improving the product in terms of variety and quality.
The Executive is considering increasing taxes on cigarettes and alcoholic beverages as an option for balancing the 2015 budget.
With the provisional suspension of the tax on telephone lines the Guatemalan government is left with a deficit $237 million, approximately, which is why it is looking at bridging the gap using new taxes on liquor and cigarettes, as the main alternative.