Nicaragua: The Impact of the "Nica Act"

Less investment, depletion of international reserves and contraction of public spending, in the opinion of Funides, are some of the effects that might be felt if the US Senate approves the bill.

Wednesday, October 12, 2016

The Nicaraguan Foundation for Economic and Social Development (Funides) has analyzed the potential impact of a possible US approval of the bill known as the "Nica Act", which aims to place conditions on the granting of loans by international institutions to the Ortega administration.

From the report "Economic Impacts of Nica Act": 

Outcomes: Reduction of financing from the World Bank and the Inter - American Development Bank, contraction of spending.

Indirect effects: Reduction of investment, depletion of international reserves.

Possible scenarios:

- Base scenario: all factors remain constant (Nica Act is not approved, nor causes adverse expectations for investors).
- Alternative Scenario 2 (indirect effect only): Nica Act is not approved, but does cause adverse economic expectations among investors.

- Alternative Scenario 3 (direct plus indirect effect): Nica Act is apporved, this affects the public sector but also causes adverse investor expectations.

See complete presentation by Funides of the implications of each of the possible scenarios (in spanish).

See full text of the bill.

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