Because of the economic crisis, Foreign Direct Investment flows have practically vanished, and in order to attract the few investments that are projected for next year, countries are expected to compete by offering incentives and aid programs for businesses.
The covid-19 outbreak dissipated the investment intentions of companies globally. At the beginning of the fourth quarter of the year, there are signs that business confidence has begun to recover; however, pessimism among investors is expected to continue next year.
In the context of the tense diplomatic and commercial relationship between the two world powers, Central American countries could have the opportunity to attract new investments, as it is estimated that some American companies would need to migrate their operations to the American continent.
As a result of the tension between the two nations, Mauricio Claver-Carone, an advisor to President Trump, believes that U.S.
Because of the tension between the productive sector and the government, coupled with the lack of official statistics from the Central Bank, some companies in Nicaragua have chosen to stop providing information to the authorities.
In an attempt to hide the complicated economic situation, the country is going through, local authorities have not published information on the Monthly Economic Activity Index since February 2019, when the year-on-year drop was 7.5%. This prevents businessmen from making decisions based on the real situation of the economy.
Strengthening government institutions in the areas of contract enforcement, property rights protection and investor protection are part of the recommendations made by the IMF in its most recent visit to the country.
According to the international organization, policies to regain the confidence of the private sector, including a frank assessment of the impact of recent measures, are essential to promote economic recovery and compensate for increased poverty. In the short term, strengthening government institutions in the areas of contract enforcement and efficiency of the legal framework for dispute resolution, protection of property rights, investor protection, property registration, and insolvency resolution could significantly improve the country's competitiveness.
In Nicaragua, the authorities have not published information on the Monthly Index of Economic Activity since February 2019, when the year-on-year fall was 7.5%, a situation that prevents businessmen from making decisions based on the real situation of the economy.
Between the first semester of 2018 and the same period of 2019, the flows of Foreign Direct Investment reaching the country decreased by 25%, a decrease that is explained by the uncertainty that predominates among businessmen, derived from the political and economic crisis.
According to official figures, from January to June of this year the country received $364 million in Foreign Direct Investment (FDI), which is less than the $483 million received in the first six months of 2018.
Panama and Honduras were the only two Central American countries to report increases in foreign direct investment in 2018 over the previous year, with year-on-year changes of 36% and 3%, respectively.
The growth of investments directed to Panama, which concentrated 51% of the sub-regional total, explained the increase that was reached in 2018 in Central America (9.4%), since except Panama and Honduras, the Central American countries received less Foreign Direct Investment (FDI) than in 2017, explains the report "Foreign Direct Investment in Latin America and the Caribbean 2019", produced by the Economic Commission for Latin America and the Caribbean (ECLAC).
Although the goal for this year was to issue $100 million in debt bonds, during the first quarter the Nicaraguan government only awarded $1.1 million, doubting the level of investor confidence.
According to the "Public Debt Report, First Quarter 2019", prepared by the Central Bank of Nicaragua, from January to March regarding Investment Securities in dollars, 1.03 million was issued at an average rate of 5.31% and an average term of 7 months.
The latest risk ratings for the issuance of long-term debt of Central American economies identify Panama as the most attractive country to invest in.
On March 8, Moody's decided to raise its long-term issuer rating in foreign currency from Baa2 to Baa1, arguing that the outlook remains more favorable in the medium term.
One of the decisions taken by Guatemalan businessmen with interests in Nicaragua is to suspend new investments until the situation in the country is normalized.
Due to the social and political situation that the country has been experiencing for more than three months, Guatemalan investors that operate companies in Nicaragua have been analyzing the situation closely, and are already taking measures to minimize the impact of the crisis on businesses. One of the decisions that some companies have taken is to reduce the cost of the operation to the lowest possible level, in order to maintain or reduce product inventories.
The 2017-2018 Guide by the Nicaraguan - German chamber of commerce provides details on tax exemption regimes by sector, requirements for foreign investors and other data.
From a statement issued by ProNicaragua:
Under a joint effort between the Government of Nicaragua through PRONicaragua, the official investment promotion agency of Nicaragua, the Ministry of Development, Industry and Commerce (MIFIC), in coordination with the Chamber of Industry and Nicaraguan Trade (AHK) by its acronym in German), the third edition of the Investor's Guide in Nicaragua 2017-2018 / Leitfaden für Investitionen 2017-2018, was presented yesterday, February 27, in the Spanish and German languages.
The bureaucratic procedures and permits required by the Cuban government and some restrictions on the establishment of companies could represent obstacles for foreign businessmen interested in investing on the island.
Although in Cuba there exists sectors such as telecommunications and construction, which have high growth potential due to a backlog in investment, those who are knowledgeable about the real situation in Cuban say that it will be difficult to take advantage of these opportunities, at least for now.That is the perception of the former ambassador of Costa Rica in Cuba, Rodrigo Carreras, who in an interview with the newspaper Nacion.com, detailed the conditions of the economy of the island and the difficulties that could be faced by entrepreneurs interested in doing business there.
Small investors have bought $15 million in shares ranging from $1,000 to $20,000, from a trust that will finance a wind project in Uruguay. Another $62 million will be offered to institutional investors.
EDITORIAL
The offer received in the Uruguayan Securities Exchange from small investors reached $100 million, a clear sign of the high interest in the prospective investment which has a mitigated risk as it is a project by a strong state run enterprise, with a return almost assured, estimated at about 11.5% a year, in the 20 years which is the term of the share certificate.
On November 4th, Guatemala City will host a regional summit on energy investments in Central America.
From A statement issued by the Government of Guatemala:
The minister Erick Archila has announced that Guatemala will host a summit on energy investment in the countries of the Mesoamerican region which will take place on November 4, convened by the Ministry of Energy and Mines (MEM).
As the economy grows significantly, reduced government involvement in 2013 led to a meager 1% growth in transactions on the Stock Exchange.
During 2013, transactions in the securities market of Nicaragua grew by just 1%, going from $888.5 million in 2012 to $893.2 million in 2013. The almost zero growth is due to low participation of the government and lack of promotion of its emissions, among other factors.