Nicaragua's 2020 vision is to do business across the Interoceanic Grand Canal

The XIX Conference of Free Trade Zone of the Americas was held on November 5th and 6th, where it was discussed, among other issues, the viability of the Interoceanic Grand Canal of Nicaragua, expected to be ready by 2021. Our TMF Group Nicaragua and El Salvador Manager participated in the conference and tells us what this might mean for investors.

In order to promote investment opportunities in the free zones of the Americas, several panelists gathered at the XIX Conference of Free Zones of the Americas to discuss issues such as:

  • free zones as a growth factor for companies
  • motivation to invest in the region, innovating in productivity and logistics,
  • evolution of political regimes and Free Zones

But the issue that caused the most debate was the construction of the Interoceanic Grand Canal of Nicaragua. The experts assessed the economic conditions in the country and the viability of the project. Completion of the project is expected to bring incalculable investment opportunities for foreign companies.

The vision of the Interoceanic Canal of Nicaragua

The Commission of the Grand Canal of Nicaragua indicated that the importance of this project is based mainly on the saturation of the Panama Canal, the need for efficiency in terms of operating costs and increased demand for containers, among other things.

The project that would be developed by the Chinese company HKND Group, would connect the Pacific to the Caribbean Sea through a path 276km long and would include sub-projects such as:

  • Channel (including the locks)
  • Two ports
  • Trade Free Zone
  • Vacation centers
  • An international airport
  • Various highways
  • An electric plant
  • A cement factory

The cost of the project is 50 billion dollars and is expected to be completed within five years. It is expected that the development of Canal generates between 40 and 50 thousand jobs a year during the construction phase, 200,000 jobs during the operational phase and 113 thousand more jobs for the free trade area.

The Channel would have a width of 230mts and 520mts, depth of 27.6 meters and length of 276 km. Also, reduce travel time/transport in the area of up to 2 months.

General Alvaro Baltodano, presidential delegate for Nicaragua investments said that the country has a stable economic condition to invest in this project mainly due to: the average growth of 5% over the last 3 years; macroeconomic stability, exchange and inflation; an increase in employment rates and growth in foreign direct investment (FDI) in Nicaragua.

Since 2007, Nicaragua has maintained a steady average growth of 22% for a total increase of 279%. At the end of 2014 FDI incomes were 1,447 million.

The conference organized by the National Commission of Free Zones of Nicaragua and ProNicaragua.

The challenges for investing companies

Opportunities to invest in Nicaragua continue growing for all sectors especially those related to the activities of the Grand Canal. However, companies must be aware that each market has its complexities and it is important to understand and know how to handle them when investing in Nicaragua or any other country.

For example, according to the World Bank’s Doing Business Report, Nicaragua dropped two positions in the ranking of ease of doing business. TMF Group’s Global Benchmark Complexity Index for 2014 places it in the 17th position. Issues such as the establishment of a company in the country remain complex aspects for multinationals when they enter the Nicaraguan market.

It is important that companies have the support of a local expert to help you understand and successfully execute business processes in the country. TMF Group has a team of experts in Nicaragua attending national and international clients with financial services, legal, human resources and payroll in the country. We can incorporate, provide a single point of contact and help you focus on what you do best: sell your products and services. Contact us for more details.

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Xilot  Mejia
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