On February 24, 2025, Law No. 1240, the Foreign Investment Law (the “Law”), was published in La Gaceta, Official Gazette No. 36. This law establishes the legal framework for promoting, facilitating, and regulating foreign investments in Nicaragua. Below is a summary of its main aspects and its impact on foreign investors.
The Law will enter into force 90 days after its publication in La Gaceta and must be regulated by the Presidency of the Republic, in accordance with the provisions of the Political Constitution.
- Scope and definition of foreign investment
The Law applies to all foreign investments established in Nicaragua, defining them as those that involve the transfer of foreign capital, regardless of the investor’s nationality or residence. Capital can take various forms, including foreign currencies, tangible and intangible assets, intellectual property rights, and technology with economic value.
- Competent authority
The National Commission on Foreign Investment (CNIE) is established as the authority responsible for enforcing the Law. The CNIE will be composed of the Presidential Advisor for Investment, Trade, and International Cooperation; the President of the Central Bank; the Minister of Development, Industry, and Trade (MIFIC); and the Executive Director of the National Commission for Free Trade Zones. Additionally, the Secretariat for the Promotion of Investments and Exports (SPIEX) will function as its Technical Secretariat.
- New Concept for strategic investment
The Law introduces the category of “Strategic Investment,” applicable to investments aligned with the Government’s development plans and that generate a positive impact on the national economy. These investments must be formalized through a contract with the relevant sectoral authority, with evaluation criteria to be defined in the Law’s regulations.
- Mandatory registration for foreign investments
The Law requires that all foreign investments be registered with the Investment Directorate of MIFIC, obtaining the Certificate of Unique Registration of Foreign Investment (RUIE). This document is necessary to formalize the investment and access benefits based on economic activity. Foreign investments already operating in the country will have 120 days from the Law’s entry into force to complete their registration.
- Foreign investment contracts
Foreign investment contracts will be executed in accordance with applicable sectoral regulations. In the case of Strategic Investments, the investor must sign a contract with the corresponding sectoral authority, establishing the rights, obligations, and guarantees of both parties.
- Incentive regime
Incentives for foreign investors will be governed by existing sectoral and national laws. However, to access any benefits, it will be mandatory to obtain the RUIE issued by MIFIC.
- Protection of foreign investment
The Law guarantees fundamental rights for foreign investors, including:
- The use and enjoyment of property related to the investment.
- Free access to foreign currency exchange and its convertibility.
- Transfers of invested capital and remittance of profits abroad.
- Protection against non-commercial risks under current international treaties.
- Access to fiscal and sectoral incentives in accordance with the applicable legal framework.
- Obligations of the foreign investor
Investors must comply with the existing legal framework and submit quarterly reports to the sectoral authorities regarding the fulfillment of their investment plans. They must also provide financial and operational performance data to the Central Bank.
- Simplification of procedures and business formalization
MIFIC will be responsible for facilitating and expediting the registration and formalization of foreign investments, coordinating with the Public Registry, the General Directorate of Revenue, the Nicaraguan Social Security Institute, and other relevant institutions.
- Dispute resolution mechanisms
The Law establishes that any disputes between the State and an investor must first be resolved through friendly negotiation before MIFIC and CNIE. If no resolution is reached within 30 business days, the investor may resort to national courts or international arbitration, in accordance with Nicaragua’s existing treaties. Once a dispute resolution mechanism has been chosen, the investor may not seek recourse in another jurisdiction.
Conclusion
Law No. 1240 represents a significant change in Nicaragua’s regulatory framework for foreign investments, aiming to attract and regulate foreign capital while facilitating procedures and aligning with national development objectives. Monitoring the approval of the Law’s regulations will be essential to understanding its specific requirements, processes, and other applicable elements. Foreign investors should analyze this framework in detail and assess the legal and strategic implications for their projects in Nicaragua.