Growth by Economic Sector in 1997. Copyright: Thinkquest Team 17749

However, there are some areas which still remain a problem for investment which need to be remedied. One problem is the national infrastructure--roads are substandard where they exist and there are not enough suitable ports for shipping. The judicial system in Nicaragua is cumbersome and inadequate in general and incredibly slow-moving. The rules are sometimes not clear and can be changed suddenly while judicial resolution of disputes are sometimes "questionable" and "arbitrary." Even when ruling are finally made, the enforcement of them is anything but a certainty. One classic example are the thousands of property disputes which have rendered many premium pieces of property in Managua and elsewhere unavailable. Also, corruption, especially bribery, begins at the lowest levels of business and government and extends upward. Business success often depends on who one knows and contacts are therefore of the utmost importance. Although the Aleman administration has eliminated most non-tariff barriers to investment and eased the rates, taxes can reach 50% of the products face value and many investors complain of steep secondary customs costs. However, Nicargua is in the process of instituting import tax reductions and by the year 2002 they will be the lowest in Central America. On the good side, foreign investors are allowed to remit all of their profits and foreigners are not required to share ownership of the enterprise with nationals. Another plus, which is sure to damage the country in the long- term, is that there are no pollution controls so industries need not spend money on expensive pollution preventatives.

The private banking system in Nicaragua is generally considered to be sound although there is no deposit insurance and total deposits have grown greatly over the last few years to reach a total of 837 million dollars by the middle of 1997. Of the thirteen commercial banks, all but one have ties to North American and European banks and deposits of dollars and cordobas are accepted. Dollars can be purchased or sold through the banks or through a legal secondary market which offers a better exchange rate. Interest rates are established by the market and they are currently at about 16 to 25 percent on short-term loans and 14 to 20 percent on long term loans, but long-term financing is scarce.

A major concern of potential investors has been the threat of political violence and turmoil and it was just that threat which has kept investors out of Nicaragua for almost two decades. However, political turmoil in Nicaragua has declined steadily since the inauguration of Violeta Chamorro and the Sandinista party, which has typically been behind the disruptions, seems to be losing its potency (in the last major show of strength in which the party leaders were estimating a minimum of 40,000 in participation only 8,000 appeared). In the last two years, students have protested three times by digging up the cobblestone streets and building blockading in front of the universities and defacing public property. However, each protest has been weaker and found less support than the last. Aside from the students, transportation and agriculture workers are the most likely to stage labor protests, but these are rarely potent.