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Legal market overview

Interest in Nicaragua continues to increase, reflecting GDP growth that has been estimated at around 5% in 2015, although the country remains one of the least developed and the second poorest in Latin America and the Caribbean.

Of particular interest to investors and the international audience is the planned interoceanic ‘Grand Canal of Nicaragua’, which would involve a $40bn-$50bn investment by the end of the decade. The proposed project is strongly supported by the country’s population but, on the flipside of potential wealth generation and economic growth, others point to the inevitable impact on displaced populations or damaged wildlife and ecosystems.

After years of delay, the Tumarín hydroelectric power plant finally received its $1.1bn funding in April 2015. The 253MW power plant, which is to be developed by Centrales Hidroeléctricas de Nicaragua, is now projected to commence operations in February 2019.

Besides renewable energy, the mining, banking, tourism and service sectors are also growing. Notably, Grupo Financiero Ficohsa recently purchased Citibank’s Nicaraguan businesses five months after the bank’s announcement that it would divest its commercial operations in six Latin American markets. In the real estate space, hotels and other tourism infrastructure assets have been a strong source of activity throughout the past decade, but the majority of law firms also now report an increased demand for advice on commercial and office space developments, as well as agro-industrial investment and residential projects, particularly in Managua. Property title disputes remain a major issue and the raft of regulations in place continue to make property purchases risky and difficult but the Nicaraguan government’s work on mapping properties raises hope of incentivising a larger volume of investor traffic. In general, the country is relatively open to foreign investment and poses fewer restrictions than some others in the region.

Amendments to the new Nicaraguan tax law, which has been in effect since 2013, were enacted in December 2014 and include an increased tax rate on the capital income of non-residents and an elimination of VAT self-assessment; these changes have generated a steady inflow of demand for legal advice.

As regional firms continue to expand across Central America and beyond, the legal market in Nicaragua has seen some new arrivals with both Pacheco Coto and BLP opening local offices in 2013 and 2014 respectively. They join other regional firms with a presence in Nicaragua, including Lexincorp, Arias & Muñoz, Consortium - Centro América Abogados and García & Bodán. Local firms such as Alvarado y Asociados provide excellent service and ensure the market remains a competitive one for these regional players.

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