Nicaragua a Haven of Strong Economic Growth

Posted on 02/29/2016 ~ Categorized as Invest
Nicaragua a Haven of Strong Economic Growth

It was almost exactly a month ago that China released their official numbers on 2015 GDP growth. The official number, which obviously needs to be taken with a grain of salt, is 6.9% GDP growth for 2015. Many have disputed this number, claiming it to be even lower, with some economists such as Xu Dianqing, an economics professor at Beijing Normal University and the University of Western Ontario, claiming it to be as low as 4.3%.

Even if you do accept the official government figures, however, this growth rate is still the marking of a new era for the Chinese economy. This is the slowest growth rate for China in two decades. In addition, government officials have claimed that growth rates at or under 7% are the “new normal” for the Chinese economy. That’s their official terminology. What this means is that even the strongest driver of the international economy over the past several decades is slowing down. And let’s not even talk about the United States or the European Union, who are barely clinging to 1 and 2% annual GDP growth rates. Basically, the Western world is slowing down in terms of economic growth, and this is leaving investors reeling, looking for places to put their money.

The good news is that even while the Western economies and China slow down, there are still countries experiencing very strong economic growth. Central America, for example, is home to some of the world’s fastest growing economies. Countries like Belize, with 3.6% GDP growth in 2015 and Costa Rica, with 3.5% 2015 GDP growth are strong regional economic drivers.

Nicaragua especially is seeing some of the best economic growth of the region, and really of the entire world. In 2014, Nicaragua’s economy grew by 4.7%. Its average growth over the past five years has also been 4.7%. Nicaragua is even getting recognized by reputable international organizations for its strong growth. The World Bank’s president for Central America, for instance, stated that, “Nicaragua’s performance is one of the best we have in the Latin America region.”

Construction Boom

One of the strongest economic drivers in Nicaragua is construction. Rodrigo Pereira, the president of Nicaragua’s Chamber of Construction, stated that construction in Nicaragua grew by a whopping 18% in 2015. These are very impressive numbers, and are certainly indicative of strong overall economic growth. The report by Mr. Pereira also reveals that private sector construction constituted a large amount of this growth, with 2015 Q2 private sector construction growing 20% from its value in the second quarter of 2014.

It has been noted by many in the industry that strong construction growth is one of the main factors that drives an economy upward. For example, to return to the discussion of China, one of the major reasons that economists are so skeptical about the government’s official 6.9% number is that the construction industry did very poorly in China last year. Growth of construction and industry is estimated to have been between 0 and 2% in 2015 for China.

We can expect strong construction growth in the future as well. Mr. Pereira expects 2016 construction growth to be around 17%. Nicaragua has set funds aside for the construction of 11,025 new houses across the country, as well as for the construction of many new community centers and health clinics.

Infrastructure Improvements Across the Board

The Nicaraguan government has many other plans for improvements to the Nicaraguan infrastructure. For instance, earlier this week, the government approved plans for many infrastructure improvement projects across the country. Funds have been secured for the building of 48.4 km (30 miles) of new highway, as well as the expansion of 40 km (24.9 miles) of existing highways. Funds have also been secured and set aside for the expansion of the power grid in rural areas, as well as the creation of 3 electrical sub-stations.

Nicaragua made infrastructure improvements by way of telecommunications last fall, when many of their cities gained access to 4G data capabilities. In the future, the Nicaraguan government has plans to put 2 satellites into space for the purposes of improving broadband capabilities. They expect both satellites to go up by 2017.

All of these improvements are in addition to the plans for the construction of the Nicaraguan interoceanic canal, which is slated to begin construction sometime around the end of 2016.

The Dollar Getting Stronger Here

Another factor contributing to the growth in Nicaragua’s economy is the relationship of its currency, the cordoba, with the dollar. The Nicaraguan Central Bank has for years now used a policy of sliding devaluation of the cordoba against the dollar, at a rate of 5 percent devaluation per year. This makes Nicaragua an especially attractive nation for foreigners to invest in, in areas such as manufacturing especially where goods will be sold in the US markets.

In addition, the steady devaluation of the cordoba against the dollar makes Nicaragua an attractive nation for foreigners to vacation, live or retire in. With the cordoba’s devaluation against the dollar, even if one’s income in US dollars remains the same, one will be able to achieve a greater quality of life as time goes on in Nicaragua.

All of this is great news for the country of Nicaragua, and those who have vested interests here. However, it can also be great news for those who are not currently tied into the economy of Nicaragua. If you are an investor and feeling uncertain about the bearish American markets or the slowing pace of China, and are looking for a country with strong growth in which to invest, you may want to consider Nicaragua. With its impressive macroeconomic growth, and the serious improvements made to the infrastructure of this nation, Nicaragua is a solid bet for a country that is going through strong growth, and is predicted to continue to do so in the future. If you would like to talk to me directly about making an investment in Nicaragua, you can do so by emailing me at adam@escapeartist.com.


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