NICARAGUA PASSES RETIREES AND RESIDENTS LAW TO BOOST FOREIGN INVESTMENT

UNCLAS MANAGUA 000907 SENSITIVE SIPDIS USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN E.O. 12958: N/A TAGS: EIND EINV ECON NU SUBJECT: NICARAGUA PASSES RETIREES AND RESIDENTS LAW TO BOOST FOREIGN INVESTMENT REFS: A) MANAGUA 799, B) 07 MANAGUA 1947 SUMMARY -------------- ¶1. (SBU) The National Assembly approved a foreign retirees and residents law to promote Nicaragua as a retirement destination. The law was drafted in close consultation with the private sector, which sought legislation that would provide a stimulus to the construction, real estate, and tourism industries (Ref A). The Government of Nicaragua (GON) plans to promote the new law in the United States, Canada, and Europe. Industry representatives caution, however, that passage of the law is only the first step in a series of actions that the GON and private sector should take to help Nicaragua compete with its neighbors to attract foreign investors. While passage of the new law is important, promoting Nicaragua as a retirement destination against strong competition from Costa Rica and Panama will be a difficult challenge, in light of endemic political tension and a major infrastructure deficit. PASSAGE OF FOREIGN RETIREES AND RESIDENTS LAW -------------- ¶2. (U) On June 18, the National Assembly approved a new Foreign Retirees and Residents law (694/2009),replacing a Retiree Law (628/1974),to promote Nicaragua as a retirement destination. The law provides tax exemptions for imported household goods and scientific or professional equipment, personal vehicles and car rentals, and construction materials to build homes for personal use. Retirees and residents are also exempt from paying a guaranty bond, a requirement for foreigners seeking residency in Nicaragua. RESIDENCY REQUIREMENTS -------------- ¶3. (U) The law states that a foreign resident or retiree must be at least 45 years old with a monthly income of $600 to $750 to receive tax exemptions and other incentives. Nicaraguan nationals who reside outside of the country are also eligible to apply for residency and the benefits under this law. All applicants who qualify may work only if they receive a work permit from the government. They are not allowed to seek employment in the public sector, or receive government funds for their entrepreneurial or charitable activities, unless their work promotes scientific or intellectual advancement. Beneficiaries of this law are not allowed to participate in politics or promote any actions or activities that would harm Nicaragua's image as a tourist destination or undermine�0A;its cultural, ethnic, and religious heritage. INTUR TO IMPLEMENT LAW -------------- ¶4. (U) The Institute of Tourism (INTUR) is the government agency responsible for the implementation of the law. To apply for residency, an applicant must submit several documents with Spanish translation and certification by INTUR or a Nicaraguan consulate. These include a birth certificate, passport, monthly pension or earnings statement, marriage certificate (if applicable),a letter or certificate of health from a doctor, a police report stating applicant has no criminal record, and a list of household goods and/or a description of the vehicle to be imported. Applicants who qualify as residents or retirees under the law will be classified as special tourists. They must live in Nicaragua for at least six months out of the year unless they receive permission to depart the country for medical reasons or they are unable to travel here. AGGRESSIVE INDUSTRY LOBBYING -------------- ¶5. (U) The law was drafted in close consultation with the private sector, which sought to help the construction, real estate, and tourism sectors recover from the negative impact of the global economic crisis. Aggressive lobbying convinced legislators that this law would help attract foreign investment and provide a boost to the Nicaraguan economy. Lucy Valenti, President of the Nicaraguan Chamber of Tourism (CANATUR),told Econoff that CANATUR supported the law because it offers good incentives to attract foreign retirees and investors. GON EAGER TO PROMOTE NICARAGUA... -------------- ¶6. (SBU) The GON believes that the new law is a positive step toward attracting investors and retirees to Nicaragua. Javier Chamorro, Executive Director of ProNicaragua, the government's investment promotion agency, explained that GON officials plan to promote Nicaragua as a retirement destination to investors in the United States, Canada, and Europe. He announced that ProNicaragua will participate in the American Association of Retired Persons (AARP) National Member Event and Expo on October 22-24. ...BUT MORE WORK NEEDS TO BE DONE -------------- ¶7. (SBU) Some industry representatives, however, consider the passage of the law is only the first step in a series of actions that the GON and private sector should take to help Nicaragua compete for foreign residents and retirees with Costa Rica, Panama, and El Salvador. One suggestion they had was that the GON should reduce the paperwork required for residency applications. They explained that Costa Rica and Panama have application processes that require less red tape. They also recommended that the GON and private sector work together to improve basic infrastructure, such as water, electricity, and roads. They expressed concern that Nicaragua will need to build more hospitals, clinics, and other medical facilities to serve residents and retirees. They noted that Nicaragua lags behind its Central American neighbors in these areas and questioned whether the GON and private sector will take these necessary steps to make it an attractive retirement destination. COMMENT -------------- ¶8. (SBU) While the GON's efforts to support the development of the tourism industry and provide a stimulus to the ailing construction and real estate sectors are commendable, promoting Nicaragua as a retirement destination will be a challenge. The country's unstable political situation, weak protection of property rights, widespread disregard for the rule of law, and lack of basic infrastructure, including modern medical facilities, are all significant shortcomings. These factors cannot be overlooked by the GON and private sector, and they put Nicaragua at a huge competitive disadvantage vis-a-vis its neighbors (Ref B). CALLAHAN