Where the Free Zones in Nicaragua are located and what they produce
- 17 June 2021
Companies belonging to the Free Zones System currently provide 121,521 jobs and their exports exceed US$2,600 million per year, thus being the main export sector in the country.
Free Zones play a crucial role in the economic development of Nicaragua, mainly in terms of industrialization and job creation. According to the National Commission of Free Zones (CNZF, for its acronym in Spanish), companies belonging to the Free Zones System currently provide 121,521 jobs and their exports exceed US$2,600 million per year, thus being the main export sector in the country.
A Free Zone is defined as any area of the national territory, without a resident population, under the supervision of the General Directorate of Customs Services (DGA, for its acronym in Spanish), subject to special customs control and regulated by the CNZF. Free Zones can be located anywhere in the national territory, except protected areas and national parks.
On the other hand, a Managed Free Zone (ZOFA, for its acronym in Spanish) refers to companies that operate under the Free Zone System but are authorized by the CNZF to establish outside of an Industrial Park. These exceptions are made considering the nature of its production or service processes, the origin of its raw material, or other characteristics of the company that require it. The minimum space authorized as ZOFA is 2,500 m2 of industrial space.
Either within an Industrial Park or as a ZOFA, companies decide to establish operations under the Free Zones System to take advantage of the tax incentives offered by the Industrial Export Free Zones Law (917). These incentives allow them to greatly reduce their operating costs, making Nicaragua an attractive destination to invest, which is evidenced by the growth of the Free Trade Zones established in the country.
To register under the Free Zones System, companies must be export-oriented; in other words, they must export 100 percent of the total sales of their goods or services. Likewise, they must meet a series of requirements to register under the Free Trade Zone System.
Currently, in Nicaragua there are a total of 49 industrial parks, within which 223 user companies are established. The Free Zones are distributed throughout the country, having presence in almost all the departments of Nicaragua.
Managua is the department with the highest quantity of Free Zones in the country, with 129 user companies and 20 industrial parks. It is also the department with the greatest variety of sectors, since it has many Textile-Clothing, Outsourced Services, and Agroindustry companies.
The second department with the highest quantity of Free Zones is Estelí, which has 42 user companies and 6 industrial parks. Its most representative sector is Tobacco, largely due to its geographical location and climatic conditions.
In third place, at the national level, is the department of Masaya, with 13 user companies and 7 industrial parks. Here the Textile-Clothing sector predominates almost entirely, with a small presence of the Automotive Harnesses sector, and Agroindustry.
They are followed by Leon, with 9 user companies and 3 industrial parks; Chinandega, with 9 user companies and 4 industrial parks; Carazo, with 5 user companies and 4 industrial parks; Granada, with 4 user companies and 1 industrial park; and the Autonomous Region of the South Caribbean Coast (RACCS, for its acronym in Spanish), with 4 user companies.
Finally, we can find Matagalpa, which has 2 user companies and 2 industrial parks; Rivas, which has 2 user companies and 1 industrial park; the Autonomous Region of the North Caribbean Coast (RACCN, for its acronym in Spanish), which has 2 user companies; Madriz, which has 1 user company and 1 industrial park; and Nueva Segovia with 1 user company.
At the national level, Free Zone companies are developed in five large sectors: Textile-Clothing (32%), Tobacco (17%), Outsourcing Services (14%), Agroindustry (13%), and Automotive Harnesses (2%). At the sub-sector level, these companies have diversified their operations to include more sophisticated products and services.
The growth of Free Zones, both in the number of companies established and in the diversity of sectors and sub-sectors served, shows the performance and significance of the Free Trade Zone System in the country. This in turn is an important indicator of the development of the Nicaraguan economy.
Contact us to learn more about the Nicaraguan Free Trade Zone Regime and the investment process in the country.