2015 Index of Economic Freedom


overall score57.6
world rank108
Rule of Law

Property Rights10.0

Freedom From Corruption28.0

Limited Government

Government Spending76.6

Fiscal Freedom78.4

Regulatory Efficiency

Business Freedom58.0

Labor Freedom56.7

Monetary Freedom67.8

Open Markets

Trade Freedom85.4

Investment Freedom65.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 6.1 million
  • GDP (PPP):
    • $27.9 billion
    • 4.2% growth
    • 3.2% 5-year compound annual growth
    • $4,554 per capita
  • Unemployment:
    • 7.2%
  • Inflation (CPI):
    • 7.4%
  • FDI Inflow:
    • $848.7 million
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Nicaragua’s economic freedom score is 57.6, making its economy the 108th freest in the 2015 Index. Its score is 0.8 point lower than last year due to declines in half of the 10 economic freedoms, including property rights, monetary freedom, labor freedom, and the management of government spending, that outweigh modest improvements in business freedom and freedom from corruption. Nicaragua is ranked 18th out of 29 countries in the South and Central America/Caribbean region.

On a net basis, economic freedom in Nicaragua has dropped by 1.2 points over the past half-decade. Declines in half of the 10 economic freedoms include large drops in property rights, labor freedom, and investment freedom.

Nicaragua’s shaky institutional infrastructure makes any score declines potentially damaging. Protections for contracts and property rights are uneven, reflecting the incompetence of the judiciary. Corruption remains pervasive, and attempts to target corrupt officials have turned into political battles. Entrepreneurs find it hard to do business, and the labor market is rigid. This forces many small businesses into the informal sector. The inefficiency of the financial sector inhibits capital formation.



Despite a constitutional prohibition, Sandinista President Daniel Ortega was re-elected in November 2011, and constitutional changes approved by the National Assembly early in 2014 will allow him to stay in power indefinitely. Ortega has weathered domestic opposition thanks to economic assistance from Venezuela, divisions among his opponents, and a policy agenda that maintains relative economic openness. The Central America–Dominican Republic–United States Free Trade Agreement (CAFTA–DR) has helped to diversify the economy. Agricultural goods and textile production account for 50 percent of exports. Nicaragua is the second poorest nation in the Americas. Much of the workforce is underemployed in the formal sector. The government has granted a Chinese company a concession to construct a transatlantic canal, but the feasibility of the project has been questioned.

Rule of LawView Methodology

Property Rights 10.0 Create a Graph using this measurement

Freedom From Corruption 28.0 Create a Graph using this measurement

Democracy was further weakened in 2014 by Daniel Ortega’s authoritarian tendencies and efforts to subvert the constitution for political benefit. Ortega’s significant influence over all state organs, including the Supreme Court and the Supreme Electoral Council, has undermined checks on the executive. Protection of private property rights is not enforced effectively, and contracts are not always secure.

Limited GovernmentView Methodology

Nicaragua’s top individual and corporate income tax rates are 30 percent. Other taxes include a value-added tax and a capital gains tax. With adjustments in the income tax thresholds, revenue generation has reached 18.9 percent of domestic income. Public expenditures equal 28 percent of gross domestic product, and public debt equals approximately 42 percent of the domestic economy.

Regulatory EfficiencyView Methodology

Requirements for launching a business are not time-consuming, but the licensing process still takes more than 200 days to complete. Labor regulations are not efficient enough to support a vibrant labor market. Substantial energy and cash subsidies from Venezuela have distorted domestic prices, although the level of that aid could fall because of Venezuela’s growing economic problems.

Open MarketsView Methodology

Nicaragua’s average tariff rate is 2.3 percent. Imports of used cars and genetically modified food are restricted. The legal and regulatory environment may be difficult for foreign investors. The small financial sector has been evolving, particularly in the urban areas. A limited number of commercial credit instruments are available to the private sector, and capital markets are rudimentary.

Country's Score Over Time

Bar Graph of Nicaragua  Economic Freedom Scores Over a Time Period

Country Comparisons

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Regional Ranking

rank country overall change
3Saint Lucia70.2-0.5
4The Bahamas68.7-1.1
5Uruguay 68.6-0.7
6Saint Vincent and the Grenadines681.0
9Jamaica 67.71.0
10Costa Rica 67.20.3
12El Salvador 65.7-0.5
13Trinidad and Tobago64.11.4
14Panama 64.10.7
15Paraguay 61.1-0.9
16Dominican Republic61-0.3
17Guatemala 60.4-0.8
18Nicaragua 57.6-0.8
19Honduras 57.40.3
28Venezuela 34.3-2.0
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