2017 Index of Economic Freedom

Nicaragua

overall score59.2
world rank98
Rule of Law

Property Rights31.1

Government Integrity27.4

Judicial Effectiveness15.9

Government Size

Government Spending80.8

Tax Burden77.2

Fiscal Health96.1

Regulatory Efficiency

Business Freedom59.0

Labor Freedom55.6

Monetary Freedom71.2

Open Markets

Trade Freedom81.0

Investment Freedom65.0

Financial Freedom50.0

Embed This Data

Create a Comparison Chart

See how Nicaragua compares to another country using any of the measures in the Index.

vs
Close
Download PDF
Quick Facts
  • Population:
    • 6.3 million
  • GDP (PPP):
    • $31.3 billion
    • 4.5% growth
    • 5.0% 5-year compound annual growth
    • $4,997 per capita
  • Unemployment:
    • 6.0%
  • Inflation (CPI):
    • 4.0%
  • FDI Inflow:
    • $835.0 million
Embed This Data

Nicaragua’s efforts to improve macroeconomic stability and enhance economic growth have been modest. Relatively well-controlled government spending has strengthened the management of public finance, but inefficiency and uncertainty in such other key policy areas as the regulatory and investment frameworks have impeded dynamic growth.

Overall, Nicaragua’s structural reform effort has been sluggish, and privatization has stalled. Significant state interference in the economy through state-owned enterprises or inconsistent regulatory administration introduces uncertainty into the market. Institutional weaknesses persist in protection of property rights and combating corruption. The inefficient judicial system enforces contracts inconsistently and is subject to political interference.

Close

Background

In the late 1970s, the Sandinista National Liberation Front, led by Daniel Ortega, overthrew the authoritarian Somoza political dynasty. Ortega became de facto ruler of a provisional FSLN-led government before free and fair elections in 1990, 1996, and 2001. Ortega lost all of these elections but was finally elected to a five-year presidential term with 38 percent of the vote in 2006. Since then, he has been reelected twice and has engineered constitutional changes that may permit him to retain power indefinitely. Despite his revolutionary rhetoric, Ortega has governed fairly pragmatically, accepting billions in subsidized oil shipments from Venezuela while embracing the U.S.–Central America–Dominican Republic Free Trade Agreement.

Rule of LawView Methodology

Property Rights 31.1 Create a Graph using this measurement

Government Integrity 27.4 Create a Graph using this measurement

Judicial Effectiveness 15.9 Create a Graph using this measurement

Private property rights are not protected effectively, especially for foreign investors, and contracts are not always secure. The judicial system suffers from corruption and long delays, and the politicized Supreme Court is controlled by Sandinista judges. Bribery of public officials remains a major challenge. The authoritarian and open-ended rule by President Daniel Ortega and his family is the greatest threat to the rule of law.

Government SizeView Methodology

The top individual income and corporate tax rates are 30 percent. Other taxes include a value-added tax and a capital gains tax. The overall tax burden equals 21.9 percent of total domestic income. Government spending has amounted to 25.3 percent of total output (GDP) over the past three years, and budget deficits have averaged 1.1 percent of GDP. Public debt is equivalent to 31.2 percent of GDP.

Regulatory EfficiencyView Methodology

The regulatory system lacks both transparency and clarity. The lack of employment opportunities has caused chronic underemployment. The state regulates and heavily subsidizes the energy and water sectors. The Ortega government was able to consolidate power partly because of the inflows of hundreds of millions of dollars of Venezuelan PetroCaribe oil subsidies.

Open MarketsView Methodology

Trade is important to Nicaragua’s economy; the value of exports and imports taken together equals 93 percent of GDP. The average applied tariff rate is 2.0 percent. The judicial and regulatory systems impede foreign investment, and state-owned enterprises distort the economy. Inadequate levels of financing reflect the low level of financial intermediation in the economy and continue to undermine private-sector growth.

Country's Score Over Time

View Chart of Scores over Time

Regional Ranking

rank country overall change
1Canada78.50.5
2Chile76.5-1.2
3United States75.1-0.3
4Colombia69.7-1.1
5Uruguay 69.70.9
6Jamaica 69.52.0
7Peru68.91.5
8Panama 66.31.5
9Saint Vincent and the Grenadines65.2-3.6
10Saint Lucia65-5.0
11Costa Rica 65-2.4
12El Salvador 64.1-1.0
13Dominica63.7-3.3
14Mexico63.6-1.6
15Guatemala 631.2
16Dominican Republic62.91.9
17Paraguay 62.40.9
18Trinidad and Tobago61.2-1.7
19The Bahamas61.1-9.8
20Nicaragua 59.20.6
21Honduras 58.81.1
22Belize58.61.2
23Guyana58.53.1
24Barbados54.5-13.8
25Brazil52.9-3.6
26Argentina50.46.6
27Haiti49.6-1.7
28Ecuador49.30.7
29Suriname48-5.8
30Bolivia47.70.3
31Cuba33.94.1
32Venezuela 27-6.7
See Entire Region List ›

View all countries ›

Back to Top