The Public-Private Partnership Law N. 935 in Nicaragua pursues economic growth through partnerships between the government and the private sector. The aim is to combine the abilities and resources from both sectors so that risks and responsibilities are shared.
Nicaragua is in the third place in Central America, after Panama and Dominican Republic, in relation to its steady economic growth of almost 5% on an annual basis. In 2016, the foreign direct investment (FDI) registered $1,442 million in income. The key pillars were the citizenship security and communications and consent of the private sector.
With the purpose of continue generating this growth, Nicaragua´s administration passed the Public-Private Partnerships Law (PPP) which allows the government to delegate daily operations to the private sector. This way, the government can focus on the development of laws, planning and regulations that contribute to the development of the country.
How does this Law works?
The aim of the PPP Law is to regulate the participation of the public sector with the private one in the planning, procurement, financing, execution, operation and termination of projects within the public-private association. This is applicable to projects for infrastructure and public services sourcing. The Ministry of Finance and Public Credit, through the General Directorate of Public Investments, is in charge of the preparation and coordination of plans, policies and regulations for the development of the good performance of the public-private contracting modality. In this context:
- providers can be natural persons or legal entities, national or foreign, that are part of the public bid of the project
- once an APP project is awarded, a Nicaraguan sole purpose commercial partnership should be established in a term of 30 business days
- all PPP projects should be related to the embodiment of the general good and demonstrate through economic studies that they are the best alternative in terms of efficiency, effectiveness and sustainability
- all PPP contracts should state the validity term of the contractual relationship.
Project finance
- Self-sustainable arising from collected fees directly from users that cover all project costs during the valid term of the contract and allow the private participant to obtain a private or financial profitability based on the undertaken risk.
- Subvencionados that require financial resources from the government as transfers or securities that imply a tax expenditure from the Ministry of Finance, in case of non-payment from users or when they are enough to cover the project costs.
The private participant
Besides complying with the obligations, levels of service, standards and technical specifications established in the contract, the private participant must allow and facilitate those inspections and audits with the aim of verifying the performance and prove the compliance of quality conditions and financial compensation. Moreover, he or she must present the audited financial statements by an external provider. Financial statements are published on an annual basis in the webpage of the Ministry of Finance.
Get help from the experts
According to the Nicaraguan administration, some projects are already being structured under this modality. These projects ensure commercial enablement, merchandise and people mobility, access to new production centres, bordering areas, ports and airports.
Contact our team to obtain more information about the PPP modality and/or how to grow your business in Nicaragua.
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