VZCZCXYZ0000
PP RUEHWEB

DE RUEHMU #0907/01 2592130
ZNR UUUUU ZZH
P 162130Z SEP 09
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC PRIORITY 4559
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

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
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