Nicaragua Gets Vote of Confidence with New OPIC Accord

July 30, 2004

GRANADA, Nicaragua — Theinvestment climate in Nicaragua took aturn for the favorable last week when theU.S. government-affiliated OverseasPrivate Investment Corporation (OPIC)concluded a new bilateral agreement withNicaragua to encourage safer direct foreigninvestment here.The new investment-promotionaccord, an updated version of a bilateralagreement signed in 1966, will streamlineprocedures in Nicaragua for U.S. companiesseeking private loans or political-riskinsurance from OPIC.The accord represents an importantboost of confidence from the U.S. afterseveral decades of tumultuous investmentexperiences here.“WE are a country that has recoveredcredibility as a result of a profound democraticprocess that includes institutions thatare apolitical, professional and modern,”said Foreign Minister Norman Calderaduring the signing of the accord with U.S.Ambassador Barbara Moore.Michael Lempres, director of OPIC’spolitical risk insurance division, agreeswith the minister’s assessment.“It is a bright time now for investing inCentral America, and we are doing our partto support it,” he said.LEMPRES said trade and investmentgo hand in hand. As more capital continuesto cross borders between Central Americaand the United States in the form of remittancesand trade, it is logical that foreigndirect investment in the region will continueto increase, he said.During the last fiscal year, 65% ofOPIC’s small business deals and 40% of itsinsurance projects came from CentralAmerica and the Caribbean, Lempres said.OPIC president and CEO Peter Watsonnoted that U.S. trade and investment withCentral America has already reached $20billion per year, and is expected to increasethree-fold pending the ratification of theU.S.-Central American Free TradeAgreement (CAFTA).“Most people don’t realize the importanceof U.S. – Central American trade inboth directions,” Lempres said. “U.S.exports to Central America since 1996have increased by 42% and are now at thesame level of combined exports to Russia,India and Indonesia.”TO stimulate increases in foreigndirect investment – especially in a part ofthe world that has a recent history of politicalinstability – OPIC offers political-riskinsurance for expropriations, political violence(including terrorism), and problemswith currency transfer. The investmentfirm also offers insurance against so-called“creeping expropriation” – governmentbreaches of concession contracts and indiscriminanttaxing practices.“If people are concerned about (investment)risks, we mitigate those risks,”Lempres told The Tico Times this weekduring a phone interview from Washington,D.C.OPIC currently has bilateral investmentaccords with every Central Americancountry, including Panama. Many of theaccords, however, are outdated and are inthe process of being updated and renewed,such as occurred last week in Nicaraguaand Honduras.Lempres acknowledged that the ratesof political-risk insurance vary from onecountry to the next and from one project tothe next, but declined to divulge specificrates in specific countries.In the case of Nicaragua, Lempres saidthe fact that OPIC is once again fully promotingdirect foreign investment here“says something about the degree of confidencein Nicaragua.” He noted that manyof the insurance and loans terms offered byOPIC are for 20 years, and would coverany change of government that could occurduring that period.IN neighboring Costa Rica, Lempressaid OPIC is aware of recent concessionproblems between the government and foreignoil and mining companies, but did notmention how or if the situations wouldaffect political-risk insurance assessmentsthere.Lempres said that generally OPIC doesn’tattract as many clients in Costa Rica, notbecause of a lack of investor interest, butbecause of a perception of political stabilitythere. Interest in OPIC support inNicaragua, meanwhile, has increased dramaticallyin the last year, he said.Minister Caldera said he hopes theaccord will facilitate projects that are consideredtoo risky to be financed byNicaragua’s private business or financialservice sector.OPIC currently is supporting sevenprojects in Nicaragua – from a SouthCarolina billboard company to a famousU.S. warehouse wholesaler – totaling $82million in insurance and loans. The corporation,which focuses on working withsmall and medium-sized business, represents$5 billion in projects throughoutLatin America.OPIC was formed as an independentagency of the U.S. government in 1971 tohelp U.S. businesses invest overseas andfoster economic development in emergingmarkets. The corporation claims tohave supported $150 billion worth ofinvestments in 150 countries, helpingcreate 690,000 host-country jobs and257,000 U.S. jobs during the last threedecades.

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