Published on March 7, 2011
The Nicaraguan textile and apparel industry is in a buoyant mood after a recovery in US demand last year helped lift the sector's exports by 14% to $1bn. Here government promotion agency ProNicaragua spells out some of the country's competitive advantages.
Nicaragua has positioned itself as one of the most dynamic platforms in the western hemisphere for manufacturing and textiles operations, with exports that reach the largest markets in the world.
Indeed, the country's textile and apparel industry is an important development engine for the national economy. In 2010, it employed nearly 52,000 qualified workers and exported over US$1bn in apparel products, an increase of 14% versus 2009.
In terms of volume, textile and apparel exports reached 362.4m square metre equivalents (SME), increasing by 17.9% when compared to 2009.
Moreover, Nicaragua has become an important player in the global textile and apparel industry. During the past 10 years, the sector has experienced a 10.5% growth in the value of exports and a 14.3% growth in volume exported. By 2010, Nicaragua was the 12th largest worldwide apparel supplier to the US in volume.
For investors, Nicaragua has a number of competitive advantages, including:
High productivity and competitive labour costs
Nicaragua offers one of the region's most competitive cost structures, giving companies an edge in the global market - especially those looking to establish labour-intensive operations, such as textiles and apparel activities. The country's labour force of 2.3m is one of the most competitive and productive in the region.
Speed to market leading to speed to profit
Nicaragua's strategic location in the heart of Central America allows companies to deliver products to the US in as little as 50 days from the start of the program to shipment out of the Free Zone area. Due to Nicaragua's proximity to the US, ships reach southern US ports within three to five days. Additionally, it takes 2.5 hours of flying time to Miami and Houston and there are eight daily direct flights to main US airports.
Nicaragua's safety and business climate
According to a study carried out by CID Gallup Latin America, Nicaragua had the lowest incidence of crime in 2010 in Central America. The study measures the crime rate and population threatened by criminal acts, taking into account factors such as the risk of leaving home and drug-trafficking in school systems. The 2011 Doing Business, published by the World Bank, ranks Nicaragua as the top location in Central America in starting a business, investor protection, and closing a business.
The implementation of DR-CAFTA and its benefits
The Dominican Republic-Central American Free Trade Agreement (DR-CAFTA) has helped eliminate duties for most of Central America's exports to the US and integrates the region's economies into a single trading block. DR-CAFTA's general rule of origin for apparel articles is 'yarn-forward,' meaning duty-free benefits apply when cut and sew operations take place in Nicaragua using regional yarn and fabric. Nicaragua also enjoys preferential market access to countries such as Mexico, Taiwan, Canada, Chile and the European Union.
Attractive fiscal incentives
The main legislation that governs foreign investment consists of the Foreign Investment Promotion Law (Law 344) and its bylaws, establishing a series of solid legal guarantees for foreign investors. Additionally, Nicaragua offers significant tax benefits under the Free Zone Regime for companies seeking to establish export-oriented operations. These include 100% exemption on income tax, Value Added Tax (VAT) and capital gains and property tax for a period of ten years.
Some of Nicaragua's main investment opportunities in the textiles and apparel sector include:
- Vertically-integrated production of natural and synthetic knit fabrics.
- Yarn manufacturing for woven apparel.
- Manufacturing of T-Shirts and all kinds of knitwear, made with natural and synthetic fabrics.
- Manufacturing of men's wool coats.
- Jeans and twill garments.
- Trims, screen printing and embroidery services.
- Production of boxers, brassieres, pyjamas, woven shirts, shorts and baby wear, among other types of garments.
The presence of leading international companies successfully operating in Nicaragua supports the country's credentials for establishing textile and apparel operations. Various world renowned brands source garments here, including Polo Ralph Lauren, Liz Claiborne, North Face, Wrangler, Lee Jeans, Levi's, Dockers, Dickies, Hanes and Under Armour. Apparel companies operating in Nicaragua also service major retail chains such as Target, JCPenney, Wal-Mart, Kohl's and Gap.
For more information on Nicaragua and the investment opportunities the country offers, contact us at: