Country Presentation ● 2016

Assessment and decision making Implementation of the project OUR SERVICES Information about Nicaragua and business opportunities Customized information packages Organization of site visits: meetings with companies and institutions Support with information on the structure of operational costs and fiscal charges Identification of options for locations for real estate Legal advice Directory of suppliers of related goods and services Support and facilitation Facilitate and expedite government procedures Support in facilitating the exporting process Information about business opportunities in the Caribbean Coast through our regional office PRONiCaribe Assessment and decision making Implementation of the project Aftercare PRONicaragua is the Official Investment Promotion Agency of the Government of Nicaragua.

COUNTRY PROFILE Capital Managua Area 130,373.4 km2 Official Language Región Central / Central Region Región Pacífico/ Pacific Region Región Caribe/ Caribbean Region Capital Managua Area 130,373.4 km2 Official Language Spanish Population 6.2 million Currency Córdoba Exchange Rate (2016 Average) C$28.62 = US$1.00 Time Zone UTC/GMT -6 hours Source: Central Bank of Nicaragua.

STRATEGIC LOCATION

2015 ECONOMIC FIGURES Gross Domestic Product US$12.69 billion (4.9% growth vs 2014) GDP per capita US$2,027 Exports US$4.89 billion FDI Inflows US$1.22 billion* Gross International Reserves US$2.49 billion (2.35 times the monetary base) Inflation 3.05% Devaluation of Currency 5% annual vs. US Dollar Sources: Central Bank of Nicaragua, Ministry of Development, Industry and PRONicaragua. *Estimates Data

ECONOMIC GROWTH Real GDP Growth (%) 2011 2012 2013 2014 2015 6.2 5.1 4.5 4.7 4.9 Min Zhu, Deputy Managing Director of the IMF, described Nicaragua´s economic growth as “excellent” as it has outperformed Latin America´s average growth rate of 1.2% and Central America´s 2.2%. Source: Central Bank of Nicaragua.

GDP GROWTH IN THE REGION HONDURAS GDP 2015: 3.6% Average of 5 years: 3.5% GUATEMALA GDP 2015: 4.1% Average of 5 years: 3.8% NICARAGUA GDP 2015: 4.9% Average of 5 years: 5.1 EL SALVADOR GDP 2015: 2.6% Average of 5 years: 2.1% PANAMA GDP 2015: 6.0% Average of 5 years: 8.4% COSTA RICA GDP 2015: 3.5% Average of 5 years: 4.0% Source: Central Bank of Nicaragua and IMF.

ECONOMIC STABILITY Nicaragua maintains positive relations with different multilateral organizations such as the International Monetary fund (IMF), World Bank (WB), the Inter-American Development Bank (IDB), and the Central American Bank for Economic Integration (BCIE) On July 2015, Moody´s announced an improvement in the credit rating of Nicaragua, going from B3 to B2. On December 2015: Fitch Ratings assigned B+ for the first time to Nicaragua with steady perspective. On February 2016: Standard & Poor's assigned B+ for credit ratings, local and foreign currency. The perspective of the qualification is long term steady. “¨The macroeconomic policies implemented by the Government of Nicaragua are positive, and should serve as an example for Latin America” Min Zhu, Deputy Managing Director of the IMF

EVOLUTION OF FOREIGN DIRECT INVESTMENT According to preliminary statistics from 2015, the sectors that registered more FDI inflows were: telecommunications, industry and commerce and services. Source: Central Bank of Nicaragua, Ministry of Development, Industry and Trade and PRONIcaragua.*Estimated data

EVOLUTION OF EXPORTS For 2015, total exports reached US$4.9 billion. The main export destinations were: the United States, Central America, Mexico, the European Union and Venezuela. Source: Central Bank of Nicaragua.

2015 Main Export Products (% of total value) Textile and Apparel (26.8%) Cigars and Tobacco (4.5%) Automotive Harnesses (11.7%) Dairy Products (4.0%) Bovine Meat (9.4%) Sugar (3.2%) Coffee (8.6%) Shrimps (3.1%) Gold (6.5%) Peanuts (2.1%) Source: Ministry of Development, Industry and Trade.

Access to 1.5 billion people AN IDEAL EXPORT PLATFORM Access to 1.5 billion people Free Trade Agreement Preferential Access Agreement Solidarity Union Agreements Central American Common Market Agreements under Negotiation Source: Ministry of Development, Industry and Trade.

MARKET ACCESS Nicaragua constantly seeks to increase its access to the world’s most important markets in order to consolidate itself as the ideal export platform. Agreements Countries Free Trade Agreements United States, Mexico, Panama, Taiwan, Dominican Republic, Chile & European Union Central American Common Market Nicaragua, Guatemala, El Salvador, Honduras & Costa Rica. Additionally, free movement of capital, services and human resources among CA-4 countries. Generalized System of Preferences Japan, Norway, Canada, Russia and Switzerland. ALBA agreement Venezuela, Ecuador, Granada, Saint Lucia, Bolivia, Cuba, Antigua & Barbuda, Dominica, and Saint Vicente and the Grenadines Agreements under Negotiation South Korea, Canada, Peru, Bolivia. ALADI (Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay, Venezuela y Cuba) Source: Ministry of Development, Industry and Trade.

Demographic Indicators LABOR FORCE Demographic Indicators Population under 39 years old 76.1% Unemployment* 6.7% Labor Force* 3.2 million Underemployment 46% Source: Central Bank of Nicaragua. *2014 third quarter estimated data

MODEL OF DIALOGUE AND CONSENSUS The Government of Nicaragua, the private sector and workers coordinate efforts and design strategies to: Promote economic development Generate new decent jobs Reduce poverty       Governmental entity chaired by the President with government and private sector representatives, to follow up on agreements and promote better working relationships. Signing of tripartite agreement between government, private sector and union leaders to fix minimum wage increases and social responsibility strategies in the long term. The model of dialogue and consensus has been included in the article 101 of the Political Constitution of Nicaragua. More than 100 laws passed by consensus with the Superior Council of the Private Enterprise (COSEP).

DEVELOPING THE ENERGY SECTOR Since 2007, the Government of Nicaragua set out to: increase generation capacity, Expand coverage, and go green, as part of its key development strategies of the country. Installed Capacity: 1,346 MW Installed Capacity: 819 MW Expected Capacity: 1,666 MW Thermal Renewable Energy Installed capacity has increased 64% since 2007. Coverage has reached 85% of the national territory. Source: Nicaraguan Energy Institute.

LEGAL FRAMEWORK FOR FOREIGN INVESTMENT The Foreign Investment Promotion Law (344) offers investors fundamental guarantees such as: Full currency convertibility Freedom to expatriate all capital and profits Full international ownership No discriminatory treatment for foreign investors Full protection of intellectual property rights, patents, and brands Access to loans through local banks, according to their terms and conditions of approval. Nicaraguan legislation allows the setup of companies with 100 percent of foreign capital; in other words, the participation of national partners is not necessary. Additionally, the Mediation and Arbitration Law (Law 540) governs two alternate methods to the judicial process to expeditiously solve any dispute resulting from contractual relations between parties.

FREE ZONE REGIME

GEOGRAPHIC LOCATION Sector # of Companies Share Apparel 81 39% Tobacco 33 16% Agroindustry 27 13% Outsourcing Services 25 12% Automotive Harnesses 5 2% Other 36 17% Total  207 100% Department with free zones Department without free zones Source: National Free Zone Commission

FREE ZONE EVOLUTION 2007 2015 Change Industrial Parks 32 50 56% Companies 120 207 73% Employment 88,750 110,314 24% Industrial Space (m2) 1,000,051 1,901,876 90% Exports (millions of US$) 1,106 2,557 131% Exports / Employment 12,459 23,182 86% Employment / Companies 740 533 -28% Source: National Free Zone Commission

FISCAL INCENTIVES Free Zones Incentives Law (Law 917) Nicaragua offers significant fiscal incentives under the free zones regime for industrial companies with transformation or value added processes and that will exporting all of their production. The law is administered by the National Free Zone Commission. 100% tax exemption of: Income tax 1 Import taxes for machinery, equipment, and raw materials Municipal tax Sales tax capital and property tax real state taxes 1Valid for 10 years with the possibility to be extended once with previous authorization.

Minimum Wage by Law (US$) MINIMUM SALARY - FREE ZONES An agreement signed by the Government of Nicaragua, the Private Sector and Unions that sets forth increase rates on minimum wage for a specific period of years in the future, applicable to companies in the Free Zones Regime. The third edition of the Tripartite Agreement established the following increase rates: Minimum Wage by Law (US$)   2014 2015 2016 2017   Monthly wage, including fringe benefits (48%) 228.35 234.88 241.58 248.48 Hourly wage, including fringe benefits (48%) 1.09 1.13 1.16 1.19 The 8% yearly increase equals to 2.9% in U.S dollars, due to the 5% annual devaluation rate This positive dialogue between all parts provides predictability and reflects the country’s stable investment climate.

Free Zones Corporation. Industrial Real Estate – Basic Structure INDUSTRIAL PARKS IN NICARAGUA Nicaragua has one state-owned industrial park called “Las Mercedes”, which is administered by the Free Zones Corporation. Additionally, there are over 15 privately-owned industrial park that offer quality industrial space to companies operating under the free zone regime. Most of these parks also offer a rent-to-own option. Industrial Real Estate – Basic Structure Type Tariff per m² (US$) Rent 3.00 - 4.50 Some of the services provided include: perimeter security, maintenance, customs office, water treatment plant and collection and disposal of solid wastes.

A Competitive Cost Structure NICARAGUA’S VALUE OFFER Low labor costs + generous fiscal incentives + FTAs with main international markets High degree of social cohesion resulting from dialogue between the Government, the private sector and workers Pro-business government that understands the value of foreign investment and supports their successful development. High levels of personal safety and great quality of life.

COMPANIES UNDER THE FREE ZONE REGIME