Our comprehensive assessment of Nicaragua's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Nicaragua, as well as the latest industry developments that could impact Nicaragua's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Nicaragua before your competitors.
Nicaragua Country Risk
Nicaragua Country Risk
External Tailwinds Supporting Regional Underperformers
Central American outperformers Costa Rica and Panama are facing a more challenging road ahead in the coming years. As real GDP growth slows in Panama on the back of the end of canal construction, establishing fiscal discipline will be crucial. Should the country fail to rein in spending in an environment of lower growth, this would likely cool investor enthusiasm toward the country. Similarly, Costa Rica is also facing a challenging fiscal outlook, though we believe the country is more likely to embrace fiscal consolidation after a recent sovereign credit rating downgrade by Moody's.
In contrast, our outlook for most of Central America's underperformers is brightening. Guatemala, Honduras and El Salvador will benefit from stronger US demand for their...
Nicaragua Industry Coverage (7)
BMI View: The Central America region continues to struggle with disease outbreaks in the coffee sector, which decimated the 2013 crop. We believe that coffee production will remain at risk over the next few years as the nature of subsistence farming will limit investment into safeguards. Countries in Central America are generally dependent on corn imports and we expect the corn production deficit to widen over our forecast period. Strength in the US dollar over this time frame will hurt the capital accounts of the region's countries. We expect Central America to remain self-sufficient in sugar and even increase its potential for sugar exports. The sugar industry has potential to attract investment over the medium term.
|Honduras Agribusiness To Outperform|
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BMI View: The outlook for the autos industry in the Central Americas region in 2014 is modest, with tepid sales growth expected in some markets, but contractions likely in others. This is broadly in line with our outlook for the Latin America region, although many markets in Central America are very small in volumes terms, and modest changes in sales figures could have a relatively large impact on the year-on-year (y-o-y) growth rate.
Income distribution across much of the region is highly unequal, and the majority of headline spending growth comes from the relatively wealthy sections of the population. This income structure is likely to continue to restrict growth in the regional autos sector.
Nicaragua Freight Transport
Moderate To Strong Freight Growth In 2015
2015 will see moderate to strong growth across the Central American freight industry. The positives will be a small acceleration in macro-economic growth and trade in most of the Central American economies, benefitting the dominant freight mode, road haulage, as well as boosting activity levels at some of the largest ports in the region. Air freight will see more modest growth, in the low single percentage digits. Despite some interesting efforts to rehabilitate some of the region's railways, it will take some years before any concrete results can be seen. In terms of industry news, the big headlines concern the expected increase in competition among ports when the widening of the Panama Canal is completed in 2016, and Nicaragua's extremely ambitious and enigmatic 'Grand Canal' project to compete with the Panama Canal. More immediately and pragmatically, we are tracking...
BMI View: We currently forecast an average of 3.43.3% real growth in Central America's construction industry value for 20145 (excluding Panama) which is considerably higher than our regional average estimate for 2014 at 0.2% (excluding Panama). We expect Nicaragua's construction industry to return to positive in 2015 while Panama's will contract, as the completion of the Canal expansion nears its end.
We see high risks, small scale and limited growth opportunities across the region as a whole. A crucial factor underpinning our forecasts for infrastructure investments in future years is political and security risk. This is a particular concern in El Salvador, Honduras, and Guatemala where high levels of crime, homicide, violence, and insecurity exacerbate operational risks for companies willing to invest in those countries. As such, we believe that local and regional...
BMI View: Collectively, the six insurance markets of Central America represent a medium-sized, and quite rapidly growing, market opportunity. The insurers themselves, and their corporate clients, have proven themselves to be resilient in the face of challenging business environments. Many companies are innovating in both distribution and products to increase insurance penetration in their markets.
BMI expect Central American insurance markets to continue to grow rapidly in the coming years. The annual average growth is forecast to be between 7.8% - 11.3% (Guatemala is the lowest and Nicaragua the highest). We would highlight Panama and Costa Rica as markets which will outperform in absolute terms. Consumers in these insurance markets have the greatest ability to afford insurance and the insurance companies that operate are established and able...
Pharmaceuticals & Healthcare
Nicaragua Pharmaceuticals & Healthcare
BMI View: A growing ageing population, favourable tax incentives and high demand for medicines confirm Central America's ability to continue offering revenue-generating opportunities to foreign drugmakers. However, the region's growing preference for traditional medicines could interfere with productive sales in coming years.
Headline Expenditure Projections
Pharmaceuticals: USD3.7bn in 2014 to USD3.9bn in 2015; +5.6%. Our forecast has been revised upwards since Q115 due to historical data.
Healthcare: USD16.8bn in 2014 to USD17.8bn in 2015; +5.7 %. Our forecast has been revised upwards since Q115 due to revised historical data.
BMI View: Although the rise in number portability, with four out of eight countries having implemented or in the process of implementing a form of number porting, should encourage an increase in competition, BMI believes that it would be challenging for newcomers like Xinwei to penetrate the market. Mobile forecasts show much slower growth across the board, with only Nicaragua offering any real growth potential. Increasing government interference, as is the case of Guatemala, is a worrying new development.