Although having experienced relatively high economic growth in recent years with inflation contained and budget deficits reduced, the majority of the Nicaraguan population continues to live in poverty. Poor governance and corruption have contributed to further deterioration of living conditions and to public distrust in the government in a country that struggles with high levels of inequality, unemployment and malnutrition. Since the 1990s, the Nicaraguan business environment has been substantially liberalised, and despite President Ortega's occasional harsh rhetoric against capitalism and free-trade, he has largely continued the free market policies of his predecessors. For instance, Nicaragua has abolished all WTO-inconsistent non-tariff barriers and does not have commercially-based import prohibitions.

Positive developments in relation to corruption and investment:

• In principle, Nicaragua has a well-developed legislative framework criminalising acts of corruption.
• The country has signed the Dominican Republic-Central American Free Trade Agreement (DR-CAFTA) which provides a framework for further market improvements and transparency, as it requires each participating government to ensure that bribery affecting trade and investment is treated as a criminal offence.

Risks of corruption:

• Many of Nicaragua's anti-corruption initiatives have been ineffective due to the politicisation of the institutions in charge of implementing and enforcing them.
• Companies should be prepared to deal with corruption when interacting with the registry and permit services, for example, when applying for construction and operating permits and when obtaining access to public utilities, such as electricity, water and telephone connections.
• The absence of effective anti-corruption agencies or whistleblower mechanisms is a challenge for companies operating in Nicaragua, as it limits the options for reporting cases of corruption.
• Investors cite arbitrariness and discrimination in taxation and customs procedures, as well as a lack of professionally trained tax and customs officials as major business constraints.