Nicaragua does not have the best reputation on the global markets. President Daniel Ortega has been trying to circumnavigate the country’s law and seek re-election at the end of his term in 2011, while Iran’s $1.5m investment to build a hospital in the country – which some see not as a humanitarian gesture but a politically charged move – and close ties with Venezuela have made observers nervous about the region’s political stability.

However, to the country’s finance minister, such concerns appear non-existent. “There are opportunities for business in Nicaragua and clear rules for businesses here,” says Alberto José Guevara Obregón. And a recent surge in foreign interest would seem to support his view.

While still limited, private sector investments in Nicaragua have grown in recent years. The country has received $2.3bn in FDI since 2003. FDI dipped from $1.12bn in 2003 to $141m in 2004, but investment flows are growing again, according to fDi Intelligence data.

The Nicaraguan investment promotion agency says there have already been three key energy and natural resources deals in 2010, including a $700m investment in the Tumarín hydroelectric dam, which will be developed by Brazilian energy firms Queiroz Galvao and Eletrobras. North American companies Ram Power, B2Gold, Amayo and Hemco have announced plans to invest a total of more than $300m in the energy and mining sectors over the next couple of years.

Energy and resources

Private investments, particularly in renewable energy and natural resources, are crucial in pulling the country out of poverty, says Mr Guevara. “We want to be able to develop based on our own means, in line with our own resources,” he says. “Nicaragua is growing as a producer of energy. Energy investors will find great ease in developing their projects [here] and will find a nation with its arms open.”

However, some investors will still need convincing. Besides the political uncertainty, Nicaragua is also dependent on multilateral agencies’ funds, the terms of which Mr Guevara does not always find suitable. “We have our own institutions and way of politics,” he says. “We don’t need intervention that would affect our natural way of doing things.” Tension with such agencies and an inability to meet lending conditions could aggravate Nicaragua’s prospects.

External debt remains high, at 65% of GDP, despite debt forgiveness from the International Monetary Fund, the World Bank’s initiative to support indebted countries and G8 debt relief.

The financial sector is also seen as a weak point. While stressing the role banks play in the economy, Mr Guevara says greater opportunities would come from a closer alignment with national development plans. “Banks need to be more proactive, more in line with the national development plans and not just focus on financing credit cards or stock exchange operations that are far beyond people’s necessities,” he says.

Nicaragua hopes a greater use of its land and water resources will contribute to economic growth, says Mr Guevara. While oil currently represents 80% of energy sources, the country is committed to bringing renewable energy sources to 90% of its consumption, using hydroelectric, biomass, geothermal and wind power ventures.

Mr Guevara says Nicaragua could significantly expand its energy output. “We are waiting for investors to come and take advantage of our natural resources,” he says. “Energy is the future of our country and we can produce energy for our neighbours in Costa Rica, Guatemala, Honduras and Panama.”