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  • GDP, US$bn: 13.4
  • GDP per capita, US$: 2,185.3
  • Population, mn: 6.1
  • Inflation, CPI ave: 3.5
  • FX, LCY/US$: 28.6
  • Budget Balance, % of GDP: -1.1
  • Mining GVA, US$bn: 0.7
Regulatory Risk Rating
82
0
100
Score: 82
Very Low Risk
Nicaragua ranks just behind Mexico (2015); together, these two countries are the Latin American leaders in mining regulation. In our opinion, it is far more likely that any difficulties regarding security of tenure will arise from special-purpose "blocking" or banning laws or regulations, then administrative actions taken within the existing law.

Corruption Potential Index

Score: 40
Low Corruption Potential

Corruption Risk Index

Score: 28
Low Corruption Risk

Regulatory Risk Rating

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Environmental Overview Commentary plus sign

NICARAGUA - ENVIRONMENTAL REGULATION

 GENERAL

Nicaragua, officially the Republic of Nicaragua, is the largest country in Central America, bordering Honduras to the north and Costa Rica to the south. The Pacific Ocean lies to the west and the Caribbean Sea to the east. It is known for its volcanoes, the Rio Coco, and the largest lakes on the continent (Lake Nicaragua and Lake Managua), as well as its marine life. Lakes Managua and Nicaragua are on the Pacific side of the country. The opposite side of the country features the Caribbean coast, known as the Mosquito (or Miskito) Coast, which has wet, tropical forests. Inland, there exist a plateau covering about one-third of the total country, as well as mountain ranges that reach the height of 2,000 m (6,600 ft.).

Nicaragua's lowland rainforests are true tropical jungles. Some are deluged with more than 15 feet of annual rainfall and provide enormously enriched ecosystems supplying substantial biodiversity. There are more than 1,400 animal species classified and 12,000 species of plants in Nicaragua. Wildlife includes the puma, monkey, armadillo, parrot and freshwater sharks. Despite these numbers, much of the country’s biodiversity is in danger of disappearing through pollution, soil erosion, eradication of forests and other factors. Several species are threatened, including the tundra peregrine falcon, some species of turtle (green sea, hawksbill, leatherback, and olive ridley), the spectacled caiman, and the American crocodile.

PRINCIPAL LEGISLATION AND REGULATOR

The General Law of Environment and Natural Resources (1996) (ENR) is the principal piece of legislation in Nicaragua. The ENR is supplemented by Executive Decree No. 76-2006 (EIA Law). Article 25 of the ENR provides that no project that can cause damage to the environment or natural resources is to proceed without an environmental permit. Article 26 goes on to say that such projects must be subject to an environmental impact assessment (EIA) as a condition to such permit. Pursuant to Article 77 of Mining Law, the Energy and Mining Ministry (MEM) together with the Environmental and Natural Resources Ministry (MARENA) is responsible for overseeing the EIA and the permit award.

 EIA PROCESS

Pursuant to Article 104 of the ENR, it is necessary for the regulatory authorities to consider the following in respect of the exploration and exploitation of minerals when considering the award of an environmental permit:

  • the rational use of raw materials and the rational exploitation of deposits;
  • the treatment and safe disposal of waste materials;
  • the promotion and efficient use of energy;
  • the prevention and alteration, direct or indirect, of the elements of ecosystems;
  • ensuring the protection of protected areas and fragile ecosystems and the restoration of degraded environments.

According to the EIA Law, there are 3 categories of projects: Very High Impact (Mega) Projects; High Impact Projects; and Moderate Impact Projects, representing Category I, II and III projects (Art. 5). Each of these requires an environmental impact assessment (Art. 7); projects not falling into one of these categories (i.e., Low Impact Projects) do not require an EIA. Category I projects include major road, port, waterways, hydrocarbon and power projects. Category II projects include (in relation to the mining sector):

  • exploration drilling at depths greater than 50 metres;
  • exploration work involving trenching, shafts and tunnels;
  • industrial mineral mining operations where more than 40,000 tonnes / day of material is being mined;
  • any metallic mining operations;
  • any mineral processing plant; and
  • any tailings dam.

Exploration and exploitation activities involving the mining or removal of less than 40,000 kilos a day falls under Category III (Arts. 15-18, EIA Law).

The process of EIA is initiated by a form to aid in the assessment of the proposed project. In the case of Category II activities, the MARENA and the MEM have a maximum term of 10 working days to review the preliminary documents received and request from the applicants any further information that might be needed. Furthermore, the MARENA and the MEM have a maximum term of 120 working days for its technical review and to grant the corresponding resolution. For activities under Category III, there is a maximum term of 30 working days for its technical review and to grant the corresponding resolution. 

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Mining Overview Commentary plus sign

NICARAGUA – MINING REGULATION

GENERAL

Nicaragua, officially the Republic of Nicaragua, is the largest country in Central America, bordering Honduras to the north and Costa Rica to the south. The Pacific Ocean lies to the west, and the Caribbean Sea to the east. The country has a rather similar history to Cuba with dictators, civil war, and American trade embargoes and political intervention playing critical roles in its development. Nevertheless, the country has had four “free and fair” elections since 1990 and has progressively advanced its economy for many years. The World Bank notes that it is the second poorest country in the region (next to Haiti) with a relatively small population of just over six million people.

Over the past decade mining has become a strategic pillar of growth for Nicaragua, which now has the highest recorded gold production in the Central American region. According to its PDAC profile (www.nicaragua-pdac.org), the country has seen its gold production rise from 100,000 ounces per annum in 2007 to over 300,000 ounces in 2014. There are currently three large modern producing gold mines: Bonanza (Colombian owned), El Limón (Canadian controlled) and La Libertad (Canadian controlled). Silver is also produced as a by-product from some of these mines. As well, the country produces aggregates and a variety of cement products in its non-metallic sector.

PRINCIPAL LEGISLATION AND REGULATOR

The Nicaraguan Constitution, the Mining Law No. 387 (ML) and its regulation (Decree 119/2001) (Mining Regulation), and the Foreign Investment Promotion Law No. 334 are the main sources of regulation for Nicaragua’s mining industry. Under Article 102 of the Constitution, natural resources belong to the state, which is responsible for preserving, developing and managing them in a rational and efficient manner (see also Art. 2, ML). The state may grant mining rights by means of public and transparent processes. The Energy and Mining Ministry (MEM) is responsible for granting and monitoring mining concessions. Equal mining rights and duties are guaranteed for both national and foreigners operators (Art. 3, ML).

GRANTS AND MINERAL TITLE

Pursuant to Article 14 of the ML, the principle of first-come / first-served applies, although concessions are not granted as of right and there is a review and process undertaken by MEM prior to each grant. As well, each concession is subject to an agreement (Acuerdo Ministerial) issued by the government of Nicaragua. Once issued, however, concessions offer substantial protection from revocation and security of tenure. The right is granted for a period of 25 years, which may be renewed for another 25 years. The initiation of exploration activities must begin within four years of the date of the concession grant, albeit this period may be extended in the event of force majeure – e.g., the failure to obtain an environmental licence.

The concession confers the right to explore, develop, mine, extract, export and sell all minerals found and produced from the concession. Concessions may be transferred (subject to prior approval by MEM), mortgaged and made the subject of third party contracts. A concession area may not exceed 50,000 hectares. A violation of the law or regulations gives rise to a potential fine or cancellation of the concession (Art. 98, Mining Regulation). The holder of a concession is required to submit annual reports of its activities and production statistics to the government, as well as quarterly reports on its exploration activities.

DEVELOPMENT CONSIDERATIONS

Concession holders are obliged to pay superficial right fee payments and a royalty (3% of the value of the extracted minerals). The failure of the payment may result in revocation. Additionally, a production report must be submitted annually to the MEM. As stated in the ML, in order to carry out mining activities, the holder of a permit has the right to access surface land via easements or expropriation, procedures for which are subject to the provisions stated in Chapter IX of the General Law of Natural Wealth. These rules indicate that where necessary to conduct work and where unable to reach agreement with a landowner, the Director General (Dirección General de Riquezas Naturales llevara) will report to the Economy Minister and make a recommendation as to whether or not expropriation is essential. If essential, then expropriation is ordered. The fair market value of the property is then paid in compensation. The ML also requires compensation wherever the use of land causes damages to said land (Art. 63, ML).

The law indicates that concessions constitute real property and are mortgageable (Art. 18, ML). Pursuant to Art. 20 of the ML, the concessionaire benefits from articles 80 and 86 of the Law on the Expropriation of Natural Resources, which indicates that no act should be taken to undermine the rights of the concessionaire during its currency. An Environmental Permit must be issued by MARENA (Ministry of Environment and Natural Resources) before starting any exploration or exploitation activities.

ENVIRONMENTAL REGULATIONS

See Nicaragua Environmental Regulation.

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