Nicaragua Hopes to Attract FDI

Even though foreign investors got almost nothing back from Nicaragua’s restructuring, the government is hopeful they will return to invest in the small Central American economy. “The clearing of Nicaragua’s external commercial debt arrears will create additional momentum to attract foreign direct investment and new trade partners in key sectors such as energy, tourism and the free trade zones,” says the Nicaraguan public credit department. The stock of debt eligible for the workout consisted of external commercial debt arrears, 95% held by financial institutions, most of which were grouped under the Nicaragua International Creditors Association, led by Hans Humes, president of US-based hedge fund Greylock. All litigating creditors who had won judgments against Nicaragua agreed last year to become members of the association to facilitate dialogue with the sovereign. All of them accepted a cash offer price of 4.5% of their debt. A second closing is expected in Q1 2008 to secure further debt relief from additional commercial suppliers who are still finalizing tenders. Nicaragua says the restructuring will cut the public external debt to GDP ratio to approximately 57%, versus 161% in December 2003.