Investment opportunities in Nicaragua's auto part industry
Although traditional commodities continue to lead the list of Nicaraguan exports, the country's fastest growth is now found in nontraditional manufactured goods, such as apparel and auto parts.
Nicaragua’s manufacturing industry is a significant economic driver and one of the country’s most dynamic sectors, consistently contributing to about 15 percent of the country’s gross domestic product (GDP). A traditionally apparel-driven industry, Nicaragua’s light manufacturing activities have grown to include higher valueadded operations, such as auto parts components.
The light manufacturing industry is defined by its labor intensive nature; under the free zones regime, nearly 15,000 people are employed within this subsector, not including apparel manufacturing jobs. Manufacturing operations include autowire harnesses, cardboard boxes, and furniture manufacturing operations. In 2012, exports in this sector totaled US$496 million, representing 21 percent of regime’s total exports and 10 percent of the country’s total exports.
Nicaragua has positioned itself as an attractive export platform for manufacturing companies supplying to diverse locations around the world, due to its free trade agreements with the United States, Mexico, Panama, Taiwan, the Dominican Republic, Chile and the European Union. Speed to market and duty-free access present measurable savings for companies operating in Nicaragua. Export-oriented operations established in Nicaragua can also benefit from generous fiscal incentives through the national free zones regime, which fully exempts companies from paying a variety of taxes and duties. By the end of 2012, 146 companies operating nder the regime employed 103,412 workers and exported US$2,327 million, which represents 49 percent of the country’s total exports.
These companies mainly originate from the United States, Korea and Mexico, and are dedicated to the apparel and light manufacturing operations.
Auto Parts Industry
In today’s challenging business landscape, particularly for the automotive industry, it is important for companies to find strategies to build low cost supply chains. Nicaragua has proven to be successful in fulfilling the expectations of companies already established in the country by providing a competitive cost structure, qualified labor force and proximity to important markets, among other benefits. In 2012, Nicaragua’s auto parts industry’s exports accounted for 20 percent of the country’s free zones exports and 9.4 percent of its total exports. There are currently three companies operating in this sub-sector; Yazaki (Japan), Dräxlmaier (Germany) and Stainless Ride (United States), which together have created more than 14,300 jobs, where Yazaki on its own is the country’s largest employer. These companies comply with ISO quality control certification and manufacture auto-wire harnesses for renowned brand names such as Chrysler, General Motors, Ford, BMW and Volkswagen; also, exhaust systems for the motor industry for Harley Davidson, BMW, Volkswagen, among others.
Nicaragua presents an array of profitable investment opportunities for companies with labor intensive operations looking to benefit from one of the world’s most well-located export platforms. One of the country’s main investment opportunities in the light manufacturing and assembly sector is the further development of its auto parts industry. Although the country mainly produces auto wire harnesses, there are growth opportunities in manufacturing certain vehicles components, such as:
- Floor mats and liners
- Seat covers
- Other labor intensive process