V. MARKETING U.S. PRODUCTS AND SERVICES - DISTRIBUTION AND SALES CHANNELS Distribution and sales of imported products are handled by local distributors and agents. The Nicaraguan retail market is small, and there are no truly large-scale department stores or other retail operations. - USE OF AGENTS/DISTRIBUTORS; FINDING A PARTNER The rights and obligations of agents and distributors are set forth in the Law of Agents, Representatives, and Distributors of Foreign Products (Decree 13 of January 5, 1980). This law provides for considerable protection of the interests of local agents and distributors; termination of a relationshp can prove costly. Nevertheless, partnerships among U.S. and Nicaraguan business interests are common due to the historical nexus shared by the two countries. There is no clearinghouse of information for finding a partner in Nicaragua. It is recommended that U.S. companies seeking agents, distributors, or partners in Nicaragua purchase the Agent Distributor Service (ADS) from the nearest U.S. Department of Commerce District Office, contact the Commercial Section of the U.S. Embassy in Managua, the Center for Export and Investment (CEI) of the Ministry of Economy and Development, and local business chambers. (See Appendix C for contact information.) - FRANCHISING In Nicaragua, there is no specific law regulating franchises. Prospective franchisees must follow the general regulations concerning foreign investment and starting a business contained in the Commercial Code and Foreign Investment Law. The franchise market for Nicaragua is promising. Domino's Pizza, Pizza Hut, Hertz, and Budget Rent-A-Car franchises, among others, operate in Nicaragua at present. Many Nicaraguans have lived several years outside of the country and have grown accustomed to fast food outlets and other services appropriate for franchising. - DIRECT MARKETING There is little or no direct marketing in Nicaragua at the present and no specific law or regulation governs the field. While limited potential for direct marketing exists, an unreliable postal service, inconsistent treatment of goods at Customs, and lack of an efficient delivery system may create obstacles for profitable direct marketing operations. - JOINT VENTURES/LICENSING All types of business organizations are governed by the Commercial Code. The code permits joint ventures, license arrangements, general and limited partnerships, and corporations. Foreign investors are generally accorded national treatment under the Commercial Code. Nonetheless, investors may wish to register under the Foreign Investment Law. - STEPS TO ESTABLISHING AN OFFICE There are various ways to constitute an operation in Nicaragua; the two most common are as a sole proprietorship or as a corporation. The three basic steps for organizing a business are as follows: 1. Register and incorporate the business at the Ministry of Finance. After paying the registration fees, a tax identification number must be acquired. (Note: If incorporating, a notarized letter from the corporation's board of directors authorizing incorporation in Nicaragua is required.) 2. Apply for an economic license at the Ministry of Economy and Development (MEDE). 3. Register with the office of the Mayor in the seat of government of the Department where the business is located. At this office, the new business may elect to pay a fixed tax quota on sales or contract an accountant to maintain detailed records. If the accountant option is chosen, the books must be registered with the Ministry of Finance Office of Fiscal Records. In addition to these steps, additional permits/licenses may be required depending upon the business in question. We would recommend the retention of an experienced commercial attorney for any investor interested in establishing an operation in-country. Benefits of the Foreign Investment Law: Foreign investors may, but are not required to, register investments and negotiate a Foreign Investment Agreement with the Ministry of Economy and Development. This guarantees the investor the following privileges under the Foreign Investment Law: - Repatriation of net foreign capital, less any losses incurred, 3 years after the capital to be repatriated entered the country. - Remittance abroad of the net profits generated by the capital registered. - Prompt, adequate, and effective compensation in case of expropriation for reasons of public utility or social interest. In addition to the benefits listed above, other tax benefits may be individually negotiated depending on the type of business incorporated. - SELLING FACTORS/TECHNIQUES Sales and marketing techniques in Nicaragua are still largely unsophisticated due to the lack of commercial activity during the Sandinista years. Most advertising takes place on the radio, in newspapers, or on billboards. Major, up-scale promotional activities are rare. As the Nicaraguan economy liberalizes and grows, more modern sales techniques including television advertising and direct marketing will likely be employed with greater frequency. - ADVERTISING AND TRADE PROMOTION The majority of business advertising and trade promotion in Nicaragua is conducted through the print media. Below are the most commonly utilized publications: Newspapers: LA TRIBUNA LA PRENSA Mansi n Teodolinda 1/2 c. al sur Km. 4 Carretera Norte Managua, Nicaragua, C.A. Managua, Nicaragua, C.A. Tel: (505-2) 667581/4 Tel: (505-2) 490322 Circulation: 12,000 Circulation: 28,000 BARRICADA EL NUEVO DIARIO Detras del Bolerama Km. 3-1/2 Carretera Norte Managua, Nicaragua, C.A. Managua, Nicaragua, C.A. Tel: (505-2) 674727 Tel: (505-2) 491190 Circulation: 30,000 Circulation: 40,000 Business Journals: CABLE CENTROAMERICANO EL OBSERVADOR ECONOMICO Apdo 1407 Del Hospital El Retiro 2 c. al lago Managua, Nicaragua Apdo 2074, Managua, Nicaragua Tel: (505-2) 668075 Tel: (505-2) 225304 Fax: (505-2) 668068 Fax: (505-2) 668711 VISTAZO ECONOMICO Centro Comercial Camino de Oriente Costado Oeste de Los Cinemas Apdo Postal 282 Managua, Nicaragua Tel: (505-2) 780810 There are no regularly scheduled trade shows in Nicaragua. Trade events are usually held at the Olof Palme Convention Center in Managua. For the latest event schedule, contact: Olof Palme Convention Center General Manager Harvey Mayorga Tel: (505-2) 281000-05 Fax: (505-2) 225423 (See Appendix E, Trade Events, for more detail.) - PRICING PRODUCTS There are no price controls in Nicaragua with the exception of pharmaceutical sales margins, sugar, domestically produced soft drinks, and most petroleum derivatives. - SALES SERVICE/CUSTOMER SUPPORT Most businesses in Nicaragua place little emphasis on sales service and customer support. U.S. and foreign businesses which have made customer service a priority have been well received. - SELLING TO THE GOVERNMENT Government procurement is governed by the Law of Administrative Contracting by the State, Decentralized/Autonomous Agencies, and Municipalities (August 28, 1981) and its implementing regulations (November 8, 1981). In theory, the legal framework for procurement applies to all government acquisitions in excess of one million cordobas (approximately $140,000), and bids are managed by the Ministry of Finance's General Directorate of Procurement (GDP). In practice, many government agencies and parastatals engage in direct purchasing outside of the legal framework. In addition, whenever a project is financed, even partially, with external funds (e.g., from the IDB, World Bank, Central American Bank for Economic Integration), bids are conducted according to the procedures of the financing organization. - PROTECTING YOUR PRODUCT FROM IPR INFRINGEMENT Patents: Patent applications must be filed with the Ministry of Economy (Secci n de Registro de la Propriedad Industrial). Fees total $800 and, on average, there is a 6-9 month delay for issuance. Protection is granted for 10 years, renewable for an additional 10 years. Copyrights: Copyright applications must be filed with the Ministry of Education (Secci n de Registro de Obras Literarias, Cientificas, y Artisticas). Fees total $350 and, on average, there is a 3-month delay for issuance. The protection granted is for the lifetime of the author and lifetime of his/her heirs. Trademarks: Trademark applications must be filed with the Ministry of Economy (Secci n de Registro de la Propriedad Industrial). Fees total $330 and, on average, there is a 9-month delay for issuance. Intellectual property rights protection in Nicaragua does not meet international standards. See "Protection of Property Rights" under Chapter VII, Investment Climate, for more information. - NEED FOR LOCAL ATTORNEY Local attorneys are recommended for all business activities in Nicaragua. There are several firms in Managua with experience in international business and with English-speaking attorneys on staff.