INVESTMENTS IN TOURISM

[URRACA]

The Decree No. 520 of 1960, Decree on Hotel Investments, declares of
national interest any capital investment in hotel constructions or
entertainment centers that promote tourism , provided that the
investment is not less than C$ 7,000,000.00 (equivalent to around US
$ 700,000.00).

In the event that the Tourism Institute22 considers favorable an
investment application of this nature, the Executive Branch is
empowered to:

a) Transfer to the investor, following the procedures established by
law, a quantity of national land required for the installations, and
receiving the corresponding payment in cash or in shares of stock of
the investment.

b) Grant to the Investor in hotels or entertainment centers all the
facilities required to develop its project, particularly in tourist
attraction zones that are subject to the Governments control.

c) Issue special provisions and regulations that govern the type of
hotels or entertainment centers contained in Decree 520, in order to
facilitate its purposes and to promote tourist attraction.

The following benefits and exemptions are granted to the investor:23

a) Tax exemption on the capital and income tax for a term of 10 years
starting on the date that the Tourism Institute certifies that the
corresponding center has started its operation. Likewise, the
investor is exempted from direct tax on capital during the period
within the execution of the project and the date the center starts
its operation.

b) Custom duties and consular fees exemption on the importation of
all kinds of materials, equipment, goods, furniture, machinery, and
articles exclusively assigned to the construction of the center and
its annexes, and also for its maintenance.

c) Exemption of the obligation to make prior deposits for its import
and authorization to make use of foreign credits.

The Municipalities tax plans for these type of investments will be
adjusted to the spirit of Decree 520, in order not to levy tourist
investors similar municipal taxes that are described and exonerated
above.
FOREIGN INVESTMENT
Law No.127 of 1991, Foreign Investment Act and its regulation, found
in Decree No. 30-92, provides several benefits to foreign
investments.

Foreign investment is any investment carried out through the transfer
of foreign capital into Nicaragua, understanding that such investment
has originated from abroad regardless of the nationality or residence
of the investor.

To enjoy the benefits granted by the Foreign Investment Act, the
foreign investor must obtain a favorable resolution from the Foreign
Investment Committee of the Ministry of Economy and Development. In
addition, it is necessary to enter into an investment contract with
the pertinent authorities (the Government of Nicaragua represented by
the Economy and Development Minister as President of the Foreign
Investment Committee.)

Foreign capital may be transferred into the country and valued in one
of the following ways:

a) Freely convertible foreign currency, negotiated with the Central
Bank of Nicaragua at the exchange rate prevailing in the banking
market .

b) Tangible assets, in any form or condition, which are brought into
the country with the investors own funds under the general
regulations applicable to imports. These assets are valued according
to the ordinary procedures applied to imports.

c) Technology in its diverse forms, provided that it can be qualified
as capital by the Foreign Investment Committee, taking into
consideration its real price in the international markets.

d) Capital from loans obtained by the investor in a freely
convertible currency, provided that the corresponding contracts have
been duly authorized by the Foreign Investment Committee.

e) Reinvestment of profits duly authorized by the competent
authority.

Foreign Investors receive the following benefits that constitute
obligations for the Government of Nicaragua :

a) Repatriation of the net foreign capital. This can only be done
after three years from the date the capital that is intended to be
repatriated was registered in the country.

b) Remittance abroad of the net profits generated by the registered
capital.

c) Expedite, adequate and effective indemnization in the event of
expropriation for reasons of public utility or social interest.

To make use of their repatriation and remittance rights, foreign
investors have access to purchase foreign currency from the Central
Bank at the official exchange rate at the time of the purchase.

Any foreign currency that the investor was to obtain from exports
must be entered into the country.1

In general, foreign investment is subject to the tax legislation of
the country.

A company that receives the foreign investment benefits mentioned
above may borrow money abroad within the limits previously authorized
by the Foreign Investment Committee. Access to local funding is
limited to short term borrowing to be used as working capital.

In any case, foreign investors shall be subject to Nicaraguan
jurisdiction.2

Considering the financial stability and the free exchange policy
existing in Nicaragua since 1992 and confirmed in 1995, many foreign
investors have decided not to become subject to the procedures of
this Law, as they can freely acquire foreign currency in the free
exchange market.