Report: Nicaragua to Pay $2 Billion in Debt Trap Interest to China

Nicaragua is set to pay $2 billion in interest to China for the multiple predatory debt trap loans it has signed with the Chinese communist regime, the newspaper Confidencial reported Monday.

The interest payments, Confidencial stated, far exceed the amount loaned by China to the Central American country.

The communist regime of dictatorial couple Daniel Ortega and Rosario Murillo embraced China in 2022 shortly after cutting ties with Taiwan. Since then, the Ortega regime had Nicaragua sign agreements with China that have granted the Chinese communist regime significant control of the country.

Some of the agreements include a Free Trade Agreement (FTA) with questionable benefits, multiple gold–mining leases, and multiple loans under the framework of the Belt and Road Initiative (BRI) predatory debt trap program for infrastructure projects. According to local reports, Ortega has leased over six percent of Nicaragua’s territory to China through gold mining deals.

Confidencial detailed in its report that Nicaragua signed 11 different loan deals with China between 2023 and 2025, totaling $1.43 billion. Ortega’s odes to China’s purported “solidarity” and “cooperation” are not backed by official statistics, which reportedly indicate that between 2023 and September 2025, China has only disbursed some $191 million toward six of the 11 projects.

Instead of being a financial support with favorable terms for the country, Confidencial stressed that the agreements impose a “heavy burden” on Nicaragua through high interest rates and commissions.

Confidencial, citing an analysis of the deals conducted for the newspaper by banished Nicaraguan analyst and former political prisoner Félix Madariaga, explained that Nicaragua will have to pay back China $2.048 billion in interest accrued by all the loans. Madariaga presently serves as professor of political science at the University of Virginia.

The newspaper reported that the detailed analysis of the loans indicates that the debt incurs both “financial and strategic” costs, with interest rates ranging from four to six percent with relatively short terms and initial fees between two and 3.5 percent.

“Typical fees include: initial fee (1.3% to 3.5% of the amount), origination fee (0.5%), commitment fee (0.6% to 0.7% per annum on undrawn funds), and annual agency fees of nearly $100,000,” Confidencial reported.

Maradiaga’s analysis reportedly stressed that one of the most “alarming” conditions established in the loan’s terms is the mandatory payment of 20 percent of the contract value of each project, a payment that Nicaragua must make “even before the Chinese company begins to mobilize machinery,” and which represents an “exceptional” and “highly unusual” condition.

Confidencial stressed that, as a result, every dollar loaned by China will see Nicaragua pay back an additional 20-50 percent through interest and commission fees due to China boasting higher rates than those offered by either the World Bank (WB), the International Monetary Fund (IMF), or the Inter-American Development Bank (IDB).

“China has become Nicaragua’s lender of last resort, imposing harsh financial conditions that reflect the country’s risk and the Ortega regime’s lack of financing alternatives,” Madariaga said.

The most “illustrative” example of China’s debt trap loans, Confidencial detailed, is 2024’s $440 million loan for the renovation of the Punta Huete military airport. The newspaper said that, between debt and local counterpart funds, the total cost of the airport is now close to $800 million, almost doubling the announced cost. According to Confidencial, even the “smaller loans” incur additional costs of over 30 percent.

Argentine analyst Hernán Alberro told Confidencial that it is “not necessary” to go into debt with China to maintain good relations with the country, but stressed that in the case of small, developing countries such as Nicaragua, China uses it “discursively to say that it is providing development assistance.” Alberro further pointed out to the newspaper that China does not have to do anything to get Nicaragua to align itself with its interests.

Evan Ellis, a researcher at the United States Army War College’s Strategic Studies Institute, told Confidencial that for Chinese companies, the key is to ensure payment for their investment.

“If they are sure they are getting paid, the Chinese will build anything, even a wall in the middle of the desert. Whether or not this generates value (in other countries) is not their concern,” Ellis told Confidencial.

Confidencial noted that the commercial viability of the projects is the responsibility of the partner who took the loan. As such, Ellis explained that in the case of the Punta Huete airport project, the investment is “difficult” to justify commercially at a time when Nicaragua is increasingly isolated and lacks demand for international tourism.

The “exorbitant” amounts involved in the loans also transform the way Nicaragua finances and executes its projects. Confidencial said that now “all loans are tied to Chinese contractors, ensuring that much of the money returns to Beijing in the form of payments for services, equipment, and materials.”

“In practical terms, this limits the multiplier effect in Nicaragua and creates technological dependence. Solar panels, wind turbines, telecommunications systems, and port equipment come from Chinese companies, which commits the country to continue relying on those suppliers for spare parts, maintenance, and upgrades,” Confidencial explained.

Maradiaga warned that “this scheme, facilitated by opaque contracts awarded without public tender, consolidates Beijing’s influence in strategic sectors in Nicaragua such as energy, road infrastructure, telecommunications, and ports, which now become burdened by Chinese debt and technology, adding more to the debt trap scheme. 

Confidencial pointed out that once the loans’ grace period ends between 2026 and 2028, Nicaragua fill face “peak payments” of around $150 million to $200 million per year just in interest and principal repayments alone. If the Nicaraguan economy does not grow at the necessary rate, the newspaper warned, Nicaragua could be forced to renegotiate under unfavorable conditions or even “cede strategic assets.”