Potential investors in Nicaragua’s growing tourism industry packed a conference room in the lavish Hotel Real Intercontinental west of San José Tuesday to hear that country’s Tourism Minister and industry insiders talk up the new beachfront frontier to the north.
The talk of the Nicaraguan Investment Summit 2007 was that Nicaragua is Costa Rica before the building boom and price explosion; a market with great developmental potential that offers clear tax incentives for investors, low crime, relatively less bureaucracy and a wealth of cultural life in its people and colonial architecture and natural resources preserved in its 51 protected areas.
“Nicaragua is looking very interesting to me, because (in Costa Rica) the prices are exploding,” said conference attendee and Dutch furniture company owner Joris Van Roosmalen.
The summit’s excitement was undercut by a cloud of uncertainty as new Nicaraguan Tourism Minister Mario Salinas tiptoed around what could be an explosive issue in a room full of potential investors: the country’s political stability under the administration of new President Daniel Ortega.
While luxury condos in Costa Rica’s northwest region of Guanacaste start at half a million bucks, beachgoers can drive north across the border and soon find themselves in San Juan del Sur, a once-dinky fishing village that has become a haven for surfers.
There, three-bedroom homes with glorious beach views start at $150,000, and restrictions on coastal land are more lax than in Costa Rica, though there’s a proposal to make more of the beach public domain like under Costa Rica’s Maritime Zone Law, according to Raul Calvet of Calvet and Associates investment agency.
Tourism dollars are beginning to change the beach town, where investors’ concerns about the Sandinista regime returning to power have been intensified by recent violent property disputes (NT, Dec. 15, 2006).
Though Nicaragua’s south and central Pacific beaches – with their close proximity to Costa Rica – are booming, the country’s colonial cities León and Granada are the most visited tourist sites, according to Lucy Valati of the Gray Line tour company.
Foreign investment pouring into the old cities is being used to renovate infrastructure and colonial buildings and homes.
All in all, some 140 tourism developments are in the works in Nicaragua right now. Though the largest piece of the investment pie in Nicaragua comes from the United States, more than half of the 773,000 visitors who went to Nicaragua last year came from Central America, including 140,000 Costa Ricans. U.S. residents represented a third of the tourist market in the country, according to Valati.
Michael Navas, investment director of Pro-Nicaragua, an investment promotion agency that organized the summit, said the idea of the event was to tap into potential foreign investors in Costa Rica as well as Costa Rican investors in tourism and other industries.
Growth and Stability
“What’s important for an investor is growth of an economy and political stability,” Van Roosmalen said.
President Ortega, who took office this year, inherited an economy with 3% growth, though the tourism industry broke a new record last year with 8% growth. Some in Nicaragua see the fate of the economy depending on Ortega’s ability to carry out a political balancing act: to keep promises to strengthen trade with the United States and negotiate a new program with the International Monetary Fund (IMF) while at the same time enlisting the help of Venezuelan President Hugo Chávez on the other end of the ideological spectrum to push his agricultural production strategy and alleviate the energy crisis (TT, Jan. 12).
Van Roosmalen said he doesn’t envision Ortega redistributing land like he did in his first administration, and added “The only thing I don’t like now” is Ortega’s affiliation with Chávez and other populist leaders across Latin America.
Last week, Chávez made a surprise visit to Nicaragua to urge the Nicaraguan people to unite with his country’s socialist revolution (NT, March 16), adding that “internal adversaries” supported by the United States would try to stop the revolution. He promised support for oil, credit for small farmers, aid for health and education and new productive capabilities such as a new aluminum plant similar to the one he recently threatened to close in Costa Rica (TT, Feb. 23).
There were few answers to investors’ qualms about Nicaragua’s political stability Tuesday. In a question-and-answer forum at the end of the conference, event mediator Navas read an investor’s written question about the security of investments amid the former Communist country’s political climate. Salinas side-stepped the question.
“In a few minutes I’ll have some words on that in my speech. I thought that point would be of much interest,” he said.
In his speech, he spoke of an “absolute guarantee for foreign investment,” and said so far this year, $40.5 million worth of new tourism projects have been requested in Nicaragua.
The industry brought in some $239 million in income last year (NT, Feb. 9), and INTUR has budgeted $1.5 million this year to promote Nicaragua as a tourism destination.
“We’re in an exciting moment; the growth is only beginning,” he said, his eyes coming up above his glasses to meet the audience.
Other than that, he avoided the issue of political stability, saying only that Nicaragua has a “great legal framework” for investment, and referred to a new tax code that clarifies the system for investors, and gives up to 100% tax deductions for certain investors on property, income and other taxes.