San José, Costa Rica, since 1956

Waiting for the Other Shoe to Drop

Almost immediately after winning the presidential election last November, and even before the final vote count was tallied, then-President-elect Daniel Ortega moved quickly and decisively to meet with business leaders and foreign investors to assure them that their money would be safe here.

Given the history of the Sandinistas’ land confiscations and persecution of the private sector in the 1980s, Ortega was wise to deliver a clear and firm message to business leaders right out of the starter’s blocks: “We want to work with you, not against you.”

That message was received enthusiastically by many who decided to give Ortega an early vote of confidence. Others, however, decided to play their cards more conservatively and wait to see if the other shoe would drop.

For the 70 mostly U.S. investors of ArenasBay development on the Pacific coast near Tola, the other shoe just hit the floor.

The luxury development, which recently accused several high-ranking members of the Sandinista Front of running an extortion racket, was suspiciously issued a work-stoppage order this week by the Environment Ministry for allegedly violating environmental norms. Several days later, a regional prosecutor asked a judge to annul the title and registration of another large section of the developement’s

property in an act that is being likened to a government confiscation.

Armel González, the polemic developer of ArenasBay, claims the government’s actions against the development are a form of political revenge for his recent efforts to expose Sandinista extortion efforts and government corruption.

The Sandinistas, whose quiver contains many arrows, couldn’t get him one way, so now they’re getting him another, he says.

That perception is a real concern in a country with a weak separation of powers and a very powerful government, one whose roots are a clandestine guerrilla movement, no less.

In Nicaragua, two separate yet seemingly related events that appear to be a coincidence are oftentimes not. And the difference between “legal” and “illegal” here often depends on how hard the authorities want to look, and what they hope to find.

Perhaps ArenasBay was in violation of some environmental norms. But it is hard to imagine that they are the only culprits in a country with lax environmental enforcement and more than 100 competing development projects popping up along the coast and in other delicate ecosystems.

Was ArenasBay the first project to be censured by a government that has suddenly decided to enforce its environmental legislation, and miraculously found the funding to do so? Doubtful.

Is ArenasBay a casualty of a multi-flanked counteroffensive by a government that felt threatened by a corruption scandal? Who knows.

What is clear without knowing all the facts, is that from a distance the situation smells a bit like LakeManagua. And this government should be worried about perception, because most investors and business leaders are watching the saga unfold and forming opinions about whether to invest here.

The American-Nicaraguan Business Chamber in Miami this week expressed alarm at the turn of the events, echoing similar concerns raised earlier last week by the National Tourism Chamber in Managua.

For a government that is sending its probusiness envoy – conservative Vice-President Jaime Morales Carrazo – to assure the private sector and foreign governments that the Sandinistas will respect and protect private property and enterprise, the closure of ArenasBay is sending mixed signals.

If Arenas Bay was indeed in violation of environmental norms or an illegal acquisition of land, then the problem needs to be straightened out and due penalties applied. But the laws should be applied evenly and consistently to everyone, and not selectively as an arm of government repression or payback.

Ortega, who yesterday celebrated the 28th Anniversary of the Sandinista Revolution, needs to follow through on his campaign promises of providing judicial security and an even playing field for everyone.

The President’s real problem so far is not related to his controversial and high-profile friendships with revolutionary Venezuela and Iran. Ortega’s problem is his relationship with Nicaragua.


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