MANAGUA – After years of courting lawmakers on a bill that investors hoped would finally lead to a happy matrimony with the government, the private sector was unceremoniously left at the altar earlier this month when the National Assembly broke its promise by failing to pass the muchanticipated Coastal Law before breaking for mid-year recess July 3.
Investment boosters are lamenting the situation as a “missed opportunity” for Nicaragua to get back on track by sending an unequivocal message that the country is open for business. Instead, private business chambers, which had urged the National Assembly to pass the Coastal Law in June, now expect the law won’t be voted on until the end of this year or next.
At stake is an estimated $1 billion worth of homes and condominiums that are scheduled to be built along Nicaragua’s expansive coastlines, but are waiting for clear rules on how to proceed.
“Lots of investors are waiting for this law; as long as the law is not approved, they don’t want to continue,” said Roberto Lacayo, president of the Nicaraguan Chamber of Construction. “There is a lot of construction that is now paralyzed and tourism investment that has stopped. People are waiting for judicial security so their investments won’t be affected; they are waiting for adequate rules to the game in this country.”
The Coastal Law has promised to do just that. The problem, however, is that while the bill is continuously debated and revised, speculation and rumor about the final law is having a negative effect on investor confidence.
The private sector hopes that when the law is eventually ratified, it will put to rest any lingering doubts about the Sandinista government’s intentions, while offering investors the judicial protection and clear rules they need to continue developing coastal property on the Caribbean and Pacific shorelines, as well as along lakes and rivers in the interior of the country. The law is also supposed to clearly delineate between public and private property, as well as establish clear rules for beach access.
Nicaragua’s current legislation related to coastal land use is a confusing spider web of laws dating back more than 100 years.
The various existing laws – pertaining to agrarian reform, national sovereignty and environmental protection – all seem to contradict one another on the finer points. More importantly, none of them deals specifically with the issue of coastal development, which in today’s Nicaragua is a major issue.
Yet instead of fixing the confusing situation and offering assurances to investors, so far the Coastal Law – in its prenatal stage – has only served to exacerbate investors’ concerns with its constantly revised wording and unclear intentions.
Some concerns are justified, given the bill’s shady origins. The first version of the Coastal Law was sponsored by polemic Sandinista ex-lawmaker Gerardo Miranda, who has been involved in several high-profile coastal property scandals in recent years.
But that first version of the bill, which investors called “confiscatory,” was eventually sent to the legislative garbage heap three years ago and a new bill was put back on the drawing board (NT, Dec. 23, 2005).
That’s when investors’ fears gave way to befuddlement.
Lost in the Numbers
Confusion over the Coastal Law is well deserved. There are currently three or more versions of the bill floating around, each one using different figures and terminology. One version talks of 30 meters of public land, while another 50 and another 150. Trying to understand how the law will turn out is a bit like playing Sudoku.
Investment consultant Raul Calvet, of leading Managua-based market-research firm Calvet & Associates, says there have been some advances in the private sector’s negotiation with lawmakers in the past year, but there are still several sticking points.
The central issue for the private sector is that of clear rights to private property and land ownership, and a clear distinction between public and private lands.
“In our country, where the judicial power doesn’t have much credibility, we need clear laws so that they can’t later be interpreted in one way or another,” said Sergio Argüello, a legal adviser to the Nicaraguan National Tourism Chamber (CANATUR) and an expert on the Coastal Law.
Also of great concern and confusion is the amount of beach property the Coastal Law will designate as public domain.
The current working draft of the bill sets the distance at 50 meters for public beach, and establishes an additional 250 meters of land for “restricted use.” Public land means that everyone would have access, and that no homes or buildings could be constructed within that distance of the high-tide line.
The private sector wants to reduce the amount of public beach to 30 meters – consistent with previous legislation – and ensure that private property rights are fully guaranteed beyond that, with proper zoning restrictions taken into account.
If the final version of the law sets public domain at 50 meters rather than 30 meters, some investors who’ve bought beachfront lots could feel the state nibble into their property, and might have to adjust their building plans accordingly. However, Calvet and others note, most development plans wouldn’t contemplate building within 50 meters of the ocean in the first place, due to the dangers of storm waves and bad soil for construction.
So as long as private property is clearly protected under the Coastal Law, most building plans wouldn’t be affected by the 30-50 meter difference.
Those who have already built within the affected zone would be grandfathered by the new legislation, regardless of what distance it puts on public domain.
“No laws in Nicaragua can be applied retroactively,” Argüello says, putting to rest any lingering fears that the law could be used to confiscate existing coastal homes.
The other sticking point is that of beach access, and whether private land owners would be required to provide a public access point through their property. Calvet said that – at the moment – there appears to be consensus among lawmakers, many of whom are coastal property owners themselves, to respect historic beach-access routs and offer indemnification to any property owners who have to provide an access point to beaches where none currently exist.
Tower of Babel
For the past three-plus years, the Coastal Law has become Nicaragua’s Tower of Babel – much to the frustration of private sector leaders who’ve spent long hours discussing the bill with lawmakers.
“We have spent three years discussing interminably the themes of this law, which we are still discussing today,” said José Adán Aguirre, president of the leading private business chamber, COSEP. “Time is passing and other countries are running while we are still walking.
“Nicaragua urgently needs this law to foment employment and investment,” Aguirre stressed.
Calvet, whose investment-consulting firm represents more than half of the 160 residential and tourism development projects underway in Nicaragua, said that sales continue for coastal projects, but that speculation and uncertainty over the Coastal Law has deterred many from moving forward on construction.
The hundred-plus coastal-development projects dotting the Pacific coast have a combined 8,121 lots or condos for sale, of which 43 percent have already been sold, Calvet said. That means that there is more than $1 billion worth of construction waiting – in part – for the government to give a green light to move forward, he said.
“Projects are detained and still waiting to see how the law will be passed. Based on that they will make a decision in terms of execution of projects,” said Lucy Valenti, president of CANATUR.
The National Chamber of Construction is also hopeful that the law would spark a resurgence in development activity.
“The demand for construction has gone down,” Lacayo, the chamber’s president, told The Nica Times. “We hope that if the law is approved, the tourism sector will be reanimated and we’ll start to see this activity that in the past has given lots of work to construction workers who right now are without jobs, especially in Rivas, where there was lots of work before.”
While the wait is excruciating for some, Calvet said it’s better to wait and get the law right than ram it through and get stuck with a bad piece of legislation. Some are worried that if the National Assembly were to address the issue during the second half of this year, it would become too politicized in a heated pre-electoral atmosphere. So some think it’s almost better to shelve the law until next year.
Despite the delay, Calvet said that some promising talks have been conducted behind closed doors and there appears to be a new commitment to passing a law based on consensus with the private sector. But until then, many coastal developers will remain with their toes in the sand, waiting for the tides to change.