San José, Costa Rica, since 1956

Coastal Law Approved (Finally)

First in a three-part series on Development During Economic Crisis


MANAGUA – After years of uncertainty, speculation and exasperating lobbying efforts, Nicaragua’s beleaguered private sector is exhaling in relief this week following the recent approval of the long-awaited Coastal Law.

The Coastal Law establishes one clear set of rules and guarantees for land ownership and development along ocean, lake and lagoon shorelines. It supersedes a centuryold tangle of previous legislation that was both unclear and contradictory.

The new law stipulates that all oceanfront land within 50 meters of the high-tide line is public domain and cannot be built on in any form. The same goes for all land within five meters of the shorelines of lakes and lagoons. Rivers are excluded from the law.

The law is not retroactive, as many had feared it might be. That means all land legally acquired prior to the law will be respected, as will all pre-existing structures and permits for land use or development within the affected coastal zones.

In other words, the law will only apply to people who haven’t yet developed their coastal land, or those who purchase land after the Coastal Law enters into effect, sometime in the coming weeks.

Investors and developers had lobbied strongly on behalf of setting the area of public domain at 30 meters instead of 50. The private sector argued that the 50-meter mark is an arbitrary political determination that is unfounded in any technical studies or environmental arguments.

But in the end, the law was drafted as a compromise between many different interests. Plus, the private sector got what it wanted most: legal assurance that private property will be respected and protected by the government.

That alone is cause for celebration. “I feel like we can finally relax after five years of doubt,” said Lucy Valenti, president of the National Tourism Chamber (CANATUR), which lobbied the National Assembly relentlessly for years.

Though no one has gone so far as to claim the new legislation will be a panacea to cure Nicaragua’s ailing economy and slumping investment and development sectors, it’s already being called an important step on the road to recovery.

Some say the Coastal Law could act as a stimulus plan for Nicaragua’s once-budding Pacific coast, where an estimated $1 billion in tourism and residential development projects have been put on standby in anticipation of the new law.

Even if half of those 140 projects now move forward on construction, Valenti said, it would be a huge boost to the regional economy, creating employment and stimulating new investment and cash-flow in Nicaragua.

Mario Zelaya, president of Nicaragua’s Construction Chamber, estimates that the impact on the construction sector could be 10,000 new jobs by next year, or roughly a 25 percent increase in the formal construction sector by 2010.

In that sense, he said, the Coastal Law could provide an important stimulus for Nicaragua, allowing it to kick-start its slumbering economy and begin to reclaim its competitive edge in the region. All this despite – or perhaps because of – the global economic downturn, he said.

The reason: Nicaraguan construction costs are still much less expensive than anywhere else in Central America. Building in Nicaragua is 20 to 30 percent cheaper than in Costa Rica or Panama, Zelaya said.

And that’s not even factoring in land costs, which are still much cheaper in Nicaragua than in neighboring countries.

In addition, Zelaya said, construction costs are down 20 to 25 percent from last year, when petroleum costs went through the roof. So Nicaragua is the logical choice for investment and development at a time when money is tight around the world, he said.

The only thing that was missing here, Zelaya added, was judicial security. And the Coastal Law just took care of that.

“The importance of this law is that it provides a climate of confidence,” Zelaya said.

Overcoming a Dubious Past

Despite the Coastal Law’s shady origins (it was first introduced by a polemical ex-Sandinista lawmaker embroiled in several high-profile coastal property scandals in recent years), investors and politicians alike say the final product approved last week is a compromise everyone can work with.

The law now needs to be ratified by President Daniel Ortega, a process that’s expected to take another week or two. After that comes the promulgation of regulations that will specify how the various articles of the law should be interpreted. That process could take another 60 days.

But at this point, after five years of trying to reach a consensus on the law, no one is expecting any last minute surprises.

Lawmakers stress the Coastal Law will in no way be confiscatory and is meant to promote development rather than restrict it.

“This is not a property law, but one that vindicates the rights of land owners who have acquired their land legally,” lawmaker Agustin Jarquín, president of the Commission on Population, Development and Municipalities, told The Nica Times this week.

“Soil-use studies and permits from MARENA (the Ministry of Environment) and all other permits will be respected, even if it’s for land within the 20 or 30 meter mark and even if they haven’t yet started construction,” Jarquín said.

The lawmaker said the only people who will have to adjust their plans to the new law are “those who haven’t applied for permits yet.” Lawyers representing the private sector agree it’s “a good law.”

Sergio Argüello, a lawyer who spent years working on the Coastal Law first as a lawyer for the Nicaraguan Tourism Institute (INTUR) and then for the tourism chamber CANATUR, says the final law is clear in respecting private property and establishing supremacy over all other legislation, such as Nicaragua’s infamous Agrarian Law of 1917, which has been causing headaches for landowners and developers for years.

The only case in which the Coastal Law is not the final word on coastal development and landowner rights is on the Caribbean coast, where the law is still subject to the Law of Autonomy – a potentially tricky legal complication that will have to be clarified in the bylaws.

Another potential question mark on the horizon is the forthcoming Zoning Law, or the Ley de Ordenamiento Territorial, which will establish new zoning regulations.

According to the Coastal Law, all territory within 200 meters of the shoreline is considered “restricted use,” meaning landowners can build but only in accordance with municipal zoning laws.

So the forthcoming Zoning Law, according to investment consultant Raul Calvet, will be “the other side of the coin to the Coastal Law.”

In broader terms, Calvet added, stimulating Nicaragua’s economy will take more than just one new law.

“It will take a good Coastal Law, reliable justice system, secured property system, good country image, marketing efforts, improved infrastructure and utilities, and a good U.S. and world economy,” he said.

Still, for a private sector that hasn’t had much to celebrate in several years, the approval of the Coastal Law is a Champaign-popping event.

Coastal Law: At a Glance

50 Meters – area of public domain on all ocean coastlines. All new construction inside 50 meters from the hide-tide line will now be prohibited. Previous construction and legal ownership inside 50 meters will be grandfathered. Law subject to variation on the Caribbean coast.

5 Meters – area of public domain for lakes and lagoons. Same construction restrictions apply.


Next Week: Central America’s shopping mall boom amid global economic crisis



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