Nicaraguan Real Estate and Coastal Law

June 26, 2008 in Investment, Nicaragua Real Estate | Tags: , , | by jameskrieger | 3 comments

Despite my intended hyperbole in a recent post regarding the upcoming Coastal Law and its possible negative outcome, I really don’t believe that Ortega would allow such foolishness. Too many investors and too much money is involved to mess with the Coastal Law too much. Any law that would stifle growth would also be too damning to Ortega’s reputation as the guy who is going to finally make some lasting changes for the people of Nicaragua, and those changes are going to happen because of tourism.

Visions of hammocks on the beach dance around the heads of millions of burnt out middle-class workers as they sit in front of their computers each day. U.S. workers and those around the world need holidays away from the blue screen to maintain their sanity, and Nicaragua is staged to accommodate them. Most baby boomers believe that the USA is still the greatest country on earth in terms of entrepreneurial opportunity, but that doesn’t necessarily mean they want to live here full time.

According to statistics from AARP, nine percent of the 76 million baby boomers are “affluent,” earning over $150,000 per year. That’s about seven million retirees getting ready to party. The National Association of Realtors recently did a poll that showed 15 percent of baby boomers are interested in buying a second home. It’s not a stretch to think that a bunch of these soon-to-be retirees are going to be looking for the best ROI for their second home, say, somewhere warm and near the ocean, where they have hammocks. Hello Nicaragua. Incidentally, 15 percent of 7 million is over a million people. Tourism and retirees have pumped billions of dollars into the economies of Mexico, Costa Rica, and Panama over the last two decades and it’s time Nicaragua gets in the game.

One of the challenges for anyone interested in playing with the idea of investing in Nicaragua is finding good sources of information about real estate, locations, financing etc., and I recently found an excellent source called Coastal Dreams. Coastal Dreams is a website that has a lot of really good information, things you might not of thought of, helpful hints and could be a real asset for those ready to take investing in Nicaragua seriously.

IMF Says: Nicaraguan Economy Remains Generally Positive

June 24, 2008 in Economy, News | Tags: , | by jameskrieger | Leave a comment

Nicaraguan Economy

A press release issued on June 23, by the International Monetary Fund says Nicaragua’s economy is currently stable, however, “there are growing challenges from a deteriorating global outlook, notably rising prices of oil and other commodities.”

During a 12 day mission to review progress of the Poverty Reduction and Growth Facility Arrangement (PRGF), mission lead Luis Cubeddu met with government authorities and several other groups.

The press release states, “There has also been significant progress in the implementation of the structural reform agenda” Presumably referring to a new law approved by the National Assembly deterring the illegal consumption of electricity.

Various other subjects were discussed and Cubeddu states that talks will continue, “…to resolve outstanding isssues.” When resolved, “documents for completion of the first review under the PRGF arrangement will be presented to the IMF Board for its consideration.”

Ortega’s willingness to continue dialogue with the IMF may been seen as a small positive for Investors shaken by recent headlines out of Nicaragua. Considering Ortega’s developing dependence on Chavez and Ahmadinejad, two of the wackiest demagogues around, the IMF seems almost trustworthy.

Ocean Front Property in Nicaragua: Turning to Ocean View?

June 18, 2008 in Investment, News, Nicaragua Real Estate | Tags: , , | by jameskrieger | Leave a comment

Nicaragua’s Coastal Law

Investors in ocean front property in Nicaragua might need a pair of binoculars to see the surf, if the upcoming coastal law ends up reflecting the current property title suspensions.

Since 1937, Presidents, Somoza, Ortega (the Marxist one), Chammora, Aleman, Bolanos and now Ortega again, have all had their land reform agendas that have resulted in a hodgepodge of legal ambiguity. Throw in years of squatter’s rights, and Daniel Ortega was correct to announce that his administration would try and sort out the previous potpourri of property laws and create some definitive and reliable statutes. Statutes that international investors were hoping they could rely on to help build the future of tourism and retirement property in Nicaragua.

In an effort to correct the problem however, the administrations’ actions could be the death knell for investors in Nicaragua.

One of the most important issues that the pending new Coastal Law will establish, is how close to the shore (of any body of water) developers can build.

According to a recent article in the Miami Herald,

“In a series of memorandums sent out earlier this year, Attorney General Hernan Estrada ordered a suspension of all property titles within 2,624 feet of any body of water.”

That’s about 800 meters or half of a mile inland from the shoreline. In contrast, the previous restriction created 30 meters or about 96 feet of public beach.

The problem is that most of the ocean front property that has been sold or is currently on the market occupies land within that half-mile. The vast majority of these holding are owned by U.S. investors and are somewhere in a pre-construction stage. This means that if the Ortega administration so desired, and implemented the current suspension, it could effectively block any construction on beach front property within that distance. And that, has a lot of people worried.

Investors who have bought ocean front property in Nicaragua are cautiously hopeful that the new coastal law will be growth positive and reject any “confiscatory” implications. For now, we’ll just have to wait and see.

World Bank Approves $40 Million Investment in Nicaragua

June 17, 2008 in Economy, Investment, News | Tags: , , , | by jameskrieger | Leave a comment

World Bank & Nicaragua Water/Small Business Funding

The World Bank’s board of Directors announced last week that it had approved “a zero-interest credit for $20 million to support the government of Nicaragua to improve water and sanitation services in rural areas.” An additional $20 million in zero-interest credit will go “to enhance the competitiveness of micro, small, and medium enterprises (MSMEs) and the business climate that affects those firms.”

According to the World Bank Press Release on June 12, 2008, the money earmarked for the development of the water and sanitation infrastructure is focused on improving the access to water in rural and indigenous communities.

The other $20 million for the MSMEs will be “implemented over five years and improve the quality and affordability of services to MSMESs through four components:

  1. Improvements to the business and investment climate for MSMEs.
  2. Matching grants for MSMEs to support, inter alia innovations, environmental improvements, and forward and backward linkages.
  3. Innovative financial services such as a plot partial credit risk guarantee system for MSMEs in coordination with regulated financial institutions.
  4. Improve strategic, technical and coordination abilities of MIFIC in the field of competitiveness… The primary focus of the projects’ interventions will be on urban MSMEs.”

“Both $20 million zero-interest credits funded by the International Development Association have a reimbursement period of 40 years with a 10-year grace period.”

If the credits are appropriately applied, this is good news for rural communities and small and medium businesses in Nicaragua that desperately need infrastructure assistance.

This is also encouraging news for investors in Nicaragua that rely on the govenments’ involvement to create a stable and reliable economic environment.

With his domestic popularity in decline, President Daniel Ortega should welcome the news too, and view this as a vote of confidence from the World Bank and the international community to continue the policy of opening Nicaragua to direct investment.

Investors Watch Nicaragua’s Hotel Barcelo Decision

June 16, 2008 in Investment, News, Nicaragua Real Estate, Perspective | Tags: , , | by jameskrieger | Leave a comment

Daniel Ortega continues to butt heads with big investors in Nicaragua. This week Ortega’s Sandinista government slapped a lien on the country’s only all inclusive hotel. The Spanish owned Hotel Barcelo Montelimar considered by many as the finest hotel in Nicaragua, says it’s being “harassed” by the Nicaraguan government.

The government claims the owners owe back taxes and that the 1993 purchase price of 3 million dollars for the luxury hotel was “ridiculous.” They may have a point, albeit sour grapes. According the hotel’s web site, “The Barcelo Montelimar Beach Resort and Casino, a five-star Nicaraguan jewel is nestled amid the lush tropical rainforests on the glittering coast of the Pacific Ocean. This magnificent beachfront resort in Playa Montelimar boasts four kilometers of sandy shoreline, 293 guest accommodations, and the largest swimming pool in South America.” Sounds like someone got a killer deal.

The point being made in this week’s headlines is that the sanctity of Nicaragua’s “rule of law” and “judicial security” are being exposed by the government’s actions. On the investor’s side I can see their point. The owners of the hotel bought the property in 1993 when the country was still reeling from the Sandinista/Contra conflict. Back then, only those with a long-term vision and the deep pockets to back it up would even consider investing in Nicaragua’s unripe fruit. Consequently they bought at the right time and most likely weathered years of negative cash flow. Now that the hotel is presumably prosperous and Ortega is desperate for public approval and money he feels justified to challenge the legality of the Barcelo deal.

The Hotel Barcelo’s legal representation are scheduled to appear at a hearing this week at the National Assembly’s Tourist Commission. The results of this meeting and the subsequent decisions made by the government in the case could be a telling factor how other investors in Nicaragua should view the permanence of their speculation.

Investing In Nicaragua: Right for Some

June 9, 2008 in Economy, Investment, News, Perspective | Tags: | by jameskrieger | 1 comment

Nicaragua Investment

Investing in real estate in Nicaragua at this point is speculative. No one is getting rich and probably won’t for a while. Today Nicaragua is more of a lifestyle investment, or an educated long term speculation. I say educated, because there are two solid facts, Baby Boomers are getting older, richer, and are buying second homes, and China, Russia, and India are producing a new and vacation eager middle class. Both groups are, and will continue to look for their best options in fulfilling their desires. Development in Nicaragua is and will continue to happen because there is a market for competitively priced real estate in one of the most beautiful destinations in the world, (see Costa Rica, Panama, Mexico).

Like I and others have written, because it is underdeveloped, Nicaragua’s potential is what makes it so attractive to investors. Its pristine Pacific Coast, the diving off of the Corn Islands on the Atlantic Coast, and its historical treasures Granada and Leon, are just a few of the highlights ready for growth in this beautiful and proud country. Geographically, it’s a short plane ride away from the U.S., and there is enough existing infrastructure to access these areas with little effort.

Recently, I have posted about headlines regarding Nicaragua’s political and economic situation cautioning investors to be aware of the tumultuous atmosphere there. I think it is important for potential investors to know what’s going on, that’s what this blog is about. For example recently I’ve written about the many social issues that threaten the stability of the country, their leader’s volatile history, and that he is currently courting allies that are polarizing to say the least. With that said, Ortega is trying to open up the country for investors with the abilities he has, and, there are many (including the press) in Nicaragua who would benefit from seeing Ortega fail.

There is no denying Nicaragua’s prices are attractive to investors. But If you’re looking to put your life-long savings in an ocean front condo and expect immediate rental income to cover the investment costs, you might look elsewhere for the short-term.

Nicaragua is ready for investment input if you have time, there is a vacuum waiting to be filled and it will happen. The only question, is investing in Nicaragua’s future right for you?

Ortega and Nicaragua’s Chilly Investment Climate – Forecast: Caution

June 3, 2008 in Economy, News, Perspective | Tags: , , | by jameskrieger | Leave a comment


The Price of Oil

Francisco Aguirre, president of the National Assembly’s Economic, Production and Budget Committee, recently said “ Nicaragua could be heading for its worst economic depression in 70 years.” according to a recent article in the NicaTimes reported by Tim Rogers.

Citing terms such as, “grave, grim, tailspin, very, very critical, tragedy, and nightmare the article paints a portrait of Daniel Ortega as a president that is unwilling, or worse, unable to remedy Nicaragua’s growing economic decline.

Daniel Ortega and Iran

According to several sources, Daniel Ortega will be heading to Iran for meetings with President Mahmoud Ahmadinejad, to discuss debt forgiveness and Iran’s continued financial support. It is no surprise that Ortega’s developing alliance with Iran is prompting a “wait and see” attitude from the U.S. government and consequently sidelining investors’ confidence in Nicaraguan real estate.

Ortega and FARQ

Another dubious ally that Daniel Ortega seems to be cultivating is his association with FARQ, or, the Armed Revolutionary Forces of Columbia. Recent allegations that Ortega is sponsoring two terrorists and that he had supplied their guerrilla group with weapons, has many worried that Ortega’s past affiliations with the leftist violence is still an issue.

Nicaragua’s Food Crisis

Anti-Hunger demonstrations are capturing the headlines as reportedly over a thousand took part in the rally calling for a comprehensive program to deal with Nicaragua’s growing food shortage problem. On Sunday June 1st, participants in Matagalpa marched to bring attention to issue that has been worsened by the recent skyrocketing price of fuel.

Ortega’s Antagonism

Understandably Daniel Ortega is a polarizing figure. Animosity between the Sandinistas and other more conservative parties has been gaining traction since his election. However, Ortega must realize that his actions are not solely alienating the opposition, they now also threaten international investors pouring millions of dollars in to the country. Recent statements made by Ortega have only served to escalate the tension between these groups. Referring to western financial aid, Ortega recently rebuked, “the colonialist mentality” of countries that offer “conditional aid. There is no doubt that “loans” from the IMF and the World Bank and their Structural Adjustment Programs have hurt Nicaragua’s growth in the past. It is also arguably not constructive for Ortega to alienate foreign investors who are helping to develop Nicaragua’s principal future market, tourism.

Investing in Nicaragua: Do It – Don’t Just Think About It

May 29, 2008 in Investment, Perspective | Tags: , | by jameskrieger | 1 comment

Investing in Nicaragua sometimes means more than just spending money on its real estate. Perhaps the most well known travel writer Arthur Frommer wrote in a recent post that travelers to poor countries like Nicaragua should think about why prices there are so cheap.

Frommer quotes in his post,
“In a devastating article appearing in the current edition of The New York Review of Books (June 12, 2008), Stephen Kinzer points out (in “Life Under the Ortegas,”) that 80% of the Nicaraguan population “subsist on less than two dollars a day.” Twenty-seven percent of the population “is undernourished.”

Kinzer also notes that,

“Nicaragua is among the safest and cheapest places in Central America, and a booming tourist enclave has already emerged around the beach town of San Juan Del Sur. Some entrepreneurs also dream of creating retirement communities to attract middle-class retirees from the United States.”

It’s only natural that when travelers plan a trip, they will try and maximize their vacation experience for as little money as possible. The same principle applies for investing. Therefore, it comes as no surprise that because Nicaragua is comparably poorer, they can offer tropical vacations (or investment opportunities) for less than their regional neighbors. But do these bargains come at the cost of exploiting the Nicaraguan people?

Frommers’ post ends with the question,

“As we lie on the beach and bask in the sun and click our fingers so the waiter will bring another drink, should we travelers pay some thought to the dreadful conditions that brought about our vacation pleasure?”

So what is Frommer saying? Is he suggesting that tourist and investors should pay more and go somewhere else? I don’t think so, but here’s where I have a problem with his post. Clearly, Frommer is suggesting that tourists and investors should think about the “dreadful conditions” that are raised in Kinzer’s article. But thinking about something and doing something are two different things.

My criticism about Frommer’s post is, that as one of the world’s most experienced travelers, he offers no suggestions how to make things better. We’re being called on to “think” about it. Where are the tips for tourists and investors to do their part to make a difference? Thinking is good – doing is better.

I have argued in this blog more than once, that part of what makes Nicaragua an exciting place to invest or vacation in, is the country’s room for growth. For the investor, part of that growth involves responding to the needs of the country on a local level. The term invest, means “to put money to use” and “to furnish with power.” Return on investment happens as a result of growth. So, yes, tourists go to Nicaragua and spend your money, investors you too!

Like Arthur Frommer, I agree that it is important for the visitor and the investor to think about how poor the country is, while you are there. And, here is a list of great non-profits that are helping to improve the living conditions for Nicaraguans in need. Invest in Nicaragua: invest too in its people.

Invest in Nicaragua by letting me know of any other organizations to add to this list.

Top 5 Reasons to Invest in Nicaragua’s Ocean Front Property

May 27, 2008 in Beachfront Property, Investment, Nicaragua Real Estate | Tags: , , | by jameskrieger | Leave a comment

Nicaragua’s Ocean Front Property

Whether you are thinking about a long term investment in speculative land or a turn-key resort community, Nicaragua’s ocean front property is low hanging fruit. Here are the top 5 reasons why ocean front property investments on Nicaragua’s Pacific coast are so sweet.

1. Tourism: Nicaragua knows its economic future is in tourism. Whether it’s under Daniel Ortega’s administration or his successor, look for continued investment incentives from this burgeoning market.

Tax Law 306

Highway construction

Power Stations

Geothermal

International Investment

2. Safety: Nicaragua is rated the second safest country on the continent after Canada. The U.S. ranks 97th out of 140.


3. Bang for Your Buck: Investment cost compared to U.S. ocean front property. Also to be considered, is the price of home services such as house cleaning among others.

4. U.S. growth potential. Projected to be slowed by debt and the credit crisis for the next 10 years. This U.S. down turn could translates into appreciation potential in Nicaragua from international investment.

5. Destination: Nicaragua is one of the most beautiful destinations in the world. Great Climate, Relaxed Lifestyle

Nicaragua’s Pacific Coast

San Juan Del Sur is host to several dynamic developments and dozens of individual possibilities.

Nicaragua Surf Report

Condo Hotels

Land information on the southern Pacific coast

Moving up the coast there a few stand out developments, some of which are only a 30 minute drive from Managua and the international airport.

Seaside Mariana

Gran Pacifica

International Living

Final Wash

Although recent headlines from Nicaragua reflect the countries fragile political and economic condition, recent headlines from the U.S. aren’t any better. The bottom line that makes investing in Nicaragua (especially its ocean front property) have huge potential, is that international tourism coupled with the aging U.S. population is sure make Nicaragua a “go to” destination in the near future.

Investing in Nicaragua: Headlines Raise Red Flags

May 23, 2008 in Investment, News, Perspective | Tags: | by jameskrieger | Leave a comment

There is a lot to consider right now when it comes to investing in Nicaragua. This week’s news out of Nicaragua regarding Daniel Ortega’s alleged involvement with the Armed Revolutionary Forces of Columbia (Farc) is disturbing, considering his past association with violence. As a reminder, Farc is considered by the United States and the European Union as an international terrorist group. The full story could cause investors to pause when considering the political stability of Nicaragua’s current administration and its relationship with the United States and Europe.

On the bright side, for investors whom are aware of the tremendous investment potential in Nicaragua and have not yet made the decision to buy, these headline merely extend the window to get involved at earlier prices. Existing developments need to have a stable political backdrop to sell their product and ongoing negative headlines out of Managua are not helping. This could give the investor a stronger playing hand at the negotiating table.

Whether you are already invested or are taking a wait-and-see stance, Nicaragua is still an investor darling at this point due to its substantial underdeveloped potential. Compared to its regional neighbors, real estate investments in Nicaragua may require a more long-term vision, but the potential is still worth the due diligence.