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Nicaragua Real Estate
Why invest in Nicaragua real estate, especially now? Here in the U.S. gas prices are crowding four dollars a gallon, the housing market is stalled in many key areas, and fear of a prolonged recession is becoming a reality. The US economy is definitely rattled. In a recent New Yorker article by Ian Buruma titled After America the author puts into words the fears on a lot of investors’ minds, he writes regarding this year’s meeting of world leaders in Davos, Switzerland,
“The first time I visited this august assemblage, around the turn of the century, the received opinion was that the United States was so far ahead of the rest of the world that no one could ever catch up. This year in Davos, America’s fall was on everyone’s lips.”
What “fall” means is up for speculation. However, it could be that now is the perfect time for US investors to seek investments that have future global potential for growth. While real estate investment in the U.S. is a can of worms, real estate investment in Nicaragua is continuing to grow. In a recent post, Mike Cobb, CEO of Gran Pacifica and Barry Dufresne, President of Stealth Financial Services on their Nicaraguan real estate investment new letter write,
“Although the flow from the US has slowed down considerably, investments from other nations in the region, Europe and Asia continue to be strong and new ventures are springing up around the country.”
The development of millions of new middle class wage earners in countries such as India, China, and Russia, is and will create immense amounts of disposable income. Some of this new income will be earmarked for tropical vacations. Many investors see the potential of Nicaragua’s pristine coasts as poised to become major new tropical tourist destinations. Now is not the time for savvy U.S. investors to get caught up in domestic fear by thinking inside the box, perhaps it’s time to think about investing outside the country, in Nicaragua.
Ortega and the Opposition Media
Recent headlines in Nicaragua suggest there are rising tensions between Daniel Ortega and the “opposition” media due to upcoming regional elections. It is interesting that the party that lost the last election in Nicaragua is called the opposition. If that term were to be used to describe the Democratic Party in the U.S. over the last 8 years, the label would be considered a pejorative because it suggests opposites, like good and evil. Opposition, implies that there is no possibility of reconciliation. Which leads to the question, what party would benefit the most by embracing an unyielding stance.
Nicaragua and Foreign Investment
The opposition media represents Nicaragua’s conservative contingency of well entrenched business and landowners to whom economic change means competition. It’s not surprising that the conservative aristocracy of Nicaragua are skeptical of Ortega’s moves to organize campesinos and his stated commitment to open the country to foreign investment. However, as reported in a recent blog, Nicaragua’s export sector grew 16.5 per cent to $1.26 billion over taking remittances and foreign aid as the country’s primary economic driver in 2007. In fact, CAFTA driven agricultural productivity is expected to exceed $2 billion by 2010. To foreign investors and the populace of Nicaragua these are encouraging statistics. For the opposition the stats may represent something different – a business model that is too inclusive. Incidentally, until 2007, remittance money from the U.S. was the largest source of income for many wealthy business owners in Nicaragua.
Tropical Breeze or Hot Air
As a foreign investor, one has to differentiate between the upcoming media battle between the current administration and the opposition, and something that may be more sinister. The opposition (read losing party) uses its media for one purpose. Their goal is to needle, antagonize, undermine, say anything, and do everything in its power to discredit the Ortega administration regardless how effective his policies are. And many times that kind of media works, remember the wacko swift boat tactics used against John Kerry in the 2004 U.S. elections.
The conservative opposition party lost in the last election and they represent the old guard of Nicaraguan power. It’s no wonder they’re butting heads with the current administration who have taken some controversial measures to stifle the opposition’s media hyperbole. So how serious is Ortega’s reported media interference to those who are or are thinking about, or are investing in Nicaragua real estate? Most sources say that the rising tensions between the current administration and the conservative party will have no long term consequences. Ortega is too smart to impose any kind of real censorship on the media. It’s too risky for his credibility with the foreign investors. And the “opposition” can’t cry wolf too loud, after all, the country’s in better shape than it’s been in years.
Take Home
To Daniel Ortega – It is important for the government of Nicaragua to realize that the mere suggestion of controlling the media makes foreign investors nervous, especially during elections.
To Nicaragua’s Conservative party and its Media – It is important to realize that foreign investors, indeed nobody takes a dog that barks at the breeze seriously.
To Nicaragua’s Investors – a) It is important to keep an eye on these municipal elections and the issue of free speech. b) Remember that Nicaragua is fundamentally moving forward and there are still plenty of investments to be made.
Surf Turf
If you’re a pro surfer raking in mad prize money or an old school big kahuna, a Nicaraguan ocean front getaway home should be the newest addition to your quiver. Or better yet, how about starting a surf business where you can live on beach front property all year-round. For the price you’ll pay for a two bedroom condo, a mile from your favorite break anywhere in Southern California, you can probably start your own surf-business on the sandy beaches near San Juan Del Sur in Nicaragua. Is that a surfers dream gig – or what?
Growing up in San Diego, California I know how dedicated surfers are to riding waves, and when not riding waves, they’re thinking about riding waves. If you’re a surfer living in the megalopolis from San Diego to Santa Barbara, life has always posed the challenging question – how can I surf as much as I want and still pay the bills? Surfers with some capital might seriously (can one be a surfer and serious?) consider investing in Nicaraguan real estate – ocean front property of course. Just buy a piece of land, build some buildings, rent out rooms, start a blog, and sell burritos and beer. Totally!
Investing San Juan Del Sur
One thing to know is that purchasing property in Nicaragua usually means that you pay cash. So if you have the capital, and think the expat lifestyle is one you could commit to, now is the time to invest. San Juan Del Sur has become more costly in the last few years, but many believe that it’s no where near its investment potential. All around San Juan Del Sur on Nicaragua’s southern pacific coast, small communities are being developed. Lots are available starting around 25K. Check out some properties at Nicaragua Surf Report, a web site that has clearly made a successful business out of surfing in Nicaragua. Beside giving daily reports on the local swells, their web site features local real estate for sale along with lots of other information.
If your thinking about investing in ocean front property, think San Juan Del Sur in Nicaragua. Whether the investment is for a getaway or starting a busines, there is still plenty of opportunity. What are ya waiting for?
Agriculture Driving Nicaragua’s Exports
Just as small businesses are the engine that drive the U.S. economy, it’s no surprise that small businesses are leading Nicaragua’s economic recovery. Recently, Blake Schmidt writing for the Nica Times interviewed Fransisco Mayorga one of the architects of Nicaragua’s transition economy. The article points out that the economy of Nicaragua is shifting from remittances and foreign aid, to one that is export based. And, those exports are coming from small agricultural businesses.
Nica Numbers
- In 2007 Nicaragua’s export sector grew 16.5 per cent to $1.26 billion.
- Exports overtake remittances and foreign aid as economic drivers.
- CAFTA driving agricultural productivity, expected to exceed $2 billion by 2010
“Power-Sharing Cooperatives”
President Ortega’s policy to “organize Nicaragua’s poorest campesinos into agricultural cooperatives – [is] a move that he [Mayorga] says will help small producers get their share of the country’s booming export sector.” Mayorga says about Ortega, “They want to promote a model in which cooperatives and corporations coexist and compete.” Not unlike the Grange Movement in the late 1800s rural U.S., (which led farmers to demand stable prices and fair wages for their efforts) Ortega is implementing a more organized system of production in rural Nicaragua. These cooperatives will help small businesses compete with corporations that often times return little to the local economy. In the near-term, these cooperative will help increase profits for small and medium-sized businesses which will help circulate more money in their regions.
It’s not a stretch to see that more profit and better organization at the local level will make Nicaragua more powerful competitor with its neighbors, not only with its exports and its economy, but also with the strength of its democracy. And for the investor interested in Nicaragua, that’s big news.
Check out this week’s news about Nicaraguan Coffee exports.
Little Corn Island – Que Rico
If you are looking for an adventurous new destination for world class diving or fishing Nicaragua’s Little Corn Island might be the spot. If you’ve dived Roatan and Utila islands off Honduras or Cano Island off Costa Rica, and are looking for a more “tranquil” island experience, Little Corn Island is both isolated and oh so unaffected.
Island in the Mainstream – Not!
That isolation means it’s more difficult to get to and most likely, not have the amenities you’ll find at the more mainstream islands, but, it also mean that Little Corn doesn’t have the tourists, traffic, or troubles either. In a humorous forewarning to those considering visiting Little Corn Island, local Hotel “Casa Iguana” has a test list for the,
Top 10 Reasons We Might Not Want You to Visit Casa Iguana
1. Your favorite travel destination thus far in your life has been Nassau, Bahamas.
2. You assume hotel owners have degrees in meteorology.
3. You are unable to distinguish between a mild case of diarrhea and the Ebola virus.
4. Until recently you thought Nicaragua was an African nation.
5. Terms such as “Type A” “anal retentive” and “A.D.D.” are things you have discussed with your analyst.
6. You actually HAVE an analyst.
7. Upon arriving at Casa Iguana one of your first questions will be: “Hey, where’s a guy go around here for a good-time (wink-wink)?”
8. The last time you tried something new and different to eat was when your mother bribed you with ice-cream.
9. Small boats, small planes and BIG seas give you a long lasting case of the heebie-jeebies.
10. Three words: “picky, picky, picky.”
Sounds like a dare to me. I’ll ask my analyst.
Nine miles from Big Corn Island, Little Corn Island hosts several places to stay, from the rustic to more traditional. As Casa Iguana points out, visitors should keep in mind that Little Corn is a tiny island, in a really remote part of a country that is still very underdeveloped. It will be an adventure just getting there.
Diving Little Corn Island
Once you arrive though, there are several diving guides including www.divelittlecorn.com. a “PADI”certified shop. When you’re out of the water, most of the hotels have guides that will take you fishing, or direct you to horse back riding or the hiking trails. The food is generally fresh fish, lobster and conch that is caught daily, and fruit and vegetables that are grown on the island.
Unlike Roatan, and other well exposed Caribbean diving destinations that can be less than receptive, Little Corn Island is a burgeoning business community that is eager to host international travelers looking to snorkel or scuba dive or just kick back and untie some city knots. In fact, while visiting Little Corn Island, you might spend as much time diving into a hammock as you will on the reefs.
There have been several stories written, and lots of blog action about the recent riots in Puerto Cabezas on Nicaragua’s Atlantic coast. The question of the motive for the government to cancel the election is valid and suggests that Ortega and Sandinista allies would lose the elections if they went forward.
Postponing elections due to hurricane damage seems random and could be an excuse to hold on to power in the region. But for what reason? How valuable is the northern Atlantic coast to the Ortega administration? Considering the recent go-ahead for oil exploration penned by the administration and MKJ Xploration, Puerto Cabeza could literally be the future well-head of revenue for the entire country. And that, makes it very valuable indeed.
Nicaragua’s right-wing opposition has “started to organize against what it claims is President Daniel Ortega’s similar [to Venezuela] intentions to consolidate power in this country” according to a recent Tim Roger’s article “Nicaraguan opposition resists Chavez’s expanding ‘revolution…’”
Rogers writes, “Mr. Ortega, an ally of Venezuela’s president, has promised to implement his own version of ‘direct democracy’…” Ortega’s direct democracy is defined as, the “sharing of power” through the implementation of “Councils of Citizen Power.” The opposition fears that these councils would subvert their local authority through a chain that starts at the neighborhood and progresses to municipal, regional and national institutions.
The term “Direct Democracy” brings to mind the Chicago political machine of the early 20th century that traded favors at the local level, for party loyalty at all levels. Comparing the disenfranchised immigrant population of turn-of-the-century Chicago and Nicaragua’s poorest populations’ struggle to survive, it seems an effective way of consolidating power. Nicaragua’s “Direct Democracy” is an experiment for Ortega’s battle to secure power. The question is will it work. Certainly, Chicago’s machine worked in the burgeoning neighborhoods of Chicago, and it ended up to be the dark side of democracy in the city’s proud legacy.
U.S. Real Estate Bubble
As headlines across the U.S. continue to predict an economic slow down, beach front properties in Nicaragua prompt a second look. Some economists predict the U.S. real estate markets is in a bubble that is doomed to pop, and that the current slow down is the precursor to a major real estate correction. Others say that real estate corrections are regional, and that the U.S. economy as a whole will recover quickly.
Nicaragua Investment Incentives
Either way, the economics of investing in Nicaraguan real estate seems to be a viable choice with some huge potential. If you are considering real estate as an investment option, Nicaraguan beach front property is still available at reasonable prices that are heading one direction. Up. One reason Nicaragua is peaking investor interest can be found on the front page of the ReMax Nicaragua web page where they point out that, “Tourist based businesses, now classified under the tax incentive Law 306, can operate tax-free, exempt form income taxes, property taxes, and importation taxes, for up to 10 years. Ex-Patriot retirees are also invited to enjoy similar tax incentives when they make the decision to move to their dream home in the tropics! …It is no wonder that the World Bank recently named Nicaragua as ‘the most pro-business atmosphere in Central America.’”
International Tourism
Tourist based businesses especially those located on beach front property are and will be increasingly in demand in the future according to a recent article in the Harvard Business Journal titled The Tourism Time Bomb. Here is an excerpt from that article,
“International tourism is ready to explode with investment opportunities, according to an article published in the Harvard Business Review titled “The Tourism Time Bomb.” The writers–Paul F. Nunes, a research fellow at the Accenture Institute, and Mark Spelman, global managing director of Accenture’s strategy practice–state that international tourism is growing exponentially, and that this growth will soon lead to dramatic changes in major tourism destinations as well other locations which are likely to benefit from the resulting overflow
As the U.S. real estate market flounders in shallow waters, investors are looking for fresh ideas, and they don’t get much brighter than beach front property in Nicaragua.
Nicaragua could start drilling for oil off its Atlantic coast within four years, according to Prensa Latina. “Nicaragua legalized oil exploration in its Caribbean waters Wednesday and it will start exploiting a resource that might turn Nicaragua into a Central American exporter…”
Two concessions contracts were signed with MKJ Xploration, a U.S. company based in New Orleans. “U.S. enterprise MKJ president Eric Conrad said 48 precent of the extracted crude will remain in Nicaragua.” Which might suggest that Nicaragua could build a refinery?
“Signed by General Prosecutor Hernan Estrada, the agreement opens doors to a project that may produce incomes up to 20 billion dollars” according to the article.
This is good news for Nicaragua’s economy, its citizens and for international investors. Currently, Nicaragua imports a costly 80 to 100 percent of its oil and gas to meet the country’s energy demands. The signing of this agreement clears the way for creating desperately needed revenue for the struggling nation as well as energy independence from Venezuela and the Chavez administration.
Read this for some background on, Oil in Nicaragua.
Development In Nicaragua: Civic Debates Mark Positive Sign
Development in Nicaragua is progressing rapidly, and, there are signs that reflect that growth. Yet, reservations about Daniel Ortega’s long term political ambition have led to trepidation for some investors looking at the future of Nicaragua. If you look closely at stories coming out of Managua, however, there are indicators that Ortega’s administration recognizes that a democratic approach is the ticket to economic gr.In a recent article, Jose Adan Silva writes about the conflict in Managua between the construction and real estate industry, and the future of the water supply. The article suggests that changes are on the horizon. Regardless which side you’re on, both sides are arguing for development.
Natural resource officials say that the 355 urban development projects that are under construction are excessively stressing the city’s water treatment infrastructure. City planners argue that, there needs to be a moratorium on building until suitable water treatment facilities are operating. The real estate and construction industry argue that, hundreds of millions of dollars and thousands of jobs are being infused into their city which is helping to buoy Managua out of poverty.
For the investor, the most positive note in Silva’s article comes from lawmaker, Agustin Anaya “an ally of the leftest governing Sandinista Front, who said, “the ban on housing construction is ‘healthy and commendable,’ but alternatives for the private investment projects affected by the measure should be explored.” Anaya goes on to say, “We should not be so drastic. Alternative solutions that seek to preserve water sources and that do not affect the country’s economic growth should be sought.”
Development in Nicaragua real estate, or Managua’s infrastructure, both sides have valid arguments. Each side believes their argument should be the priority. For the investor, both real estate and infrastructure have potential, because they are both signs that Nicaragua is moving in the right direction.
