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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.
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.
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 & 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:
- Improvements to the business and investment climate for MSMEs.
- Matching grants for MSMEs to support, inter alia innovations, environmental improvements, and forward and backward linkages.
- Innovative financial services such as a plot partial credit risk guarantee system for MSMEs in coordination with regulated financial institutions.
- 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.
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.
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?
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 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.
- Mercy Corp
- World Vision
- Wisconsin/Nicaragua, Partners of the Americas Inc.
- Project Concern
- CRS Catholic Relief Service
Invest in Nicaragua by letting me know of any other organizations to add to this list.
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.
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.
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.
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.
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.
Ethanol as Biofuel
Today’s production of corn in the US destined to become ethanol accounts for over 25 percent of the traditional food/feed crop. That shift over the last two years has caused a dangerous increase in the price of corn, negatively impacting the growing but still fragile economy in Nicaragua.
Food As Fuel
Since corn is now seen an alternative fuel source, the agricultural commodity is now economically linked to the price of crude oil.
- Barrel price in 2006 - $66.00
- Barrel price today - $129.00
- Projected year end price - $200.00
- Bushel of Corn in 2006 - $2.00
- Bushel of Corn Today - $6.00
- Projected year end price - $8.62
Due in part to the negative economic impact from U.S. subsidized corn imports and recent soaring prices in gasoline, Nicaragua is facing some serious food shortage problems.
How does this effect the poor in Nicaragua? There are two results that are predictable, the first is social unrest. The World Bank estimates 33 countries face social unrest because of soaring food and energy prices. As Bob Marley once sang, “A hungry mob is an angry mob.”
The other expected consequence is increased emigration to the U.S.. According to a report today on China Radio International,
- “63.3 percent of Nicaraguans are inclined to seek jobs in other countries, up from 55.5 percent at the end of 2007…”
- Of those intending to seek jobs abroad, 44.5 percent prefer the United States.
- About 42 percent of respondents said the main reason for seeking jobs abroad was the lack of jobs domestically, while 23.6 percent cited poverty as the cause and 17.1 percent said the rise in food prices was triggering the exodus.
Food that should feed people is being converted to satiate the worlds hunger for gasoline, that’s just wrong.
Hey I Know!
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Thinking about Investing in a luxury waterfront condo in Nicaragua? Plan on visiting a few months or less each year? Here is a question you should ask; what about the rest of the time, can I trust a property management company to maintain the property and keep it occupied with reliable renters? This question is a non issue if you consider investing in a Condo Hotel, or Condotel.
Condotels have been around few years and are an excellent option for some. They also have their limitations. Miami was one of the first destinations to develop the idea that has taken off in popularity as a vacation investment option. Basically, as the owner of the unit, you can stay for a designated amount of time each year. During the remaining time, your investment becomes hotel inventory. As the owner of a product that’s sold, you receive a percentage of the money brought in by the hotel. This return, if steady, can help offset the costs of the investment. Mean while your investment is professionally maintained, which you pay for in a monthly service charge.
One of the main advantages of the Condotel market in Nicaragua, specifically San Juan Del Sur is it’s a comparatively burgeoning investment arena. What that means is you will pay less and get way more for your money. Here’s a general idea. What you will pay for, literally a hotel room in Miami, will buy you a luxury waterfront condo in a resort community in San Juan Del Sur.
Cala Azul is a prime example of a luxury Condo Hotel resort development currently under way in San Juan Del Sur. According to their web site, pre-construction investments starting around $200,000 are still available.
Here’s a short list of some of the advantages and disadvantages for the Condotel investment in Nicaragua.
So Cool:
- Tourism Law 306
- What you get for your money
- No maintenance worries
That Sucks:
- No full time retirement
- May not generate income for awhile
- Personal Limitations i.e. it’s a hotel
In Related News
For the investor who wants a really short vacation stay with a minimal investment, I am developing the idea of the motel/apartment, which I refer to as the Moment. Angel investors, I’m still waiting.
Hey I know!
Got the urge to do something good? Check out Peacepassers.org. They collect and distribute soccer gear to kids in Nicaragua and elsewhere. It could be the best investment you make in Nicaragua this week.
According to several news reports the planned month long national transportation strike is taking its toll on the capital city. Sources report that “…travel in the city [Managua] is both risky and tense…” with taxi drivers refusing to enter parts of the city where blockades are set up to disrupt traffic. A bus driver was killed on Wednesday in northern Nicaragua but reportedly there was no conection to the strike.
The strike which started on May 5th is expected to last for 30 days. Transportation organizations including taxis, bus lines, and the trucking industry are demanding a reduction of fuel costs and a freeze on future prices.
The U.S. Embassy in Managua recommends U.S. citizens buy fuel, food, and water to last for at least a week. It also advised that travelers avoid driving through barricades.
If you have to travel in Nicaragua it’s a good idea to review some travel safety tips and be aware of the tension on the specific routes to your intended destination.
World-Wide Food Crisis
Most headlines out of Nicaragua this week are regarding the food crisis. There are many reasons why there is a world-wide food crisis right now, and they are mostly political – but I won’t open that can of worms in this post. Memo to self: must remember this blog is about investment. The subject does remind me of a comment I heard recently. It went, “politics is about two things – the first is money, and…I can’t remember the second.”
Food Crisis In Nicaragua
I feel strongly that investing in foreign real estate ties an investor to that land in ways other than those that are self-serving. Fundamentally, that tie involves an ability to respond to the needs of the people on that land. That response-ability is an insurance that the investment made, like the people of that country will prosper. One won’t happen without the other. Investment supports people, people make investments grow, and in Nicaragua, both have a lot of room to grow.
Food Crisis Action Plan
One way you can insure that your investment in Nicaraguan real estate stays healthy, is to do your part and insure the people of Nicaragua stay healthy too. Here’s a short list of quality organizations to contact.
If you are considering investing in real estate in Nicaragua consider the “Community RE Fund Program” set up by Coldwell Banker in Nicaragua. According to their web site, “The REfund model encourages every participant in a real estate transaction to contribute funds at the time of closing. Investing that creates value in society and the environment while at the same time being financially profitable.” (read more)
Affiliated with the RE Fund program in Nicaragua, Dos Manos is a collection of non-profit organizations that focuses on children’s needs and education.
Unlike politics, investing in a country is about more than just one thing, today’s headlines make it easy to remember what it is. Do what you can to help with the food crisis in Nicaragua.
Why Nicaragua?
One of the compelling reasons for investing in Nicaragua is its potential for appreciation as the country develops. Because of its tumultuous recent history the country is playing developmental catch-up with its neighbors such as Costa Rica and Mexico. Yet geographically, Nicaragua boasts the same coastline, rainforests, and volcanoes as its neighbors, and lots more of them, including the largest fresh water lake in Central America.
In a recent correspondence with an investment adviser from Mexico, all of the conventional reasons why not to invest in Nicaragua were pointed out. All of which, are exactly why investing in Nicaragua holds so much promise, not only for the eventual return but also the current venture possibilities.
The negative reasons were; lack of infrastructure, limited flights into the country, Ortega’s political associations, a still growing economy and Nicaragua’s lack of exposure on the world market. On the surface these reasons seem valid and could be of concern if you’re looking to buy a vacation condo to use for a couple of weeks a year and need to have access to first world amenities.
Nicaragua is a long term investment, so as long as you are focused on long term appreciation potential and demand you will do ok. On the other hand if you are planning on buying into a brand new development on the coast where there is little to no infrastructure, and hoping to rent it out at near occupancy for premium rent you will be disappointed. Tourism is growing by leaps and bounds in Nicaragua; however, it still is way behind many of its neighbors and will be for some time yet. If you are the type of investor ready to pay top dollar so you can go on vacation and shop at arena sized super markets and shopping malls, indeed Nicaragua may not be right for you.
However, if you are an investor that is looking down the road, Nicaragua is an exciting opportunity. What I’m getting, at is there is at least one other reason that is possibly even more satisfying than Nicaraguan real estate’s potential appreciation. And that is the satisfaction of being on the vanguard of creating something new and watching the possibilities (negatives to some) develop.
It goes back to the investment adage, don’t buy the best house on the block.
From beach front investments on the coast to a grand old colonial city, Granada is currently considered the safest real estate investment in Nicaragua. Granada is located on the massive Lake Cocibolca also referred to as Lake Nicaragua and is just 30 miles from the capital Managua. Granada is the most popular tourist destination in Nicaragua and that alone makes it comparable to Antigua, in near by Guatemala. Other similar characteristics between Granada and Antigua are their shared history as the first two cities established by Europeans in Central America.
Aside from their age and continuous habitation, these two cities share historical, architectural, and cultural value that no other cities in Central America can claim. These attributes make them both attractive investments, whether it’s for a vacation home, or a retirement home.
OK, let’s talk about investment comparisons between these two cultural center pieces of Central America. First, remember the investment adage that, “the greater the risk, the greater the return” this is an important disclaimer because Granada is less developed than Antigua, therefore, there is more risk and so the potential for return is greater.
Here’s a list of comparisons:
Two Old Jewels – One Needs Some Polishing
Antigua is a UNESCO international heritage site (IHS) - Granada has applied and is awaiting approval. This status carries weight because it focuses an international eye on the city, which translates into money from their respective governments for police and infrastructure. In the case of Antigua, which is the jewel of Guatemala, the money it has received certainly has made a difference – and you’re going to pay for it. By all rights considering historical value, Granada should receive the UNESCO designation in the near future. Once UNESCO status is achieved, building regulations will surely become more restrictive similar to those in Antigua. As far as investment potential for the future, Granada has way more room to grow .
Antigua: No Lake
As mentioned, Granada is situated on the largest fresh water lake in Central America. The potential for development around the lake is, well, as big as the lake itself, not to mention the islands within the lake. Being the largest city on the lake and the closest to Managua and the airport, Granada has the potential to service any communities that may spring up around the lake. A comparable and very busy lake city is Panajachel which is the center of activity on Lake Atitlan in Guatemala. Again, if you consider the historical culture of Granada and the value of the lake it sits on, tourism has only begun to reach its potential in Granada. One just needs to count the number of expat communities around lake Atitlan to get an idea of the possibilities around Granada. Yoga retreat anyone?
Property Potential
In my research I found that the average price for a two bedroom home/business in Antigua is north of $200,000 and for a similar property in Granada you’ll pay about half that. It’s all about the lack of property listings in the city of Antigua. The reality is, if you want to live IN Antigua, property is at a premium on a completely different level than you’ll find in Granada. Not to mention the building restrictions. So as far as finding a home or property for sale, coupled with its potential for property appreciation Granada has the edge for the investor willing to take some risk.
There is a lot to know about investing in international real estate, and it’s encouraging when you can point to a precedent that has worked. Antigua has achieved a level of success that is envied by most small cities across Central America. In many ways Granada is lucky because today’s investors know what the potential is for a small historical city. Antigua is the known model for what Granada can become, throw in a lake that links to the Caribbean Ocean and the possibilities are impressive.
Choosing to invest in vacation ocean front property in Nicaragua, Costa Rica, or Mexico presents a staggering variety of opportunities. Vacations are usually synonymous with getting away for a couple of weeks, lounging by a pool or sunbathing on the beach. Investing in a beach front property allows you to enjoy a getaway and still be in your own home. If you invest carefully you benefit when you use your home, and for the rest of the year your getaway property should appreciate in value, and generate rental income. So with this in mind, I’ve created a list of criteria for the Best Vacation Investment Opportunities in Central America and Mexico. These beach front real estate investments are:
- Well established
- Offer Bank Financing
- Rental management
- Walking distance to the beach
- Two bedroom and two bathroom condo or similar
Starting off the list is the Bahia Del Sol located in San Juan Del Sur, Nicaragua. Bahia Del Sol asserts they “take care of everything from construction to furnishings to rental.” With units starting at $176K for a 2bd/2b this development is worth taking a second at.
Seaside Mariana has all the criteria covered and then some. Seaside Mariana is located about an hour from Managua, and the international airport which gives this development easy access once you arrive in Nicaragua.
Gran Pacifica is also located less than an hour away from Managua and the international airport. Gran Pacificas’ web site offers ocean front condos starting at, $134,990 with 50 percent financing available.
So you’re saying, what about investments in Costa Rica, Panama, or Mexico? Well, I submit the best overall long-term investments on ocean front properties considering get-in costs and the potential for appreciation are in Nicaragua. If you know of other developments inside or outside of Nicaragua that can compete with these investment opportunities, I invite you to write a comment and tell us why.
Next Post: Granada vs. Antigua. Perhaps you’re ready to make a bigger commitment and live for an extended period in your new getaway home. If you are considering living away from your primary residence for a few months at a time you might be interested in a location with more culture than waves lapping on the beach.
Defining what you want your investment to do for you.
Before anyone thinks about investing in Nicaragua one needs to ask themselves a few questions.
1. Am I looking at investing in real estate in Nicaragua simply because it is an under developed country with impressive potential for international tourism? A return on my investment is a risk, but foreign investment is gaining momentum in Nicaragua which makes the potential for profit more secure every day.
2. Do I want to invest in a getaway property that can be visited a few weeks out of the year for family vacations? What are the possibilities of having a property management company rent and manage the unit for the rest of the year to generate some income?
3. Do we want a beach front gated-community with a golf course? Or, do we want a location with a more local feel?
4. What about living in Nicaragua for six months of the year? One thing to consider is that life in a small colonial town would provide more social activities than a condo on a stretch of beach.
5. What if we wanted to start a business? Running a restaurant, a small hotel, or a bed and breakfast in a tropical setting is an idea that is really exciting.
All of these questions have become a realization for many foreign investors already in Nicaragua and though out Central America. And, there is still plenty of opportunity for those ready to get involved.
Over the next few posts, I will cover these five options and the reasons why which one might be the best for you. Comparing locations within Nicaragua will give you an idea what each area has to offer. Adding a little twist, I will compare the top investment locations in Nicaragua with some comparable destinations in Central America and Mexico.
For now, let’s start at the beginning of the list and revisit why one would want to invest in Nicaragua in the first place. Many articles have been written about the investment boom in Nicaragua and Nicaragua Real Estate: Navigating the Market is a must read.
Another informative article is the Top 5 Investment Opportunities In Nicaragua. This article gives some actual prices on properties located in the fastest growing areas in Nicaragua.
Next time, the most popular investment vacation spots in Nicaragua.
U.S. Economy - A Sinking Ship?
The first day of May is celebrated by many around the world as the day to acknowledge laborers and their contribution to the economy. Unfortunately, there’s not much to celebrate when it comes to economic news in the U.S. These three headlines sum up the news for the first day of May 2008.
NEW YORK (Reuters) - U.S. companies’ planned layoffs jumped 68 percent in April from the prior month to the highest since September 2006, pointing to further deterioration in the labor market, a report showed on Thursday.
AP Economics - The number of newly laid off workers filing claims for unemployment benefits soared last week. The economy is expected to lose 70,000 jobs, the fourth straight month of job losses.
NuWire Investor - America Losing Faith in Economy: Confidence Hits 5-Year Low.
I don’t know about you, but I’m really needing some good news right about now. I mean C’MON! It’s Spring time for crying out loud. I thought April showers brought May flowers. It looks like April’s bad news has turned into an economic down pour that is not letting up any time soon. Well, if I’m going to get wet, I might as well be in the sunshine.
Hey - I know, lets take a look at some economic news from Nicaragua.
- Nicaragua sees Foreign Direct Investment Up.
- 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
- Great Opportunity for Smart Real Estate Buyers
- Real Estate and Business Opportunities
May Day might just be the time to see what opportunities are waiting to blossom for you in Nicaragua.
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.
Researching Nicaragua real estate investment opportunities can seem a bit daunting, but today, much of it can be done over the internet. With that said, the amount of information on the web can also be confusing and even misleading. Be careful not to waste too much time reading about an event that is really interesting, and, 25 years old. A cursory Google search using key words such as “real estate Nicaragua” or “investment Nicaragua” will net an abundance of ads for brokers, agents, tour guides and basically a network of people looking for their commissions. Cool, if that’s what your looking for. However, if you are sarching for current background information, say, on the stability or economy of the country, it’s a different story.
In a recent blog I wrote that investors should to proactive on promoting education in Nicaragua. When I started researching “education in Nicaragua” I was astonished how outdated most of the information was.
Save your self some valuable time and a mountain of frustration by checking with these sources that highlight current information and news that could help you decide what investments might work best for you.
1. How to be a Successful Nicaragua Real Estate Investor April 01, 2008
2. Nicaragua’s ex-foreign minister likely to be president of UN General Assembly March 24, 2008
3 .