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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.
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.
