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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.
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.
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.
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. 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.
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 .Nicaragua Signs Deal with U.S. Oil Company April 11, 2008
4. Kevin Fleming: Nicaragua April 1, 2007
5. Jeffrey Finch: Nicaragua April 1, 2007
If you have any resources regarding investing in real estate in Nicaragua please let us know.
Investing in Nicaragua? More investors are looking at this budding nation because of its proximity to the U.S. and its abundance of resources and natural beauty. If you are thinking about, or are investing in Nicaragua, here is an idea to ponder.
As Nicaragua emerges from its past of instability, the youth are increasingly focused on their education, why not help them. The facts that, “65% of the population [in Nicaragua] are younger than 25 and both elementary and high schools are mandatory and free” indicates that education is in demand. One of the core goals of Daniel Ortega’s, administration is to build and staff more schools. This represents an opportunity for the youth of Nicaragua to become better educated and hence more prosperous and secure than previous generations. As a more educated population emerges, so does the possibility for a more stable national economy.
Helping to stabilize the future of Nicaragua should be of interest to any investor or possible investor who is interested in this beautiful and burgeoning country. As Jeremy Ames at NuWire Investor writes, “If you want to earn trust, stop asking,”What’s in it for me?” Instead, start asking, What will best serve this client.” In this case, the trust an investor wants to earn, is the reliability of a secure investment and your client is the future of Nicaragua.
Opportunities for investing in Nicaragua are expanding nationwide due to foreign investment and the possibilities that emerge as roads, airports and trade continue to open up to the world. With that in mind, supporting the development of schools for Nicaragua’s youthful population should be a long term goal for anyone interested in the future of their investments. Check out how you can help by connecting your investment with a national program or a regional school.
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Source: Nicaragua.com/culture/education,
