Nicaragua’s Sandinista government, in power since January, is scaring away U.S. investors by seizing land and buildings and punishing opponents with fines, the president of the country’s largest foreign business group said.
Since August, Daniel Ortega’s government has seized an Exxon oil facility, scrapped government contracts with a business owned by a leader of an opposition party and fined Nicaragua’s largest newspaper for failing to pay back taxes. Critics say the actions were politically motivated.
“There is no trust of the government,” Cesar Zamora, the president of the American Chamber of Commerce of Nicaragua, said in an interview in Managua. “The companies that are already here fear they’re going to owe the government `favors.”’
Foreign investors, lured by inexpensive beachfront property, are transforming parts of Central America’s poorest country into gated communities, and textile makers such as Cone Denim have set up plants to take advantage of low labor costs. Investments by foreigners, which rose 18 percent last year to $282 million, may be threatened by Ortega’s policies.
Zamora said that U.S. investment, Nicaragua’s largest foreign source, has dropped since Ortega returned to power, without providing specific figures. It may fall further if the administration seizes more property and assets, he said.
“There are practical people in the government and others who are more radical,” said Zamora, whose group promotes U.S. business opportunities in Nicaragua. “The radical side is winning at the moment.”
1979 Revolution
Ortega, whose revolutionary Sandinista party imposed a state-run economy and nationalized thousands of properties after seizing power in 1979, has said that he welcomes outside investment as a way to eradicate poverty.
“Foreign investment will help reduce our unemployment problem,” he told investors gathered at his Managua home on Oct. 5, a month before he was elected president.
Ortega’s previous stint as president ended in 1990 after a decade-long civil war that devastated the economy. He ran last year on a platform of reconciliation and fighting poverty.
Vice-president Jaime Morales has repeatedly said that the administration respects private property and welcomes foreign investment from all countries. Still, he told reporters on Aug. 28 that “no private interest can be put ahead of the national interest.”
Tourism Industry
Foreign investors spent $282 million in Nicaragua last year, compared with $238 million in 2005. The growing interest is mainly tied to the burgeoning tourism industry, with hotel construction and other tourist-related services attracting the majority of capital, according to Nicaragua’s Ministry of Industry, Commerce and Promotion.
Nicaragua’s Central Bank said on Aug. 10 that foreign investment has slowed during the first six months of 2007, with an estimated growth of 2.5 to 3.4 percent.
Tourist spending rose 31 percent to $240 million in 2006, exceeding coffee sales, the country’s traditional top income earner, according to Nicaragua’s Institute for Tourism. The prime Pacific coast area, where 120 luxury housing developments are either completed or under construction, is poised to lure about $495 million in foreign investment, according to Calvet & Associates, a Managua-based consultant.
Yet even as construction begins, disputes are escalating over land ownership, an issue clouded by shoddy records, local demands and shifting government policies.
At least three battles in which local residents lay claim to developers’ land have boiled over on the Pacific coast in recent months, causing one $88 million project near the Costa Rican border to temporarily shut down.
`Getting Slammed’
Armel Gonzalez said that his development is in danger of being halted permanently after a judge on Sept. 28 confiscated homes and construction equipment on his property for failing to pay members of a cooperative who have long challenged its sale.
“We’re getting slammed,” said Gonzalez, a native of Nicaragua who fled to the U.S. after the 1979 revolution and is now considering moving to Panama to build resorts there. “This is political payback.”
Foreign developers are lobbying against a bill proposed by lawmaker Gerardo Miranda that would put new restrictions on coastal development and turn over all islands to the government.
“We can’t help this country grow if people are scared to buy,” said Kirk Hankla, a Coldwell Banker real estate agent and former California resident who offers properties on Nicaragua’s coast.
Raul Calvet, the president of Calvet & Associates, says that property sales have dropped by 50 percent and home sales are down 25 percent this year due in part to the “Ortega effect.”
“The government doesn’t want to harm investment,” said Calvet. “It would be suicide for them if they did.”
