Latin America Collection

*** ***Nicaragua enjoys an excellent investment climate; and the
forecast calls for continued sun.
The Law of Foreign Investment provides equal treatment under
the law for foreign and national investors, offers access to local
financing, eases the transfer of funds abroad and offers added
protection to properties.
The pro-business, anti-corruption government of President
Enrique Bolaños (2002-2007) has aggressively sought increased
Foreign Direct Investment and worked to boost international
confidence in Nicaragua.
The result has been record-high levels of foreign investment,
tourism, bank reserves and exports, as well as the highest
economic growth rate in Central America for 2004.


In 2004, Foreign Direct Investment in the areas of trade and
services (namely free-trade zones and telecommunications)
increased by a whopping 447%, from $14.8 million in 2003 to
$81 million last year. Overall, Foreign Direct Investment in
Nicaragua in 2004 was $260.7 million, and that number is
projected to grow an additional 30% in 2005, to close the year
at $346 million.
The tourism sector last year also generated record-breaking
statistics, creating $166.7 million in revenue, for a 9.8% growth
rate.
Fueled by the increases in trade and tourism, Nicaragua's
construction sector in 2004 grew by a monstrous 646%.
Building upon its success, the government in early 2005 drafted
an innovative new tourism-investment law ­ billed as the best in
Latin America ­ to offer new tax breaks and benefits to a wider
cross-section of foreign investors. The reform measures, expected
to go into effect later this year, would improve Nicaragua's
already progressive Tourism Incentive Law, known popularly as
Law 306 (see separate section).
In comparison to Nicaragua's efforts to further open its doors to
foreigners hoping to live and invest here, Costa Rica is repealing
its tourism investment incentives, again prompting foreigners
living there to consider moving north.
Nicaragua has also worked to streamline bureaucracy in recent
years. The World Bank and International Monetary Fund, in
their annual report Doing Business in 2005, qualified Nicaragua
as one of seven Latin American countries to notably improve its
investment climate by reducing the average time it takes to get a
business license from 71 to 45 days.


Common business Lingo
A pagos
.....................................................Payments, buy on time
Abogado, Licenciado
...........................................................Lawyer
Acciones
... ..........................................................................Stocks
Accionista
.. ............................................Stockholder, Shareholder
Activo
.. ...............................................................................Asset
Agrimensor
.....................................................................Surveyor
Al contado
.. ....................................................................For cash
Anualidad
.......................................................................Annuity
Año Fiscal
....................................................................Fiscal year
Anticipo, prima, depósito
.........................................Down payment
Arrendamiento
....................................................................Lease
Autenticar
......................................................................Notarize
Avalúo
..........................................................................Appraisal
Certificado de depósito
..........................................................C.D.s.
Cheque
..............................................................................Check
Cláusula
...........................................................................Clause
Comprador
.........................................................................Buyer
Contrato
........................................................................Contract
Corredor
........................................Stockbroker, real estate broker
Costo
....................................................................................Cost
Cuenta
...................................................................Bank account
Cuenta Corriente
..............................................Checking account
Déficit
..............................................................In the red, deficit
Depreciación
.............................................................Depreciation
Deuda
.................................................................................Debt
Divisas
......................................Foreign exchange (hard currency)
El Justo Valor del Mercado
...................................Fair market value
Embargar, Enganchar
................................................Attach assets
En efectivo
...................................................................Pay in cash
Escritura
.............................................................................Deed
Estado de Cuenta
...................................Bank statment, statement
Facilidades de Pago
...................................................Payment plan



Fideicomiso
...........................................................................Trust
Fidecomisario
.....................................................................Trustee
Financiamiento
..............................................................Financing
Gastos
..................................................................Costs, expenses
Giro
........................................................................Money order
Hipoteca
.......................................................................Mortgage
Impuestos
.............................................................................Taxes
Intereses
...........................................................................Interest
Impuestos Prediales
..................................................Property taxes
Inversiones
.................................................................Investments
Lote
.......................................................................................Lot
Montar, Poner Un Negocio
......................................Start a business
Negocios
.......................................................................Businesses
Notario
.............................................................................Notary
Pagaré
.................................................................Promisory note
Parcela
...................................................................Parcel of land
Plazo
...........................................................Term, period of time
Precio
..................................................................................Price
Préstamo
..............................................................................Loan
Principal
........................................................................Principal
Propiedad
.......................................................................Property
Registro
.......................................................Record of ownership
Renta
..............................................................................Income
Rentabilidad
..............................................................Profitability
Saldo
..........................................................Balance of an account
Seguros
.........................................................................Insurance
Socio
.................................................................................Partner
Sociedad
....................................................................Corporation
Subcontratar
..........................................To subcontract, farm out
Superávit
.......................................In the black, surplus of capital
Tasa de interés
..................................................................Interest
Testaferro
..........................Person who lends a name to a business
Terreno
................................................................................Land
Traspaso
..........................................................................Transfer
Timbres Fiscales
............................................................Tax stamps
Valor
...................................................................................Value
Vendedor
.. ...........................................................................Seller


The increase of tourism and foreign investment has also spawned
improvements to Nicaragua's infrastructure. A new four-lane
highway connecting Granada to Managua, scheduled for
completion in November, will bring the capital a lot closer to the
colonial city by the lake. And a new Pacific coast tourism
highway ­ known as La Costanera ­ is scheduled to break ground
in 2006 (with a completion date of 2008), and promises to have
an explosive effect on coastal tourism and real estate values. In
the last three years, the government has paved, bricked or
repaired more than 600 kilometers of road, averaging almost 17
kilometers a month, mostly on the Pacific coast. Most of
Nicaragua's interior is still inaccessible jungle.
Other infrastructure improvements include a $12 to modernize
the port of San Juan del Sur, and $10 million investment to
modernize the northern Pacific port of Corinto, as well as the
Atlantic ports El Rama and El Bluff (Bluefields). Also, just north
of Nicaragua, on the border of Honduras, a new $170 million
mega-port/tourism project is being built on the Gulf of Fonseca,
which promises to be the largest Pacific coast port in Central
America.
The improved infrastructure, particularly the ports, will help
facilitate trade as Nicaragua ­ and the rest of Central America,
and the Dominican Republic ­ prepare to enter into a $25 billion
free-trade agreement with the United States, known as CAFTA.
Nicaragua is also currently negotiating a free-trade agreement
with Taiwan, and free-trade negotiations are expected to start this
year between Central America and the European Union.
Nicaragua already has free-trade agreements with Mexico and the
Dominican Republic.


To facilitate free trade and the movement of merchandise,
Nicaragua is in the process of integrating into a joint-customs
union with the rest of Central America. The joint-customs union,
which should be fully operational by the end of 2005, will
expedite border crossings between the five Central American
countries (or at least the four northernmost countries; Costa
Rica is dragging its feet in opening its borders with the rest of
the region).
Telecom and Internet infrastructure in Nicaragua has also been
privatized, with three separate cell phone providers to choose
from. Foreigners can purchase cell phones, and Internet service is
widely available from half a dozen service providers (see separate
section).
Nicaragua also has a very young and willing workforce of 1.5
million people, mostly under 25 years of age. Nicaragua is still a
predominantly agricultural country, but two-thirds of the
population is now living in urban areas, and 65% of the 5.2
million population lives on the Pacific coast ­ the most developed
region of the country.
With the implementation of CAFTA, even larger numbers of
rural Nicaraguans are expected to be displaced to the ever-
growing cities. Nicaragua has a $50 million fund to help the
anticipated influx of displaced campesinos in years to come.
While a majority of the workforce is low-skilled labor, there is a
growing pool of U.S. and foreign trained, multi-lingual
managers available for hire. Investment promotion group Pro
Nicaragua in 2004 created the website
http://www.nicasearch.com to create a database of bilingual
Nicaraguans. The response was enormous, attracting some 4,000
Nicaraguans to sign up in the first year alone, 2,000 of whom


A Successful Restauranteur
by Carla Fjeld Benz
http://www.olaverde.info, mailto:olaverde@ibw.com.ni
I am a founder of Ola Verde S.A., a socially responsible business established to
promote healthy eating and to emphasize uses of local agricultural products in
Nicaragua, particularly those cultivated organically or in an environmentally-friendly
way, as a means to help sustain agricultural diversity and human health.
Local press, both newspapers and television, has covered our story well. We think
the principal reasons for their interest are their general interest in documenting
growth in the business community, and the specific interest in the business because
it fills a gap, has an ambiance and product that are attractive, and perhaps also
because it was founded by a female foreigner, with a doctorate in human nutrition
and consumer research experience, which lend credibility to our efforts and attract
to this atypical business. There are professional organizations which support
businesses of any size in the quest to gain market share and one has ready access to
such organizations.
A challenge is sometimes the quality and sustainability of goods produced and
services provided. One assumes a certain level of quality which is not necessarily the
level delivered. In the early phases of beginning the business, I made the mistake of
signing contracts that did not clearly define acceptable product conditions, or paid
for goods or services in advance of inspecting the final product. These errors can be
costly, and can require that one reinitiate the work, paying a second time. Luckily
one learns--I think it is called the graduate school of ´hard knocks´!
In Nicaragua, obtaining the information needed to write a business plan is not
straight-forward, and for many issues, I never was able to obtain the information I
needed to fully develop my plan. Perhaps a more seasoned resident, or a more savvy
business person, would have had less difficulty. Nevertheless, introducing and
maintaining the business has been successful and worthwhile and I thank the local
media for their coverage of the theme and practice of the business, as well as the Ola
Verde team who are instrumental in the implementation of the business.
At present, I am looking for alliances or partnerships to produce and market healthy
food products derived from Nicaraguan agriculture. I also am interested in
partnering with businesses to form an association or educational foundation to
provide education on healthy dietary practices.
I am an American-Swiss who came to Nicaragua 4.5 years ago with my husband
who is a Swiss diplomat and our daughter who was 11 at the time. We chose
Nicaragua as our next assignment, because Nicaragua is at an important time in its
development, which we hope will continue to be in the direction of a democracy. We
wanted to be in such a country at such an important time in its development and are
happy, for ourselves as well as for our daughter, that we made the decision to come
and invest in Nicaragua.


"Hecho en Nicaragua" Giftshop
By Scott Deitler, Granada
I was born and raised in the United States, but had traveled extensively around the
world in my quest to see different places.
In the year 2000 I was living in South Beach in Miami and decided I wanted to look
for a third world country close to the United States that I thought had investment
opportunities.
In my research Nicaragua came up on the radar map. Since I was living 12 minutes
from the Miami airport, and it is a two-hour flight from there to Nicaragua, I
decided to check it out. I immediately fell in love with Granada and bought a house.
At that time there were probably 25 foreigners living in Granada. Now there are
hundreds.
For the next eight months, I went back and forth between South Beach and Granada
before moving full-time to Nicaragua. I worked hard on my Spanish and met my
future wife at that time.
Within a year we bought a store on the Central Park that specializes in selling crafts
made in Nicaragua to tourists. Over the last few years the stores revenues have
continued to increase as more and more foreigners are discovering Nicaragua.
I would suggest to anyone looking to buy property in Nicaragua that the most
important thing is to have a good lawyer. The property needs to be thoroughly
checked out just like a property would be in the United States or other first world
country. Foreign ownership of property is no problem and title transfers directly
into your name or your company's. Title insurance is also available.
The house that I bought was an old, Spanish Colonial that needed to be completely
renovated. This is a full-time job and I would not suggest anyone renovate a
property in Nicaragua unless they are going to be available at all times to watch and
supervise. This is probably good advice for renovations anywhere. Costs for
materials are not that much different than in the United States, however labor costs
are so low that it brings total cost way down from what you would spend in the
United States. You can literally build for less than $30 a square foot.
For any of you that are thinking of moving to or investing in Nicaragua I would say
that the first thing you should do is come down and do some research or due
diligence. Ask lots of questions and take some time to get to know the area. If you
would like to talk to me just ask anyone who the number one Red Sox fan is in
Granada and they will immediately direct you to my house.


have been certified by Berlitz as having "advanced" English
language skills.
Nicaragua's minimum wage for unskilled labor is $.67/hour, the
lowest in Central America (compared to Costa Rica's
$2.25/hour). Bilingual employees usually expect to make about
four or five times that amount, and efforts are underway to raise
the $.67 minimum wage to a more dignified and livable salary.
Because of the aforementioned benefits, an increasing number of
foreign investors ­ mostly Asian and North American ­ have
found Nicaragua an attractive country for foreign investment in
areas such as: tourism (the country's number-one money maker);
textile and apparel; light manufacturing and assembly;
agribusiness and forestry; export services and contact centers.
Before investing or starting a business here, however, you should
take the time to do your homework and acculturate to Nicaragua
to make sure the country is a comfortable fit for you. This is still
a very poor and underdeveloped country. While the situation
lends itself to unique business and investment opportunities, it is
not a good fit for everyone from the World North.
Make a special effort to learn the language; it will help you feel
less like a stranger, and make you less vulnerable to scams, rip-off
artists, corruption and over-billing.
Under no circumstances should you invest right off the plane, or
throw your money at investment projects without doing diligent
investigation beforehand. Before starting a business, take the
time to meet with other expats in the area and learn about their
experiences. Listen to their recommendations, and take note of
the pitfalls they mention. Don't go it alone. There are
organizations that can help you before you decide to invest.


American Embassy Managua Economic and Commercial
Section: mailto:amembmga@tmx.com.ni; phone 011-505-266-
2291; fax 011-505-266-9056;web site
http://www.usia.gov/abtusia/posts/nul/wwwhcom.html.
The American Chamber of Commerce of Nicaragua
(AMCHAM) (English- speaking contact is Executive Director
Desiree Pereira): mailto:business@amchamnic.org.ni; phone
011-505-267-3099; fax 505-267-3098; web site
http://www.amchamnic.org.ni
ProNicaragua, a new investment-promotion agency, is an
excellent source of information, advice and assistance (English
and Spanish spoken) Tel. 011-505-270-6400, fax: (505) 278-
7332, http://www.pronicaragua.org
RELOCATION, INVESTMENT and RETIREMENT
CONSULTANTS is a firm we highly recommend to any
newcomer or potential investor. They have many years of
experience helping people in Central America, will steer you in
the right direction and save you a lot of headaches and money.
Their expertise, network of reliable contacts and insider
information have already helped hundreds of people find success,
prosperity and happiness in Costa Rica.
You may contact them at: http://www.liveinnicaragua.com, or
mailto:crbooks@racsa.co.cr.
The Tourism Boom
Nicaragua last year continued its streak of breaking tourism
records from the previous year. Last year 734,971 foreign
tourists visited Nicaragua, up 13.6% (88,200 more visitors)
from 2003.


The tourism sector generated $166.7 million in 2004, up 9.8%
from the year before. For the second straight year, tourism was
Nicaragua's number one source of foreign income.
Yearend statistics provided by the Nicaraguan Tourism
Institute (INTUR) reveal that foreign visitors in 2004
increased from most regions of the globe.
Central American tourists increased by 21.7%, accounting for
more than half the market. North Americans accounted for
157,782 tourists last year, up 13%, and European tourism was
up 6.6% to finish at 51,262 foreign visitors.
By country, most tourists to visit Nicaragua come from the
United States (131,865 in 2004), up by nearly 13% from the
year before. Costa Rica, with 99,674 tourists visiting Nicaragua
in '04, represents the highest growth rate, at 30%.
15,586 Canadians visited Nicaragua last year (up 18.8%), and
Spain topped European countries with 9,954 visitors last year
(up 12.4%).
In fact, the only two origin countries that registered decreases in
tourists for 2004 were England (6,022, down 8.8%) and
Holland (4,817, down 11%).
INTUR continues to aggressively promote Nicaragua abroad as
a new tourism destination. The government tourism institute
regularly participates in the most important tourism trade shows
in North America and Europe, and is in the process of planning
a new massive outreach program in the United States.
INTUR last year also promoted Nicaragua during a series of 30-
second TV spots, called "Nicaragua: It's Hot," which aired on
the CNN airport network and CNN International.


INTUR's promotional budget this year will be even larger ­ a
result of the increase in tourism generated revenue. The
government agency is funded by the $4 tourism card purchased
by each tourist upon entering the country, a fraction of the 15%
sales tax on tourism-related activities, and a three-dollar slice of
the $32 airport exit tax.
INTUR is also implementing a $1.2 million training bond
project in conjunction with the International Development Bank
to help provide financing to train bartenders, cooks, waiters,
tourism guides, administrators and technicians. The program
hopes to have train 4,300 tourism employees by the end of this
year, thereby making the industry more competitive.
The reforms to Tourism Investment Law 306 will also help
attract more tourism development (see separate section).
Domestically, INTUR is also helping to promote national
tourism by releasing attractive new tourism maps (in English and
Spanish) of all the major cities. Thus far, the maps (which cost
$1 each) have been created for Granada and Masaya. The maps
for León, Chinandega, Estelí and Managua are in the works.
INTUR minister Lucía Salazar, who has a very close working
relationship with President Bolaños, says she expects
Nicaraguan tourism to surpass Costa Rica in the next five
years.
Law 306. The Tourism Incentive Law
Nicaragua's Tourism Incentive Law (Law 306) offers tax
incentives and benefits to qualifying tourism projects. Since Law
306 was first implemented in June 1999, INTUR has approved
443 tourism projects to receive benefits, for a total investment of
$2.9 billion.


The law is currently being expanded to also include small tourism
businesses, by creating a superfund that will allow for qualifying
small business owners to finance their development projects
through the sale of certificates (bonds) to private financiers.
INTUR is calling the reformed Law 306 the most aggressive and
innovative tourism incentive law in all of Latin America.
In its original form, Law 306 includes:
1) 80 to 100% exemption on income tax.
2) total exemption on property taxes for a period of 10 years
3) exoneration from import duties on vehicles (in some cases)
4) exemption from sales tax on the purchase of equipment and
construction materials.
In its original form, Law 306 is extended to the following
categories:
a) hotels with a minimum investment of $150,000 (or
$500,000 in Managua).
b) tour operators investing $100,000 in Historical
Preservation Sites, or $40,000 in other protected areas.
c) domestic air-transportation companies.
d) yachts visiting Nicaraguan ports for less than 90 days.
e) tour operators and travel agencies.
f) new companies that provide food, beverage or recreational
services and have a minimum investment of $30,000
($100,0000 in Managua).
g) nightclubs, restaurants, discos and casinos with a minimum
investment of 35% their total value.
h) companies in national territory engaged in producing
Feature Length Films of an international character.
i) new or existing companies dedicated to renting land or
water vehicles to tourists.


j) companies that invest in other tourism projects for the
minimum of $100,000 ($250,000 in Managua).
k) individuals or corporations dedicated to activities to
develop national handicrafts, artesenry or dance, with a
minimum investment of $50,000.
Under the reformed Law 306 (currently in Congress and
expected to pass into law by mid '05), tax exemptions and
benefits will also be extended to new small businesses (minor
lodging facilities, restaurants, and artisan workshops) that fit into
the following parameters:
1) employee between five and 30 workers.
2) generate between $75,000 and $250,000 in annual sales.
Previously existing small businesses may also be included under
the reformed law if they invest 35% of their net value in new
development.
New Financing Options Under the Reformed Law 306
The reformed Law 306 will allow qualifying small businesses to
finance up to 70% of new tourism projects ­ or a maximum of
$100,000 ­ through the private sale of certificates.
The certificates, set at a market-based interest rate of around 10-
12%, will be sold to private investors or banks at an agreed-upon
term of up to 10 years.
The capital generated from the sale of the certificates will provide
small-business owners with the funding needed to construct their
hotel, restaurant or tour operation.
Once the business is generating income, investors will be repaid
the certificate value plus interest with money provided by the


Another Entrepreneur's Story
by Chris Berry
Pelican Eyes...Hotel Piedras y Olas,
San Juan del Sur
Nicaragua has been a part of my life for as long as I can remember. I feel
as at home here as I do in San Francisco, where I lived the greater part of
my U.S. working years. The challenge was adapting to the times as they
began to give clear signals of changing.
Our long-term goal in Nicaragua was to establish a foundation fund for
education for San Juan del Sur and the surrounding areas. The A. Jean
Brugger Foundation was formed and we began building the support
system. Donations kept us going in the beginning, including a large
donation that allowed us to purchase adjacent land for a reserve that we
will hold in perpetuity for the town of San Juan del Sur.
The task at hand was to create a for-profit operation to support the non-
profit education center, so as not to rely on donations and intensive
(looking for money). I had a lot of experience in the hospitality industry,
so we started from there.
The Pelican Eyes...Hotel Piedras y Olas hotel/restaurant project was born
seven years ago on a much smaller scale than we exist today, and with a
very humble business plan. We've grown as the demand and the market
grew under us. Our initial goal was a small 12-room hotel with a small
restaurant for guests only. Our current business plan includes 2 restaurants
and up to 150 rooms.
With three active founders, we looked for a group of investors to provide
sufficient income. We purchased a small amount of land in the hills and
built the Rancho so we would be visible long before we were ready to
open. We successfully applied for assistance under Nicaragua's Law 306
(The Tourism Incentive Law), but the business plan we applied for was
changed before we qualified. Land costs were higher, we needed more
room and it became clear we didn't have sufficient funds to build.
One member of our original group suggested we build units, sell them to
people and then manage rentals. That became our model and financial


strategy. We used the income from sales to build out dedicated hotel units
as well as the units we were selling.
Although I had my architectural ideas in tact, two architects worked with
us through this process to create the resort that exists, and continues to
grow, today. José Tercero Barragan and Luis Guzman have created a blend
of New Mexico and the Mediterranean.
Finding a "Nicaraguan architectural model" for the coastal area was
impossible; it doesn't exist. So we created our own based on tropical
influences worldwide. Construction themes were based on adobe and other
traditional styles.
In addition to the financial stresses we have encountered over time, we also
have had to surmount supply and "local talent" issues. The energy is here,
but the training is not.
With a small group of talented workers and our German foreman, Axel
Meisengeier, we hired contractors for pools, adobe specialists to build the
walls, and, further into the project, strawbale experts from Canada for
construction of the hotel rooms.
Reaction to our project has been positive. And although the learning curve
was a long one, this project has been nurtured by Nicaragua because it was
about Nicaragua. However, our initial expectations for the banking system
(loans), government, and industry assistance were too hopeful and a bit
naïve.
Yet despite the bumps along the road, the project is continuing to grow as
we try to keep up with the larger, more expensive development projects
being built up all around us.


15% value-added tax (known as I.V.A. in Spanish). In other
words, the government will give qualifying small tourism
businesses a 10-year grace period on their I.V.A., with the
stipulation that the tax money generated goes toward repaying
investors.
The development model is adapted from the City of Chicago's
time-proven urban-renewal plan known as "Tax Increment
Financing," of TIF.
The best part of the new development plan is that private
financers will have their tourism-certificate investments backed
100% by a special government fund of no less than $1 million.
In the event that the new tourism business fails, investors will
recover 100% of their investment plus interest from the safety
fund. The bank would then confiscate the failed tourism project
and sell the property to recoup most of the money spent from the
safety fund.
Investment Opportunities
Good opportunities exist for entrepreneurs who are willing to
make a long-term investment in Nicaragua's emerging tourism
industry, especially along the Pacific coast between Managua and
Costa Rica. With the construction of the Pacific coast tourism
highway ­ La Costanera ­ Nicaragua will be even closer to
northern Costa Rica's Guanacaste, and Nicaragua hopes the
development and tourism boom there will carry across the
border.
There are currently a total of nine major tourism attractions and
20 residential development projects on the coast, which, in the
words of the Ministry of Transport and Infrastructure's


planification director Ernesto Téllez: "Make you forget you're in
Nicaragua."
The tourism developments are, from north to south: Masachapa,
Pochomil, La Boquita, Casares, Huehuete, Astillero, Brito, San
Juan del Sur, and Ostional. Nicaragua's Pacific coast attracts
646,000 tourists annually, and the numbers will continue to
grow.
"There is enormous potential in this cluster of tourism," said
Téllez, who is overseeing the Design and Planning state of the
Costanera. "The new highway will continue to help development
along the coast."
Real estate agents estimate that property values on the Pacific
coast will increase by 50% after the tourism highway is finished
in 2008. Real estate values will only continue to grow as more
development goes up on the coast.
There are some 20 development projects up and down the Pacific
coast, with special interest seeming to be focused on Tola Beach,
known as the Nicaraguan Riviera. The projects range in progress
from ready-to-move-into, to the pre-planning artist rendition
stage. The group of projects has recently formed the Tola
Development Association, which can be looked up on the
internet at http://www.rcalvet.com.
Coastal development has exploded in the last five years, and
continues to grow, with plans to build two more tourist marinas
and two 18-hole golf courses.
Make sure you do you homework before investing in Pacific real
estate, and inquire to see whether or not the development project
has title insurance.


There is also continued development in Granada, Laguna de
Apoyo and Mombacho Volcano and Managua.
Food for Thought: The Sandinista Factor
Nicaragua's Sandinista National Liberation Front (FSLN) still
brings to mind negative images for foreigners who remember the
former revolutionary government's land confiscations and the
Reagan-sponsored Counterrevolutionary war (Contra War) in
the 1980s.
Although the party has evolved over the last fifteen years since
being voted out of office in 1990 (Sandinista leaders now are
among some of the largest tourism boosters in the Nicaraguan
government, not to mention some of the most successful
businessmen in the country), the prospect of a Sandinista victory
in the 2006 presidential elections has some investors on edge.
The Sandinistas won a majority of the seats in the November
2004 municipal elections (87 out of 152 mayoral seats), and,
with a divided opposition on the right, the former
revolutionaries appear to be in the best position ever to return to
the nation's highest office in November '06 (provided their own
current internal party divisions don't crack the FSLN in half
before the elections).
Former revolutionary President Daniel Ortega is once again the
FSLN's candidate for 2006, after losing the last three presidential
elections. Herty Lewites, the former Mayor of Managua, a
successful businessman and a self-described "Sandinista Lite,"
also has his eyes on the presidency ­ an ambition that threatens
to split the Sandinista vote between the hardliners and the
reformers.


Ortega's candidacy has the opposition party tasting early victory.
Liberal Constitutional Party congressman Wilfredo Navarro, a
loyal disciple of former President Arnoldo Alemán, has already
declared his intentions to run for President on the Liberal ticket.
He said Ortega's candidacy ensures his victory, because the
Sandinista leader is already a three-time loser. Navarro has also
said that in the event Alemán is pardoned from his 20-year jail
term for money laundering and embezzlement, he will cede his
party's candidacy to the former president and run on the lower
half of the ticket as the V.P. candidate. That possibility would pit
Alemán versus Ortega ­ two of the country's least popular
political leaders, and both members of the U.S. black list ­
against each other in the presidential elections.
While both the FSLN and the Liberals are deeply divided, the
prospect of a Sandinista return to power has some potential
investors on edge. Some realtors are reporting that U.S. buyers
are looking at properties, but waiting to see how the elections go
before putting down any money.
Still other buyers ­ who are not worried about the Sandinista
return to power, or who believe that it won't happen ­ are buying
property now, hedging their bets by assuming that Ortega's
fourth defeat is inevitable and that property values will soar after
he loses again.
The country's political situation has created a curious
circumstance for the real estate and investment market. If Ortega
were to win the presidency in 2006, real estate prices might
suffer a temporary dip, and the investment market would take a
hit. However, if the Sandinistas lose again, real-estate prices will
most likely continue their upward swing with more gusto than
ever before.


So now might be the time to buy, if you are betting that the anti-
Ortega vote will win out over the pro-Ortega vote, as it did
during the elections in 1990, 1996 and 2001. But, in the event
Ortega wins again, real estate prices could suffer a temporary
dip, due to investor uncertainty.
Most insiders seem to be confident of two things: 1) Ortega
won't win. 2) Even if he does, he won't be able to derail the train
that is Nicaragua's investment and development (nor does he
want to).
The political and economic realities of the world have changed
dramatically since 1979, when Ortega first took power after the
Sandinista's revolutionary victory. Successful socialist
governments in other Latin American countries, such as Chile
and Brazil, have developed a new, business friendly hybrid
economic model, which uses money generated from capitalist
activities to fund social spending programs.
Another factor that will ensure a continuance of economic
development and investment is the fact that the Sandinista
leadership is among the leading businessmen in the country.
As AMCHAM President René González recently noted, there is
a real disconnect between the Sandinistas' political rhetoric and
their own economic interests.
"They are capitalists," he said, adding that investors shouldn't
expect anything to change if they win, which they most likely
won't.
Even if the Ortega wins, there is a very slim chance that the
revolutionary policies of the past ­ namely the property
confiscations ­ would be re-implemented.


Central America Real
Estate Investment Trusts
Do you want to invest in the booming real estate markets of Costa Rica
and other Central American countries, but don't want to acquire the
headaches, aggravation and anxieties of becoming an international
absentee landlord? Then Costa Reit may be the alternative investment you
have been looking for!
Costa Reit is a "land banking" corporation focused on the booming real
estate markets of Costa Rica and other Central American countries such as
Panama, Nicaragua and Belize. Managed by Barry Strudwick and William
Ramirez, who each have combined their respective expertise in
acquisitions, finance, project management and development to form this
joint venture. The offering size for Cost Reit is strictly limited by SEC
regulation to a maximum of $5,000,000. Once this limit has been reached,
no additional funds may be raised for a period of 12 months. Units will be
offered at $25,000. IRA funds may be used to purchase shares.
Why Costa Reit?
"Cash is King" in the Central American real estate markets. Unlike North
America where real estate is typically financed by borrowing, our
experience has shown in Central America it is often possible to negotiate
discounts of from between 10% and 50% by putting "cash on the barrel-
head". With $5 million in the bank, Costa Reit will have a war chest to
hammer home the best deals!
Could I do this myself?
Not likely. In Central America there are two real estate markets, the "public
market" where "gringos" guy and sell to each other at progressively higher
prices. The second and more important market is the private market which
we have access to. Your typical "gringo" investor will not only likely pay
much higher prices for land, but there are also considerable obstacles to
clear in dealing with local municipalities, permits and utilities which Costa
Reit's experienced management offers significant advantages. In addition,
the average investor will not have the financial resources to develop a
diversified portfolio.


Why Costa Rica?
Often called "the Switzerland of Central America", Costa Rica has a well
deserved reputation for political stability, a U.S. friendly population and a
booming economy. Also the wave of demand from North Americans is
currently strongest in Costa Rica. But Costa Reit will also diversify into
several other emerging markets as well such as Panama, Nicaragua and
Belize.
Tell Me about the Management of Costa Reit?
Over the past 3 years Barry Strudwick and William Ramirez have worked
in the acquisition, financing and development of several projects totaling
over 4,500 acres in Central America. Barry Strudwick has over 20 years
investment experience as president of a firm managing over $50 million for
both a U.S. and international client base. In addition, William Ramirez
brings over 15 years of construction, development and negotiation abilities
to the team as well as a wealth of local contacts. With our access to the
private market, we can buy Costa Rica at Nicaragua prices!
Why do you need investors?
Our investment philosophy has been to finance our projects with 100%
"equity" and no debt. The reason for this very conservative approach is that
it's difficult to accurately predict demand growth in 3rd world countries.
Without the "carry cost" of bank interest expense, our worst case is to hold
great land until the retail market demand appears!
With Costa Reit we will have "money in the bank" when the best
opportunities arise and the staying power to last until the market comes to
us.
Do you have target properties already in mind?
Yes. Because of our extensive contacts we are constantly shown great
opportunities. We are currently in the process of "due diligence" on a
number of projects ranging from a 350 acre "beach front" parcel with
nearly a mile of private beach to a 600 acre mountain ranch as well as an
Ocean View condominium project. In these projects, Costa Reit would
joint venture with other investor partnerships.


What is the expected holding period?
Anticipate a 5 to 10 year holding period on your investments.
What's the down side risk?
Because of our "all equity" acquisition philosophy, our downside risk is
limited because we don't have the risk and expense of having to make bank
interest payments. Aside from unforeseen global political or economic
events, our greatest risk is having to wait for demand to catch up to our
land.
Important information on the structure of Costa Reit and on the risks of
international real estate investing is included in the prospectus. All
prospective investors must read and complete the information.
Costa Reit is not an appropriate investment for investors anticipating
liquidity needs in the next 5 years. As a speculative investment, we
recommend that holdings should be limited to no more than 10% of your
investments.
Key Facts about Costa Reit
*
$25,000 per unit
*
Eligible for IRA accounts
*
Multi-country Real Estate portfolio
*
Diversified Real Estate Holdings:
- Beach Front
- Commercial
- Farms
- Condos
*
Maximum Size: $5,000,000; over $2 million already allocated.
*
Experienced management with excellent local "private market"
contacts
COSTA REIT
12 EAST EAGER STREET
BALTIMORE, MARYLAND 21202
TEL. 410-727-6444 · FAX. 410-783-9070
mailto:barry@noload.com or
*Please tell them where you obtained this information.


While the Sandinista leadership has admitted that it made
mistakes in the past by confiscating properties (and they swear
they won't do it again), some leery-minded Nicaraguans believe
that Ortega will win the elections, and will then be cornered by
the Bush administration, prompting some of the reactionary
policies of the past.
There still remain many pending property claims resulting from
the confiscations of the `80s. While most have been settled since
the mid `90s, the U.S. Embassy still has 760 pending claims yet
to be resolved.
And Congress' move to name a new Property Superintendent to
handle the remaining property claims has some people worried.
Critics of the new Property Superintendency claim it will be a
Sandinista-controlled post used to legalize the infamous property
grab in 1990 (known as the Piñata) and use pending properties
as electoral leverage to win votes at the polls.
Currently, an estimated 25% of rural properties (mostly in the
north) and 10% of urban properties still have conflicting
property title claims. According to 2005 calculations by the
Property Forum, there are 1.8 million manzanas of disputed
property in Nicaragua, and an additional 100,000 properties still
without title.