The Sandinistas: Central America's Last "Value" Play
Greg Grillot gives a recent history of Nicaragua: The Somoza dictatorships and the Sandinistas who overthrew them and were voted out of office in turn, and discusses the cheap real estate opportunities available in the country.
Here’s the main gist of what I found: Nicaragua boasts some of the cheapest pristine coastal real estate left in the Americas. Admittedly, land prices in Nicaragua have trended briskly upward over the past few years. But it seems to me that that’s simply the beginning of a long-term trend. And compared to overdeveloped coastal plots in my South Floridian Fatherland, Nicaragua’s a darned steal.
But why is Nicaragua still somewhat cheap? There must be some good reason.
To answer that question, please permit me to impersonate Byron and use recent history to show why Nicaragua’s real estate market lay dormant and cheap for so long – and why it’s just started to appreciate at a healthy clip.
That’s right, Nicaragua has, until now, suffered from a lack of foreign investment. Too exotic, perceived as too dangerous, not worth the risk went the mantra. And, it’s remained undervalued until recently because people still think the country is run by Communist, or that a civil war rages on.
That couldn’t be further from the truth. Nicaragua’s become very stable and safe, and the present President has made it very easy for foreigners to come in and invest. An unfounded but persistent fear has kept Nicaragua cheap for along time…but savvy investors knew better and jumped in at the bottom of what should be a long-term profitable development trend.
Why were investors scared for so long? And why were they wrong? To explain that, we must delve further into Nicaragua’s 20th century to see from whence the Sandinistas sprung.
The Sandinistas: “Somoza May Be A Sonofabitch, But He’s Our Sonofabitch”
So said Franklin Delano Roosevelt of Anastasio Somoza Garcia, who ruled as de facto military dictator of Nicaragua from 1937 to 1956. Successive American administrations backed his harsh and kleptocratic rule because he buffered against the spread of Communism in Central America.
A native poet shot Somoza Garcia in late 1956, and he perished a few days later. His eldest son, Luis Somoza Debayle ruled from 1956-1963, and then his next eldest son, Anastasio Somoza Debayle became dictator until 1979, when the Sandinistas overthrew his regime. This last Somoza dictator met his end by assassination in Asuncion, Paraguay’s capital.
Here we should look back a few more decades to uncover the Sandinistas’ origin. The group took its name from Augusto Cesar Sandino, who led various rebellions against the U.S. military presence in the country and assorted Nicaraguan regimes. Forced to flee to Mexico after attempting to kill a prominent conservative politician’s son, Sandino apparently fell in with Freemasons, Seventh-Day Adventists and communist revolutionaries. He returned to Nicaragua when the statue of limitations for his attempted murder ran out.
Upon his return to his native land, Sandino led a revolt against the U.S.-backed conservative regime. He also fought directly against the U.S. military presence. Here’s something he said to American forces:
“Come on you pack of drug fiends, come on and murder us on our own land. I am waiting for you on my feet at the head of my patriotic soldiers, and I don’t care how many of you there are. You should know that when this happens, the destruction of your mighty power will make the Capitol shake in Washington, and your blood will redden the white dome that crowns the famous White House where you plot your crimes.”
There is no dome on the White House, by the way. But in 1933, U.S. forces pulled out of Nicaragua, turning control of the National Guard over to the aforementioned Anastasio Somoza Garcia. Sandino laid down his arms. And in early 1934, he laid down his life. Somoza’s National Guard kidnapped and executed him.
Fast forward to 1961. Somoza’s dictatorial dynasty begins as three men form the Sandinistas to oppose the U.S.-backed Somoza ruling family. The Sandinistas were inspired and influenced by Marxism, especially Fidel Castro’s particular Cuban brand. . They portrayed themselves as liberators and organized a guerrilla revolt against the Somoza dynasty.
The Sandinistas gained considerable peasant support in the early 70s, and experienced a huge upsurge in power after the devastating earthquake in Managua that killed 20,000 people and left six in ten Managuans homeless. The Somoza regime embezzled a huge part of the international aid intended for quake victims and neglected to rebuild large swathes of the city. ( In fact, the earthquake’s ravages are still visible. A handful of tall buildings dot the skyline and the city grows ever outward to escape the vengeful fault line passing right through her center. )
In early 1978, a prominent anti-Somoza newspaper editor was assassinated. The Sandinistas used this to gain more popular support, leading general strikes, uprisings and guerilla attacks. With the support of other Latin American countries, the Sandinistas launched a “war of liberation” from Costa Rican soil. The National Guard eventually disbanded and the final Somoza dictator fled as the Sandinistas marched into Managua, greeted by, at least for awhile, an ecstatic populace.
In 1984, a national election placed the Sandinista Daniel Ortega in the President’s seat. The Reagan administration told the CIA to covertly reassemble the disbanded National Guard as a counter-revolutionary army to fight the Communist-sympathizing Sandinista government.
Sandinistan dissidents unhappy with the growing influence of Cuba also launched attacks. Finally, native tribes banded together on the Caribbean coast to fight the Sandinista’s “modernization” efforts and control over resources contained in their ancestral lands. The American press called these various forces the “Contras” for short.
In 1981, Ronald Reagan approved the National Security Decision Directive 17, which provided $19 million in aid to the Contras and authorized the CIA to recruit and support them. Reagan assumed that the Sandinistas would install Cuban-brand socialism and that they supported Salvadoran leftist guerillas. Placing a complete embargo on Nicaragua, the U.S. mined Corinto, Nicaragua’s most important Pacific port.
After the Boland Amendment forbade any future American involvement in Nicaragua in 1982, Reagan and the CIA turned to “alternative” methods of financing the Contras. This led to the infamous Iran-Contra affair where proceeds from secret missile sales to Iran washed over to the Contras, despite Reagan administration vows never to deal with Iranian terrorists. It is also suspected that drug profits from Panama and other countries went to fund the Contras with tacit U.S. approval. From a report from the Senate’s Foreign Relations Committee: “senior U.S. policy makers were not immune to the idea that drug money was a perfect solution to the Contras’ funding problems.”
After long mediations with other Latin American governments, and possibly due in part to the increased difficulty in obtaining U.S. funding and assistance, the Contras finally agreed to a ceasefire in 1988. Then, in 1990, the Sandinistas had a nasty surprise as the Nicaraguan people voted them out of office. You see, the people were sick and tired of living under the painful trade embargo and the decade of war. The country’s infrastructure crumbled, the economy shriveled, and the populace bristled under the forced Sandinista conscription of 16-year-old young men.
Throughout the 90’s the country gradually rebuilt itself as more moderate administrations ruled Nicaragua. The Sandinistas are a spent political force and haven’t won a presidential election since the 1990 loss. The present President, Enrique Bolanos, beat the Sandinistas cleanly in the 2001 election, and he has presided over the new economic resurgence.
He aggressively courts foreign investment and tourism. Tourism Law 306 allows a foreign investor to open a tourism-related business and not pay taxes for a full decade…and not pay taxes on any service or good related to starting or maintaining that business – whether that’s constructions, furniture, rental surfboards, a fishing driftboat, etc. That’s a great deal. And it seems to work.
- A Taiwanese group of investors bought the Intercontinental Hotel – Managua’s biggest. They also built and entire super-modern shopping mall and another hotel in Managua.
- A Guatemalan group invested millions in refurbishing the Managuan Princess hotel. Another Guatemalan group has built another Managua hotel and a new sparkling convention center.
- A New Orleans company has secured the rights to improve Puerto Cabezas, the closest port to the U.S. They will sock over $100 million into modernizing that port, more than likely bringing in American Cruise ships packed with eager tourists…
And this is just the beginning of the boom times…
So, while the popular and well-known countries like Costa Rica, Belize and Panama are relatively overpriced and nearly over-developed, Nicaragua looms as the best remaining “Central American Value Play.”
For example, the cost of living is miniscule compared to what you’re used to in America, Canada, and most parts of Europe and Australia. You can have a full-time maid for less than $100 a month…a fine lobster dinner for two with a nice bottle of wine costs less than $20. You can go see a movie for $2 – or get a haircut for $1.25.
In 2004, the IMF “forgave” about 86% of Nicaragua’s debt, with the only caveat that she’d have to spend the same amount of money on infrastructure improvements. This money heads stright for schools, hospitals and roads, bringing prosperity and production jobs to the Nicaraguans.
Speaking of roads, Nicaragua will soon break ground on the Coastal Road, which will run down almost the entire Pacific Coast. When finished, the road will certainly bring more tourism and development to my beloved Pacific Coast (which, if you remember, is the home of my choice location, Rancho Santana.)
Nicaragua’s own “Pacific Coast Highway” is another big reason why the recent uptick in Nicaraguan real estate prices is just the beginning of a long term trend. As it gets easier to reach the entire length of the west coast from the Managuan airport and the other major cities, development will almost certainly soar.
In the past three years, the real estate prices have doubled in Rancho Santana. And even if it looks as if American development and prosperity have also brought American-style price bubbles, there’s no reason why this little nook of Paradise can’t continue to appreciate at a healthy clip.
Rancho Santana, perched on a sprawling 1,700 acres of gorgeous oceanfront beaches, mountains and cliffs, is a self-sustaining escape with modern conveniences such as a clubhouse with full restaurant serving red snapper and lobster caught mere hours before you sit down to eat, a cool swimming pool, a bar that serves sublime margaritas, convenient internet access ( which prevented me from having a “work-free” vacation, ) a helipad, horse stables, a cozy general store, lighted tennis court, hiking trails, and too many more amenities to list.
So even though I basked on nearly abandoned beaches, I wanted for no modern convenience. That’s the ironic allure of the place – it’s simultaneously rustic, romantic, beautiful and convenient.
Here I must add that Rancho Santana has made great strides for the local Nicaraguans. Over 300 men and women work there, doing anything from security to construction, landscaping, bartending, full service cleaning, fishing and cooking.
I met one young man who fished from the rocky shore until the waves picked up, when he’d sell his catch to the clubhouse kitchen and then surf until sundown. That seems pretty darned good to your city-stranded managing editor. I talked to the manager of the restaurant and other Rancho employees, and they told me that just a few years ago, the surrounding area suffered from massive unemployment and poverty. Now, the young men have surfboards and bikes while the maids will busily work while wearing fashionable American clothes and listening to portable CD players. The development has brought some prosperity to the local Nicaraguans.
I hope I’ve piqued your interest in Nicaragua in general, and in my favorite little Pacific Paradise of Rancho Santana specifically. There are still lots for sale there, and you can easily go there for a week (or ten) and the helpful team, led by my buddy Tom Gordon, will be happy to show you around.
Now, I must disclose that the same guys who feed your managing editor’s voracious pitbull own a stake in Rancho Santana. Yeah, they pay my check. And it is also possible that Whiskey & Gunpowder could receive commissions on certain future property sales in Rancho Santana. I’m also good friends with some of the staff there, including Tom Gordon, who I’ve sung plenty of bluegrass with. But the most important disclosure I can make is my sincere desire for you to at least visit this place. It’s the most beatific place I’ve ever seen, but don’t let me gush too much: please see for yourself:
January 29, 2006
Make sure to say hello if you see me down in Rancho Santana when you visit. I plan on going back as soon as humanly possible. And – I am very interested in buying my own property down there, so I hope it doesn’t all get scooped up right away.
If you want, you can contact my friend Tom directly: email@example.com
Tell him Greg from Whiskey sent you! And if you decide on going down there, shoot me an e-mail – maybe we’ll run into each other on the beach! I’ll be the tan guy with the big smile and a big cigar.
Headline(s) of the week: “Silver sets 19-year peak, gold near highs” ~ fxstreet.com
“Americans: world’s worst savers” ~ CNNMoney.com
Quote(s) of the week: “One of the “wins” in the win-win of globalization has failed to materialize. Job creation and real wages in the mature, industrialized economies have seriously lagged historical norms. It is now commonplace for recoveries in the developed world to be either jobless, or wageless — or both. That this shortfall has occurred in the midst of accelerating globalization and surging global trade is all the more disconcerting.” ~ Stephen Roach
“Si pequeña es la patria, uno grande la sueña.”
“If small is the fatherland, one dreams it large.” – Nicaraguan poet Rubén Darío