The U.S. Expatriate Paradise of Nicaragua

Greetings from Leon, Nicaragua, which is about an hour drive northwest of Managua. Leon is the second largest city in the country and was the old capital for more than 200 years, before Managua took the title in 1851. I’m staying with a friend of mine from college and his family, who moved down here five years ago.

He lives very well here for not much money. His house is a comfortable 4,000 square feet with everything you could want— a big kitchen with granite countertops, beautiful ceramic tiles throughout, an open courtyard, balconies overflowing with pink flowers and vines, a red tile roof — all done in the Spanish-influenced style you find throughout South and Central America. It’s bright and airy, not at all humid. So even though it is 90 degrees here, we have the windows open and feel fine.

A house like this puts you out about $200,000 or so. If you got the lot and built it yourself, it might cost you $150,000. This is a nice location, too, in a quiet neighborhood. I’m within walking distance of central Leon with its central park and the largest cathedral in Central America.

Want to live extravagantly here? It’ll cost you $2,000 a month — enough to have hired help like a maid, who’d ask only $100 a month. Now let’s talk dinning. My friend took me down the little narrow streets of Leon (the city was founded by Spanish conquistador Francisco Hernandez de Cordoba in the 1500s). We had nacatamales — meat, peppers, rice and more mixed in with corn meal and cooked in banana leaves — for $1.50 each. These delicious tamales were huge, a solid meal all by themselves. And my friend adds that these were the high-end version. There are cheaper versions in the city.

Labor is very cheap here. Food is cheap. But I was shocked to find that gasoline is $4 a gallon. For the wages people earn here, that is a lot of money. Brand-name U.S. products are expensive here, too. If you want to buy a pair of jeans, it will cost at least 30% more than in the U.S.

Still, the overall cost of living here is very low. And there is a lot to like about Nicaragua besides that. The people are friendly, and Nicaragua is safe to travel through. The food is great and so are the beaches. Come here and enjoy summer all year round. The only ice is what I see in my glass. (Nicaragua also makes one of the world’s best rums, Flor de Caña — “flower of the [sugar] cane.” I enjoyed it neat and in the national drink, el macua, made with guava juice.) In short, all the things you’d want to enjoy as a tourist or expat.

But when you think of Nicaragua, you might think of the Sandinistas and President Daniel Ortega and the problems of the 1980s. Just about everyone I mentioned my trip to thought I was going to a dangerous country full of crazies. Ortega is on his second stint as president, which began in 2007, after being out of power since 1990. He’s trying to bring the Hugo Chavez model to Nicaragua. (At the same time, when I look at my own country these days, I feel like I can hardly cast aspersions anymore.)

Luckily, Ortega faces stiff resistance. More than 60% of Nicaraguans oppose him and the Sandinistas. Right now, the opposition party is split. If they can unite before the November 2011 election, they will bounce Ortega out.

Fresh Look at a Frontier Market

I also took in Managua and Granada — before hitting Rancho Santana. The latter is a development project on a spectacular 3,000-acre property on the Pacific Coast near Rivas. Think of Big Sur with its dramatic coastline.

Nicaragua ought to be a rich country. It has lots of good land for growing things. The soil supports a wide variety of crops and livestock. Coffee in the north. Bananas, papayas, mangoes, sugar cane and more grow everywhere else. Nicaragua Central America’s largest country and is among the least densely populated.

Plus, Nicaragua ranks high in the top water-rich countries in the world. About a third of the world’s population lives in areas with only 8% of the world’s renewable fresh water supply. Contrast that with Latin America, which has 28% of the world’s renewable water and only 6% of its population.

Lake Nicaragua, one of the largest lakes in the world, is the future water supply of Central America. Nicaragua’s many rivers and lakes also make useful internal waterways. And Nicaragua gives you access to both the Pacific and Atlantic oceans. Its waters are fantastic fishing.

There is also great potential for wind, geothermal — from volcanoes all along the western half of the country — and hydroelectric power. In fact, Rancho Santana is trying to become self-sufficient in energy. Wind blows constantly on the ridges here. So it’s no surprise to me that a recent wind feasibility study scored as high as it could.

Pair that potential with the great timber resources, as well as mineral resources such as silver and gold, and you’ve got a true paradise of plenty in Nicaragua.

Are You a Penthouse Gypsy?

Last fall, I introduced you to my first  “penthouse gypsy” friend. That’s someone who’s willing to go wherever his or her money is treated best. Increasingly, penthouse gypsies no longer flock to the U.S. or Europe. Plenty are settling here in Rancho Santana.

Why not? Every box on the checklist ticks off:

  • Diversify out of the U.S
  • Avoid skyrocketing tax rates
  • Cheap, stunning real estate
  • Property taxes are hardly anything
  • You can live very well on not much money

That’s exactly why my old college friend moved down to Nicaragua five years ago, even if he didn’t buy a “penthouse.”  And he’s not worried about confiscation of property. Most folks I talked to here consider that risk remote. Tourism is the No. 1 cash cow of what is still a poor country. Even Ortega doesn’t want to do anything to upset that cash flow. (He owns several hotels.) Plus, you’ve got lots of ways to hedge your bets, including insurance against confiscation.

As far as enforcement of contracts, the IMF and World Bank rank Nicaragua third among all Latin American and Caribbean countries. Foreign direct investment in Nicaragua is soaring — up fourfold since 2000.

There is no time like today to get in on the Great Convergence — the closing of the gap between emerging and developed markets. I think Bill Bonner summed it up well in a recent Daily Reckoning piece. “The world turned against them, relatively, at the beginning of the Industrial Revolution,” Bonner begins. “But if the world turns long enough, it comes back to where it began.”

He was writing about India. But I think it is apt for several other emerging markets, too — including Nicaragua — which was once a prosperous place of some renown. In the 19th century, for example, Granada was Central America’s most prosperous city, a rich trading city holding down a key spot in global commerce.

Chris Mayer
Whiskey & Gunpowder

April 9, 2010

The Daily Reckoning