VZCZCXYZ0000
RR RUEHWEB

DE RUEHMU #0341/01 0371903
ZNR UUUUU ZZH
R 061903Z FEB 07
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 8981
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHEHNSC/NSC WASHINGTON DC

UNCLAS MANAGUA 000341 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR WHA/CEN GSCHIFFER, MKOPOLOW, EB/IFD/OIA, L/CID, 
WHA/EPSC 
 
E.O. 12958: N/A 
TAGS: EINV ECON ETRD USTR KIDE NU
SUBJECT: NICARAGUA: TOURISM SECTOR 
 
REF: MANAGUA: 000327 
 
 ¶1. (U) Summary:  Statistics from the National Ports Company 
(EPN) and the Institute of Tourism (INTUR) paint an 
attractive picture of the tourism industry in Nicaragua. 
Tourists spent 30% more in 2006 than they did in 2005, and 
new investment in the sector totaled $60 million.  The 
election of Sandinista candidate Daniel Ortega as president 
does not appear to have deterred investor interest yet, but 
there are signs of investor concern as the new government 
struggles to define its economic course.  The new government 
continues to view the tourist industry as a way to create 
jobs, generate needed foreign exchange, and contribute to the 
reduction of poverty.  INTUR is considering proposing 
investment incentives for the sector.  Investor interest has 
been piqued by a number of international publications that 
promote the country's tourism potential, but often overlook 
the challenges that exist.  The country lacks infrastructure 
and investors must contend with serious legal issues when it 
comes to purchasing or leasing land.  End Summary. 
 
The Numbers Are Looking Better 
------------------------------ 
 
¶2. (U) Statistics from the National Port Company (EPN) and 
the Institute of Tourism (INTUR) paint an attractive picture 
of the tourism industry in Nicaragua.  Nearly 900,000 
visitors entered Nicaragua in 2006, 14% of them as tourists. 
The country's main attractions are beaches, colonial sites, 
volcanoes, and lakes;  popular activities ranged from surfing 
to birdwatching.  Of the 125,000 tourists, 14,112 arrived on 
one of 34 major cruise ships that docked at the small Pacific 
port of San Juan del Sur, and spent at least a day in the 
country.  International visitors average at least one night 
in Nicaragua.  INTUR is examining at strategies to extend the 
average stay to 3-4 nights.  From 2005 to 2006, the number of 
tourists grew by 8.6%, helping to make tourism one of the 
fastest growing and most important foreign currency earning 
sectors in the economy.  INTUR estimates that tourists spent 
$239 million in 2006, up 30% from 2005.  Tourism accounted 
for more than 5,000 new direct and indirect jobs in 2006, and 
contributed to the reduction of poverty in a number of 
coastal and rural areas.  Despite this relative success, 
INTUR spent just $1.5 million on promoting tourism, the 
lowest in Central America. 
 
 
¶3. (U) Managua is the political and business capital of the 
country, and hosts the country's only international airport. 
For this reason, most travelers spend a night in Managua 
before heading to the beaches.  As the number of visitors to 
Nicaragua has grown, so has Managua's ability to accommodate 
them before they head off to their final destination.  In the 
past nine years, the number of hotel rooms in Managua has 
more than doubled -- 300 luxury rooms were added in 2005 
alone.  Trendy dining spots and America-style restaurants 
have sprung up throughout the city, largely clustered near 
international hotels.  To meet growing demand, Delta Airlines 
has added direct daily flights from Atlanta and Los Angeles 
to Managua.  American, Continental, and TACA also provide 
direct service to the United States.  Managua has a number of 
daily connecting regional flights to the TACA Airlines hub in 
El Salvador and the COPA Airlines hub in Panama.  Domestic 
airlines La Costena and Atlantica  serve the internal market 
amidst frequent delays and cancellations caused by an aging 
turbo-prop fleet. 
 
Investment 
---------- 
 
¶4. (U) In 2006, new investment in tourism totaled $60 
million, creating something of a mini boom.  More than 80 
construction projects (many smallscale) cover 430 acres of 
beachfront property, most on the Pacific coast.  U.S. 
developers are responsible for the lion's share as they look 
to Nicaragua to build high-end resort and retirement 
communities at lower cost than they can in neighboring Costa 
Rica.  Developer presence has created a bit of a speculative 
property market, as some individual investors look to buy a 
beachfront lot or two for resale in a few years. 
 
¶5. (U) Such investor interest has been piqued by a number of 
international publications that promote the country's tourism 
potential.  International Living magazine touts the country 
as a "best-kept retirement secret" and characterized the 
country as "safe, stunning, and still affordable."  A 
December 2006 New York Times feature entitled "The 
Rediscovery of Nicaragua" described the nation as "the next 
Costa Rica," portraying the post-revolution scene as quiet, 
beautiful, and culture-rich.  National Geographic Explorer 
magazine lauded Nicaragua as one of fifty "tours of a 
lifetime."  This type of (perhaps a tad too breathless) press 
coverage has encouraged Americans to view Nicaragua as a 
possible vacation destination or location for a 
vacation/retirement home, but often overlook the challenges 
that exist. 
 
Tourism Bonds 
------------- 
 
¶6. (U) The Ortega government continues to view the industry 
as a means to create jobs, generate needed foreign exchange, 
and reduce poverty.  INTUR is considering possible incentives 
for the sector.  In 2006, the Bolanos government proposed 
creating tourism investment bonds (BIT) as an investment 
incentive.  The legislation proved to be controversial, 
however, and the initiative was dropped after the 
International Monetary Fund resident representative concluded 
that the economic benefit did not warrant the cost (i.e., 
forgone tax revenues).  More recently, INTUR promised to 
rewrite the initiative and reintroduce it into the National 
Assembly in 2007, with a commitment of support from Daniel 
Ortega, barring Ministry of Finance objections.  However, the 
influential Managua daily "La Prensa" recently reported that 
INTUR would likely opt to reform the existing Tourism 
Incentive Law rather than continue to support BIT 
legislation.  In his meeting with the Ambassador, new 
Executive Director of INTUR Mario Salinas seemed to confirm 
this approach (septel). 
 
Enter the Sandinistas 
--------------------- 
 
¶7. (U) The change in government does not appear to have 
deterred investor interest in Nicaraguan tourism.  Sandinista 
Comandante Daniel Ortega "is president of a different 
Nicaragua," from the one he governed in the 1980s, noted a 
New York Times article.  "There seems little chance that the 
Sandinista victory will lead back to the chaos of the past." 
Indeed, from Ortega's November 5th election victory until his 
inauguration, very little seems to have changed for 
developers on the Pacific coast and other key tourist areas. 
Post is aware of no pullouts of major investors.  Meetings 
between investors and newly-elected administration officials 
have gone fairly well.  Vice President-elect Jaime Morales 
Carazo, the public face to foreign investors of the 
Sandinista government, predicted to local business owners in 
San Juan del Sur, a popular and growing beach town, that 
"tourism will be guaranteed a thriving future under the new 
Sandinista government."  He further assured investors that 
1980s-style Sandinista land grabs were a thing of the past. 
"Respect for private property is essential," Morales 
declared, "to set the basis for the credibility and trust 
that the country needs." 
 
¶8. (U) Despite the assurances and rosy New York Times 
outlook, there are signs that some investors are taking a 
wait-and-see approach.  Some have indicated that their 
investors are anxious and others are receptive to suitable 
purchase offers or other arrangements. 
 
A Dearth of Roads and Other Challenges 
-------------------------------------- 
 
¶9. (U) One of Nicaragua's greatest tourism development 
challenges is the lack of good roads.  Since 1999, investors 
have been pushing for a Pacific coast highway to support the 
development of coastal resort areas and Costa Rica as many 
coastal areas are only accessible by off-road vehicles.  In 
2004, the GON announced plans to build such a road, only to 
see the project scrapped two years later by the Ministry of 
Transportation and Infrastructure (MTI).  MTI alleged at the 
time that the approximately US$120 million price tag could 
not be justified, although investors scrambled gamely to 
convince GON officials otherwise.  Industry reps argued that 
the highway project would lead to US$600 million in real 
estate investment over the next 10 years.  MTI agreed to 
re-examine the project, but no concrete action was apparently 
taken. 
 
¶10. (U) The tourism industry must also contend with other 
challenges.  The country is sorely in need of all kinds of 
infrastructure investment.  Potholes pockmark city streets. 
Public transportation is woefully inadequate.  Sidewalks are 
often nonexistent.  Most parts of the country suffer power 
outages on a daily basis.  Many regions do not enjoy access 
to potable water or water treatment facilities.  Malaria and 
dengue fever are endemic in certain areas.  Managua has no 
street signs and comprehensive maps of the country are 
remarkably scarce.  The government's ability to channel 
investment to meet these challenges will determine the pace 
of development for the tourism sector. 
 
Land Disputes Still a Problem 
----------------------------- 
 
¶11. (U) Investors must contend with serious legal issues when 
it comes to purchasing or leasing land in Nicaragua. 
Thorough due diligence must be performed to determine which 
property law determines titling requirements and whether any 
competing claims exist.  Large developments may generate 
unwelcome attention, as local interests may file false or 
questionable claims to grab a piece of a pie.  These disputes 
can delay projects and be costly to resolve.  Retaining 
competent legal counsel from the very beginning is important. 
 Notwithstanding, serious property disputes are the exception 
rather than the rule.  The FSLN government has emphasized its 
desire to resolve all still festering disputes arising from 
the free-for-all property confiscations, and vowed to eschew 
future land grabs. 
TRIVELLI