VZCZCXRO9390
RR RUEHLMC
DE RUEHMU #0648/01 0821437
ZNR UUUUU ZZH
R 231437Z MAR 06
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 5676
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHDG/AMEMBASSY SANTO DOMINGO 0516
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHDC

UNCLAS SECTION 01 OF 03 MANAGUA 000648 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR WHA/CEN AND WHA/EPSC 
 
E.O. 12958: N/A 
TAGS: ECON EINV ELAB PGOV SOCI NU
SUBJECT: TOURISM MAKES RIVAS ONE OF THE MOST SUCCESSFUL 
REGIONS IN NICARAGUA 
 
REF: MANAGUA 0417 
 
¶1. (U) The southern Nicaraguan department of Rivas has 
capitalized on its natural beauty and relatively well 
developed transportation infrastructure to build an economy 
increasingly based on tourism.  During the civil war of the 
1980s, Rivas was not a battleground, but a refuge, and the 
department's population consequently does not, for the most 
part, claim strong ideological affiliation with Liberals or 
Sandinistas.  Rivas also enjoys agricultural development, 
benefiting from fertile soil and extensive coastlines on the 
Pacific Ocean and Central America's largest freshwater lake. 
Despite all of Rivas' attractions, however, many people still 
emigrate abroad, and key industries are prevented from 
reaching their full potential by a lack of government 
investment,  insufficient academic training, and the 
conservative attitudes of farmers and business owners.  End 
Summary. 
 
¶2. (U) During a February 15-16 reporting trip to Rivas 
(reftel), Emboffs met with local private sector, political 
and church leaders to discuss Rivas' economy, social 
structure, and potential for growth.  Pristine beaches and 
fertile soil are fueling development in the tourism and 
agriculture sectors.  Although manufacturing is not yet a 
major element of the economy, one Canadian-owned maquila 
employs 600 workers in the city of Rivas and will reportedly 
double in size this year.  Jose Rene Martinez, the PLC mayor 
of Rivas, heads the Rivas (Department) Mayors' Association, 
which brings together the department's Liberal, Sandinista, 
and Conservative mayors to work together on development 
plans.  Even though Rivas has one of the most successful 
local economies in Nicaragua, its inhabitants' general lack 
of willingness to take risks to expand their businesses and 
reach new markets has limited growth. 
 
COASTLINES AND NATURAL BEAUTY ATTRACT TOURISM AND INVESTMENT 
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¶3. (U) Rivas contains two different tourism zones, each with 
its own distinctive characteristics.  The first is on the 
Pacific Coast, and is characterized by extensive foreign 
investment, including several high-end developments (with one 
eco-resort charging $300 /night in the high season).  Hector 
Sanchez Arguello, a local partner of several North American 
investors developing Remanso beach on the Pacific Coast, 
shared that the Nicaraguan departments of Rivas and Granada 
enjoy the highest economic growth rates in Central America, 
thanks to tourism-related investment.  Sanchez claimed that, 
of the 70 largest investment projects in Nicaragua, all but 
three are located in these two departments. 
 
¶4. (SBU) Other contacts pointed out that the two major 
obstacles to growth in tourism are land titling issues (a 
major problem throughout Nicaragua) and a lack of trained 
staff.  Rommel Hollman, the president of the Rivas Ranchers 
Association, whose family owns a major development near the 
beach town San Juan del Sur, complained about the lack of 
English-speaking waiters and hotel managers.  Hector Sanchez 
reported that, while local universities do offer some 
hospitality courses, students lack practical training.  He 
explained that many hotel and restaurant owners bring in 
trained staff from Costa Rica.  When asked about recent land 
invasions in the Sandinista-controlled municipality of Tola, 
rancher Noel Rivera Sandino commented that the land title 
issue is a major challenge for foreign and local investors. 
Monsignor Leonel Navas, the senior Catholic prelate resident 
in Rivas, told us that the vast majority of the citizens of 
Rivas are happy with the investment in tourism and that the 
land invasions are driven by a small band of (FSLN directed) 
instigators who "make a business of disputing land titles." 
 
¶5. (U) The other tourism zone is the large volcanic island of 
Ometepe, located in Lake Nicaragua.  The tourism industry on 
Ometepe, which directly employs over 400 people, is 
characterized by modest businesses (hostels and small hotels) 
run by locals and a few foreigners, usually retirees from 
North America or Europe.  Abraham Paisano, a director of the 
Ometepe Civil Society Network, remarked that foreign 
investors are welcome on Ometepe and "usually take better 
care of the environment than the natives."  Ometepe is 
divided into two municipalities: Altagracia and Moyogalpa. 
Moyogalpa mayor Jose Rene Martinez commented that Altagracia 
has the better beaches and tourism accommodations.  Martinez 
said that land prices in Ometepe have risen considerably, 
though an investor can still find land at a reasonable price: 
$8,000/manzana (1 manzana = 2.3 acres) for a plot with no 
coast access; $20,000/manzana for a plot with "tourism 
potential"; and $100,000/manzana for prime beach access in 
Altagracia.  Land invasions have not been an issue in 
Ometepe, Martinez reported. 
 
¶6. (U) Roberto Rivera, a member of the Ometepe Chamber of 
Tourism, is concerned that, under CAFTA, large foreign 
investors would displace local tourism businesses.  Chamber 
members also complain about the "lack of service mentality" 
of the minimally-educated labor force (mostly former 
subsistence farmers), shortages of telecommunication, water, 
and electrical services, very limited access to (expensive) 
financing, and a lack of English language training.  (Note: 
Chamber secretary Helmut Arce noted that service workers are 
often intimidated by the expectations and language barrier 
presented by English-speaking tourists and frequently abandon 
their jobs, leading to high turnover rates.  He said that 
several Peace Corps volunteers had trained a few workers in 
basic English during their spare time, which had been 
immensely helpful.  Peace Corps plans to start a formal 
English training program in Nicaragua later this month.  End 
Note.)  When Emboffs suggested that Rivera and other Chamber 
members consider partnering with foreign investors to raise 
capital and upgrade their accommodations, several responded 
that they are "too conservative" for this approach. 
 
COMMERCIAL AGRICULTURE DEVELOPMENT HELD BACK BY RISK AVERSE 
MENTALITY 
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- - - - 
 
¶7. (U) Running a distant second to tourism, agriculture forms 
the other pillar of Rivas' economy.  Contacts mentioned 
ranching, plantains, lumber, and sugar cane as the principal 
agricultural sub-sectors.  On Ometepe, tobacco and watermelon 
are produced commercially.  Rommel Hollman explained that 
fishing employs several hundred people in Rivas, but most 
fisherman employ "traditional" methods to make their living 
and sell their catch locally to hotels and restaurants.  Jose 
Rene Martinez reported that the Government of Spain is 
supporting 70 fishermen in Ometepe by constructing 
refrigerated storage facilities and providing other equipment. 
 
¶8. (SBU) Chamber of Commerce member Pedro Joaquin Mendoza 
explained that, despite benefiting from good soil and decent 
transportation infrastructure, the conservative mentality of 
many farmers and a lack of follow-through on the part of the 
GON prevent Rivas from realizing its full potential.  As an 
example, Mendoza noted that many local farmers produce a type 
of papaya that sells locally, but is too large for export 
(North Americans like to eat their papaya in one serving so 
it doesn't get mushy, he noted).  He stated that conservative 
farmers want to see their neighbor succeed first before they 
try something new.  At one point, the Ministry of Agriculture 
and Forestry (MAGFOR) started a program to promote the 
cultivation of smaller papayas, but, according to Mendoza, 
the initiative fizzled before the supply chain was fully 
developed.  The failure of the program made farmers even more 
reluctant to try producing for an export market. 
 
¶9. (SBU) Other obstacles to growth in the agricultural sector 
include high interest rates, skyrocketing land prices, and 
the "lack of a legal framework" to promote development. 
Hollman claimed that interest rates have dropped slightly for 
medium and large producers, to about 15 percent annually, but 
Mendoza reported that most producers must accept rates as 
high as 18 to 27 percent.  Hollman related that, while 
tourism is a boon for Rivas, farmers must now pay up to 
$100,000 for a "good manzana" of land.  Moreover, he stated 
that he must pay bribes to the local police and hire guards 
to prevent land invasions, which naturally raises the costs 
of production.  As often the case in Nicaragua, contacts 
reported that local judges are corrupt, and favorable rulings 
regarding land disputes are purchased by the highest bidder. 
 
¶10. (SBU) One of the more controversial agricultural 
investments concerns a tilapia breeding ground in 
Altagracia (Ometepe).  While local residents overwhelmingly 
support the project and appreciate the employment 
opportunities afforded by the operation, critics maintain 
that the tilapia will displace local breeds and harm 
recreational fishing.  (Comment: Previous environmental 
impact studies have shown that this is not the case.  End 
Comment.)  More significantly, a few politically connected 
owners of beachfront properties near the tilapia operation 
have been exerting their influence to prevent the company 
from using a legally issued concession.  Their chief 
objections are that the buoys over tilapia cages are an 
eyesore and that the operation impedes navigation.  They 
further argue that these factors will hold back the tourism 
potential of Ometepe.  The land owners have gained support of 
the Nicaraguan Tourism Agency INTUR) in their campaign 
against the operation.  Abraham Paisano, however, was 
sympathetic to the plan and said that a local environmental 
committee plans to investigate and report on the impact of 
the project.  Paisano blamed opposition to the tilapia 
breeding on "ignorance and misinformation." 
 
DESPITE GROWTH, EMIGRATION STILL PREVALENT 
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¶11. (U) Monsignor Navas described a large-scale "exchange of 
labor" with neighboring Costa Rica.  Unskilled Nicaraguans 
travel to Costa Rica to harvest crops while skilled Costa 
Ricans come to Rivas to work in the tourism industry and sell 
consumer goods.  He commented that, while the large majority 
of migrants go to Costa Rica, a smaller and wealthier 
demographic set tend to leave for the United States.  Navas 
lamented that large-scale emigration contributes to the 
disintegration of families, with young fathers departing for 
months at a time or permanently.  Jose Rene Martinez noted 
that, out of 3,000 households in Ometepe, 2,500 have a member 
living in Costa Rica or the U.S. 
 
¶12. (U) The large number of emigrants has generated a 
considerable flow of remittances into Rivas, though, 
according to local leaders, no formal program exists for 
channeling the money into development or investment 
activities.  Paisano noted that 12 people in Ometepe are 
employed full time transporting money and goods related to 
remittances. 
 
COMMENT: LEAVING THE COMFORT ZONE 
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¶13. (SBU) Although Rivas is blessed with beautiful scenery 
and good soil, the conservative attitude of many locals has 
prevented the department from reaching its full potential. 
While the citizens of Rivas have little control over interest 
rates or the corrupt judiciary, CAFTA and Nicaragua's 
increasing visibility on the international tourism scene 
offer many possibilities for growth in different sectors. 
These possibilities will only be realized by foreigners, 
however, if locals -- like the hostel owners in Ometepe and 
the papaya growers -- are unwilling to step outside of their 
comfort zone and take some risks.  The Nicaraguan Government 
and USAID programs facilitate linkages with international 
buyers and investors, but ultimately opportunities must be 
seized by the people of Rivas. 
TRIVELLI