Nevermind Ortega—Markets In Crisis, Part 2
“Forget about the Sandinistas. They’re obsolete.”
That was Violeta Chamorro’s advice in September 1989, when asked about her chances for defeating the Sandinistas in Nicaragua’s first presidential election after the Contra War. To the surprise of sitting El Presidente Daniel Ortega and all Nicaragua, Mrs. Chamorro won that election in February 1990. The Sandinista Ortega stepped down graciously, and Doña Violeta began the work of rebuilding her country.
I visited Nicaragua for the first time three years later. Managua, thanks to the earthquake of 1972, the revolution, and the civil war, was a near disaster zone. No reason at the time to stick around and this is only slightly less true today. Gringos like me, then and now, migrated instead slightly west and south, to the Pacific coast, where, by the early 1990s, speculators had already begun snatching up stretches of this country’s primo beachfront, and inland, to the colonial city of Granada.
Visiting Granada for the first time during that initial scouting trip in 1993, I found a single hotel, the Alhambra, recognizable (still today) by its long, breezy porch overlooking the central square. A rocking chair out front of the Alhambra is the best perch in this city. Back in the early and mid-1990s, the hotel itself was a far less appealing place to spend time, with rusty fixtures in the leaky bathrooms and cockroaches under the cot-like beds. The Alhambra has since been nicely renovated, along with much of the rest of Granada.
While Granada and Nicaragua both historically have been and can still be short on amenities, they have always been long on heart. This country when I discovered it was pulling itself up by the bootstraps. In the towns and traveling along the dirt roads back then, you saw men and boys in olive green military garb, sometimes carrying weapons. They seemed intimidating, until you stopped to speak with them. They talked openly of their desire for peace. These Nicaraguans were tired of fighting, worn out by decades of watching their once-prosperous little country dissolve into chaos.
In the years that followed, the transformation was remarkable. The gringos kept coming and even began settling in. The speculating along the Nicaraguan Pacific Riviera went into overdrive. Sleepy Granada became a tourist hub, so crowded you’d sometimes have to wait your turn for a rocking chair on the porch of the Alhambra. Doña Violeta, it seemed, had been right. The Sandinistas had become obsolete, just like the political model they’d sought to follow, replaced, it appeared for some time, by property investors, foreign retirees, and adventure-entrepreneurs. Indeed, through 2006, Nicaragua was on the fast track to a bigger, brighter future.
That is not to say that the Sandinistas–the party or the people–had disappeared. Indeed, the most famous Sandinista of all, Daniel Ortega, sits again, today, in the seat of the country’s presidency. How did that happen? You’d have to ask the Nicaraguans. They re-elected him, putting him back in office in 2007. And, as a result, all those investors, retirees, and entrepreneurs who had tied their dreams to Nicaragua’s post-Sandinista future panicked. The panic deepened when, in 2011, Ortega adjusted things so that he could run for a consecutive term as president, something that had previously been mandated against in the country’s constitution. Ortega ran again…and was re-elected again. Again, you’d have to talk to the Nicaraguans to understand the thinking behind this. It’s a mystery.
Meantime, in 2008/2009, U.S. and world real estate markets began to tumble, compounding investor panic further and creating a perfect storm of negative influences that succeeded in nearly annihilating Nicaragua’s property market. The whole of Central America (with the notable exception of Panama) has been hit hard by the global recession, but Nicaragua has been hit harder than its neighbors. Historically, the majority of foreign property buyers in this country have come from the United States and Canada. Most of these buyers leveraged property assets back home to find the money to acquire new Nicaraguan assets. That hasn’t been a realistic option for some time now, meaning Nicaragua’s buying pool has all but evaporated.
I don’t see this changing in the short term, despite what some Nicaraguan developers you might speak with might argue, meaning that I don’t see Nicaragua as a place to buy for quick growth. On the other hand, the investor-buyer willing to take a longer-term view should be looking at Nicaragua right now. This is a market close to the bottom of its crisis cycle, and the bottom, if you can identify it, is the place to buy. You won’t enjoy big increases in property values within the coming few years but, thinking long haul and putting this opportunity into perspective, Nicaragua boasts something that will always be in demand: Pacific coastal real estate reminiscent of the best of southern California. Right now, values along this country’s long and dramatically beautiful Pacific coastline are down 40% and 50% from their peaks, and developers are uncharacteristically open to offers. It’s possible to buy a lot in a full-amenity development for as little as $30,000, sometimes even with developer financing. And back in Granada, Nicaragua’s other key expat and investor market, it’s possible today to buy one of the small Spanish-colonial houses the city is famous for for as little as $40,000 or $50,000.
Politics have too long distracted people from recognizing what Nicaragua has to offer. Take Doña Violeta’s advice and forget about Ortega and the Sandinistas. Three decades ago, they tried to make a new Nicaragua. Fortunately for you and me, the old Nicaragua, the largest but least-visited nation in Central America, lives on. This Nicaragua is a beautiful country with loads of sunshine and two long coasts, one of white sand, one with wildly crashing surf. It is a land of lakes and volcanoes, of cloud forests and tropical jungles, of cattle ranches and Spanish-colonial cities (including two of the oldest cities in the Americas, Granada and Leon, both classic colonial towns with shady plazas and centuries-old Spanish-colonial architectural gems), of rare orchids and white-faced capuchin monkeys, and, most recently, of a new-and-improved foreign retiree residency program.
Nicaragua is a land of pirates, martyrs, heroes, warriors, and poets, fighting each in his way for what he believes. Colonial Leon is at the heart of many of the country’s struggles, historically its quixotic center. Leon is proud to be known as the place where the last of the Somoza dynasty finally ran out of bullets, bombs, and power in 1979. The red and black flag of the FSLN (Sandinista National Liberation Front) waves proudly over the monuments and the city hall, where, still, vendors hawk souvenirs of those valiant, bloody times.
Perhaps, though, what struck me most my first visit to Nicaragua years ago and what has continued to draw me back to this country all these years since is the spirit of the Nicaraguan people. On my first visit, I met a young Nicaraguan man, maybe 20- or 22-years-old. “When I was very small,” he told me one afternoon, “the soldiers came for my family. It was the middle of the night. We were all asleep inside. The soldiers were in a pick-up truck. They stopped out front and came to the door. They woke us all up and told us that our house was needed for the revolution. In the name of the revolution, they told us, we had to get out.
“We all climbed into the back of their pick-up truck, and the soldiers drove us into the mountains. They left us there, my whole family. We had nothing with us. But my father made us a place to live…and we survived.
“That is our past,” the young man told me in perfect English. “But it is not our future.”
This young man, like many others in this country, had taught himself to speak English by watching American television (“mostly MTV,” I remember him explaining).
Thinking practically, Nicaragua’s big advantage is its cost of living, which is among the lowest you’ll find anywhere in the world you might actually want to live. The Ortega Factor has frightened off many would-be retirees and expats looking for a budget destination, but not all. Both retirees and tourists in search of low-cost adventure continue to make their way to this country, which offers an affordable, quality lifestyle bundled with the chance to start over.
Granada is this country’s number-one tourist draw. Nobody visits Nicaragua without visiting Granada. This postcard-charming colonial town sits just inland from Lake Nicaragua and at the foot of the sleeping volcano called Mombacho. Given its history, its geographic situation, and its inventory of Spanish-colonial architecture (including six classic-style colonial churches), Granada will always see more tourist traffic than anywhere else in this country, meaning that if you’d like to purchase a property to generate cash flow from rental when you’re not using it, this would be the place to shop.
A final practical note: Nicaragua uses the cordoba (which, unlike most any other currency you could name these days, has been falling faster than the U.S. dollar, meaning that, while the U.S. expat’s buying power has been steadily reduced worldwide, in Nicaragua, it continues to expand); however, real estate in this country is priced and trades in U.S. dollars.
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