December 11, 2009 by sacuanjoche.

San Juan del Sur, Nicaragua — Today, like every day, begins with a smoothie: a blend of pineapple, melon, banana, passion fruit, papaya, yogurt, nuts and pitaya, a Central American delicacy responsible for the bright magenta coloring of the drink in Bob Schmidt’s hand.

“One of these will fill you up and keep you going through lunch,” Mr. Schmidt, 63, said while setting aside a creased paperback and gazing out from his second story to a view of the Pacific Ocean. Surfers flitted along the surface of a neatly groomed groundswell 50 yards below his tiled-floor home, which might pass for a beachfront palace in Malibu but for the wooden plaque on the wall reading “Bienvenidos a mi hogar” (“Welcome to my home”) and the sporadic power outages typical of rural developing countries.

Mr. Schmidt and his wife, Sheri, 62, are among the estimated 3,000 foreign property owners in this country, which, starting in the early part of this decade, followed Costa Rica’s lead as an affordable paradise for second- and retirement-home owners. When the Schmidts bought their property here in 2005, paying $200,000 for an oceanfront lot and spending about $80 per square foot in construction costs, the Sandinista leader Daniel Ortega had not yet reclaimed the presidency, and Nicaraguan real estate was booming; asking prices were selling prices.

Much has changed since then. The global economy has tanked. Mr. Ortega has not only regained power, but also won a disputed ruling by the Nicaraguan Supreme Court in November that could enable him potentially to extend his reign; that and a series of unconvincing municipal elections have catapulted Nicaragua, Latin America’s poorest country (the per capita gross domestic product was $1,123 in 2008, according to the United States State Department), back into the periphery of international concern.

Mr. Schmidt takes another drink of his fruit shake. The tropical flavors, and the atmospheric intangibles of a Sunday morning on the white sands of Hacienda Iguana, one of Nicaragua’s fastest-growing southern beach communities, help to make the world’s worries seem very far away.

“Once I saw this place and this beach, that just was it,” said Mr. Schmidt, who is originally from Southern California but worked as a livestock farmer with his wife outside St. Paul for 36 years. The couple first bought a second home on the beach at Playa Hermosa, Costa Rica, in 2002 for $150,000, calling the impulse buy “a total fluke,” and migrated to Nicaragua after his wife’s retirement in 2006.

“By the time I was ready to retire, it had already gotten so touristic down there that we just wanted to go somewhere else,” Ms. Schmidt said of Costa Rica. “And Bob wanted to be on a surf break. So here we are.”

Some might see an element of financial risk in the Schmidts’ purchase of the sort of property that one segment of buyers view as an investment, but Mr. Schmidt said that he and his wife were not driven by the profit motive. “We came down here really not as an investment per se,” he said. “It was more of a lifestyle change.” Life at Hacienda Iguana, a gated development about 20 miles northwest of San Juan del Sur with 250 home lots and over 70 condos already built, moseys along at a paradisiacal, watch-dissolving pace. Tidal swings and sunsets mark the day’s most important events.

“I think our buyers now are end users,” said Zach Lunin, a co-founder of Aurora Beachfront Realty in San Juan del Sur. “The people who are buying with us and investing here are people who want to spend time here. Bottom line is most of the people that we’re seeing are not the flippers. Nicaragua is a heart buy for most people, not that it doesn’t make sense on paper. But people come here and they fall in love with the country, and that’s why they buy property.”

Considering that Nicaragua scored an underwhelming 2.5 out of a possible 10 for honesty in the Worldwide Corruption Perception Index of 2009 (the United States was at 7.5, Canada at 8.7 and Mexico at 3.3) as tallied by Transparency International, the romance may include a few speed bumps. (“If you drive to Managua, it is very unlikely that you won’t be pulled over,” Mr. Schmidt said of the incessant traffic shakedowns and bribery attempts performed on gringos by police patrolling the roads.) And while Nicaragua’s coming 2011 presidential election is a reminder of the country’s political uncertainty, not all foreigners are so easily deterred.

“Nicaragua kind of acts like a natural filter,” Mr. Lunin said. “It’s not everybody who gets on a plane and says, ‘Let’s go down to Nicaragua,’ whereas it is everybody who gets on a plane and goes to Costa Rica.”

The impression that Nicaragua is inherently unstable has unquestionably slowed development, but it has also made an investment in “the New Costa Rica,” more affordable and appealing to the adventurous segment of aspiring second-home owners. In many cases the numbers support the gamble. In 2008 tourism brought in an estimated $944 million (nearly one-sixth of the G.D.P.), and it has grown by 8.2 percent in the past year, with almost 24 percent of visitors hailing from the United States.

Oceanfront lots in gated, rural communities like Hacienda Iguana are selling for around $250,000, and according to some real estate agents, prices have dropped as much as 40 percent in the last two years.

Unlike in many countries, property laws afford foreigners the same land rights as Nicaraguan citizens, and while the Coastal Law of 2009 prevents the purchase of land within 50 meters of the high tide line and oceanfront lots are eligible for purchase only if registered before a 1917 agrarian reform law, land acquisition in Nicaragua is a relatively straightforward process — albeit with a few notable concerns.

Because the Sandinista regime confiscated nearly 28,000 properties between 1979 and 1990 in the name of land redistribution, acquiring undisputed titles has become a central issue for foreign investors. “Most of my clients want title insurance, and I recommend it to them, because it gives them added peace of mind,” said Byron Mejia, a real estate lawyer in Managua. “Whatever we miss, the title insurance company picks up, so we don’t leave any stone uncovered. Sometimes if there’s a problem with the title, you stop right there.”

Aside from potential title disputes, aspiring second-home owners may have to consider the muddled process of constructing their getaways from afar. “We’ve watched some of the people who have had to rely on somebody else to supervise,” Ms. Schmidt said. “It’s a difficult process, and things aren’t done the way you might think they would be done. You can’t take anything for granted.”

The “out of sight …” principle applies not only to construction, but also to protecting and maintaining the asset, so hiring security and caretakers is essential. “It’s common sense,” Mr. Mejia said. “Let’s say you have a home — oceanfront property you visit three or four times a year. If you leave it unattended, it’s like New York City. Someone’s going to break in.”

While there may be fewer potential buyers than at the height of the real estate boom, those still in the hunt say they are realistic about Nicaragua’s political situation. “I don’t think we’ll bury ourselves in research on how stable it is,” said Charles Brooks, an insurance executive from Virginia who is considering the purchase of a lot in a development inland of Hacienda Iguana called Iguana Hills.

“I think we’ll take a leap of faith,” he said. “It’s money that’s at risk, perhaps, but not any more risky than watching your 401k. And it’s a lot more fun. There’s truly an upside to it.”

Source: NYT

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January 15, 2007 by sacuanjoche.

 Eric Sabo, Chronicle Foreign Service Monday, January 15, 2007

(01-15) 04:00 PST San Juan del Sur, Nicaragua — A barbed-wire fence and several angry men armed with machetes are standing in the way of Philip Christopher’s dream to build a world-class surf resort.

The 46-year-old Missouri native has spent the past two years buying up property around Popoyo Beach, 17 miles from this Pacific beach community that is also known as a surfer’s paradise.

“Popoyo is already its own brand,” said Christopher, one of thousands of U.S. investors buying ocean-view lots and other properties in this once war-torn country. “Everyone knows that this is the best place to surf.”

Yet his $14 million project, which includes beach condos and a clubhouse, has run afoul of the Nahualap, an indigenous group that first settled in the area. Its leaders claim nearly 15 acres of prime beachfront land stemming from an 1877 deed, which Christopher says is part of the 93 acres he bought from previous owners.

“You can’t come into our home and buy whatever you want,” said Bartolome Lopez, the president of the Nahualap community in Las Salinas, a town near Popoyo. “You have to respect those who live here.”

Late last month, dozens of men brandishing machetes stood on the perimeter of Christopher’s fence, claiming a new ally. “They were shouting that (new President Daniel) Ortega will never allow me to get away with this,” said Christopher.

But Ortega, a 61-year-old former guerrilla commander viewed as a dangerous leftist during the Reagan administration, may do just that.

After nearly 17 years out of office and three consecutive election defeats, Ortega was sworn in last week to lead a country that has largely grown out of its revolutionary past. Ortega himself says he has changed from the days when he imposed a state-run economy, nationalized properties to give to landless peasants and fought U.S.-backed Contra fighters. In fact, he has courted nervous foreign investors by promising to respect private property and continue free-trade agreements. As a result, there have been few signs of investor flight.

“There is not even a thought of confiscations,” Ortega told a group of business leaders at an October meeting at his Managua home, which included Christopher. “Foreign investment will help reduce our unemployment problem.”

Indeed, his Sandinista party bears little resemblance to its revolutionary roots. Seven of the nine original junta leaders have abandoned Ortega, including his brother and former head of the army, Humberto Ortega. Jaime Morales, a former Contra whose home was confiscated by Daniel Ortega, is the nation’s new vice president.

“Ortega has given absolute certainty for the respect of property rights,” Morales said last month in a speech in San Juan del Sur designed to assure foreigners that their hotels and homes are safe investments.

Chris Berry, a 52-year-old former ballet dancer and a San Francisco resident who owns the Pelican Eyes resort in San Juan del Sur, says Sandinista officials have been “especially helpful” in his dispute over hillside property with a distant relative of Augusto Sandino, the famed revolutionary hero from the 1920s. “The Sandinistas have been assisting us throughout,” said Berry.

Most political observers say Ortega is well aware that Nicaragua — the hemisphere’s poorest country after Haiti — needs tourist dollars to benefit the impoverished voters who supported him. In 2006, tourism brought in $240 million — surpassing the nation’s coffee exports — up from $189 million in 2005.

Indeed, Nicaragua’s long stretch of white sand beaches and stunning vistas along the Pacific Coast have become hot destinations these days for not only investors but also retirees and U.S. and European tourists. Visitors are also lured by the nation’s volcanoes, lakes, rain forests and colonial towns like Granada.

Calvet & Associates, a Managua consulting firm, says Californians are blazing the trail, accounting for nearly 20 percent of U.S. citizens inquiring about property. An estimated 6,000 U.S. citizens now live at least part time in Nicaragua, according to media reports.

Yet property confiscations during Sandinista rule in the 1980s have left bitter memories and a confusing array of title claims that can make buying property a tricky proposition. Although foreign investors can still find good deals, lawyers and real estate agents say, buyers should beware. A 2002 World Bank study said as many as 60 percent of Nicaraguan properties lack proper documentation.

“Finding property with a clear title is not an easy task,” said John Margolis, who worked in the hospitality industry in San Francisco before purchasing 50 acres near La Bonita Beach, an hour’s drive west of the capital, Managua. “We wanted something that was still off the radar, said the 41-year-old Margolis, who plans to build beachfront homes.

Aside from Christopher’s experience, there have been at least three other beach area property disputes — including one that turned violent. Three members of a group calling itself the Pedro Joaquin Chamorro Cooperative were shot and wounded Dec. 1 by security guards after entering a new development they claimed is being built on their land at Arenas Bay, a few miles south of Popoyo. The Nicaraguan owner, Armel Gonzalez, said that the guards acted in self-defense.

“Some followers of Ortega believe we are going back to the ’80s,” said Gonzalez. “But that’s not going to happen.”

Most owners of confiscated properties either have reclaimed their land or been compensated. According to the U.S. Embassy, more than 4,500 Nicaraguans who fled to the United States during the 1979 Sandinista’s revolution against dictator Anastasio Somoza have received compensation mainly by government bonds.

Vice President Morales has warned poor Nicaraguans who have lost redistributed land in subsequent years not to expect the new government to return those properties. “No invasions will be allowed,” he has said.

These few land disputes, however, have not deterred tourism, which is transforming once sleepy fishing villages such as San Juan del Sur into fashionable retreats dotted by million-dollar homes and $400-a-night hillside spas. Further up the coast are a growing number of gated communities, which offer American-style suburban homes and Nicaragua’s first golf course along the Pacific Coast.

“There used to be nothing but livestock and farms here,” said Steve Snider, who sailed to Nicaragua from his San Diego home 10 years ago.

Snider, now a real estate agent, says cheap land deals are becoming harder to find. Yet, he says property in Nicaragua still sells for about 25 percent less than in Belize and Panama, two other hot spots in Central America for American investors.

Meanwhile, Christopher is gearing up for what he describes as a “battle royal” if he and his business partners are forcibly evicted by the Nahualap. He expects a judicial order soon that will allow him to oust the protesters and fence off the disputed area.

“Clearly, this is not what the Sandinistas want to deal with right now,” said Christopher.

http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2007/01/15/MNGHJNIR5V1.DTL

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