Investment, Tourism Climate Gets International Confidence Boost

GRANADA, Nicaragua – This year’sdramatic plummet in tourism investment inNicaragua has not dampened enthusiasmamong industry leaders here.The 84% drop in investment during thefirst half of 2004 apparently has not affectedtourism visits, either. The number offoreign tourists increased 16.2% during thefirst eight months of this year, with respectto the same period in 2003.The 403,217 foreign tourists who visitedNicaragua between January and Augusttranslated into $114 million in revenue –up 6.5% from Jan.-Aug, 2003 – accordingto statistics from the Nicaraguan TourismInstitute (INTUR).Most foreign tourists come from theUnited States (92,460), followed byHonduras (80,101) and Costa Rica(62,426). Canadian tourists ranked fifthwith 10,898 and Spain (6,933) topped theEuropean countries. Statistics show thatGerman tourists (5,922) have increased by31% this year, while British tourists(4,367) have decreased by almost 11%.The average tourist stay is 3.8 days,with an average expenditure of $75 a day,according to INTUR’s numbers.Lucia Salazar, executive president ofINTUR, told The Tico Times she expectsthe upward trend in tourism to continue,and estimates tourism could grow by asmuch as 20% this year.In four years, Nicaragua’s tourismnumbers could surpass those of neighboringCosta Rica, Salazar predicted, ratherboldly.THE drop in tourism investment, from$3.8 million in the first half of 2003 to lessthan $700,000 in the fist six months of thisyear, is due, primarily, to last year’s implementationof Law 453 (The Law of FiscalEquality), according to Michael Navas,secretary of INTUR’s Tourism IncentiveBoard.The Fiscal Equality Law repealed theMechanism of Direct Investment and theFund of Tourism Investment (Fonciturs),which together provided financing for upto 70% of tourism projects.The elimination of the financing mechanismsled INTUR, The Tax Ministry andinvestment promotion group Pro-Nicaraguato present a new legal initiative in lateSeptember that would allow investors toemit bonds to finance up to 70% of largetourism projects. The Bonds for TourismInvestment (BID) would carry a maximumterm of 20 years.To be eligible for bond financing,tourism projects must first be approvedunder Law 306 (The Tourism IncentiveLaw, 1999), which provides 10-yearincome and property tax breaks to tourismprojects that meet minimum investmentrequirements.The bond proposal is expected tobecome law by this month. The incentivereportedly has multi-partisan support in theNational Assembly, though confusion oversome of the logistical details could delayits approval in Congress.After the bill is passed, the governmentexpects tourism investment to jump.INTUR also recently opened a newoffice in its Managua headquarters to provide“Training Bonds” to small and medium sized tour operators, in an effort tomake tourism providers more competitive.The $1.2 million training bond project,which is being launched in conjunctionwith the International Development Bank(IDB), will help provide financing to trainbartenders, cooks, waiters, tourism guides,administrators and technicians.The programs hope to hire 4,300employees in the tourism sector in the next12 months.NICARAGUA’s investment climatehas received several important internationalvotes of confidence in recent months.In July, the U.S. government-affiliatedOverseas Private Investment Corporation(OPIC) concluded a new bilateral agreementwith Nicaragua to encourage saferdirect foreign investment here.The investment promotion accord, anupdated version of the bilateral agreementsigned in 1966, streamlines procedures inNicaragua for U.S. companies seeking privateloans or political-risk insurance fromOPIC. The accord represents a new boostof confidence by the U.S., after severaldecades of tumultuous investor relations(TT, July 30).THE World Bank and InternationalMonetary Fund, in their annual reportDoing Business in 2005, qualifiedNicaragua as one of seven Latin Americancountries to notably improve its investmentclimate to become more competitive.In the last year, the report noted,Nicaragua has reduced the average time ittakes to receive a business license from 71to 45 days.Provisions in the yet-to-be-ratifiedU.S. Central American Free-TradeAgreement (CAFTA) would providemechanisms to improve investor securityhere. And investors here are waiting for anew Nicaraguan bill, which has yet to bepresented in congress, that will providearbitration measures for commercialinvestors.INVESTORS are also keeping a closeeye on the Ley de Carrera Judicial, a billthat aims to de-politicize the country’sSandinista-controlled court system.“No one will invest here until theyknow their money is safe. Investors needto know that if they have problems, theycan appeal to an unbiased court,” congressmanDonald Lacayo, president of theNational Assembly’s Judicial Commission,told The Tico Times in September(TT, Sept. 10).The bill is expected to become law byearly next year.U.S. Ambassador to NicaraguaBarbara Moore gives the Bolaños governmenthigh marks for normalizing propertyregistry procedures, and working toresolve long-standing property confiscationsfrom the days of the revolutionarySandinista government (1979-1990).“We are still working to recover or getreimbursement for properties confiscatedfrom American citizens,” Moore told TheTico Times. “We have made excellentprogress under the Bolaños administration,and had a couple of record years in thenumber of cases resolved.”The Embassy has helped resolve 2,246U.S. citizen confiscation claims since1995, and an additional 762-Embassy registeredclaims are still pending, accordingto statistics provided by the Embassy.INTUR continues to promoteNicaragua internationally through a seriesof 30-second TV spots on CNNInternational and CNN Airport Networktitled “Nicaragua: It’s Hot.”The ads, featuring Nicaraguan ecotourism,culture and adventure sports,began airing last May, and have been wellreceived, according to INTUR’s Salazar(TT, May 13).Salazar says the slogan “Nicaragua esCaliente” is the result of market studiesand laughs at the suggestion that callingNicaragua “hot” could have the unintendedeffect of reminding people of the war ora hot zone.INTUR is also about to launch a massiveoutreach campaign in the UnitedStates, the details of which were still underwraps at press time.