The Tortoise and the Hare: Nica Versus Tico

DESPITE their shared border and intertwined populations,Costa Rica and Nicaragua are two distinct countrieswith unique histories, cultures, political situations andsocioeconomic realities.Nicaragua’s two-decade revolutionary and counterrevolutionarywar in the 1970s and ‘80s set back the country’sdevelopment by 50 years, while Costa Rica benefitedduring the tumultuous years by receiving massive injectionsof U.S. dollars.Now, some 20 years later, Costa Rica and Nicaraguafind themselves on similar roads to development, pavedby tourism and foreign investment.While Costa Rica has a massive head start out of theblocks, Nicaragua appears to be pacing itself well, inhopes of running a good, long race.Below is a breakdown of how Costa Rica andNicaragua fare in areas such as foreign residency, investment,real estate and integration.FOREIGN RESIDENCYCosta Rica: Would-be Costa Rican residents got ascare last year when the country’s Legislative Assemblydiscussed a bill that would have changed eligibilityrules, making $3,000 per month the minimum pensionrequirement and eliminating the residente rentistacategory, which allows anyone with a provable $1,000-per-month source of income from abroad to become apermanent resident. The changes would also haveallowed the Immigration Department to change the minimumpension amount as frequently as every three tofour years.However, the assembly discarded these potentialchanges in January; so, for the time being, the rules arethe same. Three categories of foreigners are eligible forpermanent residency: rentistas, pensionados (retirees)who show proof of a retirement or disability pension of atleast $600 per month, and inversionistas (investors) whohave invested at least $200,000 in local businesses thatemploy Costa Ricans. For agriculture-related investments,the amount is only $100,000; for tourism or import-exportinvestments, $50,000.Nicaragua: Foreigners can apply for Nicaraguan residencyunder the category of pensionado (retiree) or rentista(someone with a steady monthly income).The requirements for both are essentially the same,requiring the same paperwork (birth certificate, marriagecertificate, passport photocopies, clean bill of health,criminal-record check and proof of income). The paperworkmust be authenticated by a Nicaraguan Consulate inthe applicant’s home country as well as by the ForeignMinistry, making the process slightly more difficult if youare already living in Nicaragua.The monthly income requirement in Nicaragua ismuch lower, at $400 per person, $600 for a couple and anadditional $100 for each dependent.Nicaragua is opening its doors to foreigners of allincome brackets (pedophiles and crooks excluded), and isconsidering new sliding-scale incentives for wealthier foreignresidents and investors. Currently, all new residentsare entitled to a one-time $10,000 import of a vehicle orhousehold appliances.TOURISM INVESTMENT INCENTIVESCosta Rica: The Comptroller General’s Officerecently rescinded tax exemptions previously granted tocar rental companies, hotels and other tourism-relatedbusinesses allowing for tax-free import of products suchas cars for rental companies, microbuses for travel agencies,and lamps and kitchen utensils for hotels. The officeclaims the country’s tourism-incentive law applies onlyto new businesses for a short period of time, while private-sector leaders say it was intended as a long-termsupport for existing businesses. The Costa Rican TourismInstitute (ICT) and other groups say the loss of incentives,as well as the regulatory uncertainty theComptroller’s Office’s decision represents, could costCosta Rica millions in foreign investment and more than150,000 direct and indirect jobs.Nicaragua: Congress is currently studying a newmeasure to expand its current Tourism Incentive Law(Law 306) to include small and medium-sized businesses,which represent nearly 50% of all tourism operations inNicaragua.The reformed law, expected to pass this month, isbeing called the most innovative and progressive, and willallow qualifying small businesses to finance up to 70%(or a maximum of $100,000) of new tourism developmentthrough the sale of certificates.The law will extend tax incentives and benefits to awider group of tourism businesses.Nicaragua is also working on passing other tourismfinancingmechanisms, such as the Bonds for TourismInvestment (BID) program, which would allow investorsto finance up to 70% of tourism development through thesale of bonds.REAL ESTATE MARKETCosta Rica: Because Costa Rica is increasinglyaccessible by air and offers a wide range of products andconveniences that are harder to find in neighboring countries,it continues to be the most attractive CentralAmerican nation for many foreign real-estate investors.However, some analysts say the country’s market willexperience a decline in the next decade as its lessexpensive neighbors – including not only Nicaragua butalso Panama and Honduras – attract an increasing percentageof buyers. Homes in gated communities and condominiumsare among the hottest recent trends, and thenorthwestern province of Guanacaste, home to many ofthe country’s most popular beaches and to the internationalairport in Liberia, continues to dominate thebuilding boom.Nicaragua: The real-estate market here is often likenedto “the way it was in Costa Rica 20 years ago.” Nicaraguais viewed as the next frontier; in some ways as anextension of Costa Rica’s growth, but with the hopes ofmanaging growth uniquely. In real-estate hotspots such asthe colonial city of Granada – which has only started toheat up in the past five years – a second generation of buyersis already coming in and purchasing homes that havebeen fixed up and then turned over for a 200% profit. It isnow nearly impossible to find a house in the center oftown for less than $100,000, whereas a year ago you couldpurchase one for $60,000. Beach real estate is also appreciatingrapidly, with the upward trend expected to accelerateas plans move ahead to build the new coastal highway,with the start of construction scheduled for next year.BORDERS, CUSTOMS, INTEGRATIONCosta Rica: Ticos have traditionally lagged behind inCentral American integration efforts. While trade officialsexpress total commitment to the Central AmericanCustoms Union, which would allow goods to pass freelythroughout the region, they say eliminating border stationsand streamlining immigration requirements are notin Costa Rica’s immediate future. The Foreign Trade Ministryis working to increase the hours and staffing at PeñasBlancas on the Nicaraguan border, but lack of funding hasslowed the initiative.Nicaragua: Nicas play well with their northern neighborsand are gung ho about integration efforts. Nicaraguahas already opened its border with Honduras, and favorsother integration efforts such as a joint Central Americanpassport, which is in the works, and joint-infrastructureefforts such as the new mega-port being built on the Gulfof Fonseca, between El Salvador, Honduras and Nicaragua.One government insider recently said he expectsCentral America’s northern four countries to become integratedinto one super Central American nation within thenext 40 years. Economically, maybe. Politically, doubtful.CENTRALAMERICAN FREE-TRADE AGREEMENTCosta Rica: President Abel Pacheco’s position on thetrade agreement has infuriated the business sector, whichargues Costa Rica risks being left out of the benefitsCAFTA could provide. Pacheco, saying he seeks to ensureCAFTA’s riches reach all Costa Ricans, refuses to sendthe treaty to the Legislative Assembly for ratification untillegislators pass a tax-reform plan that has been underdebate for years. Public opinion of CAFTA is mixed.Environmental groups oppose it, and its requirement thatthe Costa Rican Electricity Institute (ICE) and NationalInsurance Institute (INS) phase out their monopolies hascaused controversy among unions. The debate has becomemore intense as other signatory countries have ratifiedCAFTA, but everyone has one eye on the United States.Nicaragua: The Sandinistas are stalling CAFTA inCongress, but admit they don’t have the votes to preventits eventual ratification. Nicaragua was able to negotiatepreferential conditions in textiles, rice and meat exports,but the Sandinistas claim it will still be murder on thecampesinos. The Liberal Party, meanwhile, may attemptto condition their vote for CAFTA on the amnesty of theirincarcerated leader, former President Arnoldo Alemán.And no one else in Nicaragua seems to know much aboutCAFTA, despite mild protest movements.