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Biz Climate Worsens as Crisis Continues

MANAGUA – The recent wave of Sandinista-sponsored gang violence, destruction of private property and the virtual collapse of the judicial system has reaffirmed Nicaragua’s unfortunate distinction of having the worst business and investment climate in Central America, according to analysts.

A day after Sandinista thugs attacked the Holiday Inn Select here with homemade fragmentation bombs, causing $20,000 in damages and earning the label of “terrorists” from the Nicaraguan-American Chamber of Commerce (AMCHAM), the partisan mobs continued their lawless siege of Managua last week, attacking the party headquarters of opposition leader Eduardo Montealegre and destroying several vehicles, including one owned by Channel 12 TV.

As tensions rise, fueled by calls from both sides for people to take to the streets to “defend democracy,” the crisis appears to have opened a Pandora’s Box in Nicaragua. The political and social unraveling has many business leaders worried not only about their investment and safety, but also the future of the country.

“This is terrible for tourism, not just our hotel,” Managua Holiday Inn general manager José Enrique Solórzano told The Nica Times this week, following the attack on his hotel that resulted in 10 broken windows, a partially destroyed roof and other damages.

In addition to material losses, the Sandinista attack on the Holiday Inn cost the hotel another $20,000 in canceled reservations, Solórzano said. Many of the tourists who were in the hotel at the time of the siege quickly packed their bags and fled on foot, aided out the back by hotel security.

The April 21 attack on the Holiday Inn was in response to opposition lawmakers convening a session of congress inside the hotel to avoid the Sandinista mobs protesting outside the National Assembly.

The Sandinistas are trying to force the opposition to reelect judicial and electoral magistrates loyal to President Daniel Ortega (NT, April 16, 23).

Solórzano blames last week’s attack against his hotel on Sandinista ex-magistrates Rafael Solís and Armengo Cuadra, both of whom were in front of the hotel leading the mobs (TT, April 23).

The hotel manager said the international news of the attack prompted a flood of solidarity e-mails and phone messages from hotels, business chambers and tourism operators from as far away as “China, Japan, Spain, France, the United States and South America.”

He said the attack was the first of its kind against a hotel anywhere in the world. “This hasn’t even happened in countries with the most dubious reputations in the world,” Solórzano said.

As the political situation here continues to spiral out of control, causing collateral damage to the tourism and business sectors, Nicaragua doesn’t have much farther to fall before finding itself among those countries with the “most dubious reputations in the world.”

Following the attack on the Holiday Inn, AMCHAM blamed the executive branch for promoting “terrorism.”

The business chamber said it “firmly and energetically denounces the vandalism perpetuated by agents of the ruling party, whose gangster and delinquent attitude put at risk the security and lives” of the hotel’s clients and staff (NT, April 30).

The Nicaraguan National Tourism Chamber (CANATUR) also expressed alarm at the situation, blasting the government party for undoing all the progress the private sector has made in promoting the country as a safe place to visit and do business.

“It can’t be possible that irresponsible people, with no love for Nicaragua, are dedicated to continuously destroying the work we have done on improving our international image,” CANTUR lamented in an official statement.

Even the Organization of American States (OAS), which has proven to be mostly incapable and reluctant to respond to crises in the region, released a statement April 21 expressing its “profound worry” about the situation in Nicaragua, and calling on the country to “preserve its institutions.”


From Bad to Worse


According to economists and business leaders, Nicaragua’s investment climate has been in bad shape for a long time, but has gotten notably worse in recent years.

“For 20 years, we’ve been paying the cost of political instability, which is what differentiates Nicaragua from the rest of the countries in the region,” said José Adán Aguirre, president of COSEP, the nation’s superior business council.

But he said the recent events in the Supreme Court of Justice and the subsequent bouts of street violence are what really keep investors from considering Nicaragua as a viable option.

“This is the reason why, despite all our resources, we don’t have the results that other countries have had,” Aguirre said. Economist Carlos Muñiz, president of the Nicaraguan Foundation for Economic and Social Development (FUNIDES), said “perspectives for growth continue to be affected by an adverse climate for investment and low levels of competitiveness and productivity.”

The economist, who calculates Nicaragua’s economy will grow only 1 percent this year, said most business leaders view the investment climate as negative.

According to business perception polls released earlier this month by FUNIDES, 74.7 percent of Nicaraguan businesses say the business climate here is “unfavorable,” while only 3 percent thinks it’s in good shape. Even more worrisome is a poll that shows 91 percent of businesses say they have no faith in Nicaragua’s judicial system.

Muñiz told The Nica Times that Nicaragua probably has the worst business climate in all of Central America, and is definitely “losing ground” to the rest of the region.

FUNIDES executive director and former Central Bank President Mario Arana took his  criticism a step further, saying Nicaragua’s business climate is severely hampered by a judicial system that “has the worst indicators of any country in the region and is among the worst in the world.”

“Unfortunately, I think we are in a very complicated moment from an institutional point of view,” Arana told The Nica Times. He added, “We hope this is resolved as quickly as possible because, without a doubt, this could worsen the investment climate.”

That’s not good news for a country that’s already stuck in the cellar and can’t seem to find its way out.


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