Identifier
Created
Classification
Origin
06MANAGUA648
2006-03-23 14:37:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Managua
Cable title:  

TOURISM MAKES RIVAS ONE OF THE MOST SUCCESSFUL

Tags:  ECON EINV ELAB PGOV SOCI NU 
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RR RUEHLMC
DE RUEHMU #0648/01 0821437
ZNR UUUUU ZZH
R 231437Z MAR 06
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 5676
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHDG/AMEMBASSY SANTO DOMINGO 0516
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHDC
UNCLAS SECTION 01 OF 03 MANAGUA 000648 

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR WHA/CEN AND WHA/EPSC

E.O. 12958: N/A
TAGS: ECON EINV ELAB PGOV SOCI NU
SUBJECT: TOURISM MAKES RIVAS ONE OF THE MOST SUCCESSFUL
REGIONS IN NICARAGUA

REF: MANAGUA 0417

UNCLAS SECTION 01 OF 03 MANAGUA 000648

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR WHA/CEN AND WHA/EPSC

E.O. 12958: N/A
TAGS: ECON EINV ELAB PGOV SOCI NU
SUBJECT: TOURISM MAKES RIVAS ONE OF THE MOST SUCCESSFUL
REGIONS IN NICARAGUA

REF: MANAGUA 0417


1. (U) The southern Nicaraguan department of Rivas has
capitalized on its natural beauty and relatively well
developed transportation infrastructure to build an economy
increasingly based on tourism. During the civil war of the
1980s, Rivas was not a battleground, but a refuge, and the
department's population consequently does not, for the most
part, claim strong ideological affiliation with Liberals or
Sandinistas. Rivas also enjoys agricultural development,
benefiting from fertile soil and extensive coastlines on the
Pacific Ocean and Central America's largest freshwater lake.
Despite all of Rivas' attractions, however, many people still
emigrate abroad, and key industries are prevented from
reaching their full potential by a lack of government
investment, insufficient academic training, and the
conservative attitudes of farmers and business owners. End
Summary.


2. (U) During a February 15-16 reporting trip to Rivas
(reftel),Emboffs met with local private sector, political
and church leaders to discuss Rivas' economy, social
structure, and potential for growth. Pristine beaches and
fertile soil are fueling development in the tourism and
agriculture sectors. Although manufacturing is not yet a
major element of the economy, one Canadian-owned maquila
employs 600 workers in the city of Rivas and will reportedly
double in size this year. Jose Rene Martinez, the PLC mayor
of Rivas, heads the Rivas (Department) Mayors' Association,
which brings together the department's Liberal, Sandinista,
and Conservative mayors to work together on development
plans. Even though Rivas has one of the most successful
local economies in Nicaragua, its inhabitants' general lack
of willingness to take risks to expand their businesses and
reach new markets has limited growth.

COASTLINES AND NATURAL BEAUTY ATTRACT TOURISM AND INVESTMENT
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3. (U) Rivas contains two different tourism zones, each with

its own distinctive characteristics. The first is on the
Pacific Coast, and is characterized by extensive foreign
investment, including several high-end developments (with one
eco-resort charging $300 /night in the high season). Hector
Sanchez Arguello, a local partner of several North American
investors developing Remanso beach on the Pacific Coast,
shared that the Nicaraguan departments of Rivas and Granada
enjoy the highest economic growth rates in Central America,
thanks to tourism-related investment. Sanchez claimed that,
of the 70 largest investment projects in Nicaragua, all but
three are located in these two departments.


4. (SBU) Other contacts pointed out that the two major
obstacles to growth in tourism are land titling issues (a
major problem throughout Nicaragua) and a lack of trained
staff. Rommel Hollman, the president of the Rivas Ranchers
Association, whose family owns a major development near the
beach town San Juan del Sur, complained about the lack of
English-speaking waiters and hotel managers. Hector Sanchez
reported that, while local universities do offer some
hospitality courses, students lack practical training. He
explained that many hotel and restaurant owners bring in
trained staff from Costa Rica. When asked about recent land
invasions in the Sandinista-controlled municipality of Tola,
rancher Noel Rivera Sandino commented that the land title
issue is a major challenge for foreign and local investors.
Monsignor Leonel Navas, the senior Catholic prelate resident
in Rivas, told us that the vast majority of the citizens of
Rivas are happy with the investment in tourism and that the
land invasions are driven by a small band of (FSLN directed)
instigators who "make a business of disputing land titles."


5. (U) The other tourism zone is the large volcanic island of
Ometepe, located in Lake Nicaragua. The tourism industry on
Ometepe, which directly employs over 400 people, is
characterized by modest businesses (hostels and small hotels)
run by locals and a few foreigners, usually retirees from
North America or Europe. Abraham Paisano, a director of the
Ometepe Civil Society Network, remarked that foreign
investors are welcome on Ometepe and "usually take better
care of the environment than the natives." Ometepe is
divided into two municipalities: Altagracia and Moyogalpa.
Moyogalpa mayor Jose Rene Martinez commented that Altagracia
has the better beaches and tourism accommodations. Martinez
said that land prices in Ometepe have risen considerably,
though an investor can still find land at a reasonable price:
$8,000/manzana (1 manzana = 2.3 acres) for a plot with no
coast access; $20,000/manzana for a plot with "tourism
potential"; and $100,000/manzana for prime beach access in
Altagracia. Land invasions have not been an issue in
Ometepe, Martinez reported.


6. (U) Roberto Rivera, a member of the Ometepe Chamber of
Tourism, is concerned that, under CAFTA, large foreign
investors would displace local tourism businesses. Chamber
members also complain about the "lack of service mentality"
of the minimally-educated labor force (mostly former
subsistence farmers),shortages of telecommunication, water,
and electrical services, very limited access to (expensive)
financing, and a lack of English language training. (Note:
Chamber secretary Helmut Arce noted that service workers are
often intimidated by the expectations and language barrier
presented by English-speaking tourists and frequently abandon
their jobs, leading to high turnover rates. He said that
several Peace Corps volunteers had trained a few workers in
basic English during their spare time, which had been
immensely helpful. Peace Corps plans to start a formal
English training program in Nicaragua later this month. End
Note.) When Emboffs suggested that Rivera and other Chamber
members consider partnering with foreign investors to raise
capital and upgrade their accommodations, several responded
that they are "too conservative" for this approach.

COMMERCIAL AGRICULTURE DEVELOPMENT HELD BACK BY RISK AVERSE
MENTALITY
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- - - -


7. (U) Running a distant second to tourism, agriculture forms
the other pillar of Rivas' economy. Contacts mentioned
ranching, plantains, lumber, and sugar cane as the principal
agricultural sub-sectors. On Ometepe, tobacco and watermelon
are produced commercially. Rommel Hollman explained that
fishing employs several hundred people in Rivas, but most
fisherman employ "traditional" methods to make their living
and sell their catch locally to hotels and restaurants. Jose
Rene Martinez reported that the Government of Spain is
supporting 70 fishermen in Ometepe by constructing
refrigerated storage facilities and providing other equipment.


8. (SBU) Chamber of Commerce member Pedro Joaquin Mendoza
explained that, despite benefiting from good soil and decent
transportation infrastructure, the conservative mentality of
many farmers and a lack of follow-through on the part of the
GON prevent Rivas from realizing its full potential. As an
example, Mendoza noted that many local farmers produce a type
of papaya that sells locally, but is too large for export
(North Americans like to eat their papaya in one serving so
it doesn't get mushy, he noted). He stated that conservative
farmers want to see their neighbor succeed first before they
try something new. At one point, the Ministry of Agriculture
and Forestry (MAGFOR) started a program to promote the
cultivation of smaller papayas, but, according to Mendoza,
the initiative fizzled before the supply chain was fully
developed. The failure of the program made farmers even more
reluctant to try producing for an export market.


9. (SBU) Other obstacles to growth in the agricultural sector
include high interest rates, skyrocketing land prices, and
the "lack of a legal framework" to promote development.
Hollman claimed that interest rates have dropped slightly for
medium and large producers, to about 15 percent annually, but
Mendoza reported that most producers must accept rates as
high as 18 to 27 percent. Hollman related that, while
tourism is a boon for Rivas, farmers must now pay up to
$100,000 for a "good manzana" of land. Moreover, he stated
that he must pay bribes to the local police and hire guards
to prevent land invasions, which naturally raises the costs
of production. As often the case in Nicaragua, contacts
reported that local judges are corrupt, and favorable rulings
regarding land disputes are purchased by the highest bidder.


10. (SBU) One of the more controversial agricultural
investments concerns a tilapia breeding ground in
Altagracia (Ometepe). While local residents overwhelmingly
support the project and appreciate the employment
opportunities afforded by the operation, critics maintain
that the tilapia will displace local breeds and harm
recreational fishing. (Comment: Previous environmental
impact studies have shown that this is not the case. End
Comment.) More significantly, a few politically connected
owners of beachfront properties near the tilapia operation
have been exerting their influence to prevent the company
from using a legally issued concession. Their chief
objections are that the buoys over tilapia cages are an
eyesore and that the operation impedes navigation. They
further argue that these factors will hold back the tourism
potential of Ometepe. The land owners have gained support of
the Nicaraguan Tourism Agency INTUR) in their campaign
against the operation. Abraham Paisano, however, was
sympathetic to the plan and said that a local environmental
committee plans to investigate and report on the impact of
the project. Paisano blamed opposition to the tilapia
breeding on "ignorance and misinformation."

DESPITE GROWTH, EMIGRATION STILL PREVALENT
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11. (U) Monsignor Navas described a large-scale "exchange of
labor" with neighboring Costa Rica. Unskilled Nicaraguans
travel to Costa Rica to harvest crops while skilled Costa
Ricans come to Rivas to work in the tourism industry and sell
consumer goods. He commented that, while the large majority
of migrants go to Costa Rica, a smaller and wealthier
demographic set tend to leave for the United States. Navas
lamented that large-scale emigration contributes to the
disintegration of families, with young fathers departing for
months at a time or permanently. Jose Rene Martinez noted
that, out of 3,000 households in Ometepe, 2,500 have a member
living in Costa Rica or the U.S.


12. (U) The large number of emigrants has generated a
considerable flow of remittances into Rivas, though,
according to local leaders, no formal program exists for
channeling the money into development or investment
activities. Paisano noted that 12 people in Ometepe are
employed full time transporting money and goods related to
remittances.

COMMENT: LEAVING THE COMFORT ZONE
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13. (SBU) Although Rivas is blessed with beautiful scenery
and good soil, the conservative attitude of many locals has
prevented the department from reaching its full potential.
While the citizens of Rivas have little control over interest
rates or the corrupt judiciary, CAFTA and Nicaragua's
increasing visibility on the international tourism scene
offer many possibilities for growth in different sectors.
These possibilities will only be realized by foreigners,
however, if locals -- like the hostel owners in Ometepe and
the papaya growers -- are unwilling to step outside of their
comfort zone and take some risks. The Nicaraguan Government
and USAID programs facilitate linkages with international
buyers and investors, but ultimately opportunities must be
seized by the people of Rivas.
TRIVELLI