LAND DISPUTES THREATEN TOURISM SECTOR INVESTMENT

UNCLAS MANAGUA 001789

SIPDIS

STATE PASS USTR

SENSITIVE BUT UNCLASSIFIED
SIPDIS

E.O. 12958: N/A
TAGS: EINV ECON USTR KIDE NU
SUBJECT: LAND DISPUTES THREATEN TOURISM SECTOR INVESTMENT

REF: MANAGUA 1663

Summary
--------------


1. (SBU) Summary: A U.S. investor reports that local FSLN members,
with backing from senior FSLN official Lenin Cerna, have
orchestrated a land invasion and smear campaign to derail a USD 88
million tourism development along the southwest coast of Nicaragua.
In retaliation for going public with a recording of an extortion
attempt made by a local FSLN official, the investor believes that
the Ministry of the Environment and Natural Resources has falsified
environmental complaints. Municipal representatives have also filed
a lawsuit disputing the investor's title to the property. Tourism
chamber officials fear that negative publicity related to this and
other land disputes has dampened interest in further investment in
the tourism sector. End summary.

Land Invasion
--------------


2. (SBU) On November 29, 2006, Amcit Armel Gonzalez met with
Econoffs to discuss difficulties his Grupo del Sol development
company has faced in the Department of Rivas, located in southwest
Nicaragua. Grupo del Sol plans to invest up to USD 88 million
throughout the department, including USD 8 million in "El Castil,"
Arenas Bay, to build upscale vacation homes. Gonzalez claims he
purchased El Castil from the Pedro Joaquin Chamorro Cooperative in

2000. However, in December 2004, Gonzalez learned that Emerson
Zacarias Canales--husband of the mayor of Tola, the municipality
where the property is located--had filed a lawsuit against Gonzalez
claiming that Zacarias and another Tola local had purchased the
cooperative and that they are the rightful owners. In November
2006, squatters, allegedly encouraged by Zacarias, began to occupy
El Castil. On November 29, Grupo del Sol security guards shot and
injured three squatters. Undeterred, squatters continued to occupy
El Castil.

Extortion
--------------


3. (SBU) On May 25, 2007, Gonzalez met again with Econoffs, stating
that Gerardo Miranda--former FSLN congressman, former FSLN mayor of
San Juan del Sur, and current nominee for the position of Consul in
Liberia, Costa Rica--offered to bring closure to Gonzalez' property
dispute. Gonzalez claims that Miranda took him to Sandinista party
offices where he and other Sandinistas began negotiating a
settlement. Gonzalez told Econoffs that he declined to negotiate in
that meeting, but that by messenger he subsequently offered one lot
in El Castil worth an estimated USD 500,000 as compensation for
Miranda's assistance in putting an end to the dispute.


4. (SBU) In a second meeting in Gonzalez' office, which Gonzalez
recorded, Miranda turned down Gonzalez' offer of one lot and
demanded USD 4 million, threatening Gonzalez with "a decade of
litigation" if he declined. Throughout the meetings, Sandinista
negotiators referred to an unspecified leader, "el jefe," who both
Gonzalez and Nicaraguan Liberal Alliance (ALN) National Assembly
Deputy Alejandro Bolanos Davis, another investor in the project,
believe is Lenin Cerna, the former director of State Security in the
1980s and a senior FSLN official (reftel).

Exposure
--------------


5. (SBU) On May 27, 2007, Gonzalez and other Grupo del Sol
investors, including Bolanos Davis, went public with the recorded
extortion attempt on the weekly television news program "Esta
Semana." Since then, the story has been a daily fixture in local
media, with FSLN-controlled media lashing out at Gonzalez and
Bolanos.

Government Reaction
--------------


6. (SBU) Miranda and other officials sued Gonzalez for slander, and
the FSLN/PLC controlled Supreme Electoral Council (CSE) went after
Bolanos ordering the revocation of his seat in the National Assembly
(reftel). Ministry of the Environment and Natural Resources
(MARENA) officials have subsequently accused Grupo del Sol of
failing to secure environmental permits and have ordered
construction halted at El Castil and the rest of Arenas Bay. MARENA
claims that Grupo del Sol ignored the order, and the Attorney
General's Office is now investigating the issue to determine whether
criminal charges should be brought against Gonzalez and other
investors. Gonzalez asserts that FSLN officials fabricated the
environmental issues in response to his extortion claims. He and
other investors also fear that the participation of the Attorney
General's Office in the process opens the door to outright
expropriation.

Comment
--------------


7. (SBU) While claims of FSLN extortion and illegal interference in
court proceedings have been bandied about for years, this is the
first time an investor has gone public, cried foul, and provided
proof. The investors in question appear to be paying dearly for
their audacity. Other U.S. investors have also told Emboffs that
they have been victims of violent extortion attempts, but they
refuse to go public in fear of reprisals. The apparent willingness
of some FSLN party officials to openly abuse public office for
private gain spells trouble for investors, especially for those who
own coveted coastal properties. In mid-July, a local newspaper
quoted the president of the Nicaraguan Chamber of Tourism as saying
that as a result of Grupo del Sol's experience in Rivas, tourism
investment is "frozen" and that a "domino effect" is imminent. End
comment.

TRIVELLI