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