NICARAGUA: AMBASSADOR CALLS ON TOURISM INSTITUTE

UNCLAS MANAGUA 000452 SIPDIS SENSITIVE SIPDIS STATE PLEASE PASS TO USTR/AMALITO DEPT FOR WHA/CEN, WHA/EPSC, EB/TPA COMMERCE FOR ITA/MSIEGELMAN E.O. 12958: N/A TAGS: EIND EINV EAID ECON PINR NU SUBJECT: NICARAGUA: AMBASSADOR CALLS ON TOURISM INSTITUTE EXECUTIVE DIRECTOR ¶1. (U) Summary. The Ambassador called on new Tourism Institute (INTUR) Executive Director Mario Salinas Pasos to introduce himself, outline USAID activities in the tourism sector, and discuss Salinas' plans. Salinas told the Ambassador that INTUR is in the midst of defining tourist markets for Nicaragua. He believes that Nicaragua should focus on the U.S. and Central American markets. To facilitate the marketing of vacation packages, INTUR is working to develop tourist routes. On the investment side, Salinas believes that the legal framework governing the sector needs to be reviewed, including laws governing retirement, investment incentives, and the coastal areas. He believes it would cost $90-110 million to build a coastal road along the Pacific, but that the road could generate as much as $700 million in new investment. Salinas hopes to encourage small- and medium-sized businesses to invest in bed and breakfast inns, restaurants, and other tourist services, much the way as has occurred in Costa Rica. Salinas told the Ambassador that since the development of the tourism industry is a presidential priority, other ministries will play a role in the development of necessary infrastructure, e.g., roads, water supply, and power. End Summary. ¶2. (U) The Ambassador called on new Tourism Institute Executive Director Mario Salinas Pasos on February 1. Salinas was in a good spirits and spent a fair amount of time describing his priorities for the tourism sector. Econoff and USAID Program Officer for Economic Growth and Development also attended. USAID Activities -------------- ¶3. (U) The Ambassador began by outlining USAID activities to help develop the tourism industry in Nicaragua. A new two-year natural resource management program is designed to link conservation management to eco-tourism. With the help of the U.S. Forest Service, the program will involve public and private sectors, as well as local communities in conservation and watershed management. USAID had also initiated what it terms a "global development alliance" with the U.S.-based Rainforest Alliance to strengthen the competitiveness and sustainability of agriculture, forestry, and tourism industries over three years. The Ambassador explained that the Rainforest Alliance will certify products and services as "green" and help small and medium-sized businesses interested in ecotourism. In a similar alliance, USAID has a three-year agreement with the U.S.-invested Gran Pacifica Development Company to provide English training to 1150 students in Villa del Carmen, a potential tourist area on the Pacific shore. The alliance also trains students in environmental and archeological conservation. ¶4. (U) The Ambassador noted that the U.S. Mission in Nicaragua has had very good relations with INTUR, in particular with Salinas' predecessor Maria Nelly Rivas. He expressed the desire to continue these good relations, which Salinas reciprocated. Finding A Market -------------- ¶5. (SBU) Salinas told the Ambassador that INTUR is in the midst of contracting a marketing firm in Miami to define U.S. tourist markets for Nicaragua. The firm will contact the American Association of Retired Persons to examine the potential for the development of retirement communities. Salinas noted how Costa Rica had created retirement cities where there had been nothing, and Nicaragua could do the same thing. Another possible niche is Nicaraguan-Americans in the United States. Here, Salinas differentiated between the tastes of older Nicaraguan immigrants living in California and those of younger Nicaraguan immigrants in Florida. ¶6. (U) Salinas believes that INTUR should also look toward the Central American market. He pointed out that Guatemala attracts significant numbers of Salvadorans, and Costa Rica draws tourists from the whole of Central America. ¶7. (SBU) The Ambassador noted that it was important to develop tourist routes to facilitate the marketing of vacation packages. Salinas agreed, saying that INTUR is working to develop one tourist route and one alternative route. The InterAmerican Development Bank had agreed to fund $15 million to develop a coastal route that will include improving the airstrip at San Juan del Sur and building a new airport in San Juan del Norte. Also in the works is a "Coffee Route" in the north of the country to include the Departments of Madriz, Nueva Segovia, Matagalpa, among others. Over a four-day period, tourists would visit historic sites, stay at a coffee plantation, and visit the Canyon de Somoto. Also under consideration, said Salinas, is a "Sandino Route" which would take tourists to places where national hero Augusto Sandino spent time, and a "Gold Rush Route," which might interest Americans who have descendents in Nicaragua dating from the days of the Nicaraguan gold rush. Salinas added that tourist routes should help to convince more cruise ships along the Pacific coast to make Nicaragua a regular port of call. Promoting Investment -------------- ¶8. (SBU) Noting that the Embassy is receiving inquiries about the business climate in Nicaragua, the Ambassador asked Salinas for his assessment of investor interest. In answering, Salinas addressed the need to review the legal framework governing the sector, including laws governing retirement, investment incentives, and coastal areas. Salinas explained that the review should include consultations with the private sector and the National Assembly. Additionally, Nicaragua should carefully examine what has worked for other Central American countries. Salinas asserted that a new law governing coastal regions might be the single most important signal that the government could send to foreign investors. He added that better titling and regulation of coastal property, the subject of many legal disputes in Nicaragua, would bring greater certainty to investing in the tourism industry. Salinas commented that the recent proposal to create investment incentives through the issuance of tourism bonds was highly controversial and, thus, unlikely to gain the political support it needed in the National Assembly. ¶9. (SBU) Salinas commented that he had just met with Carlos Slim, the Mexican billionaire who owns Nicaragua's land line telephone company, ENITEL. The two talked about the need to build a 70-kilometer coastal road. Salinas thought it would cost around $90-110 million to build the road, but that it could generate as much as $700 million in investment. Slim showed interest in building hotels along such a road. ¶10. (SBU) Salinas said that he wanted to work with INPYME (Nicaragua's small- and medium-sized business administration) to create bed and breakfast inns with four or five guest rooms, and to foster the development of restaurants and other tourist services. He noted that this is what Costa Rica did fifteen years ago -- now Costa Rica has 40,000 rooms and Nicaragua just 5000. Salinas said he thought that INPYME could help small businesses learn how to keep the books and access credit. INTUR's responsibility would be to control service quality. Salinas said that the Central American Bank for Economic Integration had already initiated a lending program to finance small- and medium-sized investment. He agreed with the Ambassador that private banks should also create lending programs to support the development of small hotels and restaurants. ¶11. (U) The Ambassador noted that tourism depended greatly upon existing infrastructure, including the availability of power, potable water, and well-paved city streets and sidewalks. Salinas agreed, adding that the development of the tourism industry is a presidential priority. Therefore, other ministries must also play a role. Tourism contributes to President Ortega's priority to create jobs. ¶12. (SBU) The Ambassador asked whether Salinas had any plans to improve the personal safety of tourists through the formation of a tourist police, for example. Salinas replied that there is a need to rebuild the tourist police force. Nicaragua once had a force of 280, but this number had dwindled to just 20. The idea would be to build it up again, and to provide special training, including English, to the officers. The Ambassador suggested that investors might be willing to contribute to such a police force, and/or to provide job training to members of nearby communities in other areas. Salinas replied that, indeed, Gran Pacifica had put aside $100,000 for the training of small businesses and a hospitality school. ¶13. (U) Ambassador explained that a major part of his job is to help Nicaragua manage globalization and expand investment possibilities. He suggested that perhaps the Millennium Challenge Corporation could incorporate tourism development within context of its program in the Departments of Leon and Chinandega. In addition, the Overseas Private Investment Corporation (OPIC) had established a number of investment funds that could perhaps support housing development, power projects, and small business projects related to the tourism sector. Salinas was aware of these projects, having been invited to attend events associated with OPIC President Rob Mosbacher's trip in October 2006 when the funds were announced. Atlantic Coast -------------- ¶14. (SBU) The Ambassador asked about plans for tourism on the Atlantic coast. Salinas replied that he is working with the autonomous departments on the Atlantic side of the country, but that autonomy made INTUR's work there more complex. INTUR had to work with and through the governors and mayors and, at this time, had almost no personnel stationed on the Atlantic coast. He thought that, with international assistance, it was conceivable for investment to grow there. He underscored that the Caribbean is an internationally recognizable brand, and that there is no reason why tourism there cannot be developed. Costa Rica had done it with Golfo Papagayo, he noted. Property Disputes -------------- ¶15. (U) In an oblique reference to problems with titling and competing claims to ownership as a result of revolution in the 1980s and changing legal regimes, Salinas stressed that foreign investors had to be made aware of the need for thorough due diligence before purchasing any property in Nicaragua. This, he thought, was perhaps the most significant measure an investor could take to reduce the risk of being involved in a property dispute in Nicaragua. ¶16. (SBU) In reference to a recent property dispute affecting a U.S.-invested yacht port of call on the Nicaraguan northern Pacific coast, Salinas declared in a matter of fact way that the armed invasion of Puesta del Sol Hotel and Marina had been resolved. (Note: At issue was a section of property that a local judge had determined was owned by a competing claimant. The Embassy has been following the case, but we are not convinced that the core issue affecting the U.S. investors has been completely resolved.) Biography: Mario Salinas Pasos -------------- ¶17. (SBU) Mario Salinas Pasos, 63, is a founding member and Executive President of Grupo Sooner, a large housing development and construction company with a name derived from an indirect connection to Oklahoma. He has a degree in architecture from the University of Naples in Italy, and completed post-graduate work in urban development at the Milan Polytechnic Institute. From 1989 to 1990, Salinas was President of the Public Sector Tourism Corporation, comprised of twenty-five businesses, eight hotels, four restaurants, and eight duty-free shops. From 1986 to 1989, he developed and administered hotel projects for the Ministry of Tourism as the head of Hotelinsa. Salinas was Vice Minister of Transport from 1984 to 1986, and Director of Planning in the Ministry of Commerce from 1979 to 1980. He is fluent in Italian and Spanish. TRIVELLI