GRANADA, Nicaragua – This year’s dramatic plummet in tourism investment in Nicaragua has not dampened enthusiasm among industry leaders here.

The 84% drop in investment during the first half of 2004 apparently has not affected tourism visits either. The number of foreign tourists increased 16.2% during the first eight months of this year, with respect to the same period in 2003.

The 403,217 foreign tourists who visited Nicaragua between January and August translated into $114 million in revenue – up 6.5% from Jan-Aug, 2003 – according to statistics from the Nicaraguan Tourism Institute (INTUR).

Most foreign tourists come from the United States (92,460), followed by Honduras (80,101) and Costa Rica (62,426). Canadian tourists ranked fifth with 10,898 and Spain (6,933) topped the European countries. Statistics show that German tourists (5,922) have increased by 31% this year, while British tourists (4,367) have decreased by almost 11%.

The average tourist stay is 3.8 days, with an average expenditure of $75 a day, according to INTUR’s numbers.

Lucia Salazar, executive president of INTUR, told the Tico Times she expects the upward trend in tourism to continue, and estimates tourism could grow by as much as 20% this year.

In four years, Nicaragua’s tourism numbers could surpass those of neighboring Costa Rica, Salazar predicted, rather boldly.

The drop in tourism investment, from $3.8 million in the first half of 2003 to less than $700,000 in the first six months of this year, is due, primarily, to last years implementation of Law 453 (The Law of Fiscal Equality), according to Michael Navas, secretary of INTUR’s Tourism Incentive Board.

The Fiscal Equality Law repealed the Mechanism of Direct Investment and the Fund of Tourism Investment (Fonciturs), which together provide financing for up to 70% of tourism projects.

The elimination of the financing mechanisms led INTUR, the Tax Ministry and investment promotion group ProNicaragua to present a new legal initiative in late September that would allow investors to emit bonds to finance up to 70% of large tourism projects. The Bonds for Tourism Investment (BID) would carry a maximum term of 20 years.

To be eligible for bond financing, tourism projects must first be approved under Law 306 (The Tourism Incentive Law, 1999), which provides 10-year income and property tax breaks to tourism projects that meet minimum investment requirements.

The bond proposal is expected to become law by this month. The incentive reportedly has multipartisan support in the National Assembly, though confusion over some of the logistical details could delay its approval in Congress.

After the bill is passed, the government expects tourism investment to jump.

INTUR also recently opened a new office in its Managua headquarters to provide "Training Bonds" to small and medium sized tour operators, in an effort to make tourism providers more competitive.

The $1.2 million training bond project, which is being launched in conjunction with the International Development Bank (IDB), will help provide financing to train bartenders, cooks, waiters, tourism guides, administrators and technicians.

The programs hope to hire 4,300 employees in the tourism sector in the next 12 months. 

NICARAGUA’s investment climate has received several important international votes of confidence in recent months.

In July, the U.S. government-affiliated Overseas Private Investment Corporation (OPIC) concluded a new bilateral agreement with Nicaragua to encourage safer direct foreign investment here.

The investment promotion accord, an updated version of the bilateral agreement signed in 1966, streamlines procedures in Nicaragua for U.S. companies seeking private loans or political-risk insurance from OPIC. The accord represents a new boost of confidence by the U.S., after several decades of tumultuous investor relations (TT, July 30).

The World Bank and International Monetary Fund, in their annual report Doing Business in 2005, qualified Nicaragua as one of seven Latin American countries to notably improve its investment climate to become more competitive.

In the last year, the report noted, Nicaragua has reduced the average time it takes to receive a business license from 71 to 45 days.

Provisions in the yet-to-be-ratified U.S. Central American Free-Trade Agreement (CAFTA) would provide mechanisms to improve investor security here. And investors here are waiting for a new Nicaraguan bill, which has yet to be presented in congress, that will provide arbitration measures for commercial investors.

U.S. Ambassador to Nicaragua Barbara Moore gives the Bolaños government high marks for normalizing property registry procedures, and working to resolve long-standing property confiscations from the days of the revolutionary Sandinista government (1979-1990).

"We are still working to recover or get reimbursement for properties confiscated from American citizens", Moore told the Tico Times. "We have made excellent progress under the Bolaños administration, and had a couple of record years in the number of cases resolved."

The Embassy has helped resolve 2,246 U.S. citizen confiscation claims since 1995, and an additional 762-Embassy registered claims are still pending, according to statistics provided by the Embassy.

INTUR continues to promote Nicaragua internationally through a series of 30-second TV spots on CNN International and CNN Airport Network titled "Nicaragua: It’s Hot."

The ads, featuring Nicaraguan eco-tourism, culture and adventure sports, began airing last May, and have been well received, according to INTUR’s Salazar (TT, May 13).

Salazar says the slogan "Nicaragua es Caliente" is the result of market studies and laughs at the suggestion that calling Nicaragua "hot" could have the unintended effect of reminding people of the war or a hot zone.

INTUR is also about to launch a massive outreach campaign in the United States, the details of which were still under wraps at press time.