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### Viewing cable 06MANAGUA648, TOURISM MAKES RIVAS ONE OF THE MOST SUCCESSFUL

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
06MANAGUA648 | 2006-03-23 14:37 | 2011-06-21 08:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Managua

`

    VZCZCXRO9390
    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

    ¶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
    - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

    ¶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
    - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
    - - - -

    ¶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
    - - - - - - - - - - - - - - - - - - - - - -

    ¶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
    - - - - - - - - - - - - - - - - -

    ¶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

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