A Rude Awakening for Americans in Nicaragua

Some U.S. investors and retirees in the Central American nation fear president-elect Daniel Ortega, but others are more worried about how President Bush will respond to the stunning election victory

By Tim Rogers

11/14/06 "Time" -- -- Managua -- - It took North Carolina native Don McCandless 13 months, several work crews and some $600,000 to restore his crumbling two-story colonial home in Granada to its former stately self. McCandless spared no effort or outlay to get the details of his planned retirement home perfect, including the master-bathroom Jacuzzi, the satellite TVs, and the regal 18-seat dinning room with its ornate hand-painted ceiling and decorative tiled floors.

But before McCandless had a chance to finish hanging all the paintings, Daniel Ortega of the leftist Sandinista Front was elected president on November 5, turning McCandless' retirement plans upside down. "I'm outta here; I'm gone," said the North Carolinian. "It wasn't supposed to happen like this; it's like someone rose from the dead."

McCandless decided on election night to sell his dream home and leave the country, after the first vote returns showed Ortega poised for victory. Less than a week later, he had sold his home at a fire-sale price and left for Costa Rica.

But McCandless' isn't the only reaction among the U.S. expatriates living in Nicaragua to the unlikely re-election of Washington's old Cold War nemesis. While some are cashing out and preparing to leave before Ortega takes office January 10, others are hoping the Sandinista return to power will drive away many of the growing herd of foreign profiteers here to make a quick buck on the country's post-war real-estate market.

Most investors and expatriates, however, seem to be taking a more calculating wait-and-see approach with Ortega. Lori Estrada, head of the newly formed Nicaragua Association of Investors and Developers, sent out a letter informing her members: "Mr. Ortega stated that he is fully committed to promoting foreign investment and tourism, realizing that it was the future of the country's economic growth. We believe he is serious." The association is already planning to hold a congratulatory cocktail for Ortega in December.

There are an estimated 3,000-plus Americans living in Nicaragua, though there are no reliable statistics because many are here on a tourist visa, or part time. A lot of U.S. expats came here via Costa Rica or another nearby foreign-retirement country, looking for a place where they could stay one step ahead of the real-estate boom. And property prices in colonial towns such as Granada, and in beach areas like San Juan del Sur — where some 50 development projects have popped up in the last five years — have grown by as much as 300% in three years.

Ortega's election has thrown a wild card into the real-estate investment game. Some realtors claim property prices have already dipped 25% since he won the elections, but most expect the slide won't continue much beyond that. Of course, much depends on what happens next.

Ortega insists he's come a long way from the firebrand Marxist he was in the 1980s, and his campaign was focused on peace and reconciliation. He spent his first days as president-elect meeting with business leaders, bankers and foreign investors, asking for cooperation in building a new economic model focused on eradicating poverty in a system based on rewarding the risk of private capital.

Many investors seem willing to give Ortega the benefit of the doubt, not necessarily because they trust him, but because they are already here and it's easier to wait-and-see than to cut-and-run. "We believe that Mr. Ortega is serious about his commitment to promote foreign investment and tourism," said Pennsylvania native Mike Cobb, president of Gran Pacifica development, which promises to be the first Marriott beach resort in Nicaragua. Cobb says his project plans to "move ahead with all due speed" and "stick to the path we have established."

Other investors are echoing Cobb's guarded optimism. A group of 18 key investors in San Juan del Sur, Nicaragua's most important beach town, have written a letter to Ortega urging the president-elect to hold a special meeting with them as a sign of his commitment to tourism and investment on the coast. The group warned that the tourism sector is "very volatile to political perceptions," and claimed that some investors have already started to withdraw their money from the country.

But it's not only Ortega's plans that have Americans in Nicaragua worried. The Bush Administration worked hard to prevent Ortega from being elected, even threatening to cut aid to Nicaragua if he won the election, and some investors fear the consequences of any move by Washington to make life difficult for a Sandinista government. Says Chris Berry, owner of San Juan del Sur's landmark Pelican Eyes Piedras y Olas Resort, "Everyone here is more afraid of what the U.S. will do than they are of Ortega."

Copyright © 2006 Time Inc. All rights reserved.