Investing in Nicaragua

Why investing in Nicaragua? Still they seem to be a few people, at least overseas, realizing what will happen soon in Nicaragua. Traditionally considered a third world country, stained by civil war, it is still considered a country at risk and so completely ignored. In fact the only images that pretty much everyone remembers linked to this country, are those of the evening news of thirty years ago with a few soldiers firing with their guns. The problem of the majority of the news, however, is that they always leave the story in half: over the scandal of the war, they stop to say what’s going on in this country. Read this article by our friend Samuel Presti.

Political situation

Nicaragua is no exception, since the situation has changed dramatically: the war ended decades ago, has even been abolished compulsory military service, democracy has been established already in the early nineties, the local crime statistics is the lowest of Central America (strange but lower than Costa Rica) and the reality is that this country has no reason to be in the Third World. It has all the resources imaginable to be a rich country. Such as, precious woods, two outlets ocean, abundant underground water, endless stretches of fertile land and arable, possibility to use practically any renewable energy (solar, wind, geothermal), attractive from tourism point of view of everything and more.

The new Nicaragua Canal

The current situation, however, is totally different. The Sandinista government has noticed that there is absolutely the need for injection of foreign capital to grow the country. And this time they realized it seriously, so as to allow the Chinese to drill a canal that will connect the Atlantic Ocean with the Pacific, passing through Lake Nicaragua. It will be a colossal able to compete with the Panama Canal. Suffice it to say that the expected length is 278 km. There is talk that there will be initially employed 50,000 workers. Among these, in addition to simple “digger earth”, there will be hundreds of engineers skilled in the art that will come from all over the world, who will need housing for years and years. This is where comes the first major investment opportunity which I will discuss later in this article.

Nicaragua Canal Route (photo credits scmp.com)

Facilities projects related to the Nicaragua Canal

What very few people know, is that in addition to the canal, the Chinese have the contract to build an international airport, several tourist centers, two seaports and as a result the town of Rivas will undergo a turnaround that will enable it to accommodate 140.000 inhabitants.
The airport will handle an area of ​​2.5 km and handle up to 1.05 million people initially with an airstrip, but it is already provided for the possibility to extend it to two. The goal is to decrease transport times, attract investment and stave off the current situation of partial isolation of the country.
The expected tourist centers are four, and they will be built along the canal. Their names are: the Cost Relaxing Resort, the Volcano sightseeing Resort, Golf Resort and Theme Park Resort Naural.

On seaport will be located in Brito, where the channel will result in the Pacific Ocean, and the other one at Punta Aguila in the Atlantic Ocean. The exchange capacity of annual petroleum products totaled 2.8 million tons and is expected customs clearance of almost 2,000,000 containers. The Free Trade Zone will be divided into three parts: the area of ​​financial offices, the Industrial Export and Urban Area. For 2030 are estimated trades of 27 billion dollars and application possibilities for 110,000 workers.

Nicaragua Canal Tourism Projects
Nicaragua Canal tourism projects map

Consequences on the local economy

There will be a develop in different fields: industry, labor, tourism and so on. All this will explode the country, opening huge investment possibilities for everyone, both large companies specializing in the great works that will run near the channel, but also the average small investor who wants to take advantage of economic growth individually.

In fact, the southern area of ​​Nicaragua is not absolutely prepared to accommodate so many people which will have certain requirements in terms of accommodation conditions. Here there aren’t yet buildings with apartments or residences with beautiful houses. Consequently the value of homes and potentially rentable building land, will suffer an extraordinary increase. The work of the channel and the demand for housing considerably higher than offer will  increase the real estate prices.

Nicaragua Canal
A rendering of the new Nicaragua Canal

Investing in Nicaragua real estate

Here I propose to analyze and advise the property investment for of the small, average investor. The idea is to buy real estate, houses, rent for the next 3-5 years waiting for the growth of the asset value, and then sell them to three times the purchase price. The annuity due to the rent is equal to 7-8% of the capital invested. On average, a home that fits certain criteria, is currently worth 100,000 usd and can be rented to 600.- usd per month.

It is a disproportionate price for the local situation, but the cost of any dwelling rents in Nicaragua is, for reasons still unknown to me, very high. Accordingly, a yield of 7.2% per annum. The interesting thing is that there are virtually no taxes to pay. The only tax to pay on the property is once a year and it’s about 60.- usd. As well as any maintenance costs, there is no other charge. The relatively high income-related rent is the reason why I propose the purchase of property rather than the simple purchase of a plot: the latter during the waiting period before resale, has no possibility to profit, indeed, it is a cost.

In the next article I will analyze the key factors to consider for the purchase of properties:
– Time factor
– Selection of properties that meet certain requirements to be rented
– Selection of properties that do not have legal problems (reforma agraria)

(This article has been written by Samuel Presti – [email protected])

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Any news on the canal? Have latest news affected prices at all?