Moving the fence line: Teonoste conflict will test rule of law

Part II in a two-part series on land conflicts in Nicaragua

Editorial

TOLA—The government’s recent stake to a 20-manzana lot of prime beachfront property allegedly owned by Punta Teonoste eco-hotel has been an unwelcome reminder of how Nicaragua’s long shadow from the past continues to obscure the path forward.

Like a man walking in the desert, sometimes it’s hard to tell whether Nicaragua’s shadow is following or leading. But shadows can also be orienting, if Nicaragua is wise enough to pay attention to the signs and adjust course accordingly.

The Punta Teonoste dispute—which the hotel’s owners initially decried as a “clear-cut confiscation” by the government, then softened to “a misunderstanding” after starting negotiations with Sandinista officials—is just the “punta” of the iceberg when it comes to property issues in Nicaragua.

 

Walter Buhler Jr. is leading negotiations with the government on behalf of his family (photo/ Tim Rogers)

The way the Punta Teonoste conflict gets resolved in the coming days will be an interesting acid test to determine how much rule of law and due process exist in Nicaragua.

A resolution based on legal and technical determinations could be a positive step forward for the country’s wobbly judicial security. But a murky backroom deal based on arm-twisting, secret agendas and fear would further cloud Nicaragua’s investment climate and reinforce the perception of increasing lawlessness and insecurity.

“We have to send a clear message that these types of cases must be resolved by law, and not in an informal way,” said Lucy Valenti, president of the National Tourism Chamber.

Valenti’s plea for “Option 1: Rule of Law” came during a Feb. 22 board meeting of COSEP, the country’s main association of business chambers, which held its weekly meeting at Punta Teonoste last Wednesday as a show of solidarity with the hotel’s owners.

Valenti notes that Punta Teonoste is resolving its case thanks to the collective muscle of COSEP, which has criticized the government’s actions and lobbied loudly on behalf of the hotel. But Valenti asks, “What will happen to the numerous other cases? They can’t all come to COSEP.”

Felix Gaos, a Spanish-U.S. citizen, has the same question. Gaos traveled to Punta Teonoste last Wednesday in attempt to seek Cosep’s help in his own property dispute, which he says has cost him six years, nearly $600,000 and more a few grey hairs.

Gaos claims the government is attempting to confiscate 7.5 manzanas (13 acres) of prime beachfront property in Tola, which he and his U.S. business partner bought in 2006 for $350,000.

Gaos claims the Prosecutors’ Office took advantage of a legal conflict that he and his partner have with another buyer to intervene in the dispute and give the land a third party, who Gaos says doesn’t appear in any of the title history.

“Once the state got involved, it gave the land to someone who doesn’t even exist in any of the records. The situation keeps getting worse,” an exasperated Gaos told The Nicaragua Dispatch. “Now the land is full of people with machetes. It’s a mess in there.”

Gaos says the situation has become so convoluted, he’s not clear who he’s even fighting against anymore. Nicaragua’s busted judicial system only makes the matter more maddening, he says.

“The whole thing is like pissing into the wind—that’s what I’m doing. But I can’t afford to give up,” Gaos said.

Foreigners are not the only ones with land problems in Nicaragua. Last year alone, the Nicaragua Center for Human Rights (Cenidh) received more than 100 land complaints of all types. They said that number represented a spike from previous years.

Government insists it respects private property

Nicaragua’s land mess started in the 1980s, when the revolution’s initial efforts to redistribute the Somoza dynasty’s land to poor farmers got corrupted by government greed and political power.

The Sandinista government became confiscation-happy and snatched thousands of properties, including most of Tola. Some of the land was given to cooperatives as part of the government’s Agrarian Reform efforts, while other properties were rapaciously divvied up as the spoils of power by Sandinista mucky-mucks who rolled up their sleeves and got on their knees for a two-fisted land grab known appropriately as “La Piñata.”

Prosecutor General Hernán Estrada insists the Sandinista government is behaving itself with more decorum these days. The top attorney rejects claims that the government is again confiscating lands and insists the Ortega administration has full respect for private property rights.

“In the first place, here there is unrestricted respect for private property,” Estrada told the government’s media arm.

Estrada insists the government is only measuring property lines to determine proper dimensions and put order to the cadastral clutter in accordance with the Coastal Law and the Water Law. He said the Sandinista government is trying to “resolve the property issue” left over from the past—a promise President Ortega made when he returned to power democratically in 2007.

Since the 1990s, the Nicaraguan government has paid more than $200 million in indemnifications for properties confiscated in the 1980s. Estrada says there are still about 426 pending property claims, involving 201 individuals. He says the government is still working to resolve those claims and insists the U.S. waiver is not at risk.

Due to past confiscations of U.S. citizen properties in Nicaragua, the U.S. government must extend a waiver each year for the Nicaraguan government to be eligible to receive continued U.S. aid. The Embassy last week released a statement to The Nicaragua Dispatch saying it “remains concerned over respect for private property rights in Nicaragua.”

Teonoste Tensions

A week after sounding the alarm bells by accusing the Sandinista government of trying to confiscate 20 manzanas (34.5 acres) of their family’s land adjacent to their $2 million eco-resort, the Bühler family, owners of Punta Teonoste and other tourism investments in Managua, now says there is “white smoke” in their private negotiations with the government.

 

A new barbwire fence has appeared on the disputed property, courtesy of the government, the Buhlers say (photo/ Tim Rogers)

Without offering details about what his family is actually negotiating with the government, resort owner Walter Bühler, a Swiss-Nicaraguan dual citizen, announced Feb. 22 that talks are advancing in a positive manner. A resolution of sorts is expected this week.

“There are advances, we’ve had a couple meetings now and that is positive for everyone. We are working on an agreement,” Bühler said. “This government has demonstrated on many occasions that it is a government of dialogue, a government that tries to retain investment in the country. So we are confident that these talks will develop properly. We are very satisfied with the way the Prosecutors’ Office has been handling this case.”

Bühler’s gentle appraisal of the situation marks 180-degree turnaround from his comments last week, when he told The Nicaragua Dispatch, “This is a land invasion, plain and simple. The government entered by force and snatched the land like delinquents.”

Since then, the Swiss Embassy has gotten involved on a diplomatic level and the Bühler’s have put together a team of lawyers to help them negotiate a settlement with the Sandinistas, who want to give the land to former guerrilla leader Edén Pastora.

Pastora further muddied the situation over the weekend in a bizarre interview with La Prensa, where the former rebel seemed to contradict himself every other sentence, first saying the land was offered to him by the Prosecutors’ Office and he has a right to it, then saying he doesn’t care about the land and doesn’t feel he has any claim to it.

Bühler says he hasn’t been able to “identify any motives” behind the government’s move on the property, but says “We think was that this there was a confusion or error, which would be acceptable.”

Estrada, however, has hinted that economic considerations might also be influencing the situation.

“How is it possible that an entire valuable beach with its own ecosystem, which has construction on only five manzanas of land occupied by the hotel and the cabanas while the rest is vacant, is registered (as having been bought) for only 50 thousand córdobas (about $10,000 at the exchange rate of the time) by people who call themselves investors?” Estrada demanded.

Will negotiations make the situation better or worse?

Walter Bühler Sr. says all his family wants is “a happy ending and a good arrangement.”

“The important thing is that there are satisfactory results for both sides—a consensual agreement to avoid conflict,” Bühler.

While the Bühler family has every right to negotiate a settlement with the government, the private sector would be wise to take a broader assessment of the situation and demand more transparency and rule of law from the government.

Otherwise, Teonoste could become a dangerous precedent for knife-point negotiations. Even if the Bühler family is able to negotiate its own “happy ending,” it could be an unhappy beginning for other investors.

After all, there is a lot more coastline—and fence lines—that still need to be surveyed by the government.

  • Chris

    Where exactly in Tola is the 13 acres (7.5 Manzanas) owned by Felix Gaos?

  • Pedro Arauz

    Iran and its nuclear intentions are rapidly emerging as the ultimate wild card in this year’s presidential race.

    The next US administration plus Chave’z imminent death and defeat will make a bad joke out of Ortega and his cronies.

    Enjoy the show Tim !

    • http://none Darlyn

      Pedro, you are an Iran, Chavez, Nica expert. That’s amazing. Your insights are deeper then Nicaragua Dispatch. We, ill-informed Republicans, just love to read your and Rita Lugo posts – Incredibly informative. Your vision of the future is what this world needs. If only the rest of the world would conform, it would be such a beautiful place.

  • Not Concerned

    But some ‘Gringos’ as well as ‘Nicaraguans’ should be. If factual, that this valuable land was registered and tax paid on a US$10,000 value then the Government has a hell of a legal argument that fraud is involved.

    It’s one thing to yell about Government stepping on your toes if your hands are clean but quite another thing if you are so clean yourself.

    Everyone takes it for granted that you buy a house for $160,000 and declare it was purchased for $50,000 so minimum tax paid on registration. The fact remains that this is against the law and leaves one open to legal problems.

    So if you say ‘I paid $50,000 for this place’ is it wrong for the Government then to say ‘OK we’ll pay you $70,000 to compensate you for our taking over the property a few years after you bought it”.

    Try arguing in any North American court that declaring a fictional price to avoid taxes is not going to be subject to serious penalties.

    Best thing the Government could do is pass a law stating. ‘If you declare a purchase price less than what in fact was paid a determination of actual price will be determined and tax penalty of 2 or 3 times what should have been paid will be assessed PLUS the original underpayment.” This wouldn’t even be hard to do since buyers have been so blatant about declaring ridiculously low values. Hey do it for 80% of actual and maybe you can get away with it but declare at 30% and piece of cake catching you.

    Even better way to raise revenue is for Governement to offer to pay 10% of arrived at tax penalty for information leading to such assessment. Then sit back to watch all the lawyers who know about these deals start talking. Or the nice real estate guy who put you onto the deal and you paid a commission to based on the real purchase price.

  • http://playaroca.com gotothebeach

    Pretty interesting, the dibbing up of prime properties for chump change in that area. You can’t get a 10 foot frontage for 50,000 cords in Las Penitas even in 2006.

  • Walking Oxymoron — Realtor With Conscience

    I love the Dispatch but can’t say I’m happy with the reporting on this story. Please clarify beyond doubt that the Swiss group had clean title to begin with. If they don’t, then this is just one backroom deal trumping an earlier backroom deal. Maybe I’m missing something but I heard Buhler (anyone…Buhler…anyone…) has never owned the land 100%.

    I do my best to give my clients an accurate estimate of risk. There are properties in this country that are very risky investments and there are investments that are not risky at all. I can sleep well at night knowing I’ve informed buyers of all issues involved in their purchase. In the past, if a piece of land has red flags all over the paperwork and clients still want to buy, I have recused myself from the deal.

    Greed gets everyone in trouble. I’m just here to do a dozen deals a year and enjoy the lifestyle. Most raw land or arrendamiento land in Tola has problems, I figure why bother getting involved and putting my own reputation on the line? I wish some of my compatriots took the same approach.

    The Teonoste situation seems ugly, but please report some more facts without all the inflammatory quotes. You’re a good journalist, not a basement blogger.

    • Tim Rogers

      Dear Walking Oxymoron,
      The land is being disputed between an investor who claims to have clean title and a government that’s apparently challenging the property’s dimensions. At the moment, those are the facts of the story. Nicaragua Dispatch is not judge, jury or arbitrator to determine whether Nicaraguan law supports the claims of party A or B. That’s up to the courts or other authorities, hopefully folks who are qualified to make that call.

      The point of this editorial is that the resolution to this conflict ought to be transparent and done within the framework of rule of law to assure other investors that things are being done correctly in Nicaragua, and not arbitrarily. As for the inflammatory quotes, take it up with the people who made them. Our job is to report on the dispute that’s happening, and that includes letting people use their own words to describe their side of the story.

      It is not our role to try to fix the problem by “clarifying beyond a doubt” that the title is clean and legit. I would say it’s pretty clear that there is some doubt about that, which is why the land is currently in dispute. If the situation seems opaque, then the situation seems opaque. But resolving the problem of who owns the land is not up to us—all we can do is suggest it be done correctly.
      Thanks for reading.

  • Walking Oxymoron — Realtor With Conscience

    Fair enough, Tim. Valid points.

    I’m ready for my interview when you run the “Realtor Shamelessly Promotes Himself on Dispatch Comments Section” profile article.

    • Tim Rogers

      Dear Walking Oxymoron,
      Thanks for contributing to the discussion. That’s what the comments section is for—well , that and shameless self-promotion and political hooey.

  • Burrben

    Is there any update to this story? What’s the current status? Many of us new landowners are watching this story closely as it will speak volumes about future investment in this country.