How corruption works in Nicaragua... - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 28 January 2015
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How corruption works in Nicaragua... A  A  A

- By Bill Bonner

Bill Bonner
Rancho Santana, Nicaragua

Dear Diary,

"You ran through a red light."

No, I didn't. It was yellow."

Our driver, Carlos, was stopped by the police yesterday, on the streets of Managua. We were surprised by his aggressive response. It doesn't generally pay to contradict the police. In America, we are taught to keep out mouths shut. Then again, American policemen are armed.

We'll return to the scene in Managua in a minute. First, we mention that that the Dow fell 291 points yesterday. Gold was flat.

"I'm going to have to write up a ticket."

"I don't have time for that."

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"What's your hurry?"

"I'm taking this foreign investor to the Immigration Office. We have an appointment at 11."

"Well..."

The policeman took through a quizzical look in our direction.

"He's an investor?"

"Yes...he's coming here to invest money."
"Well, you're going the wrong direction. The Immigration Office is over there," he said, pointing vaguely back the way we had come.

"No, I turn to the left ahead at the intersection. Then, it's up on the right."

"No, it's over there. You have to turn around and go in the opposite direction."

The conversationalists continued as we wondered where they were going. Then, it became obvious. Our chauffeur had fished a 100 cordova bill out of his pocket. With an artfulness that must have been practiced a hundred times, the policeman slid his hand in through the open window and our driver placed the folded bill in his palm.

Thereafter, the red light incident was forgotten and we were free to go on our way.

"You just have to know how to talk to them," Carlos explained. "Some of them just give you a ticket and it's a big pain in the *** to pay it. But when he started giving me directions, I knew the directions were wrong and so did he. It was just his way of inviting conversation. So, I ended up paying about $4 to settle the matter. It was cheap. And easy. And the money supplements the policeman's earnings so we don't have to pay them so much in salary."

Life in the Third World is both simpler, and more complicated, than life in a fully developed economy. Corruption is usually more direct and much cheaper. Policemen, politicians, voters, businessmen and bureaucrats - rich and poor alike - can all be bought, just as they can north of the Rio Grande. But it can take real skill to negotiate a deal.

A friend, a lifelong resident of Nicaragua, told us how it works.

"It's about knowing the right people. And trading favors. You have to have the right connections. And you have to have something they want. Usually money.

"I know one time my nephew lost his passport just before he was supposed to leave for the US. It was Easter Weekend. The passport office was closed. And it takes a couple of weeks even when it is open. But my wife's cousin knew someone. I don't know what he had for this guy...or on this guy...but he went in on a Sunday and got the passport."

We have been here now for two weeks. The sun has shone every day. Temperatures are always in the low '80s. Here on the ocean, the waves keep coming, one after another, like drinks at Happy Hour.

But Nicaragua is not just a sleepy Central American hideaway. It is also an economy that is growing as fast as China. Seven percent is the official tally for GDP growth last year.

Trucks fill the roads. Tourists fill the bars and beaches. Almost wherever you go there are new cars, new restaurants, new shops and businesses. Yes, it appears rough and disorderly - with trash strewn in vacant lots, half-finished houses along the road, and teams of oxen drawing two-wheel carts. But that is how real progress works; it is messy, like a teenager, not carefully organized, like a senior citizen.

Along the "Pacific Riviera" our once-deserted beach is now bustling with surfers, young families, and retirees. It looks like California, there are so many surfers in the water. But it shows its youth too. Dogs run on the sand without leashes. Small children play without clothes. Older children ride horses and splash through the surf.

The houses are directly on the beach, just as they are in Malibu or Delray. But there are no warning flags, no lifeguards, and apparently no rules.

"If you want to make some money you will buy land on the coast," says our old friend. Taking a line from Will Rogers, "they just aren't making places like this anymore. Beautiful beach. Beautiful hills views. Great weather. Warm water. Cheap, cheerful household help. When North Americans realize what Nicaragua has to offer, there will be a land rush."

Maybe.

We have believed in the Nicaragua beach story for more than 15 years, ever since we came here in the late '90s. We take credit - probably undeserved - for having coined the 'Pacific Riviera' moniker many years ago. Since then, we've watched as thousands of new houses have been constructed. Now, we see in the travel magazines that Nicaragua is one of the "Ten Places to Visit in 2015." Mainstream TV shows are talking about the country as a place for Americans and Canadians to retire.

Prices have risen, but are still way below the Malibu level. This week, we had a young man from Pacific Palisades, CA, visiting:

"This is a little like that part of California. Malibu is not as nice. But similar. And close to LA. But in Malibu you're going to spend $15 million for a house on the ocean. Here you can get one for less than $1 million."

Perhaps he is exaggerating. Or maybe there's still room to grow.

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

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