Can Money Be Made Honestly in Nicaragua?

peterchristopher's picture

I originally wrote and published this article about three years ago.  I asked, "Can Money Be Made Honestly In Nicaragua?" and then presented these Concrete Examples of Dishonest Business Practices.

I think it is impossible for any person of any color to make a profit in Nicaragua without lying. I would like to hear specific examples that might prove my hypothesis incorrect.

I would also like to save a few million dollars of others’ future errors by posting valuable information.

Examples of dishonest business practices I have gained first-hand.

BUYING

A small example. I had an employee who I paid about 100 cordobas to go to Managua to buy a piston. He carried with him about 600 cordobas of my money to buy the piston. I said that was all we could afford for the piston. He came back later in the day with a very beat-up piston of the correct size. “It was a hard task,” he said. “I negotiated for two hours to get the price down to 800 cordobas. I had to pay the extra 200 with my own money.” He showed me the receipt for 800 cordobas. I gave him 200 cordobas to pay him back and another 100 cordobas bonus. Later in the day, I called the shop where he had bought the piston to verify the price. I was suspicious because it was a high price for a used piston. I asked how much he had paid for the piston. “600 cordobas,” they said. Are you sure? Yes. I went to Managua, went to the shop, looked with them through their records books. (They were reluctant to go through all this hassle with me, but I managed to pull it off by buying frescos and lunches.) Indeed, they had sold the piston for 600 cordobas, but written 800 at the request of my employee, supposedly because he was also going to buy piston rings for 200 cordobas elsewhere and wanted to have the total price on one receipt.

A big example. When I bought my farm, I had employed a Nicaraguan who I thought I trusted. I had an arrangement with this Sandinista to pay him 1% of the commission, and that he would work exclusively for me, not for the seller. I made an offer for 80,000 USD. The agent came back to me and told me the offer had been rejected. He told me about several other current offers that had also been rejected. I made a counteroffer for 85,500 USD, and this offer was accepted. At the pre-closing meeting, I clarified that the agent was working for me, that I was paying the commission, and that he had no right to earn a commission from the seller. The buyer looked surprised but nodded. 85,500 is what I paid to buy the farm. Later, I investigated through third parties and found out that my agent had earned a 5,500 commission in the purchase. I then went to the seller and we spoke frankly. He said he had accepted the original offer for 80,000 but said he could not offer a commission to the agent at that price. He also said there had been no other offers. We figured out together that what had happened after that was that the agent had negotiated with me an extra 5,500 (supposedly for the seller), then went back and told the seller that he would only bring him the buyer if the agent was entitled to the entire 5,500. They had then gone immediately to a Sandinista lawyer and signed a commission contract (I saw this contract). It was the same lawyer who we employed at the agent’s suggestion to write the original purchase-sale agreement. When I found all this out, I didn’t pay the agent the final 25% of his commission due form me. This agent later took me to court supposedly to get his 25%. Now I realize this was also in order to distract me from taking him to court. He gave up shortly in the court proceedings, but in any case booked one of the two largest thefts I have been victim, over $5,000.)

Other problems in the property purchase. I learned after the property purchase of a half-dozen problems in the title, which I estimate amount to about $15,000 of hidden liabilities of the property. I fixed about $5,000 of these for about $3,000, but passed on the other $10,000 to the buyer without his knowledge.

PAYING TAXES

In order to register a property you have bought, you need to pay your transfer taxes. It is based on the higher of purchase price as recorded in the title, or appraised value. When I bought my farm, it was 4% of this amount. I insisted to put the real purchase price in the title (normal procedure is to put in about 10-20% of the purchase price to reduce the taxes, but I didn’t want to start out here by cheating). So when I got to the tax office, they took a quick look at my title, multiplied the purchase price by 2.5 to find the appraised value, and told me I was going to pay about $9,000 of transfer taxes. I refused, and for six months we were in a deadlock. I sent in two different lawyers to negotiate, and both failed to get anywhere.

Finally after six months, I invited the appraiser to go see the farm himself. We went. He said, You stupid gringo, this farm isn’t worth sh*t. You are completely stupid to have bought here. Nobody is ever going to take this cr*p off your hands. Nevertheless, you don’t even have a right to sell until you pay your taxes. And I’m the big man who gets to appraise your property value. Why the h*** did you send me the stupid lawyers? I want money! And I work with other people, who get most of the money. If you want to pay the correct tax, FINE, but it is going to cost you $1000 to facilitate the documents. I refused, and for two months, nothing. I offered him $200, then $300, waited, nothing. He wasn’t budging from $1000. So I went to his boss (who supposedly doesn’t know about the bribes, but gets his part). I said to the boss, I’m fine paying you guys off, but the bribe your appraiser is asking for is outrageous. I won’t pay it. He was annoyed, asked his appraiser to come in, and we talked about it for a while. But still deadlocked. I got up to leave. Then I figured, fine, let’s split the difference. So I said, In no case will I pay more than the correct tax, and in no case can I pay more than $4,000 total. (This is $3420 tax, $580 bribe.) The boss’s face lit up somewhat, but there were no other words spoken. I walked out. Two days later I went back to the office, and the appraiser said, We decided to help you out. If you can pay today, you can be done for $4000. You’ll pay the $3420 at the cashier’s office, and the rest to us personally before we hand you the appraisal. And that is exactly what happened. These dudes, by the way, are PLC, not Sandinista.

SELLING

I had my farm listed for 185,000 USD. There was a fair amount of interest, but a lot of folks got scared when they found out one way or another that this was the farm where the gringo got chopped up. I had one good buyer who was about to buy for $115,000. Then one potential suegro showed up with a lawyer and a gringo at the farm. “The gringo says the price of 185,000 is CHEAP,” says my suegro on the side. “Don’t tell him how low you’re ACTUALLY willing to take! Those lawyers and him are ready to sign the documents.” The gringo says, “What’s your number, I’m going to call you tonight.” I gave him my number but (my error) didn’t get his, and they took off to look at a possible new entrance they could put for the farm (he wanted to pave all the way right to the farm). According to the suegro, they talked to the other owner there, who asked $500,000 for their $60,000 farm. He said, “You’re willing to take $125,000 as your share, right?” I said, that depends. What he was saying is that between him and the lawyers, they wanted a $60,000 commission. The gringo never called. He is a typical example of a buyer who follows Fyl’s advice and does his transactions through a Nicaraguan. MAYBE he actually made the lawyers an offer, but they tried to get him to make a larger offer by saying it wasn’t enough… perhaps we’ll never know. I tried to get the gringo’s phone number from the lawyers, but they refused to give it to me. They said they were going to bring another client but offer him my farm at $400,000. Who knows. I sold the farm first to another buyer. I heard from the suegro that the gringo had bought another farm with those lawyers. Another difficulty working with agents like these is that they are reluctant to work with a gringo seller because they might not get their commission (the gringo can just pack up and leave the country with the cash, whereas a Nicaraguan seller can’t do so as easily, especially if he has other assets in Nicaragua) Lesson? Make your offers personally to the owner.

DOING BUSINESS

I paid one Sandinista punk with a pickup 500 cordobas to transport some cans of paint from Managua to Carazo. I paid the paint shop to have an assistant in the back of the pickup in Managua so nobody would steal the paint at traffic lights. The f***er says to me the next day, “The assistant from the paint shop refused to go with me, and unfortunately two cans of paint (value 2500 cordobas total) were stolen at an intersection.” I called the paint shop, and according to them, he had explicitly REFUSED to allow the assistant to ride in the back of the pickup. Who knows where or for how much he sold those cans of paint.

I paid one Sandinista electrician to repair a generator. He said he’d work exclusively on my generator until we got it right, that he works on generators like this all the time, that we would be done in one week. Well, those were all lies. The guy turned out to be an intermediary and employed another dude to do half the actual work, paying him only one tenth of the fee. We finally got the thing running, after two months of my time WATCHING HIM watch the other electrician work (otherwise, they wouldn’t do anything). The generator ran a half-hour, then one minor repair the actual intermediary guy had done with the wrong epoxy broke and the 25,000 watt generator choked and EXPLODED.

If there is anything unique about my experience, it is not in my bad fortune, but in my good fortune. All the losses from my “errors” discussed here and others were recuperated in the gross gain on the sale of the farm. You probably can’t be as lucky, because you probably can’t learn as quickly. How come I can learn so quickly? Maybe you’d say it’s my youth?

I remember one tip about management. If you are evaluating your employees, and see someone who has apparently done nothing wrong, it is likely because he has done nothing at all.

If the rest of you haven’t experienced anything like this in Nicaragua, you haven’t done anything yet.

Peter

 

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I Hate NICARAGUA

F***  Nicaragua, they are all DRUNKS !!!!!!!!!!!!!!!

I'm not  too eager  to enter

I'm not  too eager  to enter in this yes/no discussion further than I already have. Nor do I feel the urge to register. I saw your posting accidentally and couldn’t help myself.   You're right when you accuse me of generalizing. I did that on purpose, to make a point. Yes, I did address all those other Americans I crossed paths with during my travels, for 25 years.  Maybe I generalized too much in your case, if so I apologize. I’m not going to hit and run and I promise to read your next reply, but that’s where it ends for me. Frankly, I think it’s a waste of my time and I’m already sorry for engaging.

You feel attacked, I can understand that.  I’m sorry that you see it the way you do. Then again I didn’t expect anything else.  You’re feeling of superiority doesn’t drip from the screen, it splashes.  Being (financially) successful in a business doesn’t mean that  you’re a businessman btw.  But let’s not get into these details. They don’t really matter. I think, you very well know what I mend to say.  I’m not a Latino, so there’s no race to defend here. I’m white like you (I guess), just not from the US. I’m from Europe. English is not my native tongue, so if my grammar sucks it’s because of that. Again I apologize.

 Accusing me of lying is so cheap, I won’t even go into that. Reminds me a lot of your Presidential election show.

Quote:” Then you say, "You don't give him anything to change that perspective." Wrong.  I gave many Nicaraguans the opportunity to work with me.  I gave them the opportunity to share in goal-setting and to work towards promotion and management, if they wished.  Whenever kids or adults came to my farm, I worked alongside them, be it with machete, weeding, processing harvests.  I ate many of the same foods they ate, I lived in a house a lot like theirs.  I told them that if we did well, that we could have an international center for education, humanity, and ecology.”  Are you for real? How does giving somebody a job fit in this context? Approaching someone on his level is something completely different.  “We could have an international…..” How? You gave them shares? Your “we” in this case is not the same as theirs. At least not in their perception. Unlike us “westerners” a lot of the local people don’t have the urge to work because of the work. They work for the money period. Your dream is certainly not their dream. They need food and other basics. When the job is fun, ok that helps. At the end only the dollars count. Rather they would spend their time with their family and friends, a concept which we have sadly lost ages ago.

My workers never saw me actually do labor. I know their wives, sons and daughters, show up at their birthdays when I can. Listen to their problems and help if I can.  Sponsor their soccer team with T-shirts, drink a beer with them. Laugh at their jokes, tell my own and certainly kick their but on occasion. I’m part of their lives as they are part of mine. Not because it’s hip, but they’re my people. They feel that, I feel that. Not by race, or nationality even.  They’re my responsibility, when they work for me. I love that, it’s hard sometimes but worth every effort. I take care of them and they trust me and my skills to do that.  This responsibility ,they have given me. It can make breathing difficult sometimes, it can also take your breath away at times.

Last weekend, their soccer team lost. Sadly I could not attend the game this time, the last game of the season. When they told me on Monday, they presented me with a trophy, they bought! Not because they’re afraid of me, just because they didn’t want to disappoint me and show me their appreciation. I’m proud of that, absolutely. As I’m proud of these guys doing that. These guys earlier tried to pull the same stunts you described. Now they know, at least they think, I know before they do. They know I can be a difficult, even moody man. They also know I don’t play games with them, what you see is what you get.  For Latinos difficult sometimes, there used to beating around the bush. They accept it though and seem quite content with the situation. I feel respected. In fact, when I buy a new car THEY are happy and show off to others.

Basically a boss needs to be a boss. Strict, fair and smart. You should have known in advance that your assistant was going for a percentage, when you send him with the money. You could have called the shop before, or whatever.  If not, you make someone responsible and make it clear from the start. Any money lost is coming from his/their pocket(s). Same story with the paint. You lose, you pay. Don’t make them go alone. Lots of things you can do. Important is that they know you know. There are a lot of ways to show that you’re smart and can figure them out.
BTW, this is not the same as the doing business description I gave you earlier (you have, he needs), which was a dream in your opinion. This is for using with other(local) businessmen.  Maybe I was not clear. Colleagues require a different approach than employees. Anyway I seem to live my dream very well.

I’ve been ripped off or stolen from in Panama, Costa Rica, Guatemala, Mexico, US, The  Netherlands,  Great Britain, Germany, Greece,  Portugal, South  Africa, Ghana. Most of these cases are (very) small time. The last time however, was in Panama. Actually today. I seem to have lost over 20.000 dollars to a US citizen. I have an account with Stanford Bank.  That however does not make me wine about Americans being crooks (they’re just loud and full of themselves).  When something doesn’t work, it is not always just somebody else’s fault. Your goal settings are not always the same or similar as the ones other people have. They might not even be attractive.
 

HI anonymous poster...

Welcome to the Central America Forum.

You say, "Things are not so different in any other country for that matter."  What is your experience conducting business in any countries?  Or if you don't have experience, at the least, what studies can you cite to support this?

You say, "Nicaraguans, Sandinistas, PLC.. why do you need to lable these people? That's your main problem."  Oh really?  You apparently don't know much about me, or else when you say "you" actually you mean "all Americans" ... in which case, aren't you engaging in the same generalization-thinking of which you accuse me?

You say, "From a Nicaraguan's point of view you're a f....ng Gringo, with too much attitude, self indulged, fat and loaded with money you stole ages ago from his family."  Now who is doing the generatlizing?  You again.  But that's ok with me.  I think generalization can be helpful.  You are the one who claims it's "my main problem."  But, frankly, I agree with the spirit of this statement: in general, many Nicaraguans do have the attitude about most Americans that "you're a f....ng Gringo, with too much attitude, self indulged, fat and loaded with money you stole ages ago from his family".  Then you say, "You don't give him anything to change that perspective."  Wrong.  I gave many Nicaraguans the opportunity to work with me.  I gave them the opportunity to share in goal-setting and to work towards promotion and management, if they wished.  Whenever kids or adults came to my farm, I worked alongside them, be it with machete, weeding, processing harvests.  I ate many of the same foods they ate, I lived in a house a lot like theirs.  I told them that if we did well, that we could have an international center for education, humanity, and ecology.  They had every opportunity to see that my vision and dedication were not arrogance.  Most of them did not take the opportunity.  They had known for their whole lives that anyone with a dream and money to spend could be milked like a cow and would eventually decide to leave, so that there was no point in developing a long-term relationship or taking the vision seriously.  Most Nicaraguans know that in Nicaragua most dreams don't get realized, and only exhaust the dreamer.

[Take this attitude...] "Two guys doing business. You have and he needs. Use that to your advantage. Let him make some money and don't be cheap. At the end you'll both make money and you earned respect."  Nice dream.  Unfortunately, what almost all find out who try to do business in Nicaragua - it doesn't work that way.  Different rules apply to foreigners.  We have a social conscience.  We won't shoot a thief.  We actually feel guilty when someone pulls a guilt trip on us in negotiations.  The neighbors are less willing to tell us who robbed us, or to warn us of potential problems, than to tell one of their own.

You say, "Your obviously no businessman in your home country, what made you think you could be one in Nicaragua?"  Unfortunately, your grammar is a bit sloppy here - are you talking about before I moved to Nicaragua, while I was in Nicaragua, or after?  I have been successful personally and financially in the United States in several businesses in several different fields.  So who is arrogant and labeling in this conversation?  I'm struck by the thought that you appear like a person who seems to be willing to lie, fight and argue to defend your race, right or wrong, true or untrue.  Yes, frankly, I do consider my behavior superior in the respect that I would not do such a thing but that doesn't mean I consider myself overall a superior human being, only that respect of my behavior.  And apparently you consider yourself superior in that you do not respect someone who will openly cherish things about himself that he is proud of.

Feel free to register as an official user on this site, and we welcome you to post some stories that helped you to come to your conclusions.  What are your experiences, where?  Our goal here is to make sense of life and living in Central America.  While sometimes some of us (including me of course) may be wrong, and while sometimes we may have to leave questions open or agree to disagree, nevertheless we are happy to have your participation - open dialogue is a helpful tool in making sense of our lives as fellow humans.

Thanks for your reminder about our common humanity.  I agree - may we all experience peace and happiness.

What else is new?

Things are not so different in any other country for that matter. If you don't know your business in the US, you get ripped off as well. Big problem with people settling in these countries is their perspective. They have a hard time to really understand the people. Some of them try to learn the language, but that's about it.

Nicaraguans, Sandinistas, PLC.. why do you need to lable these people? That's your main problem. You feel you're better than them, more intelligent, better educated and more money. You may not agree here, but it's a fact. One just has to read your publications to find that out. It's the main reason for the US's exterior problems, 95% of the US feels this way. When the president of the US finishes his talk to the people with the words "God bless America", he is reveiling the essence of the problem. Did you ever think about that? Why would God bless America? Why not bless everybody who could use a little blessing.

I see this on a dayly basis.Americans walking around like they own the country, no respect, no humillity at all. Rest asure there other foreigners as well like this, Americans are the worst though. That's why they're not popular. When you considder the history of Nicaragua in this case, being ripped off for centuries by people like yourself, you might be a little less surprised at the results you're getting.

From a Nicaraguan's point of view you're a f....ng Gringo, with too much attitude, self indulged, fat and loaded with money you stole ages ago from his family. You don't give him anything to change that perspective. So what's strange about you getting swindled out of your money? Your obviously no businessman in your home country, what made you think you could be one in Nicaragua? Because you are wise and intelligent and everything is so cheap?

Try to sit down with the people on the same level. Forget about your heritage. Two guys doing business. You have and he needs. Use that to your advantage. Let him make some money and don't be cheap. At the end you'll both make money and you earned respect. Respect is what you need to be succesfull in Latin America, if you don't want to lie and cheat.

Good luck to you all and God bless whoever needs it.

Yes and no

Yes and no. Yes my family IN Nicaragua have a positive cash flow and NO I am not providing cash for investments or upgrades, that is the purpose of the farm. Now they are not making what they should on the farm due to inexperience and poor farming practices. They tend to work hard not smart.

I do agree that it would be very hard to make money “honestly” on a big project but then again I do not know any in the states that do either. Someone is always getting screwed, either the workers or the owners.

Like I told you before, I am not in this to make money (or lose money either) the farm holds its own as it should. I guess the question one needs to ask themselves is how much money do they want to make. If you think you can make 10 k a month income free and clear on a 200K investment then Nicaragua may not be the place for you (unless you want to set up shop with a CR cartel)

One thing that I have learned is this. If your workers get a percentage of the product and not a salary production goes WAY up. If you have one bad apple in the bunch just use peer pressure and let them know that if Jose takes a calf, cow, pig or crops the rest of them make less money, watch them jump and start ratting on each other. This also works in the states by the way.

 

Good Tips Cory

Hi Cory,

I agree that you share some good tips in your post above.

For instance, expecting Nicaraguans (especially new contacts) to do honest work for one is a mistake, so I agree with you that many of the problems quoted above were indeed due to employing them.  In retrospect, the project I was undertaking was not a good match for Nicaragua, partly for that reason. The project was too big for the small number of trustworthy associates I had at the beginning.

Do you yourself actually have positive cash flow from your farm, or do you mean that your relatives living there have positive cash flow?  From what I understand, you provide cash for needed investments - from your work in the states, where you live full-time - while family members run the farm and have positive cash flow there?

Overall while the question is still open, one thing perhaps we can both agree on is that IF it's possible, it certainly requires an understanding of the culture, in-person management, and a very careful long-term process of developing relationships.

When Carl Towerman read my original post three years ago, he responded that it might be sometimes possible to make a very small amount of mony honestly in Nicaragua but that any medium or large sum could not be earned honestly.

Peter

RE: Can Money Be Made Honestly in Nicaragua?

Peter,

 I now have some time to write, well maybe a few seconds and I just wanted to respond. As we have talked about in the past, yes you can make money honestly in Nicaragua. I have done it for the past 8 years on my farm.

 I understand you past problems and for the most part I think your problems come from asking others to do things for you. As you know most Nicas think you are made of money just because you are from the states or any other country. This leads to the behavior we see all the time in workers taking money, parts, product from where or who they work for.

The same thing happens in the states. Workers skipping out a few minutes early when the boss is not around. Using work time to do personal business (cell calls, running errands, what ever). Take home office supplies, well the list goes on and on.

 Back to Nicaragua. In the beginning the workers (if you need them) need to understand the rules and work ethic you expect and what will and will not be tolerated. It does take some time for the future workers to understand this, they are not use to signing worker contracts (yes you need them). I had one person try to make a big deal out of me not hiring him because he could not read the contact. My come back was if he can not read the contact then how will he be able to understand notes, work orders and directions on packaging.

Another thing to remember is not to be an instant expert. Things are done differently in Nicaragua and treating people like underlings, second class citizens or idiots because one thinks they know how to do something in the states does not make you an expert in Nicaragua.

Respect is earned in Nicaland and not a given just because someone has money or position.

I had problems in the past because I did not have contracts and I just expected they (Nicas) had the same work ethic as I did. They do not have the same “urgency” in getting something done, like the saying goes “mañana” reigns king.

This in no means is the end all of the big question “Can Money Be Made Honestly in Nicaragua?” but just one step in answering the question.

 Cory

 

In a corrupt environment only

In a corrupt environment only the corrupt survive.

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