Can Money Be Made Honestly in Nicaragua?
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.
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.
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.
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.
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.