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Crisis impacts small and medium tourism businesses

The resilience of entrepreneurs: "I want to stay close to my family, and I prefer to look for another business to be able to start over again here."

The consecutive and ongoing crises that Nicaragua has experienced since 2018 have taken their toll on businesses, especially smaller ones, affecting both middle-class entrepreneurs seeking business opportunities, as well as employees who depend on such initiatives for jobs. 

When the entire world began suffering varying levels of paralysis in 2020 with the onset of the Covid-19 pandemic, Nicaragua was entering its first year of economic depression, a product of the political crisis that erupted in 2018. That was followed by a socioeconomic crisis which lasted until 2020, which resulted in the closure of thousands of businesses, and with those closures, the elimination of hundreds of thousands of jobs.

That loss of jobs –and with it, the decrease in private consumption– hit many sectors of the national economy. Tourism was especially hard hit. In 2017, Nicaragua received almost 1.9 million tourists. In 2021, that number had fallen to 312,000, representing a decrease of 83.2 %, according to data published by the Central Bank of Nicaragua.

The 2018 blow suffered by the tourism industry was significant: a drop of 534,000 visitors, or 28.7% reduction. While the data show a slight recovery of 2.9% in 2019, the pandemic came as the next big blow from which tourism businesses are still not recovering; in 2020, the country received some 919,600 fewer tourists than in 2019, representing a decrease of 67.2%.

Additionally, the decision by several international airlines to not return to Nicaragua until the Ortega government relaxed the strict measures it had imposed on air travel –supposedly to stop the spread of Covid-19–, prevented the airline industry from aiding the recovery of the tourism sector. (The air travel restrictions stayed in place despite the government organizing scores of massive public activities during the height of the pandemic.)

CONFIDENCIAL spoke with two small business entrepreneurs who had to close their tourism businesses when it became impossible to keep going. One of them had to close down because he was a victim of political repression; the other, simply because the crisis caused by Covid made it impossible to break even. 

No time to arrange anything

In 2000, Alfredo Gutiérrez founded Gutiérrez Tours, a tour operator aimed at catering to the then-growing number of tourists visiting Nicaragua. Gutierrez, now in exile in the United States, told CONFIDENCIAL that he had spent two decades promoting Nicaragua as a tourist destination, and that he catered mainly to travelers from the United States (80%), as well as from England and Spain, among others.

Gutiérrez Tours was a small business. The most they ever had was seven employees, and that was “in times of greater movement and stability”. They didn’t need many employees because their business was to subcontract companies in the tourist circuit –hotels, land, air and water transport, guides, private reserves, cab drivers, dance groups, restaurants, bars, etc.– and put together a package to sell to wholesale issuers, who would then resell to their customers.

Almost two decades later, in 2017, when his political activity had become more noteworthy, Gutiérrez founded a company linked to construction, which he called Piedra Arte (Rock Art) de Nicaragua. He recalls that “we brought technology and Argentinian ‘know-how’ to manufacture artificial stones for the facades of vertical structures such as houses, offices or buildings. The business was beginning to mature when the April Rebellion of 2018 broke out.”

The anxiety caused by Daniel Ortega’s and Rosario Murillo’s decision to respond with bullets to the Nicaraguan citizenry’s call for freedom resulted in an economic slowdown that affected many businesses, including Gutiérrez’s two companies. For example, he was forced to cancel several tours that had already been contracted and paid in advance.

When international media began to show the cruelty of the massacre perpetrated by the Ortega-Murillo regime, Gutiérrez began to receive calls from his foreign tourism partners asking about the situation in Nicaragua. Although they were willing to wait a few days to see if things would calm down, in the end they asked to have their advance payment refunded, leaving the small company without any margin or any business. 

In the case of Piedra Arte, Gutiérrez says that in March 2018 they had a small customer base that gave the company stability. They had a signed purchase contract with a developer, and another contract they were about to sign in April, but “both decided to temporarily suspend their orders, at a time when we had already spent money to be able to start fulfilling what was contracted,” he recalls.

Before the end of April, the developer with whom Piedra Arte had already signed a contract notified them that they were terminating it, generating losses because Piedra Arte had already invested in order to accumulate inventory. The other company also notified them that there would no longer be a contract “because the environment wasn’t there to continue with the projects,” according to Gutiérrez. 

Faced with this reality, at the end of May of 2018, Piedra Arte had to dismantle the factory and send their personnel into unemployment. Gutiérrez recalls that they made another attempt in mid-June, reducing fixed costs to manufacture to order. But the economic crisis resulting from the ongoing political crisis made their business untenable.

Next came the attack against Gutiérrez’ physical integrity, when a sniper shot at him during the March of Flowers. Soon after his family was attacked, when they came to his house with AK rifles the same night as the attack on the parish of the Divine Mercy. Gutiérrez decided to go into exile in the United States, where he found work as an assistant and as a bricklayer, as well as painting and cleaning houses. He now manages a construction company.

When Gutiérrez left, he said there was no time to close down his companies, pay off debts, or withdraw the funds he had in his bank accounts. “I couldn’t make any arrangements to close things down, so everything was left up in the air,” he said.

A risky proposition

In October 2019, while every economic stakeholder in Nicaragua was trying to figure out how to continue operating during the recession, Benjamín Delgadillo and his sister-in-law María Lourdes decided to launch the tour operator company Exclusive Nica Explorer, “to show the other side of León, because tourists only know about Cerro Negro, the Cathedral and the beaches,” Delgadillo recounted.

It was not a decision taken lightly. They relied not only on María Lourdes’ degree in tourism and hotel management, but also on the knowledge of university professors and experts who helped design and offer the best possible product.

Such were the beginnings of a tour operator dedicated to show the cultural backdrop of the city of Leon, in contrast to other tours with quick visits to museums. At the same time, Delgadillo and his partner recognized the drawing power of attractions such as sandboarding on the Cerro Negro Volcano, a tour of the Cathedral, or Leon’s beautiful Pacific Ocean beaches.

In early December Exclusive Nica Explorer began to receive a good number of calls, despite the fact that the economy was formally in a recession and about to enter a depression. The demand for their services was because “our cultural offer was attractive”, leading the company to attract Israeli, Colombian, and Chilean tourists. Nicaraguan tourists also hired them on their own, and the company also put together packages for businesses to offer to their personnel.

That all changed in March 2020, when the pandemic took away what they had managed to build. “The arrival of Covid-19 took away what we had,” says Delgadillo. Although they thought they could count on financial support being offered by the Central American Bank for Economic Integration (CABEI) through the national bank, they soon learned that this wouldn’t be the case.

“We thought those resources would help us get back on our feet, so we asked for $10,000. But even though those loans were unsecured, the banks imposed conditions as if we were big companies, which led many businesses to close,” recalled Delgadillo. In their case, they were hoping to get $10,000 to buy a second-hand vehicle so they could visit businesses outside León. They also wanted to buy camping and sandboarding equipment, and purchase advertising. The bank asked for assets to be used as collateral, and also required that the vehicle be a recent model, but “those cost more than the $10,000 we were asking for,” he lamented.

Despite that frustration, Delgadillo and his partner decided to continue working on their own, using their own funds. Although they managed to contract some tours, they had to close in 2021.

Now, Delgadillo works in a restaurant owned by his family, and María Lourdes works as a sales executive in a hardware company. Although hundreds of thousands of Nicaraguans have placed their hopes in the economic opportunities offered by other countries, Delgadillo does not plan to leave Nicaragua because, as he says: “I want to stay close to my family, and I prefer to look for another business to be able to start over again here.”

 

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This article was originally published in Spanish in Confidencial and translated by our staff.


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