During the late 1980s, Chris Berry set out from San Francisco aboard his boat, Pelican Eyes, on a voyage down the Pacific coast. He had no particular destination in mind. He needed a break from his law practice and intended to spend some time to think about his future. He worked his way down the Pacific Coast along the Baja Peninsula and the Mexican coast, past Guatemala and El Salvador, until one day he eased his boat into the cove at San Juan del Sur. When he dropped anchor just off shore, he knew he was home. Pelican Eyes soon became an integral part of the San Juan scenery — its white sails a stark contrast to the local fishermen’s bare wood motor boats.

The white sails of his boat multiplied into dozens after Berry started Pelican Eyes Sailing Adventures, a fleet of charter sailboats that operate along the Pacific coast. It was his first investment in Nicaragua, the cornerstone of Pelican Eyes Resort, and the financial engine behind the Fundacion A. Jean Brugger, a nonprofit organization focused on education and development in San Juan del Sur and nearby areas.

Berry was among the first to take advantage of the Nicaraguan government’s incentives to boost tourism and foreign investment. In 1990, the government passed Law 306, Incentive Law for the Tourism Industry, to provide tax breaks to hotels, restaurants, tourist programs, and rental companies. It also began expanding its ministry of tourism, all with the aim of attracting foreign investors and tourists who the government hoped would bring Nicaragua closer to economic prosperity — a sort of trickledown effect with foreign money at the top. Now, after almost two decades, it’s time to take a clear-eyed look at how successful this strategy has been in Nicaragua because it has become a major course for economic development in many developing countries.

If attracting tourists was the goal, Nicaragua’s strategy appears to have worked. Since 1997, the number of visitors to Nicaragua annually has doubled, from more than 350,000 to almost 800,000. They’ve come from around the world, but mostly from the United States and Canada, drawn by the warm weather, extensive beaches, a massive salt-water lake, and still-active volcanoes. Nicaragua is the largest country in Central America, stretching from the Pacific Ocean to the Caribbean Sea, and investors hoping to capitalize on this flood of tourists soon discovered that all that beautiful territory was extraordinarily affordable. A mere $36,000 can buy a couple of acres on the country’s Pacific coastline.

As for improving the country’s economic prosperity, there’s little evidence that the government’s emphasis on tourism has been fruitful for the vast majority of Nicaraguans. Not much money has trickled down from the foreign investors and tourists at the top of the pyramid to the locals at the base through new jobs and increased spending. According to data released by the government, tourism generated $255.1 million last year, only $30 million more than the country’s revenue from meat exports and a slight 20 percent of total export revenue, a proportion that hasn’t changed in the past five years.

The stagnating growth is also reflected in construction of new tourist related projects. For the past five years, the number and value of these projects has fallen. In 2007, 28 tourist related projects were approved, half the number approved in either 2006 or 2005. The 28 projects make up a total investment of $5.89 million, the lowest it’s been since 2000, and 90 percent less than in 2006. The Ministry of Tourism calculated that over the past five years, these projects created only 3,666 jobs. Projects approved in the past year are projected to create 132 positions, a number that is far from encouraging.

While large job-creating development remains sluggish and decreases each year, demand for property has increased, driving prices up. Land values have tripled over the past 5 to 7 years, well beyond the reach of most Nicaraguans. Furthermore, Law 306 grants tax exemption for up to ten years to developments like Berry’s Pelican Eyes Resort, decreasing the revenue that the government could get from the tourists oriented businesses that are created.

Without new jobs or increased tax revenues, the most likely way Nicaraguans can tap into the foreign money that was so aggressively courted by the government is to sell their increasingly valuable land. The Pelican Eyes resort, located on a coveted parcel of land atop one of the hills that encircle the bay, overlooks the town of San Juan del Sur, currently Nicaragua’s top tourist destination and one of the few with ongoing development projects. To clear the property for developments, many locals sold their property, giving up the Pacific Ocean views and sunsets, and now live behind the hills surrounding the bay. They’re still waiting for the overall economic benefits that will allow them to move back up the hill.

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