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Growing Nicaragua

Despite Dictators, Revolution, War and, Last Fall, Hurricane Mitch, Tobacco Men in Nicaragua Keep Planting and Rolling
Alejandro Benes
From the Print Edition:
Orlando Hernandez, Mar/Apr 99

"Se tiene que dar mucha nariz," Jose Orlando Padrón is telling his nephew Gabriel. ("You have to give it a lot of nose.") Padrón picks up the bundle of tobacco leaves and parts them as if opening a book. The patriarch of Padrón Cigars is, in effect, getting a read on the quality and progress of this batch of Cuban-seed leaf, part of the 120,000 pounds that are being stored in nine buildings around Estelí, Nicaragua, the country's cigar capital.

Padrón's son Jorge has flown in and is all business. "There's nothing to do but work," he says. This is not a complaint. "I've got a lot to learn yet. It's important that I spend time here." He chuckles as he watches his father repeat a process that he has seen him do hundreds of times. "This is the secret," Jorge Padrón says with a nod in his father's direction. "The secret to success: to have tobacco."

Last fall, that secret became a matter of survival for the Padrón family. One of their two farms, which they had owned for 20 years, was scoured by floods caused by Hurricane Mitch. The topsoil was washed away. The parcel of land that had once given fame to the brand and the country is now little more than a field of rocks. Happily, no tobacco had yet been planted.

"The place is a disaster," Jorge Padrón says. But he adds, "We were fortunate that we didn't have any losses to the factory, or to the warehouses where we keep the tobacco. Production is up and running. Everything's normal." The company did, however, lose two curing barns.

The loss of the Padrón farm--it will likely never be used again--was about the worst loss suffered by any of Nicaragua's cigarmakers.

"Nicaragua has a lot of land," Jorge Padrón says. "The problem in Nicaragua is the lack of infrastructure and barns. We're going to have to build barns. We'll purchase other properties and we'll build the barns on it."

Despite the devastation it brought to Central America last fall, Hurricane Mitch amounted to little more than a brief interruption for cigar production in Nicaragua. Most insiders estimate that industry losses amounted to just 5 percent, mainly because most producers had not yet planted new crops. Excess humidity caused producers to halt rolling for several days during the intense rains. Some stored tobacco was damaged by floods and, most significantly, the homes of an unknown number of workers in the industry were destroyed. Cigarmakers have provided direct help and have mounted fund-raising efforts. The Padróns raised more than $72,000 through mid-December.

If the estimates are correct that Nicaragua was set back 20 years by the damage done by the hurricane--mostly to infrastructure such as roads and bridges--then it is all the more remarkable how unaffected the local cigar industry was.

The boom that propelled the cigar industry in Nicaragua, as elsewhere, has leveled off, and so has the fierce competition for raw materials. U.S. imports of Nicaraguan cigars dropped 16 percent in the first half of 1998. Of the nearly two dozen cigar companies that were doing business in Estelí a little more than a year ago, approximately 10 remain. Although the number of players is shrinking, the quality of tobacco coming out of Nicaragua is at a 20-year peak.

"I think we're getting to the point we were at before the Sandinista [revolution of the 1980s]. Perhaps we're already there," says Juan Francisco Bermejo, a co-founder of the old Nicaragua Cigars company in the mid-1960s, the original maker of Joya de Nicaragua. "Before the war, the best cigar in the world was Joya de Nicaragua."

In 1972, Bermejo sold his shares in the factory to co-owner Gen. Anastasio Somoza, who, as it happened, also ruled the country. After that, Bermejo was involved in another couple of factories, both of which were burned down in the early days of the Sandinista revolution. He left the country after that, returning in 1995 to open his new factory, Nicaragua American Tobacco S.A., or NATSA.

"I can tell you that for a while now we've had the same quality that we had in 1979," Bermejo says, seated in front of a shelf full of trophies won by the company's baseball team. "The Nicaraguan cigar is recovering its prestige. The agricultural sector has also recovered, and so has the shade-grown wrapper." All of NATSA's production, approximately 60,000 cigars a day (as of last September), goes to Cigars by Santa Clara, which is the importing and wholesaling arm of 800-JR Cigar Inc., the largest U.S. cigar retailer.

Like other longtime cigar manufacturers, Bermejo believes that the end of the boom, which some refer to as "stabilization," will help bring recognition to the Nicaraguan cigar. "The stabilization will not adversely affect the quality of the Nicaraguan cigar, it will improve it," Bermejo predicts. "This year the Nicaraguan cigar is better than last year, and next year it will be better than this year. Why? Because it's an industry which has been reborn."

Over the past 20 years, Nicaragua has seen more war than peace, more state control of the economy than private enterprise, more bad than good. Before 1979--and this is what led to the Sandinista revolution's triumph--Nicaragua had more than 40 years of less-than-benevolent rule by the Somoza family.

Conventional wisdom, disputed by some in the industry, holds that it was Anastasio Somoza who gave birth in the mid-'60s to Nicaragua's modern cigar industry. Recognizing that a large number of Cuban tobacco growers and cigarmakers had fled the Castro revolution, he invited some of them to take a look at Nicaragua.

"I'm proud to say that my father [Sixto] was one of the pioneers," says Nestor Plasencia. "We got to Nicaragua in 1965. I was still young at the time. And that's where the planting of wrapper leaf began in Nicaragua. Basically, three zones were opened: the Estelí valley; the Condega valley, a valley which is 35 kilometers from Estelí; and the Jalapa valley, on the border with the Republic of Honduras."

The Cubans went to Nicaragua in search of land similar to that which they knew in Cuba's Pinar del Río. "In Cuba, we grew tobacco in November, December, etcetera, and we had winds from the north," Plasencia explains as he looks out at the new irrigation tubes poking out of his fields. "The temperature would fall and would be quite cool. Here we are much farther south than Cuba, but we have the same [climatic] effect with the altitude."

Somoza gave priority in the mid-1960s to the cultivation of tobacco. Cigarette tobacco had been grown in the area for more than 100 years, but now the focus began to shift toward cigars. With the support of a new government agency called INFONAC--which was created by the nation's central bank president, who lived in Estelí--Estelí grew rapidly into the cigar capital of the country.

"INFONAC [Instituto de Fomento Nacional, or Institute of National Development] strongly developed and collaborated in promoting the planting of tobacco, cigar factories and all that," Plasencia recalls. "INFONAC would buy all the imports--insecticides, fungicides, the cloth for the shade-grown wrappers--and machinery necessary and would make them available to the industry. There was an enormously large amount of cooperation on the part of the government in developing and promoting the tobacco industry."

Like the Plasencias, the Perez and Toraño families have been involved with Nicaraguan cigar tobacco since the 1960s. Jaime Toraño, in association with Alfredo and Silvio Perez, began growing tobacco in the Estelí area in the late '60s, according to Jaime's nephew, Carlos Toraño. The younger Toraño now heads Central American Tobacco and Toraño Cigars and is associated with Habanicsa, a factory in Estelí that makes the Carlos Toraño label, among others. "At that time, and for a long time, the main client was General Cigar," he says. "Most of the tobacco that was grown was candela." (Candela is a once-popular green-leaf wrapper that is seldom found on premium cigars these days.)

"The truth is that in the 1970s, Nicaragua became the alternative in the United States to Cuban cigars and tobacco," Toraño says. "The basic brand, without a doubt, was Joya de Nicaragua, [which] became the standard of quality cigars in the United States." By 1976, Nicaragua was responsible for almost a fifth of U.S. premium cigar sales, second in production to the Canary Islands. The Central American country was also becoming the worldwide alternative for premium leaf tobacco, all of it descended from Cuban seed introduced in the 1960s.

The cigar industry in Nicaragua flourished until the Sandinistas took over in 1979. The new government still supported tobacco, but it took away much of the land. "We continued after that with the Sandinistas, but not farming ourselves directly," recalls Alfredo Perez. "They grabbed all the farms. The government was the owner." The Perez family had already expanded their activities to Ecuador. "We never stopped [working] in Nicaragua," Perez adds. "We couldn't farm the tobacco ourselves during the Sandinistas, but we were the ones who bought the tobacco from the government, gave them technical assistance and sold the tobacco." Now ASP Enterprises Inc., the Perez's Miami-based tobacco business, rents the land from private owners, plants the tobacco directly, processes it and sells it all over the world. (Today, Silvio Perez still oversees the family's tobacco operations in Estelí, while his son, Alfredo, and Alfredo's children concentrate on other aspects of their tobacco business.)

The Sandinistas' impact was widely felt. By 1990, exports of Nicaraguan premium cigars to the United States stood at 1.25 million. "In the 1980s, the tobacco industry practically suffered a great reduction," says Omar Ortez, the president of Condega, Nicaragua-based Agroindustrial Nicaraguense de Tabaco, which makes the Felipe Gregorio, Orosi, La Gianna, Hoja de Habano, Flor de Florez and Diamante brands and employs about 1,800 people. "Factories were working here, but there was not a large amount being produced. There was an increase in the planting of burley [cigarette tobacco] and a reduction in wrapper leaf. Only filler leaf was planted."

During those days, Ortez managed state-owned farms in Estelí and Jalapa. His own family's property was not confiscated because the acreage was too small. "There was not a broad sales structure during the Sandinista years. There was also a reduction in the quality of the tobacco because they were trying to produce volume," Ortez adds, noting that during the U.S. embargo, in the second half of the 1980s, most of the Nicaraguan production was sold to East Germany. Other tobacco insiders have claimed that some Nicaraguan tobacco ended up in Cuban cigars, though the Cubans deny it.

Another problem that arose during the Sandinista regime led to the destruction of the country's wrapper crop. During these years, the Cubans brought technical assistance and additional seed to Nicaragua. But a batch of seed they brought in around 1980 had not been sterilized and it carried blue mold, a tobacco fungus that ravaged the crop and wiped out wrapper production in Nicaragua.

In 1990, the Sandinistas, believing their own public opinion polls, felt confident enough to hold elections in an effort to win crucial international respect and assistance. They were voted out. The widow of Nicaraguan martyr Pedro Joaquin Chamorro, Violeta Barrios de Chamorro, was chosen to lead the government. Her son-in-law, Antonio Lacayo, served as minister of the presidency--a post similar to the White House chief of staff--from 1990 to 1996.

"The most important thing [our administration did] was to try to reintegrate, to the degree possible, the tobacco installations and lands to their owners," Lacayo recalls. (The reintegration was fairly successful, he says; owners were awarded land, though not the same parcels that they had lost.)

"I never thought that a socialist government like the Sandinistas could survive in Nicaragua. So I decided to stay," Lacayo says. "I thought it would be very difficult for the Soviet Union to give the Sandinistas the same kind of subsidy as was being given to Cuba. But then [the Sandinistas' cause was ironically bolstered by] the openness with which the Reagan administration showed its aggression toward that government with the creation of the contras. A lot of European governments with a social democratic bent supported the Sandinistas to demonstrate their independence from the United States. [France's President François] Mitterand did it; [Spain's prime minister] Felipe Gonzales did it; [Italy's prime minister] Bettino Craxi did it, [as well as] some of the Scandinavian socialists. They perhaps did not have the intention of supporting Sandinismo, but they did intend to show within their own countries that they were independent and autonomous from the United States."

By the time the Sandinistas were voted out of power, they had saddled the country with a debt of $12.5 billion, a staggering sum for a nation whose annual gross domestic product then was $1.8 billion, with only $300 million in exports. The service on the debt alone was $250 million. Today, while Nicaragua boasts Central America's fastest-growing economy with a GDP tallying annual increases of 6 percent, the population of the country has practically doubled since 1978. This means that it will take another 25 years of such GDP increases just to return to the per capita income levels of 1977, according to Lacayo.

Under a law that prohibits a president from being succeeded by a family member (a safeguard designed to prevent a re-run of the Somoza dynasty), Lacayo could not run for president in 1996. Instead, he focused his energies on agriculture in the private sector and concluded that the best contribution he could make was by planting wrapper leaf.

"Nicaragua's principal problem, after the war and the Marxist system of government in the '80s, is unemployment caused by an enormous drop in production during that decade," Lacayo says. "So, in the cigar industry, the Nicaraguan has a type of oasis of opportunity, as much in the countryside as in the cities, where there are processing houses and the factories making cigars. It's been a blessing, really, from every point of view, because this is the agro-industrial activity which generates the most employment at this moment in Nicaragua. It competes with the employment generated by the coffee industry, except that the cigar industry jobs are more permanent in that they go on all year. Coffee is seasonal."

Lacayo, who earned a degree in industrial engineering from Georgia Tech and an MBA from the Massachusetts Institute of Technology, gives the economics lesson while driving around his company's fields with his associate, Jose Joaquin Bendaña. An industrial engineer as well, Bendaña is a Nicaraguan-born ex-U.S. Marine, who is now an entrepreneur living in Teaneck, New Jersey. Their shade-grown wrapper fields are located near León, a town in western Nicaragua whose proximity to sea level makes it considerably hotter than the Estelí valley in the mountains to the northeast. Little of that cooling northern breeze reaches here. Many Cuban veterans in Nicaragua see this "new" location as risky, but admit that Lacayo's first crop was of high quality. Lacayo ages the leaves in possibly the most unusual curing barn in Nicaragua--an old abandoned foundry, a relic of the Sandinista days that was built in cooperation with the Soviet Union but never used for its original purpose.

Between taking calls on his portable phone, Lacayo explains that his company, Tabacos Nicarao, is named after Nicarao, the Nicaraguan Indian leader who negotiated a peace settlement in the year 1523 with the invading Spanish conquistador Gil Gonzalez de Avila. The meeting, commemorated in the company logo showing Nicarao offering a cigar to Gonzalez, took place in the southwestern part of the country and indicates that cigar tobacco was already known as a symbol of friendship and dialogue. That belief, along with an 1856 U.S. newspaper article, gave Lacayo and Bendaña enough faith to plant in the plain of León. The article is titled "The War in Nicaragua" and appeared in Frank Leslie's Illustrated Newspaper, the Time magazine of its day.

"This great plain produces," the author wrote, "in the most amazing luxuriance, any or every thing [sic] that ever was grown in a tropical country. Tobacco, superior to that of Cuba..."

Lacayo and Bendaña are using advanced technologies to make up for their lack of experience in the industry. Drip irrigation is used to grow Connecticut shade and Habana 2000 wrapper leaf, a reddish-brown, shade-grown tobacco. Some of the fields are planted with corn and sorghum "to clean the soil of nematodes [worms] left by the tobacco plant," Bendaña explains.

Lacayo wants to make it clear that tobacco is a force of social stability. "Many women work in the tobacco industry, both in the countryside and in the factory," he says. "The salary that a woman earns in my country is doubly important because it's a salary that goes to the house. The salary of the male passes through the tavern and other diversions, and what makes it home is substantially less. The salary of the woman goes directly to the betterment of the standard of living of her family."

Francisca Gonzalez, a 30-year veteran at the factory in Estelí that makes Joya de Nicaragua, says succinctly, "We are living better because there are more jobs. There's more work and that benefits everybody."

A colleague agrees but notes that the tobacco, particularly wrapper, still has a way to go. "The production is not the same as it was 20 years ago, because the tobacco today is different," Rafaela Guevara says of the wrapper that she is expertly manipulating to envelop a cigar. "From one side it has been very favorable to the working class because jobs have been created. Now, however, because of falling sales, there have been fewer exports and personnel has been reduced. So, the person who becomes unemployed really has no economic resources to survive. Those of us who are here, sure we're working, but the salary doesn't really go far enough. Everything, the staple items, have gone up in price tremendously: electricity, water."

Alejandro Martinez Cuenca agrees. Martinez, an economist, is a former Nicaraguan minister and the current head of Tabacos Puros de Nicaragua, the new owner of the factory where Joya de Nicaragua is made.

"The tobacco industry has been the life and the heart of this region," Martinez says. "This whole area was battered, especially after 1986. It was basically subsistence agriculture here. Until the tobacco industry arrived, until the boom came in 1995, this had not changed a lot, but now it is radically different from what was going on in 1983. This was a dead town then."

With a population of about 100,000, Estelí now has four auto dealerships, which sell mostly four-wheel-drive vehicles, a dozen private banks and seven new hotels. Unemployment in Nicaragua has fallen significantly in the Estelí valley and other tobacco regions, and that heartens Mario de Franco, Nicaragua's minister of agriculture.

"Tobacco is what makes a city like Estelí, a city like Ocotal," he says. "This represents the life of all these zones through all the indirect implications which it has. Estelí is one of the most prosperous cities in Nicaragua because of the tobacco industry. It represents the modernization of the city."

De Franco calculates that for each job in the cigar industry--in the growing and processing of cigar tobacco, plus the making of cigars--three jobs in other sectors are created. He notes that the cigar-industry worker makes a higher salary than many Nicaraguan doctors, accountants and teachers.

"A teacher in Nicaragua, and it's ridiculous, earns about $60 a month," de Franco says. "In the tobacco industry, the salaries are around $180 a month." (Martinez at Tabacos Puros de Nicaragua disagrees, saying that the disparity only occurred during the boom and has since leveled off.) De Franco asserts that Nicaragua has 14 cigar companies and that the industry is responsible for the equivalent of 15,000 permanent jobs. Despite the official weight of the figures, there are doubters.

Martinez believes that statistics about the tobacco industry in Nicaragua are highly unreliable. "Nobody tells the truth," he says over lunch at the Hotel Moderno in Estelí. Jose and Jorge Padrón are listening and laughing. "This is a sector--I've been in coffee, in sugar, in oil--where the producers all try to fool one another. I don't know why. I don't understand the psychology of the industry. They never tell the truth. 'No, I'm producing a hundred, four hundred' they'll say, even though they're going broke. [Jose] Padrón is the exception." Padrón laughs.

Back at the factory offices, Martinez continues. "We launched a campaign from here to try to gather all of us fibbers to see if we would stop lying" with respect to the size of the industry's workforce. "We finally calculated that during the boom there were between 10,000 and 12,000 workers in field and factory. Today, we figure between 5,000 and 7,000." He's using a calculator as he concludes that the number of permanent, full-time workers is roughly 4,000, which he says is nearly 1 percent of the nation's full-time labor force.

This is Cuba!" Nestor Plasencia exclaims as he savors a cigar wrapped with this year's Habana 2000 leaf, which has begun to develop strong notes of flavor since the first tests began. "Everybody wants it. In two years this will be it." Plasencia has 400 workers at his Estelí factory; he also has factories over the border in Honduras. He divides his time between the two countries.

The Estelí factory, Segovia Cigars, produces 20,000 cigars a day. The factory resembles a Spanish-style manse, complete with a fountain in the courtyard and stained-glass windows, and is referred to as "The Cathedral of Cigars" by other manufacturers. Finished in 1997 as a joint venture with Danneman, the Swiss tobacco company that was starting to make handmade cigars, the factory is intended as a showcase where Danneman can take distributors and buyers and demonstrate a seriousness and long-term commitment to premium cigar making. The "cathedral" is a copy of the Danneman factory in Sao Felix, Brazil.

Plasencia, who has been marketing his own label for 15 years, has made it big in the cigar business principally as a manufacturer of other companies' brands. Plasencia still does a significant amount of that kind of business, but not like he did in 1997, when his factories produced approximately 50 million cigars.

"Comes the boom in 1994, and in 1996 and 1997 the boom really goes crazy," Plasencia says. "We really thought that was something that could not continue. For example, Estelí used to be visited daily by a ton of people who wanted to buy cigars. Not wanting to buy a box of cigars; [they wanted to buy] 100,000, 200,000 cigars. There was a large proliferation of factories--20 factories opened here--some put up by people who had been involved in tobacco, but many by people who had no experience. People would buy cigars at whatever price, no matter the price. It was something we had never seen before.

"Various companies visited us," Plasencia continues, cautiously. "We were increasing our production of plantings and manufacture. We make a very good quality product at a good price. We started making cigars for many companies and our production increased considerably. Our production represented a large segment of the market. A production of 50 million cigars, made totally by hand, had an impact. A lot of large companies took notice: 'What's happening there? What's going on with Nestor? He's got farms in Honduras, farms in Nicaragua. Factories in Honduras, factories in Nicaragua. Farms in Costa Rica. Nestor is alone. We've got to go see Nestor. We've got to go buy from Nestor.' Then, various companies came to visit. But really, we like what we do. We are in love with what we do apart from the economic part, which is very important. I form part of the fourth generation of the family in this business. So, they come to see us, and one of them [Tabacalera S.A.] made us a generous offer, one that was very attractive: 'If you won't sell us the whole operation, why don't you sell us one factory in Honduras and one factory in Nicaragua?'"

For how many dollars, he is asked. "For a few, for a few," he answers, and laughs.

Other makers have struggled a bit more. Henry Berger runs the World Cigars factory in Estelí, maker of the 5 Vegas brand. The company opened in Miami in 1995 and added the factory in Nicaragua a year later.

"We have a group of people who make investments. We get into different businesses and we saw cigars coming in," Berger explains as two visitors, Drug Enforcement Administration agents from the U.S. embassy, shop for cigars. "My father was a cigar smoker back in Cuba. I've always liked cigars. I wasn't a big smoker, but I had a little bit of knowledge tasting different cigars and that's about it. We opened up this business, we brought a guy in, and the first three months that he was here, we had problems with him. Weird things were happening and it gave me no choice but to come down. I was the only one who was able to come down out of all the partners. So I took over the factory and I had to learn everything from scratch, practically."

Berger's is one of the many cigar companies that was created during the boom. To prevent financial problems that could arise from the post-boom slowdown, Berger says he has reduced the number of workers from a high of 290 to about 150. He and his partners have a total of $3.5 million invested, including the "5 Vegas Mansion," a guest house in Estelí for visitors, where the rooms bear the names of cigars and show off the company brand everywhere.

"It was more of an emotional thing," Berger admits. "I came down to Nicaragua to see the factory. To be honest with you, I thought everything was fine. One day we open up a box of cigars and find that it's not our brand. [Our factory] had made a mistake and shipped us the wrong cigars. I said, 'Uh oh, something ain't kosher here.' No control. Now that I've gotten into it and now that I've really learned the business, I understand it in a different way. I don't know that I'll ever leave it, because I fell in love with this thing. I like cigars. I've learned from some of the best." He acknowledges the help he has received from Jose Padrón and Juan Francisco Bermejo by saying they are some of the best people he has ever met. Along with 5 Vegas, Berger is now producing about 5,000 flavored cigars a day under the Lacuna label: rum, vanilla and amaretto. He says they're selling well.

The road between Estelí and Jalapa to the north has always been unpaved and crowded with livestock. This is the source of Alex Gimelstein's love-hate relationship with the country. He loves the cigar business here and the people in it. He just hates taking nearly four hours to drive 90 miles. And that was before Hurricane Mitch.

"The road is very bad. The bridges are horrible. The telephone service is horrible," says Gimelstein, the owner of the Havana Republic brand. "But Jalapa is the most productive land in Nicaragua because of the soil and climate. If Jalapa had the roads that Estelí has, nobody would be in Estelí."

Gimelstein, who says he has been in the industry since he was eight years old, and his partner, Medardo Padrón (no relation to Jose), who has been in the business 57 years, are in front of the TV at the Hotel Moderno watching Mark McGwire try to hit another home run.

"From 1995 until now," says Medardo Padrón (who seems to become truly animated only when he talks about fishing), the country's economy and infrastructure "has improved 50 percent. There is more security." He says this even though everyone warns about ambushes from car jackers and others on the way to Jalapa. "Once the highway is finished, Jalapa will increase another 50 percent. The land will be more valuable than in Estelí."

Jalapa, on the Honduras border, saw some of the heaviest fighting during the contra war. Tobacco barns, generally not the sturdiest structures to begin with, were burned down. Contra combatants used to take cover behind the barns, but Sandinista AK-47s would essentially make short filler out of the buildings.

"I'd like to take the optimistic view," says minister de Franco. "Before [1997], you couldn't get from Managua [the capital] to Estelí. [In 1997], we accomplished creating access from Managua to Estelí." (An accomplishment that has to be repeated after Mitch.) "We can communicate between Managua and Ocotal. We are constructing the infrastructure for Jalapa. During the entire Sandinista period and the government of Mrs. Chamorro, there was not an additional kilometer of highway built. The highways that we have are the highways that were built before 1979. We've already built more highway than had been built before." Others contend that about 500 miles of highway were built by the Chamorro government, though all agreed that the hurricane last fall has made it difficult for the current administration to connect additional parts of the country, including Jalapa. The entire cigar region, from Estelí to Ocotal to Jalapa to Honduras, was affected when many roads were washed away. Immediately after the storm, only one of three border crossings between Honduras and Nicaragua was open. The Nicaraguan government promised that reconstructing the nation's infrastructure was its highest priority.

It is also vital to the growth of the cigar industry. No one knows that better than Jose Padrón and his 200 full-time workers. He is focused as he walks into the leaf deveining area of one of his factories. He points out that the walls of all Padrón buildings are yellow. "It keeps the mosquitoes away," he says.

Padrón notes there are problems for the industry--problems yellow paint won't fix. Infrastructure is one. The tax situation is another. Without some sort of duty-free status, the industry will find it increasingly difficult to compete with prices of cigars from other nations. This is something the government has begun to explore, but taking advantage of any resulting special status may be difficult for many cigarmakers.

"The problem with the duty-free zone requirements is the physical reality of the factories," Padrón explains. The factories in Estelí are small and in the middle of town. Generally, they are not set apart in large industrial parks the way some are in the Dominican Republic, for example.

Nonetheless, for Padrón and for others who have invested not only in the tobacco, but also in the people who work it; who have had factories burned; who have lived through wars and embargos, Nicaragua is worth the effort. "Eighty percent of those people have been with me since the 1970s," Padrón says. "Because they have followed me--they've defended me--I also have been with them."

Padrón has seen it all and he has never left Nicaragua behind. Even when he had to move production to Honduras during the Reagan embargo, Padrón's factory in Nicaragua held hundreds of thousands of his cigars. He has always made only one brand of cigar.

"I returned in 1990," Padron recalls. "I never stopped going to Nicaragua, but to make cigars I went back when Violeta Chamorro became president and the embargo was lifted. You know how many cigars I had in Nicaragua when the embargo was lifted? Six hundred thousand cigars. And they were so good. What tobacco, brother!"

Alejandro Benes covered the Nicaraguan revolution for ABC News from 1979 to 1985.

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