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Cigar Industry

Moving Forward in Nicaragua

Nicaragua's cigarmakers craft their smokes while keeping one way eye on the country's new president
| By David Savona | From Tom Berenger, July/Aug 2007
Moving Forward in Nicaragua

The meal of roast pig and all the trimmings was finished, and the sated diners retired to the living room for drinks and cigars. The clicking of multiple lighters was heard, then the air filled with the rich aroma of heady Nicaraguan tobacco. The men sat on an L-shaped couch, their eyes focused on the events unfolding on the television. Daniel Ortega, Nicaragua's newly elected president, was standing on a grand podium surrounded by his allies from around the world. Standing particularly close was Venezuelan strongman Hugo Chavez, foil to American president George Bush and in spirit the second coming of Fidel Castro. Patriotic music boomed in the background as a sea of onlookers, supporters of the Sandinista party, chanted what reminded some of those in the living room of an old Soviet work song.

For those with investments in Nicaragua, the sight could not have been comforting. Yet it's the new reality in Nicaragua, where Ortega has risen from the ashes to once again claim the presidency of this Central American nation. His previous reign—he was part of the ruling junta in 1980, then served as president from 1985 to 1990—was known for the nationalization of private assets and the American government's embargo of Nicaraguan goods. Today, however, the nation is serene, and few expect that such hard times will return. Many are betting it will be business as usual, and some are even making significant investments in ways that suggest they expect the country will continue to be a leading exporter of fine cigars to the U.S. market.

Nicaragua's cigar exports are growing faster than any other cigar producer. Shipments rose by 12 percent in 2006 to 56.4 million cigars, keeping Nicaragua firmly in the No. 3 spot for exports of premium cigars to the United States. (The Dominican Republic, which controls about half the market, ranks first.) No. 2 producer Honduras had flat shipments in 2006, at 88.2 million cigars.

The growth rate for Nicaraguan shipments has eclipsed that of other cigar producers for most of this decade. In 2000, Nicaraguan exports were 19.2 million, less than a third that of Honduras. They soared to 27.4 million in 2001, then reached 37.7 million in 2002 before slipping to 33 million in 2003. The growth resumed in 2004, jumping to 47.9 million, then 50.4 million in 2005.

The success of Nicaraguan cigars is directly tied to the country's amazing tobacco. The rich soils of Nicaragua yield superb tobacco leaf, and the nation has three distinct growing areas—Jalapa, Estelí and Condega—that allow cigarmakers the option to create complex blends using solely Nicaraguan tobacco Nicaraguan tobacco makes delicious cigars, and American cigar smokers have embraced that flavor.

The Padrón family, makers of Nicaragua's most acclaimed cigars, seem unfazed by the election of Ortega. They have put even more support behind the Nicaraguan cigar industry by shutting their Honduran factory, the outpost in Danlí where all Padróns were made during the U.S. embargo on Nicaragua. "We're moving the Honduran operation here," said president Jorge Padrón in January, seemingly unconcerned with the notion of closing his safety valve when some are wondering about the future of Nicaragua. He is walking through the large factory in Estelí that he and his father, José Orlando, opened in 2004, the source of most of the 5 million cigars the company produces each year.

At the end of 2006, the Padróns stopped making cigars in Honduras, and earlier this year they added production capacity in Estelí to make up for what was once made in Honduras. (At first, they had decided to put the rollers in their original Nicaraguan factory, which is now a warehouse, but they later changed the plan, and found space inside the large compound where they now make all of their cigars.) Rolling every Padrón in Nicaragua has streamlined the company's production. The Honduran factory remains open, but only as a box manufacturing facility.

Few things seem to faze the Padróns. This is a family that lived with bombs left on their Miami office doorsteps when a humanitarian mission to Cuba to rescue political prisoners didn't sit well with some members of the Miami community. When you can survive a bombing, a change in Nicaraguan politics mightn't seem daunting.

José Orlando Padrón flew to Cuba in October 1978 as part of a humanitarian mission to free political prisoners. During the visit, he recalled on a recent trip to Nicaragua, he met with Fidel Castro. Padrón had three cigars in his shirt pocket. "Padrón," Fidel said, "I hear you've been making good cigars." Padrón answered, "That's what they say." Asked Castro: "Can I try one?"

Padrón put the three cigars on the table, allowing the Cuban leader to choose. He selected one, Padrón took another, and put the third back in his pocket. "At that moment," remembers Padrón, "there were no journalists in the room." They spoke about the prisoners, came to an agreement and then brought in the press. At that time, Castro asked Padrón for another cigar to examine. Padrón handed him the one in his pocket. "I think Fidel did it on purpose," says Padrón. "The moment I handed him the cigar, they snapped the picture." The photograph made headlines in Miami, and it didn't sit well with some.

"It was like putting gasoline on a fire," says Jorge, who was a child when the trip occurred. The bombs—six in all, three of which exploded—soon followed.

"I have no regrets," says José Orlando, taking a puff on his cigar. "Because everything I do, I do with my heart." Forty-nine prisoners were freed on his first trip, 300 on the second, 3,600 in all.

Over breakfast one morning—an open box of Serie 1926 No. 6 Maduros sits on the counter at all times, and a cigar is never far away—father and son talk about the odd weather affecting Jalapa, the northern Nicaraguan area prized for its wrappers. Padrón Cigars Inc. gets much of its wrapper crop from Jalapa. Persistent, nagging rain has ruined some of the leaf.

"Fortunately, we have enough tobacco," says Jorge, 39. Later he'll walk a visitor past pile after pile—pilón after pilón—of fermenting tobacco leaves, enough to make five years' or so worth of Padrón cigars. Every few steps he and his father stop to dig a leaf out from the pilón, tear it in half and wrap it around their burning cigars for a test smoke. This is quality control, Padrón-style.

The work has resulted in unparalleled accolades for the family's cigars: Padróns have never rated lower than third on Cigar Aficionado's annual Top 25 list, and the Padrón Serie 1926 40th Anniversary was named Cigar of the Year in February 2005.

José Orlando Padrón seems in a reflective mood on this trip, enjoying his surroundings. He appears to be scowling, but he's deep in thought, deeply sniffing the white gardenia he has picked from the courtyard of his house, which abuts the cigar factory. "This flower is very significant," he says, a smile making its way to his face. "I used to play under a gardenia plant when I was a child." He holds the bloom in his right hand, his ever-present cigar in his left.

Padrón turned 80 in 2006, and to commemorate the occasion the family settled on creating the company's first perfecto shape, the Padrón 80th Anniversary cigar. A prototype was first smoked at Cigar Aficionado's Las Vegas Big Smoke in November 2006, and the final product is expected on the market sometime this year.

Alejandro Martinez Cuenca

Alejandro Martinez Cuenca, who vied against Ortega to become the candidate from the Sandinista party, feels Nicaragua has a bright future. "I don't see people moving out of the country," says Martinez Cuenca, 59, who owns the Joya de Nicaragua cigar brand, sitting in his office in Managua. "I think there is no possibility that we're going back to the past. I am still confident that Nicaragua will continue to be a good place to make cigars and grow tobacco as we have been in the last part of the 1990s and the 2000s."

Martinez Cuenca's factory in Estelí, Tabacos Puros de Nicaragua S.A., is busier than in past years. "Right now business is very good. The word to sum it up is stability: we are a modest factory, but we have been doing well in the last five years," says Mario Perez, marketing manager for the company. The company has 70 rollers, making some 2 million cigars a year, most of them Joya de Nicaragua. "The northern part of the country is the poorest, the area most bitten by the war," says Perez. "Estelí maybe was the most bitten city. More than 50 percent of the city was destroyed. Tobacco has given this area stability."

The Joya de Nicaragua Antaño, which took two years to create, was the company's attempt to recapture the flavor of the Nicaraguan cigars of the glory days of the early 1970s. The bold and rich cigars have found an eager audience in the United States. Perez credits Antaño with making the factory busy again.

New cigarmakers have set up shop here recently. One of the more interesting additions is Tabacalera Cubana, the Estelí outpost of Pepin Garcia's El Rey de Los Habanos, the tiny Miami factory that is making outstanding cigars such as Tatuaje.

Tabacalera Cubana, which is co-owned by Garcia and Eduardo Fernandez, has been open since mid-2006. It has 36 pairs of rollers, a few making short-fill cigars, most making long-filler smokes. The filler tobacco is all local Nicaraguan leaf, with wrappers from around the world.

To help bring the new factory up to speed, Pepin's son, Jaime, now spends much of his time there: one month in Nicaragua, followed by a few weeks in Miami, then back to Nicaragua. His father does a similar rotation to ensure that one of them is at the Estelí factory on most days.

"Cuban tobacco is the best in the world, when worked properly," says Jaime Garcia, 35, sitting in front of a modest table on the second floor of his Nicaraguan cigar factory. "For me, Nicaragua resembles the closest to Cuban tobacco."

The younger Garcia has a powerful build, a military-style haircut and sleepy eyes, and the frequent smile of a man who realizes he is hitting his stride and doing things very well. He eagerly hands out cigar after cigar. The tobacco is excellent, rich Nicaraguan leaf with lots of character. Some of the smokes are balanced and sublime, others as powerful as an uppercut from one of the Klitschko brothers. All are exquisitely made with the careful construction that has become a Garcia hallmark. Was it difficult to teach the Nicaraguan rollers how to do a three-seam cap, in the Cuban style? "It's not their tradition, so it's difficult," Garcia admits. "We said, 'You need to work more.'"

Garcia's father was a top roller in Cuba, making such cigars as the Montecristo "A." (Back in the late 1950s, Jaime says, the family had a factory in Cuba.) Pepin Garcia left Cuba for Nicaragua, worked with Fernandez in the Jalapa region, then opened El Rey de Los Habanos in 2003. High ratings in Cigar Aficionado soon followed. But the Garcias could only do so much in Miami, where they had all of a dozen rollers. For expansion, they looked to Nicaragua, the source of most of their tobacco.

There are differences. In Miami, the cigars are made by one person, who bunches and wraps. In Nicaragua, the bunching is done by one worker, the rolling by another.

With a nod to Cuban style, the cigars in Nicaragua are rolled with two binder leaves, rather than one large one. "The binders are important in the blend," Jaime Garcia insists. There are also no Temsco bunching machines here, not even for the Cuban-sandwich-style cigars made with a hefty dose of short-filler tobacco.

The factory does quite a bit of business under contract, making cigars for other companies. In addition to Tatuaje owner Pete Johnson and Padilla Cigars, there are Holt's, Cigars International and others. Total production at the factory will be about 3 million cigars.

When asked if they worry that quality will slip with this great expansion of cigar production, the younger Garcia says, "We think we can improve the quality." The high ratings have followed: the Tatuaje Havana VI Angeles, which is made in Estelí, recently scored 93 points.

Garcia is not concerned about Ortega. "Everyone is working in tobacco here. Where are they going to work if everything changes?" he says, reflecting on the importance of the tobacco industry to the Nicaraguan economy.

Toraño Cigars, one of the established Nicaraguan cigarmakers, has reaffirmed its commitment to making cigars in this country by recently acquiring a mountain overlooking the city of Estelí, where it will build a new factory for its cigar production in Nicaragua. The company envisions as many as 400 rollers and 400 bunchers eventually working there. Carlos Toraño Noventa and Toraño 1916 Cameroon will be rolled there, as well as C.A.O. International Inc.'s Nicaraguan cigars. The company also makes the Dunhill Signed Range cigar brand for British giant BAT.

Jose Oliva puts flame to one of his family's cigars.

Tabacalera Oliva Tabolisa has been making great strides in Nicaragua. The family-owned business (known as Oliva Cigar Co. in the United States) makes about 6 million cigars a year, about 90 percent of them Oliva-brand cigars. The rest are private labels. "People think we do a lot more private-label [cigars] than we do," says Jose Oliva, 34, one of the brothers working for the company under the tutelage of patriarch Gilberto Oliva Sr., 76, who came to Nicaragua in 1964 from San Juan y Martinez, Cuba. After working for others, in 1969 Gilberto struck out on his own to grow tobacco, but he had to leave in 1979 with the turmoil facing Nicaragua. "In between, Dad grew tobacco in Honduras, Mexico, Panama and the Philippines," says Gilberto Jr. "In 1995, he came back."

Over the past 12 years the Olivas have grown their business, surviving the tough days that followed the cigar boom and now prospering thanks to the succulent blends they make using well-aged tobacco, much of it grown on their own farms. Jose and his older brother, Gilberto Jr., show off several warehouses.

"We ferment at a very slow pace," says Gilberto Jr., a heavyset man who looks younger than his 46 years and wears an easy smile. "We don't like to bring the temperatures too high."

"This takes a tremendous amount of cash flow," says Jose, a quiet man with a dry sense of humor. He's standing among dozens of piles of fermenting tobacco in a warehouse in Palacaguina, Nicaragua. Humidifying is done the old-fashioned way here, by spraying water on the floors when needed. It's the way Gilberto Sr. prefers it be done—Gilberto Jr. hopes to modernize things like this someday.

The Oliva factory in Estelí is fairly new, having opened in July 2003. It replaced a smaller facility. The workforce, which includes 180 rollers, gets details right. Near a color-sorting table, a woman is cutting a half inch off the foot of each maduro cigar with a chopper. "The maduro wrapper shrinks after rolling," says Jose. The cosmetic cutting ensures that the binder and filler don't peek out like ankles of someone wearing high-water pants.

The brothers eschew the office and take seats at a wooden table in front of the galleria, to watch over the workers. They bring out a few robustos from 2003, the release of their Oliva Master Blends 1. The four-year-old cigar is rich and sublime, mellow and balanced. The company intends to release some of its aged stock as part of a special shipment within the next year.

"Everybody is wishing for the best, and worrying for the worst," says Gilberto Jr. of the political situation. "I have had a couple of meetings with officials, and they have assured me nothing bad will happen."

Oliva had a second cigar factory, in Jalapa, Nicaragua, where few cigars are made, but it recently closed that operation and moved that production across the border to Danlí, Honduras, joining other cigarmakers that have operations on both sides of the border.

To handle the uncertainty over the future, Martinez Cuenca recently organized the cigarmakers and tobacco growers of Nicaragua in order to resurrect the industry's trade group, which was renamed the Nicaraguan Cigar Guilders Association. At a December meeting, Nestor Plasencia Jr., cigarmaker and tobacco grower, was elected president.

"We have a lot of things in mind," says Plasencia, who is clearly less concerned about the change in government than he is with other matters, such as simply improving tobacco production. "Get PhDs to help the grower and improve the quality of the tobacco, help fight against the counterfeiters," he says. Unity is also important, should the government threaten. "We can fight all together," says Plasencia.

The Plasencias also make cigars on both sides of the border, including many for Rocky Patel, one of their biggest customers in Honduras. Patel's cigars are so hot that he can't keep up with demand, so he has cut deals with two small cigarmakers in Estelí to have some new brands made here.

"The reason we're here is our volume is limited in Honduras," says Patel. "We need production to serve our private labels. This allows us to be creative, so our brands don't taste the same. And it allows us to make unique-sized, unique molds. We can do some really neat stuff."

Patel walks with excitement through the dusty streets of Estelí, wearing an outfit that would look more at home in a nightclub than in a cigar factory. One factory he's working with is Tafenic, a small, five-year-old operation that seems to be straining at its walls. It has several dozen cigarmakers making a variety of smokes for eight clients, including Patel.

Not far away is Nicarao, a larger operation that's six years old. (It used to be called Nicasa.) It has about 120 rollers and bunchers, including an upstairs gallery reserved for production of Patel's cigars.

Patel is pleased with the new cigars and enjoys having the smaller factories as part of his lineup. "With these small factories, it allows us to react quickly," he says. "It's more custom. To change a factory with 300 rollers takes a long time. This allows us to be quick. We can't grow without this."

Jonathan Drew, chairman and cofounder of Drew Estate Cigar Co., is perhaps Nicaragua's most eclectic cigarmaker. He says business is growing at a tremendous rate: the creator of the Acid brand of cigars is building a 96,000-square-foot factory into the side of a cliff overlooking the farms of Omar Ortiz. (Ortiz runs Nicaragua's largest cigar factory, Nicaragua American Tobaccos S.A. [NATSA], which produces many of the inexpensive house brands for JR Cigars, as well as Juan Lopez and Omar Ortiz Originals for Altadis U.S.A. Inc.)

"The factory will produce cigars by July," says Drew, a 36-year-old, fast-talking former New Yorker who has lived in Nicaragua for nearly 10 years. He has wild, auburn hair and favors glasses with loud, colorful frames. He stands out on the streets of Manhattan, so one can imagine the reaction in Nicaragua.

"We've outgrown the factories we have," he says. "We started with six people, including myself. Now we have 800 employees."

Acid cigars are infused—Drew dislikes the term flavored—with oils, botanicals, herbs and even red wine in a factory that Drew likes to keep off-limits to many visitors. With names like Blue, Wafe and Krush Classic, they are foreign to most premium-cigar smokers, but they have also been an undeniable hit.

Drew was a law school graduate and a cigar merchant operating in the World Trade Center when he decided to create his own (unflavored) brand, La Vieja Habana. It was originally rolled in Manhattan, at La Rosa Cigars, but later it was made in Nicaragua under contract by Nick Perdomo. "After two years of going down to Nicaragua once a month with Perdomo, I fell in love with Estelí," says Drew. Perdomo's father, the now-deceased Nick Perdomo Sr., took him in. "He kept me eating and kept a roof over my head. I was there most nights," says Drew.

He prefers to smoke traditional blends that aren't flavored—he counts Padróns among his favorites—and, unlike many cigarmakers, will heap accolades on other brands he freely admits smoking. "Before anything, I was a cigar guy. I was a cigar knucklehead. I've always smoked the other guys' cigars."

Drew is now trying to make cigars that he likes. He recently released the non-flavored Chateau Real, which is mild, and in August will debut the stronger Liga Privada. By the end of the year, Drew hopes a good portion of his cigar production will be non-flavored. The company is making about 14 million cigars a year, many of them tiny smokes measuring four inches by 32 ring (not much larger than a cigarette) that are packed in tins. All are made by hand.

Tabacalera Perdomo makes all of its cigars in Estelí, in a big factory next to a curing barn. The company makes a host of brands, including the new Perdomo Lot 23 and Perdomo Reserve Limited Golf Edition, also known as Perdomo Golf. Once a newcomer to Nicaragua, Perdomo is now one of the established cigarmakers here.

Kiki Berger, who owns the small Tabacalera Estelí factory in Estelí, is in good spirits. "We're doing better than ever—sales-wise, production-wise," he says. He's growing more tobacco, including some in Jalapa, and on a personal level he's doing better as well, with a new lease on life thanks to a kidney transplant, donated by his young wife. The transplant has reenergized him and cut his dependence on dialysis, which he underwent for five years.

"Ortega seems to be positive, and it would be foolish of him to mess with this industry. He already knows that taking it away from us and giving it to the employees would be foolish," says Berger. "There is some holdup [in foreign investment]. The banks are waiting. Right after the election they started taking money out. I think within the next few months it will go back to normal. A lot of people are giving him a chance. I think maybe he'll do the right thing."

Few believe that nationalization is possible. Tobacco and cigar making are too important to the country now to risk losing it to the hands of the government. More real is the smaller threat of higher wages for workers, which would result in higher prices but would keep business moving.

In a candid moment, one cigarmaker speaks on condition of anonymity: If we have to move from the country, he explains, we will become all that we've spoken against. Like many of his colleagues, he believes being close to the tobacco of this country is vital to the image that Nicaraguan cigarmakers have molded—picking up shop and making cigars someplace else is not a pleasant thought.

Few think it will come to that, however. Hopefully, the majority opinion of those in the Nicaraguan industry will hold true, and Nicaragua's new leadership will leave its amazing cigar industry alone so that it continues to prosper.

Photos by Tomas Stargardter

Nicaragua Drew Estate Padrón Cigars Inc. Oliva Cigar Co.

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