THINGS HAVE BEEN CHANGING quickly in San Juan over the past five years. Sixty major housing developments are either under construction or soon to break ground, from the Costa Rican border, a half-hour south of town, up to and well beyond the fabulous Popoyo reef break, an hour north. More than $400 million in foreign investment has poured in. Land that was next to worthless as recently as 2002 is now flipped with ease; third-acre oceanview lots go for hundreds of thousands. The franchises have followed: The first Subway opened three weeks after I arrived.

An estimated 78 million Americans will retire in the next 20 years, some of them dreaming of deals down south. On the higher end, this could mean a $500,000, 2,500-square-foot house in a gated community overlooking one of these stunning beaches, with its own restaurants, swimming pools, shops, clubhouses, DirecTV, wireless Internet, and full security. The expats need not speak Spanish or even notice much that they are in Nicaragua. All the while, the real estate ads promise, their investments will increase at rates that would make the stock market look silly.

A quick scan of back issues of Between the Waves, a local quarterly English-language magazine geared toward tourists, reveals three things nearly all these ads tout: investment potential, concern for the environment, and sex. Between the Waves covers feature lovely, light-skinned young Nicaraguan women emerging like Venus from the Pacific foam, some of the shots proving so popular they've been reprinted as local Re/Max ads: a tall girl stepping from the sea in a bikini and hoop earrings, smiling at someone off-camera, no one else on the beach. Other developers take the green approach. One outfit, Nica Dev, promises that they "develop with a conscience," advertising green communities built around ecological reserves, and Century 21's ads exhort readers to "preserve the beaches."

It's not hard to see why there's an air of expat guilt about what's going on here. In December, I drove out to one of the bigger new projects, Cantamar at Playa Yankee. While many developments can't be seen from the gatehouses where guards stop prying visitors, this one is too big to hide. Carved into the forested hills overlooking an untouched beach are clear-cut terrace after clear-cut terrace, heavy machines at work, the ground rumbling beneath their weight. When Cantamar is eventually finished, it will be a sprawling community of luxury homes, but when I went back in March, it still looked like what it was: deforested land.

Nicaragua is a World Bank– and International Monetary Fund–designated "heavily indebted poor country," with little legal ability to control its economic future: Everything is for sale. And once Nicaraguans decide to cash in and sell their houses or farms, they have to look far inland for anything affordable. Many who sold four and five years ago realized less than 5 percent of what the same properties sell for now. A prominent development appraised by the owner at $26 million was built on land bought for $80,000, according to a son of the family who sold it.

Some of these sales are contested. "The foreigners come here knowing the titles are in disarray," one San Juan man told me late one night at L'Mche's Bar, where the local restaurant and hotel staff unwind after work. He was home for the holidays from the job he held, legally, in Texas. "They have the money to win any lawsuit. We can't afford to fight them in court. And do you know how we are treated when we go to the U.S.? We can't even jaywalk without being harassed by the police."

This huge and growing disparity in wealth has begun to reveal itself in ugly ways. Though Eduardo Holmann, San Juan's Sandinista-party mayor, dismissed a Diario report that local fishermen have been shot at when they drop anchor in bays fronting private developments, he admitted that new laws have to be written to protect beach-access rights, which some foreigners have been trying to deny. Petty theft is a persistent annoyance. Crack is a growing problem. One Wednesday night late in January, a block from Big Wave Dave's, a celebrated local hustler and avowed user stabbed a prominent expat twice in the stomach with a pair of barber's scissors, the culmination of a long-running feud. The expat recovered after surgery; the hustler was arrested and released, and a few weeks later he left town.

Meanwhile, the boom continues, despite foreign anxiety surrounding the November 2006 reelection of former Sandinista president Daniel Ortega. Ortega, after all, led the nationalization of private property following the 1979 revolution, which overthrew U.S.-backed dictator Anastasio Somoza. The Ortega of today is not the Ortega of the past; he has been actively reassuring investors that the favorable business climate here will not change. Still, few deny it comes with a price. "You've seen these developments," said Mayor Holmann. "Where is that sanitation going to drain? We are trying to support all of this with the same infrastructure that we had 30 years ago. If we don't get help from the national government, we are going to have critical situations with drainage and electricity."

The mayor is not anti-development. "If the foreign investors behave with social responsibility," he said, "community relations will turn out OK." But, he cautioned, "what we don't want to see is a San Juan del Sur of America."