 The territory or "cacicazgo" ruled over by Nicarao was situated in the isthmus of what is now known as Nicaragua's Rivas Department, next to Lake Nicaragua, and it extended southward to what is now known as the Guanacaste Province in northwestern Costa Rica.The tribe's capital city or principal settlement was called Quauhcapolca, though it has sometimes been referred to in history books as Nicaraocallí, and it is believed to have been situated near the modern lake port of San Jorge.According to a once-popular theory, the name "Nicaragua" was derived from a portmanteau of the name Nicarao and the Spanish word "agua" which means "water", due to the presence of two large lakes and other bodies of water in the country.