Wes, In reply to your question, he approached from the street side of the beach, and said, "Excuse me, guys, I need your cooperation." At that time the machete was hidden behind him, tucked in his pants. We tried to walk around him, and that's when he brought the knife out. Then he said "You're going to give me all your money." His voice was just at a normal tone and very calm, until we started to argue with him and tell him we didn't have any money.
And to clarify for some of the earlier posts, we didn't wait til the next day to report the crime, but we were asked by the police to go to the police station the next day to "file for a police report." Which brings up a whole other subject - has anyone ever been in the police station in San Pedro? One of the most run-down buildings on the island. Very few of the officers have uniforms, their radios are in bad condition, and they have very little equipment. I had brought down school supplies for the children, but it crossed my mind that equipment and supplies for the police station may have been a better idea. They are clearly underfunded. We had to return to the station each day for 3 days in a row to finally get an official copy of the police report, but you could hardly blame them for being inefficient. Luckily our "case" was handled by a very nice, hard working officer. I think his name was Marshall York. I think they have stepped up security a bit after this recent "rash" of robberies south of town, because we saw officers walking the beaches most evenings after the night we were robbed.
And I do want to restate that I agree with most of you. AC is a safe place. You run a risk of this sort of thing happening anytime you travel, and for many of us, when you think of it, the risk of being robbed is there even when you are at home. You just have to be ready for it, the "fake wallet" is a great idea, and insurance always helps (so the watch we lost is replaceable). In the end, we felt that the robbery was almost an integral part of our trip, as it let us see a differnt side of the culture that we would not have seen otherwise, and we are hopefully wiser for it now. AND, in dealing with a machete, we are glad we only lost a watch and not an appendage or something less replaceable.