I first heard about this book, and this odd little cranny of history, via this TYWKIWDBI post. Macintyre did indeed track down the lost colony in 1991, though there wasn't much left of it -- but its founding in the late 19th century is the more interesting part of the story.
Elisabeth Nietzsche (1846-1935) exemplified the type of person her brilliant brother despised -- a thud-and-blunder über-nationalist and anti-Semite, obsessed with "racial purity" and collective identity, and something of a Victorian prig as well. With her husband, the like-minded (but gloomier and less energetic) Bernhard Förster, she dreamed of founding a "pure" German colony in some remote location, where the true German spirit could continue -- she disdained Germany itself as irredeemably poisoned by Jewish influences. Unfortunately for all concerned, she had enough determination to actually make her dream a reality. A piece of land in the deep interior of Paraguay was found, 14 suitably-Aryan families were recruited to settle there, and in 1886 Nueva Germania was born.
The effort was a fiasco from the start. German temperate-zone agriculture proved grotesquely unsuited to the tropics; pounding rains, tropical diseases, and dangerous animals tormented the settlers (during his own 1991 trip upriver to find the colony, Macintyre passed the time partly by reading a book about the various poisonous snakes that infest the area); isolation and depression took their toll. Eventually some of the colonists took to denouncing the project as a fraud in the German media, hampering Elisabeth's efforts to recruit more settlers. In 1889 the perennially-gloomy Förster expressed his despair over the colony's deepening money woes by committing suicide. Four years later Elisabeth abandoned her colony and returned to Germany.
It's jarring to the modern reader to see how, in the late 19th century, anti-Semitism was considered a perfectly respectable stance on an equal footing with tolerance of Jews (paralleling, perhaps, the way homophobia is still seen as a respectable stance in some circles today). At one point Elisabeth said that her colony would show the great things that anti-Semites could accomplish. Her brother brushed her off by saying he wished all the anti-Semites would get out of Germany and go to Paraguay.
I've known for a long time that Nietzsche's philosophy has been grossly distorted and over-simplified in the popular imagination, making him a precursor and inspiration to the Nazis. What I learned from this book is that it was his sister who was mainly responsible for this corruption of his views. Nietzsche suffered a psychological collapse in 1889 and became essentially insane, no longer able to speak for himself, and died in 1900. Elisabeth edited his unpublished writings and took over guiding public perception of him.
Nietzsche was an elitist to be sure, but he was fascinated by superior individuals, not a "master race". He despised Judaism as a religion (largely for the crime of having brought Christianity into the world), not Jewish people; he attacked anti-Semitism at a time when anti-Semitism was popular and respectable. A German through and through, he was nevertheless exasperated with the crude nationalism of the time, and intrigued rather than disappointed by the fact that the name "Nietzsche" is probably of Polish origin. But Elisabeth's paint-roller covered all his subtle and clashing hues with a monochrome, making his ghost an ally of her own views which he had rejected in life.
Elisabeth lived long enough to see the rise of the Nazis, whom she of course fervently supported. Hitler respected her and visited her several times, and sent a container of German soil to be scattered on Förster's grave in Paraguay. Hitler enthusiastically embraced the endorsement provided by Elisabeth's warped re-write of Nietzsche, but there is no evidence that he ever actually read a word Nietzsche wrote. A famous photo, reproduced in the book, shows Hitler gazing "thoughtfully" at a bust of Nietzsche. The great thinker, captured in stone, looks even gloomier than usual, as if his shade were despairing over the ignorant and bigoted pygmy who had risen to power over his country, even claiming his philosophy as inspiration.
Macintyre in 1991 did find a few families and physical relics left over from Nueva Germania. Some descendants of the settlers have intermarried with local people, while others stayed true to their founders' ideals of racial purity, and are beginning to show effects of inbreeding. It won't be long before the last remnants of Elisabeth's dream merge into the tropical jungle and disappear. But "decadent" Germany itself, despite the catastrophe brought by the Nazis she came to admire so much, is doing just fine. Perhaps in time even her brother's reputation will recover from the butchery she wrought on it.