Costa Rica Sees Increase In Tourists 
March 19, 2010 Inside Costa Rica

The Instituto Costarricense de Turismo (ICE) says that 426.000 visitors came to Costa Rica during the first two months of the year, 37.000 more than the same period last year. The announcement was made by ICT minister Allan Flores based on immigration records of entries into Costa Rica.

"The numbers are a good sign of a recovery", said Flores.

 

Notwithstanding the good news, Flores explained that there are still regions affected by the downtown in tourism due to the economic crisis. Flores did not name the regions.

 

According to the immigration service records, the San José airport, the Juan Santamaría, continues to be the main door into Costa Rica, with a total of 227.000 visitors entering through the airport during January and February. Last year the number of visitors through the Santamaría was 208.000.

The Daniel Oduber airport in Liberia also saw an increase in visitor arrivals, recording a total of 50.427 visitors during January and February, 9.000 more than the same period last year.

The number of visitors entering by land at the various border posts with Nicaragua to the north and Panama to the south increased to 149.000, 7.000 more for the same period in January and February 2009.

Indications Are That Economic Crisis In Costa Rica Is Almost Over 
March 19, 2010 Inside Costa Rica
All indicators point out that the economic crisis is slowly coming to an end and the country is recuparating. Supporting that is the fact that there have been 35.995 new jobs created between August 2009 and January 2010. The figures were releaed by the Caja Costarricense del Seguro Social (CCSS).A poll by Manpower shows that Costa Rica is the number two in job expectations in Latin America, with a 23% net gain in jobs. 

Other indicators that the economic crisis is almost done and over with is the fact that 40.000 people attended the 10 days of the Expomóvil, the annual car show, that is really one big open ten saleathon for new and used vehicles. 

Add to that is the report by the Camára Nacional de Turimso (Canatur) that hotels and tour operators report an 80% occupancy rate for this Semana Santa.
And the Cámara de la Construcción is predicting a 13% increase in new hiring that translates into 15.000 new jobs in the sector. Of course those who lost their jobs in the past year see it totally different.
The price of consumer goods, clothing, groceries, appliances, etc. is still the same, while their income took a drastic drop. The economic crisis affected greatly the lower middle class to the lower class, which are still reeling from the effects and don't see the positive side like the other classes. 
However, experts in economy say the country is coming out of the crisis and there will a strong increase in hiring in the coming two years.According to the Univesidad Nacional (UNA) economist, Roxana Morales, in October 2008 there were 1.391.129 employed, in January 2010 the number of employed rose to 1.405.299 or 14.170 more people employed. 
Also, the monthly economic index produced by the Banco Central shows that the economic activity in January 2010 was 6% higher than in January 2009.
Economic experts suggest that the use of credit cards be reasonable and keeping financial order is important, as well as not speculate on the future movements of the dollar/colon exchange rate.  

Dollar Drops ¢14 in One Day To ¢523
March 16, 2010 Inside Costa Rica
The price of the dollar fell ¢14 colones yesterday, dropping to a low that not been seen in over a year, hitting a low of ¢521 for buy and ¢531 for the sell, at some banks. The Banco Central de Costa Rica (BCCR) posted this morning, Tuesday, an exchange rate of ¢523.05 for the buy and ¢532.59 for the sell, ¢13.67 and ¢13.9 less, respectively. According to economist Alberto Franco, speaking to Al Día, the reason for the sharp drop is the difference between the short term interest rate for savings in colones and that for dollars.This difference, says Franco, has led to the "colonización" of investments. With the lower demand for the dollar, the exchange rate drops. If we look back to the exchange rate in the last six months, the dollar was trading at ¢585.90 for the buy and ¢595.37 for the sell on September 17, 2009. Since then the drop and rise has been sharp and gradual, with a net drop of ¢62.85 for the buy and ¢62.78 for the sell. On March 16, 2009, the exchange rate was ¢561.18 for the buy and ¢570.76 for the sell, a year earlier, on March 16, 2008, the exchange rate as ¢492.19 and ¢498.15.

 Limbaugh: I’m Moving to Costa Rica If . . .
March 10, 2010 Inside Costa Rica
Radio host Rush Limbaugh said Tuesday that he would leave the United States for medical care if President Barack Obama’s healthcare plan is passed and implemented – a comment that was erroneously reported as meaning he’d permanently move to Costa Rica.
Liberals who don’t like the conservative Limbaugh’s vociferous criticism of President Obama’s policies seized on the comment to tout Costa Rica’s socialized medical system, Limbaugh responded on this own Web site that they had misunderstood him once again.
“And I said, ‘Well, if doctors are not permitted to opt out of the government insurance pool and so forth, Medicare, Medicaid, whatever it is, and if they're not allowed to establish a private practice with private sector patients paying their own way, then I'll go to Costa Rica.’"
Limbaugh explained that many insurance companies are making contingency plans to move to Costa Rica if Obamacare passes. Costa Rica is increasingly becoming a destination spot for many Baby Boomer retirees.
“I said, ‘Look, there are insurance companies who don't want to be put out of business.’ We've talked to them on the program. I've talked to them privately.
They are establishing healthcare clinics with quality doctors in places like Costa Rica. They're going to continue to sell policies to people who have the ability to fly down there and get treatment.
“If I have to get thrown into this massive government health care insurance business and end up going to the driver's license office every day when I need to go to the doctor, yeah, I'll go to Costa Rica for treatment, not move there.

 

Legislators Approve Drop In Traffic Fines, With Exceptions
March 10, 2010
The country's legislators approved to reduce the fines in the new Ley de Tránsito that went into effect on March 1, 2010. However, the reduction in fines apply only those traffic violations that do not involve highly dangerous behaviour like drinking and driving and reckless driving. The amendment was proposed by legislators of the Partido Acción Ciudadana (PAC) and approved unanimously. The reduction in fines is in addition to amendments that removed the point system and the increase of the maximum amount of intoxication limits of drivers. 

With the changes the new Ley de Tránsito does not have the same bite as when it was introduced for drinking and driving and reckless driving in December 2008 and the remainder of the law on March 1, 2010. Legislators, the same ones who first approved the law in December 2008, have been busy at work in the last 10 days to modify the law, bowing to public pressure of fines and other sanctions being too harsh.The motion passed on Tuesday does not affect fines and sanctions for drivers going in excess of 120 km/h or are found with more than a 0.75 blood alcohol content.  
With the changes the fine, some of the reduced fines include:  

- driving over 120kp/h, driving under the influence of alcohol, not buckling in children in a booster of child seat, will cost ¢255.551 from ¢381.420 

- driving over 20 kp/h of the limit, talking on a cell phone while driving, not respecting traffic signals, not using a seat belt, crossing a red light or not havein the marchamo (circulation permit) will cost ¢190.710 from ¢2860.65 

- not having the Riteve inspection, passing on the right, obstructing intersections, not having a license plate on the vehicle and modifying an engine will cost ¢52.907 instead of ¢190.710 

- driving with an expired license, driving in reverse on a highway, not having the right license plates on a vehicles will cost ¢38.142, down from ¢114.426 

- not carrying a drivers license while driving (different than driving without a license) will cost ¢26.699 and not ¢76.284 

- violating the vehicular restrictions of San José will now cost ¢11.442 instead of ¢38.142 

A complete list of all the reduced fines will be available in the coming days as legislators release the full text of the amendments. 

Many cheered the changes. saying that the fines are now more reasonable, as the fines contained in the original text were over exaggerated, forcing economic hardship for many for minor infractions. 

These changes, as well as the other changes approved in the last 9 nine days will all go into effect once they are published in La Gaceta.  

   

New Costa Rica Marina Set to Open
March 5, 2010 Inside Costa Rica
A new marina near Quepos is set to open in April, adding oft-requested boating facilities to Costa Rica’s Pacific coastline.
The 55-acre Marina Pez Vela project will eventually include more than 300 slips, ranging from 35 to 200 feet; dry storage facilities and a full-service boatyard, as well as 200 residential units. The first phase opening next month features 100 slips.

For a tropical country with a spectacular coastline known for its fishing, Costa Rica offers relatively few options for the boating world (and the population of boating second home owners). Last year, the ultra-lux Penninsula Papagayo in Guanacaste in north Costa Rica opened its own marina, the country’s first catering to super-yachts.
Strict environmental regulations make it difficult to build anything along the Costa Rica coastline, nevertheless a marina. The Quepos project, which is only a few miles from ManualAntonioNational Park, was the first project launched under guidelines of a law approved by the government to speed up marina development. That law was passed in 1998.
In the case of Marina Pez Vela, which has been in development for more than 10 years, demand for slips is driving the project more than the residential component.
“It’s a marina development that will ultimately have residential, versus a residential development that threw in some docks,” Phil Bronstien, a partner in the project, said in an interview a few months ago.

 

Point System Eliminated From New Traffic Law
March 4, 2010 Inside Costa Rica
Citing the inability of the Cosevi and the MOPT to administer correctly the points system in the new Ley de Tránsito, a majority of the legislators on Tuesday afternoon approved removing of the points from the sanctions of the new law.
By a vote of 25 in favour to 21 Against of the 46 legislators present, at 6:11pm Tuesday, the point system was dropped from the Ley de Tránsito, leaving only the economic sanctions for traffic violations, with the exception of drunk driving and reckless driving, where violators are subject to criminal prosecution and prison.
The approval goes against the arguments of the MOPT minister, Marco Vargas, who considers the elimination of the point system a weakening of the traffic law that has only been in full effect for two full days.
The absence of four Partido Liberación Nacional (PLN) legislators meant that the legislators of the Partido Acción Ciudadana (PAC), PUSC, Movimiento Libertario, Restauración Nacional and one independent, who were opposed to the inclusion of the points system, obtained a majority of the votes.  The objections came from PLN legislators, who opposed the proposal by PUSC legislator, Lorena Vásquez. And with four legislators missing from the voting, they could not hold their ground at the time of the vote.The Movimiento Libertatio party whip, Carlos Gutiérrez, said "this is the most sensible thing that has been done so far. The corrections to the traffic law is on track. Fortunately common sense is emerging".
Although the point system is dead in the water today, it could make a come back in the near future. Legislators commented that the point system could be re-introduced once the MOPT has had time to fully evaluate and reconsider the system and up to the new legislative body takes over their work on May 8.

 Tourists can stay for one year without leaving

 March 2, 2010   A.M. Costa Rica

Under the new immigration law, tourists will be able to stay in Costa Rica for a full year without having to leave the country. Instead, they will be able to renew their tourist visa three times here for additional 90-day stays, according to Mario Zamora, the immigration director.

Each renewal will cost $100, he noted. After three renewals, the tourist will have to leave Costa Rica, although they could quickly return with a new tourism visa, he said.

Zamora also said that he was in error when he told a reporter that rules would be changing for the so-called perpetual tourists. A.M. Costa Rica reported the incorrect information Feb. 19 and attributed it to Zamora.

Friday Zamora blamed himself for saying that tourists would not be able to go to the same country twice to renew their visa and that after two trips to renew a visa a tourist

will have to stay out of Costa Rica for a minimum of 15 days. He gave no explanation for why he made the error, but suggested that he may not be totally familiar with the new immigration law.

The news report generates some concern among Costa Rica's perpetual tourist population.

Zamora also said in an interview Friday that the regulations for the new immigration law should be ready to publish in 15 days. However, he said the law, which went into effect Monday, was written in detail and that the regulations are not extensive.

He noted that the prior immigration law operated for nearly four years without regulations being published. The new immigration law only says that tourists can renew their visas by paying $100. Not in the law is the limit on renewing the visa just three times. Presumably that will be contained in the regulations, but Zamora did not say this.

 
 Costa Rica Wakes Up To Two New Impacting Laws
March 1, 2010 Inside Costa Rica
Today, March 1, 2010, Costa Rica wakes to two impacting laws, the new Ley de Tránsito - traffic law - that will change driving habits in Costa Rica and the Ley de Migración y Extranjería - immigration law - that tightens immigration controls.

 The new traffic law that was approved in December 2008, goes into full effect today, raising the maximum fines from yesterday's ¢20.000 to almost ¢300.000 and introduces a point system that could end up in a temporary or permanent suspension of a drivers license.

 

The new traffic law will force drivers to change their driving habits or pay the consequences. Although traffic officials will go easy on drivers for the first 60 days, issuing warnings for minor offences, major offences come with heavy fines and points.

 

Every driver begins today with 50 points posted on their drivers license. Driving over 120 Km/h, for example, means a total loss of points and a suspension the drivers license for two years. Repeat offenders could lose their license permanently.

 

The new immigration law that took effect at the stroke of midnight also seeks to change the immigration problems of the past decades. 

Some of the changes contained in the new immigration law is the requirement of foreign residents working in Costa Rica to contribute to the Caja Costarricense del Seguro Social (CCSS) - social security. Foreign residents who do not contribute will no longer be able to obtain free medical services. 

Also, foreigners are required to pay an annual  $25 fee that will go to the Fondo Social Migratorio that will raise some us$12 million dollars annual from the 486.000 foreign residents. 

The new legislation also calls for a fine of $100 per month to any foreigner who overstays his or her "legal" stay. North Americans and Europeans have a legal stay of up to 90 days, while only 30 days for most other countries. 

The new law also requires hotels and others providing lodging to maintain a public register fo all foreigners, which can be reviewed by immigration officials at any time. 

In addition, the Policía Técnica de Migración (immigration police force) will expand from the current 35 officials to 285.

 

 

 

What you should know about the NEW immigration law 

 Feb. 26, 2010  By Chrissie Long Tico Times

 A new immigration law will enter into effect on Monday, March 1, which will bring information relevant to every foreigner residing in Costa Rica. According to Immigration Administration Director Mario Zamora, the intent of the law is to move the approximately 600,000 foreigners living in Costa Rica into a status that reflects their situation. 

We've compiled a short list of “Things You Should Know,” which follows. We are in the process of updating this list to answer more questions in greater depth that our readers might have. 

Please keep in mind we can only offer general information; we cannot provide advice regarding individual situations.

 

Q: Regarding the “perpetual tourist,” who enters on a tourist visa and leaves the country every 90 days, I heard that after two times renewing tourist status by remaining outside of the country for 72 hours, you must remain out of the country for 15 days. Is that true?

 

A: No. It's not true. The situation of the perpetual tourist will remain as it has been. Under current rules, tourists are allowed to stay 90 days in Costa Rica, at which point they must leave for 72 hours. If they don't leave, they are here illegally.

 

I also heard you must go to a different country to renew visa status. If you went to Nicaragua for 72 hours the first time, you must go to a different country the next time. Did I get that right?

 

No. As long as you remain outside the country for 72 hours, it doesn't matter where you spend it.

 

What if I don't want to leave Costa Rica ?

 

Under the new immigration law, there is an option for you. Beginning March 1, you can submit a petition at the Immigration Administration in La Uruca, which is to the west of San José, pay $100 and you can remain another 90 days.

 

Is this a complicated process?

 

According to the director of the Immigration Administration, it is not. You must submit a copy of your passport, a letter addressed to the head of the Immigration Administration explaining your situation and proof that you have financial solvency. You must also pay $100.

 

Is the immigration administration the only place I can renew my tourist status?

 

For the moment, the immigration administration is the only place you can renew your tourist status. In six weeks, the Immigration Administration hopes to make the process available in post offices throughout the country. Renewing status at the Immigration Administration is permitted only two times, at which point you must leave Costa Rica.

 

What if I miss this 90 day deadline?

 

If you miss the 90 day deadline, you have two options. You can pay $100 for every month you've remained in Costa Rica “irregularly” or you can leave the country. If you decide to leave Costa Rica without paying, immigrations officials can refuse re-admission to the country, or you will be allowed to return only after a period outside the country three times longer than the time you were illegal in Costa Rica.

 

I would like to upgrade my tourist status and become a resident. What do I need to know about this process?

 

Thanks to the new immigration law, you can initiate the process without leaving the country. Before, paperwork had to be submitted to consulate offices in the home country of the foreigner. Today, paperwork (such as the necessary birth certificate and police record) can be submitted and approved at the Costa Rican Immigration Administration. One of Immigration Director Mario Zamora's objectives is to make the process possible without the need to hire a lawyer. Unfortunately, it will require a good command of the Spanish language, but Zamora is hoping that he'll have all immigration material translated into English in the coming months. Lastly, you need to qualify for resident status as a retiree, investor, family member of a Costa Rican, or an employer-sponsored worker.

 

Is it possible to get residency as a homeowner?

 

Yes. You must demonstrate your home is valued at more than $200,000 in order to get investor status on your home.

 

I heard that I will need to show proof that I contribute to the Costa Rican Social Security system (Caja) in order to renew my residency. How do I contribute?

 

Under the new immigration law, foreigners must show evidence that they contribute to the social security system (public health care system) in order to renew his or her residency. You can do this at any of the Caja offices throughout the country, who will present you with a menu of options on how you can begin contributions. According to the immigration director Zamora, the Caja is prepared to receive foreigners in order to meet this requirement.

Check the March 5 Tico Times for more information about the immigration law.

 

 

Microsoft increases investment in Costa Rica

 Feb. 27, 2010 Tico Times    

Computer software giant Microsoft is the latest high technology company to increase investment in Costa Rica. The local branch of the international company announced this week that it plans to invest an estimated $6.5 million in operations in Costa Rica this year. This represents an increase of 8 percent over its 2009 investment.

This announcement was paired with the presentation of a new general manager for the company, Juan Pablo Consuegra, who will head operations for Microsoft Costa Rica. Microsoft has been operating in Costa Rica for 15 years.

“During these years of work in the country, Microsoft has identified in Costa Ricans a high potential for their technological capacities and in innovation to develop their abilities,” Consuegra said on Wednesday. “The results seen over the course of the past 15 years has encouraged Microsoft to contribute more energy into developing their technologies in the country.”   Currently, Microsoft provides services to 6,000, or 17 percent, of small and medium sized businesses in the country.

 More Flights, Lower Fares  Costa Rica      
 Jeanne Leblanc| February 26th, 2010 

American Airlines will add flights in April between New York and three destinations: San Jose, Costa Rica; Madrid; and Manchester, England.

I see some pretty good fares this spring on all three of those routes, which is probably not a coincidence. Any increase in supply can push prices down in the ultra-competitive airline business.

So fares are running at $339 between JFK and San Jose on American, round-trip, all taxes and fees included, through March and April.
Delta has the same fare between Newark and San Jose on Delta.
Mexicana and TACA are even lower, at $313 and $276, respectively, both out of JFK. And they’re all undercutting ultra-no-frills Spirit Airlines, which flies to San Jose out of LaGuardia, at this point with a bottom fare of $367.
 

Construction On The Rebound Feb. 17, 2010 Inside Costa Rica 

The Colegio Federado de Ingenieros y Arquitectos reports a surge in construction in the first month of the year. The Colegio said that the in January 2010 some 631.000 square metres of construction was approved, 220.000 more than in January 2009.

The majority of the construction is for commercial and residential projects.

Olman Vargas sais that his is the third consecutive month of increases in terms of square metres. In 2009, the construction industry decreased by 40%.

The Colegio indicates that the Puntarenas-Central Pacific-Jaco area is the province with the single largest increase in the first month of this year.

75% Of Luxury Home Owners Haven't Paid Their "Luxury Tax" Feb.11, 2010 Inside Costa Rica 
The Banco Hipotecario de la Vivienda (BANHVI) says it can only build 350 "social assistance" homes, a number far less than expected, because the majority of owners of luxury homes have not paid their "luxury tax". 

The luxury tax that applies to all homes evaluated at ¢100 million colones ($180,000) or more. 

Clara Zomer, the ministra de Vivienda (Housing Minister) said that only ¢3 billion colones has been so far paid by owners of luxury homes, out of an expected revenue of ¢12 billion colones. 

Owners of luxury homes had until January 15 to pay up their 2010 tax before incurring penalties and interest. The tax is payable for the next ten years. 

The purpose of the luxury tax is to build socially assisted homes for some 235.000 people. 
 

Costa Rica Elects First Female President Feb. 8, 2010    InsideCostaRica.com 

Laura Chinchilla was on Sunday elected as the first female president in Costa Rica's history, winning the popular vote with a 46.8% support with 94.2% of the ballots counted. 

Chinchilla's win was apparent within a few hours of the closing of the voting, as rivals Ottón Solís and Otto Guevara declared defeat, not even waiting for the vote count to reach the half way mark. 

Solís was the first to accept the Chinchilla win, congratulating Laura and promising that this would be his last campaign, moving on to others things, paving the way for the others. 

Guevara, moments later announced defeat but with a triumphant voice, claiming victory for a party that won more than 20% of the vote, a big win over the 9% support of 2006 and vowed the party to the presidency in 2014.

"With a lot of respect, we accept the reality," said Solis, who was just 1 percent of votes away from a victory in 2006 elections.

Chinchilla told her supporters gathered at the Crowne Plaza Corobici as the country's next president, whe would keep all she promised during the campaign.

"We don't receive a bounced check from the people. To the contrary, we have shouldered solemn obligations to hold dialogues with all parties and social sectors," she said. 

Chinchilla's campaign platform included improvement of the country's infrastructure, creation of a progressive income tax and new jobs with "green jobs" initiative. She also has promised to create more job opportunities, better living conditions for children and senior citizens, as well as to combat crimes and drug trafficking. 

Laura became the first female minister de Seguridad from 1996 to 1998 and held the post of first vice-president in the Arias administration from 2006 to 2009, resigning to run for the presidency. 

Voting began at 6am sharp, as all the 6.000 voting centres were in synchronized time with the Tribunal Supremo de Elecciones (TSE) and closed promptly at 6pm. At 8:15pm, Luis Antonio Sobrado, president of the TSE, announced the first voting results, showing Chinchilla with a firm lead, with more votes than her two main rivals combined. 

Costa Rica is the only Latin American country which in 60 years has enjoyed democratic elections without interruption, said Emma Maria Mejia, chief of an observer mission from the Organization of American States.
 

Tax evasion estimated at more than 70 percent but declining
Feb. 5, 2010  AMCostarica.com    
The Contraloría de la República estimated that the country lost out on the bulk of the taxes residents were supposed to pay from 1991 to 2007. A study released Thursday said that the rate of tax evasion was estimated at from 72 to 73 percent in the period from 1991 to 1993 and spiked to 79 percent in 1995.
The Contraloría estimated the amount of taxes that should have been paid by estimating the gross national product and then comparing the taxes that should have been generated with the taxes actually paid. 

However, the Contraloría, the national's financial watchdog, said that evasion declined to 70 percent in 2006 and to 64.3 percent in 2007.  

The study credited tighter controls and methods like the fiscal lottery. In the lottery citizens were asked to submit facturas or invoices from various companies, and winners of prizes were selected among the submitters by chance. But then the Tributación General would study the submitted facturas and go after those merchants who were not reporting their sales or other economic activity.

 Costa Rica has an extensive system of reporting in which both those paying for goods and services as well as those selling goods and services have to submit reports. The reports used to be annual, but this year Tributación has said it will require quarterly reports.  

So a taxpayer who goes to the dentist is supposed to file a report on the money paid for treatment. Tributación will match that against the income statements submitted by the dentist.

The Contraloría said that evasion cannot be reduced to zero, but in Costa Rica the amount withheld by taxpayers is high compared to the national economy. 

The study also showed that the average gross profit of businesses ranged from 21 percent to 17 percent from 2004 to 2007.

Tributación has been working with the U.S. Internal Revenue Service to increase the efficiency of collection.

The study did not address evasion of sales tax, which also is rampant. 

 Costa Rica rises to third on Yale's green list Jan 30, 2010 By Tico Times  Costa Rica ranked number three out of 163 nations in the 2010 Environmental Performance Index (EPI), a biannual ranking system that is produced by Yale University and Columbia University. The index, released Thursday, gauges a country's “environmental health” and “ecosystem viability,” and scored nations in 10 policy categories that are divided into 25 environmental indicators.The aggregate categories include analysis of each nation's performance in limiting greenhouse gas emissions, water management, forestry and biodiversity, to name a few, and build on information gathered before 2009 from international organizations, universities and the United Nations. Costa Rica scored 86.4 percent overall and ranked behind Switzerland, at 89.1 percent, and Iceland, at 93.5 percent.In a press release, analysts indicated that the 2010 rankings suggest that income is a major determinant of environmental success. 
By comparison, Nicaragua and Panama, Costa Rica's two neighboring nations, ranked 93rd and 24th, respectively. The United States came in 61st place.

Experts acknowledged, however, that data gaps existed in the information they used for the index. Many of the statistics came from questionable government reporting, which in some cases “are not subject to any external review.” 

Costa Rica climbed from number five in 2008 and number 15 in 2006, the first year the indicator was published.

 

 

JACO TO CALDERA! NEW HIGHWAY OPENS!
Jan 28, 2010 By the A.M. Costa Rica staff  

San José. The most crucial was the 40 kms (25 miles) of new construction between Ciudad Colón and Orotina. 

The highway is a case study in stalled public works, which Arias vowed would never happen again. He also said that shortly the Costanera Sur will be inaugurated. This is the Pacific coast road that replaced the gravel section between Dominical and Quepos. 

The opening of the new highway Wednesday was not without protest. Santa Ana residents continue to block the highway. They want a pedestrian bridge, sidewalks and a relocation of a bus stop. Arias was one of those delayed by the protest. The bus with the president and some ministers aboard had to make a detour. 

The Concorcio Autopista del Sol got a concession to complete the highway. The government put up $36 million, mostly to purchase right-of-way. The consortium put up $82.7 million, and the Banco Centroamericano de Integración Económica provided a $160 million loan. The rest, $82.5, came from the Caja de Madrid, the Spanish bank. 

Arias said that a similar concession would help finish the highway from San José to San Ramón and San Carlos. The concession holder makes a profit by tolls.  He also took credit for other transportation advances, like the reinitiation of work at Juan Santamaría airport, a concession at Daniel Oduber airport and the extension of the urban train system to Curridabat that will take place soon, Arias said. 

 

 
  San José - Caldera Road Open, Finally
Jan 28, 2010 Inside Costa Rica
Finally, after more than three decades of planning, promises, starts, stops and delays, the San José - Caldera highway, though some prefer to call it a road, is a reality and travel between the interior of Costa Rica and the Pacific coast is at least 45 minutes faster.
However, Ruta 27 is not cheap. A round trip between the Sabana, San José and Puerto Caldera, Puntarenas, costs ¢3.860 in tolls (¢1.930 in each direction), for the 77 kilometre trip that takes less than an hour.
On Wednesday, Costa Rican president, Oscar Arias, officially inaugurated the road wich for some moments was open to the public from Orotina to San José.
The road officially was opened to traffic Wednesday night and the toll stations began collecting at midnight.

Even though the road is now open and the tolls are being charged, parts of the road are still missing signaling, bus stop bays, lighting and rail guards.
What the road means to many is a savings in time, fuel and wear and tear on their vehicle.
Some prefer to call the highway a road, since it is for the most part a two lane road that weaves between the mountains, not much different than the other roads that lead to and from the Pacific, but with tolls.

 The new San José - Caldera road now means the trip takes less than an hour and no mountains to climb or descend.  Also, the new road offers passing lanes at points where there some gentle climbs, allowing slow moving traffic to the right.
Whatever you call it, a road or a highway, to paraphrase president Arias during the inauguration ceremony on Wednesday, the new highway will be a boost to tourism.
  The event took place in Orotina where a ceremony marked the opening of the highway. The $360 million project cuts about 50 minutes off trips between the Pacific coast area and Cuidad Colon. 

The government uses concessions because it does not have the cash or borrowing capacity to take on large projects. The government also wants to modernize the ports of Limón by turning the operation over to a concession holder. That was done in a prior administration with the port in Caldera on the Pacific. 

 

   Tourism Decline In 2009 Was Lower Than Forecasted
Jan 8, 2010 Inside Costa Rica
The numbers are in and show that Costa Rica had 180.000 less tourists during 2009 over 2008. Despite this decline, the agency forecasted of a drop from 12%, but in reality was just under 10%, a decline lower than anticipated.

The figures were released by the Cámara Nacional de Turismo (CANATUR).

However, what the figures do not show is that the type of tourist coming to Costa Rica has changed, they are spending less time in the country and spending less.

Hotel, resort and tour operators all agree that, even though they are still getting a fair number of tourists, revenues are lower than expected.
CANATUR estimates an increase of 5% for 2010.

An estimated 7,000 homeowners have not paid the tax on their homes valued at ₡ 100 million (nearly $179,000) or more in Costa Rica. With the Jan. 15 deadline for paying the tax having passed, those homeowners are responsible for fines that amount to 10 times the original tax.

The Tax Administration is not backing down on their requirement that every luxury home owner file and has pledged to confront delinquents in the coming months with “an order to pay.”

Jenny Phillips, finance minister, said the low number of filers is evidence “that tax payers in this country are not educated in paying taxes.” She added, “We have been announcing this everywhere. Nobody in this country can argue that they didn't know about the law.”

 

Legislators approved the law in October 2008 as a means to raise money for housing for the poor. Known as the “impuesto de solidaridad” (solidarity tax), financial experts expect the tax to raise as much as ₡ 12.5 billion (almost $22.4 million) a year.

The original deadline for the first payment was Dec. 31, but flaws in the system led officials to extend the deadline to Jan. 15. Responding to claims the tax was complicated to file, Phillips said, “This ministry administers taxes. (They are) taxes that are complicated. We would be lying if we didn't say the following: The majority of taxpayers have to look for specialists.” Alluding to the supposition that such taxpayers have money to hire help, she said, “This tax is directed at people who have homes valued at more than ₡ 100 million.” There's no excuse, she added, “Those that haven't presented their declaration, have not done so simply because they don't want to.”

 
 

 Tighter Security Controls At Costa Rica's Airports For US Bound Flights Jan 7, 2010 Inside Costa Rica
At the request of the United States the Dirección General de Aviación Civil (DGAC) has tightened its security protocols at the Juan Santamaría (San José) and Daniel Oduber (Libera) international airports on flights to the US. The measure follows the attempted terrorist attack on Christmas day on a flight from Amsterdam to Detroit, Michigan.

Among the changes are that passengers will not be able to carry on their carry on any powdered substance. Items like coffee, sugar, salt, cacao or powdered milk are a no on, unless they are purchased within the terminal's retail stores.

Jorge Fernández, director of Aviación Civil, is emphatic that passengers travelling to the US should buy items like coffee only from stores in the airport terminal - these are the stores beyond the security checks, near the boarding gates.

The only exception to the rule, according to Fernández are prescribed medical items and infant formula and milk. However, these items will be closely inspected by the Policía Aeroportuaria (airport police) before boarding.
The restrictions on liquids, like gels, creams, toothpaste, etc, continues if they are in packaging over 100ml.
Also xray machines and metal detectors will continue to inspect carry on luggage.

Fernández said that in addition to all of this, passengers on US bound flights will have to submit to a final boarding inspection, this being done by the airlines, independent of the security checks and controsl of the DGAC.

Although the tightened security measures are geared towards US bound flights, Copa airlines,  Continental airlines, said it would be adhering to the US security measures though Copa has no direct flights to the US from Costa Rica.

The director of the Policía de Vigilancia Aérea stationed at the Santamaría and Oduber airports, Glen Pacheco, said that passengers can expect more exhaustive checks to impede passengers from boarding with any dangerous substance or material.

Easier Now To Obtain Cellular Service In Costa Rica
Jan. 6, 2010 Inside Costa Rica
In an effort to become more consumer friendly in the face of competition, the Instituto Costarricense de Electricidad (ICE) - the state owned telecom - is making it easier for individuals and businesses to connect to mobile telecommunications services such as cellular telephone service and mobile internet.

Unlike in the past were in addition to personal documents, ICE required a recent utility bill - an oxymoron there because ICE is the sole utility providing fixed line telephones, but it required a printed telephone bill, not accepting an internal check - that states clearly the address of the subscriber.
In addition, ICE required that the customer provide an original and a copy of the proof of purchase of the cellular phone unit to be connected to its network.
That is no longer the case.

ICE only requires that the customer have their cedula, in the case of an individual) and the "personería" in the case of a corporate entity like an S.A.
The customer is then asked to sign a service contract, provide the deposit (¢12.500 colones in the case of cellular service) and the actual cellular telephone, is all that is now required to connect to the ICE network.
Another major change in ICE policies is the ability to transfer service to another party. ICE calls this "traspaso de derechos por mutuo acuerdo" (transfer of rights by mutual agreement).
The state institution also requires that the person to acquire the right must not have any existing debt and accepts all outstanding and future charges to the service.

Unfortunately, however, ICE still has yet to drop the "residency" provisions,  that is foreigners who are neither have a cedula by way of naturalization or legal residency, cannot obtain cellular telephone services in Costa Rica. Not yet, anyways.

Ways of getting around that provision has seen foreigners enter into arrangements with nationals or residents to obtain the service. The precaution is that the user, the person who is paying for the service, is at the whim of the other and not being able to deal directly with ICE if there is a problem with the service and/or billing.

In some cases, foreigners have reported being scammed, contracting to acquire cellular service, paying an upfront cost for the right and use, in addition to the usage charges, and then find in months or less to have the service cut and losing any upfront payments. In the old days, the days prior to GSM and few cellular telephone lines, that upfront cost reached at one point more than us$1.000.

For customers who meet the conditions of subscription have to also be cautioned that not all cellular telephones are accepted for connection to the ICE network.
ICE has a list of "homolgaldos" - approved cellular telephones - that can be connected. If the cellular telephone presented for connection is not within the approved list, an ICE agent may or may not, depending on the circumstances, accept it, having the customer sign a waiver of any responsibility on the part of ICE if the unit does not work properly. In such cases, ICE agents also refuse to configure any part of the phone.
The other consideration to the type of cellular phone unit is dependent on the type of service.
ICE now offers TDMA (which is being phased out by 2011), GSM and 3G. The customer has to have the right type of technology for the specific service. For example, ICE will not connect a GSM phone to the 3G network, though a GSM phone will work with a 3G SIM chip. However, a 3G phone can be used to connect to the GSM network, for a 3G phone is a GSM phone, but with the added capacity for High Speed Downlink Packet Access (HSDPA) and WCDMA protocols, for instance.

Too technical?  Don't worry, the cellular phones today are smart enough to know all that, even if we cannot even spell it out, and will automatically find their way around the network.
For more information on the new ICE policies go to: http://portal.grupoice.com/wps/wcm/connect/79343f004ff5bd51b80eff2a526ccfc9/info+link.pdf?MOD=AJPERES&CACHEID=79343f004ff5bd51b80eff2a526ccfc9

 

Costa Rica With Lowest Inflation Rate In The Region

Jan 6, 2010 Inside Costa Rica

The accumulate inflation rate for 2009 was 4.05%, the lowest in the last 37 years, according to the Instituto Nacional de Estadística y Censos (INEC).

 

The rate is also 9.85 points below the inflation rate of 13.9% for 2008 and was within the forecast range of 4% to 6% by the Banco Central de Costa Rica (Central Bank).

According to the INEC, December was the month in the year with the highest inflation rate, a rate of 1.02%.

 

What the 4.05% means in real terms is that Costa Ricans need an addition ¢4 per ¢100 colones at the end of the 2009 than at the begining of the year. For example, an item that cost ¢100 colones last January, costs today ¢104 colones.

 

In Latin America, at least 18 countries saw a reduction in the inflation rate, although the final numbers are not all in.

According to the Consejo Monetario Centroamericano, in addition to Costa Rica, only Colombia (2%) and Uruguay (5.9%) published their numbers.

Once all the countries publish their numbers, Costa Rica is expected to have the highest reduction in the inflation rate in Central America.

 

 Costa Rica Fared Well During Economic Crisis, Says Central Bank President  Dec. 16, 2009 Inside Costa Rica

Although the president of the Banco Central de Costa Rica (BCCR) - Central Bank, Francisco de Paula Gutiérrez, assures that this year has been a difficult year for the Costa Rican economy, he feels that the country has handled the crisis a lot better than most had thought.

Gutiérrez said that the economy should see a growth of 2.5% in 2010, following a drop of 1.5% this year due to the economic crisis.

The Central Bank president added that he expects inflation in 2010 4.7%, a goal that can be achieved thanks to reduced expectations and pressures on spending.

However, Gutiérrez cautioned that there are several factors that will affect those predictions: the cost of oil, flows of short-term capital and a further deterioration in the fiscal deficit.    Overall the Central Bank president was positive and optimistic.

 

New Consumer Protection for Real Estate  
Dec. 16, 2009 By the A.M. Costa Rica staff 
Real estate developers who offer proposed projects or projects in development must now comply with strict rules for the protection of consumers. The rules, which went into effect Oct. 27, requires those offering real estate for sale with delivery at a future date to register with the Ministerio de Economía, Industria y Comercio and show they have the financial capability to carry out the project.
The executive decree was signed by President Óscar Arias Sánchez last Aug. 6, but there was hardly any public mention of the new rules. 

The decree also covers other broad types of sales to consumers. The decree specifically mentions homes and apartments as well as subdivisions and a host of other commercial and industrial projects.

 

Costa Rica's recent real estate history is filled with cases where developers promised certain amenities or improvements and never followed through even though some purchasers paid substantial sums. In some cases, all the developer did was erect a gateway or a welcome center or bulldoze a few roadways.

 

The new rules also require that purchasers pay for the real estate or services in a proportional way rather than with all the money up front. There also are restrictions on what may be in a sales contract. For example a purchaser cannot surrender his or her rights. Some current contracts required arbitration or require the buyer to hold the seller harmless in case of problems.

 

Purchasers also have eight working days to back out of the deal. Previously the rule was eight calendar days to rescind.

 

The ministry said it has received a number of complaints about abusive practices and contract specifics being unmet. The ministry, in an explanation of the decree, mentions time shares, vacation plans and funeral services, among others.

 

The decree is No. 35548, which appeared in the Oct. 27 La Gaceta official newspaper.

 

During the Costa Rican real estate boom some developers set up shop, obtained an option on land and began selling lots, houses, apartments or other real estate that they did not really own and which had not yet been built. Some tried to zero finance

their projects by accepting substantial sums from purchasers and using the money for development instead of putting the money into escrow. Would-be expats lost millions on such deals, according to complaints directed to A.M. Costa Rica.

 

The decree also requires a seller to provide his or her exact home address and to assume the obligation to notify purchasers of any changes allowing them to exercise an escape clause.

 

The rules specify mathematical calculations of the solvency of sellers and what appears to be a complex application process. If ministry employees do not think that the seller has the funds to met the obligations, they are empowered to require additional financial guarantees, according to the decree. The decree also said that the ministry will review contracts.

 

The ministry also has the right to file complaints against vendors who are not registered.

 

Developers of projects already in the works have six months to comply with the new regulations, the decree said. The new rules are updates and additions to existing laws and rules which mostly covered just time shares, said the ministry.

 

The question still remains as to how far the ministry will expand the scope of the law. Many commercial activities anticipate delivery in the future, such as hotel rooms that are reserved some period in advance. Newspaper advertising also is an advance purchase as are new cars.

 

Since one of the stated purposes of the decree is to reduce fraud, the ministry probably will concentrate on activities where consumers have to put up substantial sums of money.

 

Region's recovery could be faster than expected,
 U.N. says    Dec. 11, 2009 Tico Times

Latin America and Caribbean countries could show 4.1 percent economic growth next year, in a faster-than-expected recovery from the global economic crisis, the United Nations' regional economic agency said Thursday. 

“The worst of the crisis is behind us,” Alicia Bárcena, executive secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), said in a statement. “The motors of growth have been turned on again, but we don't know how long the fuel will last.” Bárcena's remarks came at the presentation of ECLAC's Preliminary Overview of the Economies of Latin America and the Caribbean 2009. 

Costa Rica's economy could contract by 1.2 percent this year 2009 and expand in 2010 by 3.5 percent, slightly above the 3 percent increase estimated for next year in Central America overall, the report says. Although industry leaders are hopeful for whatever gains they can get, that rate is a far cry from this country's 7.8 percent growth registered in 2007. 

Costa Rica expects to finalize a free trade agreement with China by the end of February that trade officials hope will open further commercial prospects in that country and draw further investment here.

 

 

Is a Real Estate Revival Underway?

Dec. 11, 2009 By Adam Williams Tico Times Staff
As light begins to peek through the dark clouds of the worldwide economic crisis, members of the Costa Rican real estate community are growing more optimistic at the tail end of what has been, for many, one of the worst years they can remember in the housing market.

 

Rising Above: The Costa Rican real estate market appears to be reviving after taking a major hit during the recent worldwide recession. “In 2009, there was very little movement in the sale of homes,” said Charles Wanger of Bienes Raíces Talamanca Real Estate, in the southern Caribbean region. “In the 12 years I have done real estate in Costa Rica, 2009 was the first year I was unable to fulfill all of my own financial obligations.”

 

Wanger is not alone. Many real estate agents and firms throughout the country experienced substantial drops in real estate sales during the first half to three quarters of the year. The difficulties experienced in the real estate market stemmed from the worldwide economic crisis, as well as from the fear engendered by the cataclysmic rupture of the housing bubble in the United States.

 

“People interested in buying property here became more cautious than they'd ever had to be before,” said Christopher Howard, author of “Guide to Real Estate in Costa Rica.”  A lot of property owners here are from the U.S. and Canada, and they lost some of the funds they'd saved in hopes of buying property,” he said. “The crisis changed their plans and left a lot of people holding off on buying a second home or a vacation home in a foreign country.”

 

In some cases the crisis forced buyers who had taken the initial steps in property ownership, such as putting down a deposit or paying construction fees, to swallow their losses when their sources of capital were suddenly disrupted. Wanger said that seven of his clients had contracted architects and builders but were suddenly forced to pull the plug on their projects when the economy tumbled. To date, only three of those seven clients have paid the hundreds of dollars in preliminary construction fees owed. The other four claim they will pay when their finances recover in 2010.  

A similar plunge in investment in the real estate market also occurred on the N. Pacific side of the country. According to Les Nunez, of First Realty in Playa Hermosa in the northern province of Guanacaste, many prospective buyers who arrived before the crisis struck in 2008 made deposits of up to $100,000 on home purchases. However, when their expected financing was restricted, a number of them, unable to pay the remaining cost of their homes, lost deposits of up to six figures.

“When things went underwater, people were forced to walk on their deposits,” Nunez said. “Many of the developments and homes were frozen and never built.”

 

Lower Prices Boost Demand

 This year, most property owners looking to sell have had to lower their asking prices in order to generate any interest in the market. These price cuts have reinvigorated the diminished demand that plagued the market for the first nine to 10 months of the year.

 

“The lowering of property values has been a blessing and a curse for the market,” said Brian Friedman of Century 21 Jacó Beach. “It is a blessing in that we have seen a huge increase in traffic and we are showing property daily, as people know there are killer deals out there. However, the bad news is that it is a bad time for sellers. I have talked to many people who are in bad shape and must drop prices significantly to make a sale. Buyers are beating up on sellers right now.”  

Friedman, like Wanger, indicated that after the sluggish start to sales in 2009, buyers have shown increased interest over the past two months. Much of the revived demand has stemmed from significant drops in prices. Friedman mentioned a home that once was valued at $300,000 is now selling for $210,000. (Jeff Fisher of CR Beach says, "the buyers are back, but mostly in the $100k to $250k range.")

 

Others in the real estate community also said they expect that lower-priced properties – often referred to as “value properties” – will re-energize the market. Most agreed that once the real estate market begins to thrive again, prices will adjust accordingly and again rise to what they believe is the actual value of the home or property. But some property owners are standing pat. “Some who aren't pressed to sell or don't have to move property are expecting the market to bounce back and are staying right where they are on price,” said Nunez. “Usually these are owners who have already paid off their homes and can afford to wait for the market to come back.” 

Guarded Optimism for 2010

Like many sectors of the Costa Rican economy, the real estate market heads into 2010 with guarded optimism. Though buyer interest has shown a slight resurgence and the worst of the economic crisis seems to be dissipating, members of the real estate market remain unsure of what will come in the next 12 months.  “There is a semi-wary understanding of where the market is going to go,” Nunez said. “I don't want to give a peaches-and-cream forecast, but I'd say it looks hopeful. Are people coming here? Yes. Are people still interested in property here? Yes. If anything, we know people are out there and are looking. We just need to make it affordable enough for them to buy.”

 

Road to Jaco-Caldera and Costanera Sur To be Completed Ahead of Schedule   Dec. 5, 2009 Inside Costa Rica  
Guillermo Matamoros, viceministro de Concesiones for the MOPT, the new road to Caldera and the last 40 kilometres of the Costanera Sur, said on Friday that the two roads should be ready earlier than expected, in the first months of 2010, as the projects are about 90% complete. According to Hadda Muñoz, manager of the new road to Caldera, said that only 3.6 kilometers (2.1 miles) of the 77 kilometers (47 miles) are left unfinished in the San José - Caldera highway, and if the work continues at the same pace, the road should be ready ahead of anticipation.Both Muños and Matamoros assure that the new road will be operation by March 2010 and not July 2010 as had been scheduled. 

Costa Rican Tourism ONLY Down 10% in 2009

   Dec. 8, 2009 Inside Costa Rica  

The impact of the world economic crisis on Costa Rica will be 200.000 or 10% less tourists for 2009 over 2008, according to projections by the Cámara Nacional de Turismo (Canatur). 

For the 2008 tourist season, Costa Rica was host to 2 million visitors, while in 2009 it is expected than only 1.8 million tourists will have visited. 

According to Gonzalo Vargas, vice-president of Canatur, this will be the first decrease in tourism since 2002, when the tourism industry saw a growth of 1.6% over the previous year and continued to rise each subsequent year. 

Juan Carlos Ramos, president of Canatur, is optimistic that 2010 will be a better year for the tourism industry, as the financial condition improves in North America as consumers regain confidence.

 

Intel Costa Rica Sees Q3 Exports Increase 18%

Dec. 8, 2009 Inside Costa Rica

US chip manufacturer Intel saw third quarter exports from its Costa Rica facility increase 18% year-over-year, reaching US$595 million. Intel corporate relations manager Karla Blanco said main product destinations include Asia, the US and Europe, all of which have recovered faster than expected from the global economic slowdown.

 Intel's Costa Rica plant has had to increase production due to the closing of three company factories in Asia, the executive added.  Intel saw second quarter exports from its Costa Rica plant increase 7.6% to US$449mn, according to previous reports. The company expects year-long exports from Costa Rica to reach US$1.9bn, up 5.5% from the US$1.8bn exported in 2008.

Government Announces Public Workers Holiday Period 
Dec. 8, 2009 Inside Costa Rica
 Note on your calendar the dates December 19, 2009 to January 4, 2010, as the date the public sector employees are off on their Christmas/Year End vacation.The ministro de la Presidencia, Rodrigo Arias, made the announcement yesterday, in effect giving the order to all heads of government institutions and agencies to shut down for the holidays.Public sector employees will actually have eight days off: December 21, 22, 23, 24, 28, 29, 30 and 31. All the other days are Saturdays, Sundays and legal holidays (December 25 and January 1). Arias added that instructions are being sent to those institutions and agencies that provide "emergency" services, to adjust their schedules and staff rotations to guarantee services to the public.

20% More Job Opportunities Expected In 2010
Dec.9, Inside Costa Rica
If the expectations and projections for 2010 are realized, the year could start off with more job opportunities and growth in the economy. A recent study by Manpower of 620 Costa Rican businesses reveals that 26% will be looking to hire more staff in the new year. The hiring boom in the first quarter of the new year is expected to pick up the decrease between October and December of this year.
Of the interviewed, Manpower says that only 6% said they would be laying off staff, that would leave a positive job situation of 20%. The study also revealed that 67% of the businesses will be maintaining a hold on their hiring. The areas of job opportunities is expected in agriculture, fishing, mining, commerce, services and transport, while construction and manufacturing may see a drop or lower expectations for job opportunities.

 

 Boston Scientific to send 1,400 jobs to Costa Rica
Nov. 24, 2009 By Scott Andron, McClatchy Newspapers
Medical-products manufacturer Boston Scientific will close its plant in Doral, Fla., eliminating 1,400 jobs by 2012, Miami-Dade economic development officials said Friday.The company is transferring the plant's work to a vacant facility in Costa Rica, where labor costs are much lower, said Frank Nero, president of the Beacon Council, Miami-Dade County's economic development agency.   Based in Natick, Mass., the company makes medical devices used by doctors in fields ranging from gynecology to urology to oncology. Last year's sales exceeded US$8 billion.

 

 

Two Costa Rican Hospitals Ranked In Top 20 In Latin America  

Nov. 24, 2009 Inside Costa Rica

Costa Rica's Hospital Clínica Bíblica and Hospital de Alajuela are among the top 20 medical centres in Latin America, according to América Economía.

The Clínica Bíblica is listed as number five, while the Alajuela lists at number 20, representing the only hospitals in Central America to be ranked.

The magazine América Economía evaluated hospitals in nine Latin countries, including Argentina, Brazil, Colombia, Costa Rica, Cuba, Chile, Mexico, Peru and Venezuela.

The top five hospitals in Latin America are the Hospital Albert Einstein in Sao Paulo, Brazil; Clínica Alemana, in Santiago, Chile; Hospital das Clínicas, Sao Paulo, Brazil; Hospital Universitario Austral, Buenos Aires, Argentina; and Hospital Clínica Bíblica in San José.

América Economía is a Latin American magazine founded in 1986 by Chilean Elías Selman and Swedish Nils Strandberg.

 

 

 Nature Air Wins National Geographic Geotourism Challenge 2009   
Nov. 23, 2009 Inside Costa Rica

The global online community has chosen Costa Rica’s national airline, Nature Air as one of its top leaders for sustainable tourism in the second annual Geotourism Challenge, sponsored by the National Geographic Society and Ashoka’s Changemakers. 

Nature Air was selected by the public from 10 finalists out of 611 original entries from 81 countries.

“At Nature Air our mission is to conserve resources, protect our environment and keep the air our families breathe cleaner and healthier,“ said Alex Khajavi, Nature Air founder and CEO. “It is an honour to be recognized by the public for our 100% carbon neutral efforts.” As a winner of the National Geographic’s Geotrourism Challenge Nature Air received a $5,000 prize, and was invited to the Power of Place: Geotrouism Summit 2010 inWashington, DC in February. The airline plans to reinvest its winnings in its carbon neutral program and non-profit educational organization NatureKids.  NatureAir, based in San José, Costa Rica, is internationally recognized as the only airline in the world to voluntarily compensate for 100% of its carbon emissions through flight operations. Its commitment to saving energy extends with the use of bio-diesel (recycled cooking oils) in its entire fleet of ground equipment and diesel vans.  

 

 

 

 

Costa Rica's Answers To Fight Climate Change

Nov. 22, 2009 Inside Costa Rica By Yoav Cerralbo

The tiny country of Costa Rica has giant plans to help change the world for the better, but for that to happen, serious issues need to be looked at closely. Next month, the world will converge in Copenhagen for the United Nation Climate Change Conference and Costa Rica is proposing a similar carbon capture program to the one that was originally brought up in Kyoto 12 years ago.

"Costa Rica was the first country to propose a mechanism to capture CO2 produced in developed nations through forests and national parks," said Costa Rican Minister of Economy, Industry and Commerce Eduardo Sibaja.

The mechanism proposed was not only to exchange CO2 emissions for cleaner air produced by trees in other countries, but also a way to measure those chemicals versus clean air either filtered or produced by mother nature.

 Basically, the idea is similar to a carbon trading system.

"This works for Costa Rica because we don't produce much and it helps the industrialized countries who produce a lot," Sibaja pointed out.

   For Costa Rica, those challenges can become opportunities, especially in the fast growing green growth sector.

 Costa Rica abolished their military 50 years ago and uses that money towards social development programs such as education and health services.  Another classification would be how a country treats the environment. "We are not emitting CO2, instead we are absorbing CO2 for others, so instead of penalizing us we should have benefits for that," he said. Sibaja is looking to change the typical economic measures to add other parameters like peace and environmental protection.

Under Sibaja's plan, the middle-income countries like Costa Rica, Uruguay and Panama, which has also abolished their army recently, can receive benefits from international aid.

  The Costa Rican National Institute for Biodiversity now receives money from Korea to help expand their research in exchange for research conducted by Korean scientists for the purpose of developing new pharmaceutical medication and materials.The Institute uses the jungles and forests of Costa Rica as a giant lab.

 

 

Owner-Broker Jeff Fisher hopes to help your understanding of this new law by posting a mixture of facts and opinions.  Laws generally do not take effect in Costa Rica, until they are ruled upon after a challenge has been made to the Sala Cuarta (Costa Rica's version of the Supreme Court). We feel this will soon take place, prior to the required payments being due! 
UPDATE DEC. 15, 2009 12:30P.M.    I just had a conversation with Federico Mata of Stewart Title Jaco and yes, he also expressed disbelief at this new law.
However the official position they are taking (for the reduced price of $250) is that everybody needs to file prior to 5:00 pm Dec. 31, 2009 OOPS -NOW ITS CHANGED-SEE BELOW
for the quarterly taxes due for the period Oct. 1-Dec. 31, 2009. 
Of course keep in mind from December 19, 2009 to January 4, 2010,  ALL public sector employees are off on their Christmas/Year End vacation.
Thus no information will be available from the municipalities nor the Registro Nacional until Monday Jan.4, 2010, and the government office where you are supposed to email your forms to will be closed! And the government will take the money from an account provided to them (and I like Stewart's idea that they would provide the account number for their clients.  How many other attorneys-accounts will do the same.
 The payments for future years will be due every Jan 15th, but not this years supposedly. Unbelievable!
 Mata said they were working with Deloitte & Touche, but are no longer taking new applications.  
Thus my professional opinion remains- to contact your personal attorney for legal advice, and maybe a recommendation for an english speaking accountant. I will continue to provide further relevant data here with information and options as they become available.
Be prepared, but don't send in anything until the last possible second, or  or or........
Read the Bob Klenz letter below. Waiting is the key.
Thank-you,  Jeff  

Luxury Homeowners Evade Solidarity Tax Feb. 4, IPS   by Daniel Zueras SAN JOSÉ, Feb 4 (IPS) - The first attempt to collect a new tax on luxury homes in Costa Rica has ended in failure, in spite of the fact that it is a solidarity tax entirely devoted to building social housing for slum-dwellers.

 

The Finance Ministry in this Central American country admitted that only one-quarter of the expected revenue was collected after extending the deadline for paying the tax from Dec. 31 to Jan. 15.  

The tax is levied on homes valued above 180,000 dollars, according to Finance Ministry valuation methods that real estate experts regard as setting figures well below market prices.  

After the deadline was up, the Finance Ministry announced it had only collected 5.5 million dollars, instead of the expected 22 million dollars. The Ministry announced that there are 10,000 luxury homes in Costa Rica, but only 3,000 owners paid the tax. "We will go after those who haven't paid," said Finance Minister Jenny Phillips.  

The levy known as the solidarity tax was formulated in a special law and approved unanimously by the Costa Rican parliament. All revenue will be used to finance the Ministry of Housing and Human Settlements' slum eradication programme.  

The solidarity tax is to be levied for a period of 10 years on owners of luxury homes, at annual rates that vary in six steps from 0.25 to 0.55 percent of the value of the house, rising according to its price. The rate to be paid will be based on appraisals of the houses updated every three years.  

Housing Minister Clara Zomer told IPS that the tax would be in place for 10 years, in order to eliminate slums and shanty towns in the country. It was conceived as a solidarity measure to provide decent housing for people living in extreme poverty.  

But the driving force behind the tax, lawmaker Federico Tinoco of President Oscar Arias' National Liberation Party, says the tax should be reformed to last more than a decade, because "the slums cannot be eradicated in 10 years."  

The tax authorities have up to three years to oblige the home owners to pay up, but the Finance Ministry believes it can do this within one year because it can identify the houses involved, and even has aerial photographs of each of them.

 

Taxpayers have the space of that year to appeal the payment before the Administrative Tax Court, challenge their tax rating, or bring a lawsuit arguing that they are not eligible for the tax. In the view of real estate and tax experts, another reason for the failure to pay the first tax payment is that the Finance Ministry has established mechanisms that are unfamiliar to taxpayers, such as making declarations online, and the overall procedure is cumbersome.

"The trouble is that the amount collected has been much less than expected," said Minister Zomer.

However, the Housing Mortgage Bank, which is under the Housing Ministry, has already received the revenue collected, which will be immediately allocated to the "bono comunal" (community grant) programme to cover the cost of paving, sanitation services, parks and playgrounds and other improvements in shanty town areas.

Zomer said there are 400 shanty towns in Costa Rica at present, housing 40,000 families. She added that the revenue from the tax collected so far will only pay for the "improvement of one precarious neighbourhood."

But she said her ministry has other funds, totalling 125 million dollars, for its programme to eradicate shanty towns. The luxury home tax is "complementary," she said.

 

This country of 4.5 million people has a poverty rate of 18.5 percent, according to figures from 2009. But local authorities and social agencies are concerned because the overall poverty rate grew by nearly one percentage point compared to 2008, while the proportion of those living in extreme poverty increased from 3.5 to 4.2 percent.

Although Costa Rica's poverty rates are among the lowest in Latin America, the latest figures show that poverty has risen as a result of the global economic crisis, after a 2007 poverty rate of 16.7 percent, the lowest in the country's history.

Previously an average of 20 percent of Costa Rica's population were living below the poverty line, although in the early 1980s the rate shot up to 40 percent, said César Zúñiga, a professor of political science at the University of Costa Rica.

"Poverty in this country is different from that in the rest of the region, because Costa Rican social services have relatively universal coverage," unlike in most of Latin America, he said.

The National Housing System was created in the 1980s as part of a policy of social protection for the lowest-income population. "This is how the growth of poverty has been curbed," Zúñiga said.

 

He remarked that the social protection plan has contributed to the paradox that the country's middle classes have the greatest difficulty in achieving home ownership, as they have access neither to credits nor to the social assistance available to low-income groups. "The (social housing) policy has been effective," although administrative and political disorder have undermined the efficiency of the system, he said.

In Zúñiga's view, the reluctance of the richest strata of the population to pay the solidarity tax indicates "a lack of solidarity, which is cultural and moral in character," although he also blamed the ministry's inefficient tax collecting. (END/2010)

 

 

 

Luxury home tax missing many upscale dwellings

Dec. 23, 2009 A.M. Costa Rica staff

 

All is not grim in the luxury tax category. Several professionals who have been doing evaluations for homeowners report that a low percentage of homes actually qualifies for the extra tax.

In one case, a real estate manager hired a professional appraiser who used methods established by the Dirección General de Tributación on seven upscale homes. Only one home, a mansion, qualified for the tax, and the estimated tax will be less than $500 a year, the manager said.

Another expert said that he also evaluated seven homes and that only one of these appears to be subject to the tax.

Tributación published a manual on how to evaluate the tax.
The results are only related faintly to the real value of the property.

Tributación also has set up a computer program by which homeowners can evaluate their own property, but the program is specific for Windows machines. Those who have used the program report that the calculations are easy for a Spanish speaker. The file containing the explanation on how to use the calculation program would not open for a reporter Tuesday, suggesting that it has become corrupted. 

The tax agency also has backed off on its demand that all homeowners paying the tax permit it to debit a local bank account.

Instead, the agency said that payments of the tax may be made at any Banco de Costa Rica branch using the universal Form D-110 for tax payments.  

For those not in Costa Rica, the agency has set up an electronic transfer system with the same bank.  Of course, all the explanations are in Spanish.

 

The tax is designed to pay for homes for the desperately poor. All owners are supposed to register their property with Tributación but only those with homes worth more than 100 million colons are subject to the tax. (Jeff sez: maybe-maybe not!) 

Very few homeowners have completed the process so far, in part because Tributación has been delinquent in providing details to the public. The agency pushed forward the due date for the 2009 tax from Dec. 31 to Jan. 15.

 

Those subject to the tax are supposed to pay a pro rata amount representing the last four months in 2009. In addition they are supposed to pay the 2010 tax by Jan 15. 

The experiences of the professional evaluators suggest that many homeowners who expected to have to pay the tax will not. Today's consolidated dollar exchange rate is 569.58 colons at the Banco Central, and Banco Nacional has set the rate at 573 colons. That makes the 100 million figure worth somewhere between $175,500 and $174,500. 

There also exists the possibility that there are glitches in the Tribunal manual or the computer program because homes that appear to be subject to the tax are not.  

The low percentage of homes qualifying for the tax may endanger the program to provide housing for the poor if little money is raised.

The tax is supposed to expire in 10 years, but lawmakers already are talking about making the levy permanent.

 
 

Homeowners get a 15-day break on filing luxury tax forms       Dec. 18, 2009 By the A.M. Costa Rica staff

Expats and residents got a small break this week when the Ministerio de Hacienda announced that the deadline for filing luxury home forms would be Jan. 15 not Dec. 31.

 

The ministry also said it was planning to use a Banco de Costa Rica account for payment. Previously the ministry and its Dirección General de Tributación wanted the right to deduct the appropriate amount from taxpayers' accounts. Some snowbird residents argued that they did not have bank accounts in Costa Rica.

 

The paperwork establishing value was supposed to be filed by Dec. 21 and the taxes from Oct. 1 paid at that time. Jan. 15 was the date for paying the tax, if applicable, for 2010.

The ministry said Thursday that very few persons had paid the tax.
Some expats are simply ignoring the tax, although Tributación has been taking lessons from the U.S. Internal Revenue Service, which is not known for its laxity or humor.

 

The tax covers homes that a calculation specified by Tributación determines is worth more than 100 million colons. Based on today's rate of exchange, that would be a home worth $180,180. However, the calculations are based on square footage and have nothing to do with the market value of the home or what the owner paid.

 

The new tax has spawned a cottage industry of experts who will help homeowners navigate the complex forms and requirements. One expert even has written a book. A.M. Costa Rica has links to a number of news stories HERE!

Luxury Tax Deadline Extended to Jan 15

Dec. 18, 2009 Tico Times    

Owners of luxury homes in Costa Rica will have until mid-January 2010 to pay the “solidarity tax,” thanks to a determination by tax officials that the process is “extremely complicated.”

 

 Numbers released this week show that, to date, the owners of only 600 of the estimated 10,000 luxury homes in the country had paid the tax. In addition, meeting the fast-approaching Dec. 31 deadline was complicated by the fact many offices are closing for the holidays. “We recognize the process is complex. We accept that,” said Finance Minister Jenny Phillips, explaining the decision to delay the deadline. “And we want to be respectful of the rights of the taxpayer, as this is the first time (this tax will be paid).”

 

Even with the new deadline of Jan. 15, fines will be levied on delinquents, Phillips said. Those who miss the January deadline could face fines of up to 10 times the original tax (upwards of $5,375), plus interest on the days gone unpaid.  

The solidarity tax went into effect on Oct. 1 of this year as a way to raise money for slum eradication. According to the legislators who drafted the law, the tax will put an estimated ¢10 billion (around $17.5 million) toward housing projects under the National Housing Mortgage Bank (BANHVI).  

Every homeowner with a residence valued at $172,000 ?? or more, must pay the tax at a rate commensurate with what their home is worth (see box).  

Though they call the process “complicated” and “confusing,” top officials at the Finance Ministry stopped short of saying there are any errors in the system.  

But people like Bob Klenz know better.  

He and dozens of other foreigners had tried for months to pay the tax but, despite multiple trips to the banks and the Finance Ministry, their taxes remained unpaid.  

“I am not against the tax. It's just that they make it impossible to comply with it,” said Klenz. The 16-year resident of Playa Dominical, on the southern Pacific coast, has been a point-person in the expat community in trying to understand the process.  

“What they make you go through is absolutely ridiculous,” he insisted in a telephone conversation with The Tico Times this week.  

Chris Cobb, who lives south of Quepos, on the central Pacific coast, said he also has faced roadblocks. Though he's collected a wealth of information about the new tax (which can be found on his Web site www.ccobb.net/hacienda ), he hasn't been able to meet the guidelines of the Finance Ministry.  

“I have been trying to understand the process, the requirements and how to comply. I've realized it won't be possible,” Cobb said. “Maybe it is as of today (Wednesday), with the possibility of wiring money, but before it wasn't.”  

In the end, Klenz also threw up his hands in frustration and said he would sit tight.

 

“I am going to wait. I am not going to file,” he said. Asked whether he was concerned about the looming fine, he said, “No. There is going to be too much noncompliance. Too many foreigners cannot complete the process.”  

On Wednesday of this week things changed. The Finance Ministry published a small note in the government newspaper La Gaceta to announce it will extend the deadline for payment. It also changed the payment process so that foreigners may wire money into a local account. 

“It definitely helps,” said Klenz on Thursday. “I'm still not sure if it will work, but I'll try it later (today).”  

The process remains extremely complex, Klenz said. And the immense fines still hang in the air for those who miss the mark on Jan. 15.  

The first challenge for a homeowner is assessing the value of the person's own home. It is an in-depth process that entails strict measurements of everything from wall heights to lawn space. And it's further complicated by technical language that is difficult for even a person fluent in Spanish to understand, according to Klenz.  

“For a foreigner who cannot read Spanish, it's virtually impossible to do it on your own,” he said.  

If you undervalue your home by more than 10 percent, the new law threatens a fine of up to five times the original tax.  

And Tax Administration Director Francisco Fonseca said he will enforce the fine against undervalued homes.  

“First we will look at what the home-owner declared,” he said. “We will consult with the municipality and, if we still have questions, we will send someone to look at the home.”

 

According to the original rules, the home-owner must have a local bank account in colones linked (or domiciled) with the Finance Ministry. Many people undertaking the process met obstacles in Costa Rica because most banks had not been instructed in how to domicile an account with the Finance Ministry. “The bank manager learned alongside me,” said Jacques Bergeron, a foreigner with a home in the Central Valley, who – after much patience – was able to domicile an account.  

Cobb, who said this step made him uncomfortable, said that he would “never allow a government to transfer out of (my) account.”

 As of this past Wednesday, however, foreigners have the option of wiring money into an account at the Banco de Costa Rica (BCR) (see sidebox). This eliminates the need to domicile an account.

 

Even so, there's one more hurdle, and it's the one that has put the most foreigners in limbo.

 In order to access the online portal to pay the tax, a homeowner needed a cédula (official Costa Rica personal identification) number. Foreigners like Klenz and Bergeron were rejected each time they tried to enter a passport number or some other combination.

 

Now, however, with the ability to wire funds to a BCR account, this step has been eliminated, finance officials say.  

Homeowners cringing at the prospect of spending you're the holiday season trying to figure out this tax can look to law firms like San José-based Facio Cañas for help. But that help will come at a price.  

According to a document posted online, such tax lawyers charge between $500 and $1,400 for everything from home valuation to filing paperwork.  

Asked what the Finance Ministry is doing to inform foreigners of the new tax (many of whom live outside the country the better part of the year), Fonseca said, “Most foreigners have people here to look after the home, renters, maintenance people. …We expect them to know about the tax.”

 

 

 NEW LUXURY TAX NOW IN EFFECT!  originally published Dec. 11, 2008
We would like to inform you that the Law 8683 was published today.    This law is creating a new tax over the luxury residential houses or condos, based on its fiscal value, according to the following values (values are in colones, use 582 to convert to US$ which means 100,000 colones equals $171 U.S. ). 

VALUE Based on 582 colones per $	RATE
a)    100.000.000,00  to  ¢250.000.000,00  ($171.000--$429,500)	0,25%
b)    Over the excess of ¢250.000.000,00 up to ¢500.000.000,00                                            ($429,000-$859,000)	0,30%
c)     Over the excess of ¢500.000.000,00 up to  ¢750.000.000,00	0,35%
d)     Over the excess of ¢750.000.000,00 up to ¢1.000.000.000,00	0,40%
e)    Over the excess of ¢1.000.000.000,00 up to ¢1.250.000.000,00	0,45%
f)    Over the excess of ¢1.250.000.000,00  up to ¢1.500.000.000,00	0,50%
g)   Over the excess of ¢1.500.000.000,00  will apply	0,55%

 

 No taxes will apply to houses under ¢100.000.000,00, but recreational houses or houses with occasional use are taxed over the indicated values.

Therefore, a house with a value of  ¢125.000.000 ($214,000 U.S.),
will pay annual taxes of ¢312.000, ( $536 ) and
a house of ¢240.000.000 ($412,371)  will pay ¢720.000  ($1223)   per year.
(based on 582 colones per dollar for the above numbers.
Today its 564 per dollar,  thus 100 million colones equals $177,300)

This tax is in addition to the property tax all ready established at .25% or $250 for every $100,000 of declared value. 
The new tax will be calculated every year based on the declarations that everyone will have to present by January 15 of every year. The new law has a few clauses on fines for those not declaring or for those declaring a value under the real one.  If you declared a value below 10% of the real value, the new law establishes a fine that equals 5 times of the unpaid tax, if you don’t declare the value, the fine equals 10 times the unpaid tax.

The first declaration will have to be made 3 months after approval of the law, which will be one month after the publication of its rules.This new tax is not tax deductible, for Income Tax purposes.This law will be valid and mandatory for 10 years from today.   
thanks to Lic. Manrique Rodriguez F, CPA Pres. of  Pac. Business Accounting Group

The Highly Questionable, Possibly Illegal, Possibly Unconstitutional Costa Rica Luxury Tax Dec. 9, 2009 Inside Costa Rica: Open letter by: Bob Klenz, Dominical, Costa Rica.   

At every gathering the only topic of conversation is this problem tax and the inability of all of us to figure out how to comply with it. Many people are very upset with it and even though they may want to comply, do not know how or cannot do so legally. The high degree of frustration is evident with everyone we speak to about this tax. The Costa Rican Government should only know the amount of pain they have caused so many people who want to do their part but can’t. As to the problems of this tax. 

 

Even a blind person can see the inequities that are so blaring in this law:

 

1) Pay on line via computer! Although in this day and age, many people are computer literate, I find it highly questionable as to the legality of requiring people to own or use a computer to file a hard to understand tax form. Is it part of the Costa Rica Constitution to own a computer?

 

2) As a foreign resident, WITH OR WITHOUT A RESIDENT CEDULA, you cannot access the DIRECT TRIBU NET site. The only access can be by a Costa Rican using their cedula and its expiration date. Try it and if you can get online, please correct me and explain how you did it. In my years of experience with laws in general, I find it quite difficult to believe that you can be found guilty of not filing when you cannot access the site to do so. The Ministry of Hacienda knows about this problem but refuses to rectify it.

 

3) The law requires a person to submit to Tributacion, a Costa Rica Bank Account number with which the Government can automatically withdraw this tax from. I don’t know how many of you out there trust the Costa Rica Government, or any Government, with the ability to freely withdraw funds from your bank account. If you do, you may want to seek some psychiatric help! It should be up to the Government to give you their account to deposit funds to, not the way it is unconstitutionally proposed.

 

4) Many people are talking about hiring an Attorney, an Appraiser or a Title Company to assist them in this process. The law should not and does not require you to do this but suggests it and most people feel compelled to do so because they just don’t understand what to do. Most of the firms advertising their services do not understand the law and how to complete the forms. They are just looking for business, a business that will help them out for the next 10 years or more. I have seen several letters from various firms that show, by their own description of services, that they will most likely do a very poor job for you and should not be hired. When a law is so complicated that it almost forces people to spend between $400 and $1000 just to complete an appraisal and a form, this leads me to think the law is unconstitutional once again.

 

5) The initial tax and filing of forms is due on Dec. 31, 2009 with a 2nd tax due on January 15th. For those of you who live in Costa Rica, you understand what happens on holiday periods such as Christmas and Easter. In the case of Christmas this year, the Government offices will shut down on December 18th and reopen on January 4th 2010. When the Government shuts down, so do most Attorneys’, Accountant’s and Appraiser’s. So, in reality you don’t have until Dec. 31st to complete your filing, you have until Dec. 18th which by the way is a little over 1 week away. Also, once the Government offices reopen on the 4th, they will need at least one week to get up to speed and back to work again, especially on a reduced work force as usually is the case after long holiday periods. Once again, GOOD LUCK!!!!!

 

6) Are you an Appraiser? Have you gone through your years of schooling to be one? Do you understand how to measure your structures, the walls of your house, your outbuildings, fences, driveways and swimming pools? Can you determine the value of your land, determine slopes and grades? If you are very good at all of this you should have fewer problems than most people in completing this process. I have been involved in the real estate business for well over 30 years and I am having problems completing these forms. Once again, good luck to all of you that have the overwhelming experience you will need for this process.

 

7) Fines of 5 and 10 times the unpaid tax! How stupid is this! When penalties are usurious and unreasonable, they cannot be legal. Do you really believe they have the power to fine you 5 times the unpaid tax if you underestimate your property value by 10%? They can say this but enforcing it will be almost impossible. Again, are you an appraiser? Are you a computer expert? Can you comply with this law in the short time span given? The Government itself doesn’t even know how to collect taxes efficiently but they want to charge you a high penalty for you not being in compliance. How about the foreigner property owners who live out of the country and can’t comply for many of the above reasons. Are you going to tell me that they must pay a penalty of 10 times the unpaid tax? This is so ridiculous it is hard to believe.

 

8) What does the Government think this type of law is going to do to foreign investment? How many foreigners are going to invest knowing that they will have at least 10 years of double taxation? How many hotel and cabina owners will not be able to pay these excessive taxes due to lack of business and tourism? With this type of law, it will be difficult to sell any upper end condos, apartments or homes. Is this really what the Government is looking for?

 

In closing, I would suggest that the Costa Rica Government revisit this law and make it something that can be used simply by all taxpayers and or homeowners. Perhaps a simple flat tax on all Corporations or some other method could be a friendlier way of implementing this. The end result and the amount of money obtained could be the same or possibly better. I know and truly believe the Costa Rican Government will wake up to the fact that they passed a bad law and in the end will revise it to make it legal, constitutional and in the best interests of the people.

 

 

Opinion from Another Long-Time Resident Realtor, Ivo from american-european.net  Dec. 16, 2009

The Ministry of the Treasury has  compiled land valuation maps for most of Costa Rica.  Most of these maps were completed in 2008 and the Ministry of the Treasury expects the local Municipal governments to incorporate them into their valuation standards.

The Legislature has placed into the law sanctions for not complying with the law.   Specifically Article 12 of the law establishes fines and penalties for either failing to file the required declaration form or filing the form but under reporting the value of the property.

The law imposes sanctions for failing to file IF the tax is due or UNDER REPORTING the value of the property, however the law does not mention any sanction or penalty for NOT FILING if you don't owe anything.
As such, if the value of your property is under the ¢100,000,000) you should probably not file anything. 
If you are borderline it would be good to have some sort of appraisal on file in case you are audited in the future. Owners of properties in condominium should contact their condominium administrator or board of owners. Especially those who own property in large and expensive gated communities are bound to be checked on first.
 

 

Those who have more than 300 m2 construction should get an appraisal

We have been interviewing many people willing to do your appraisal for a fee. Fees run all over the map. I have found 5 companies that do appraisals for banks and other institutions, who have years of experience and will take responsibility if the government does not accept their appraisal.
They will charge depending on the location of your property and the size of your property.

• Up to 250 m2                     ¢127.000
• From 251 to 350 m2          ¢157.000
• From 351 to 450 m2          ¢187.000
• From 451 to 550 m2          ¢207.000
• From 551 to 650 m2          ¢237.000
• From 651 and more           ¢282.000

The appraisers included in this the cost of pulling a study of your property in the National Register and pulling a survey, so you don’t have to worry about this.
Also, they will calculate the common areas if you live in a gated community or condominium.

Properties with construction of a lower value than ¢100,000,000 (about $175,000) are exempt of paying the fee of 0.25% over your appraised value. There is no obligation to file if you’re under that value. If your property is borderline, we recommend filing. You have to file before the 1st of January 2010. If you don’t file and they catch you, you will be charged 10 times the tax you should have paid and if you file the wrong values, they will charge you 5 times the tax.

 

ARTICLE 1.- Purpose of the Law

To create a direct tax in favor of the central Government, whose product will be destined, exclusively, to finance public programs addressed to the provision of decent living, to persons and families who are considered poor or extremely poor. This tax will fall over the value of the real estate properties that are of residential use, that are used usually, occasionally, or for recreation, including fixed and permanent premises.

For more information, feel free to purchase an  E-book Luxury Tax by Attorney at Law Roger Petersen through the link www.costaricalaw.com     Thanks Ivo.

.

  

 

Costa Rica has a new luxury tax on homes, with the payment due January 2010. 

Every owner must put a value on residential construction and improvements. If it is more than 100 million Colones, about $180,000, it has to be reported before the end of 2009.

The tax is due in the first 15 days of 2010. Professionals and homeowners alike have been baffled by the forms and instructions.

We have put together a bilingual, multi-faceted team to deal with this: an architect, a local journalist, and an accountant. We'll provide you a full package from appraisal to filling out forms at a much lower price than has been thrown around on other English-language web sites.

Most small houses will not reach the threshold for the tax unless they have a pool, fancy ceramics, etc. But if your house is over 300 square meters, send us an email.

cinclus@ice.co.cr   

Ing. Adrian Benevides

Lic IC-1715 Colegio de Ingenieros  

Dennis Rogers

Elena Zamora

 

One challenge is land valuation. Click here to see if your municpality has the data posted.

 

All the following links are in Spanish: Instructions for determining construction value Electronic Payment System Information   Forms for declaring property value: D-179 (pdf) D-179 Annex:(pdf) Instructions D-179 (doc) Click cancel on the first two pop-up windows to see procedures. D-144 Form for registration as a taxpayer.

   Tico and Expat confusion reigns on new luxury tax        Oct. 20, 2009 By the A.M. Costa Rica staff  
  
 Expats can be forgiven if they are confused by the new luxury tax on homes. Even some Costa Ricans who participated in drawing up the law are confused, too. The biggest issue appears to be if land should be included in the valuation to determine the amount on which tax is to be assessed.
Some say yes and some say no. 

Well, the law says yes, but that appears to be a late change by the legislative staff without the knowledge of some of the key legislative players.
Some lawmakers were concerned that if the value of land were included in the tax base that poor people with a shack on a lot of land would be hit with a big tax.

 

That is what is going to happen.  

Article 10 of the law explains what is to be taxed and adds "the value of the land where it is located."
That's about the only mention on land in the law, but most of a decree implementing the law contains detailed regulations and formulas for determining land value.
Only land that contains a dwelling is subject to the tax. 

So, as one real estate broker pointed out, highly valuable vacant lots in some upscale subdivisions will not be subject to the tax until a dwelling is constructed.

 

Another question being asked is does everyone who owns a dwelling have to register it with Dirección General de Tributación.
That question gets yes and no responses.
The final paragraph in Article 7 of the law says that "only owners of property that will be taxed have the obligation to declare a value."
It refers to the preceding article that has a number of exceptions, like public property and property used for religious purposes.
The key element is homes worth more than 100 million colons. These are subject to tax. So based on this paragraph only persons with homes worth more than 100 million colons would have to file. 

A paragraph tacked on to the end of the law as a transitory adjustment contradicts this. This says everyone is obligated to present a declaration of value.

 

An additional problem for Costa Ricans and expats trying to comply with the law is that Tributación has not been helpful in explaining the measure.
The law and the decrees implementing it are hidden on the Tributación Web site.
There is no link or even mention on the law on the parent site of the Ministerio de Hacienda.  

There has not even been a press release. The last press release posted on the Hacienda site is from Jan. 25, 2007. No informational advertisements have been seen even in the Spanish publications.

And there certainly is no official explanation in English.

 

As a result even some competent Costa Rica real estate brokers have been putting out incorrect information on their Web pages and via e-mails. One sent out an update with corrections Monday. 

Some accountants and legal advisers are telling clients to hold off on filing the required forms until at least the end of November. They expect constitutional court cases that would suspend the effective date of the tax payments, which now is Dec. 31 for the last quarter of 2009.    (Jeff sez: my feelings exactly!) 

One lawyer said he was going to file a case because the law did not give Tributación the power to tax land. Then the lawyer noticed the tiny phrase in the law that did just that.  

Throughout the entire time that the law was being discussed land value was not being considered for the tax base.
Any legal action will have to delve down into the actions of the legislative clerks to see exactly when the phrase taxing land was added to the bill and if it was in the bill when lawmakers approved the tax last year. 

The purpose of the law is to raise money to provide homes for those individuals in extreme poverty. Any constitutional court magistrate is sure to weigh the intentions of the law against possible technical irregularities.

How to figure the dwelling's luxury tax value?
Editors asked Dennis Rogers, a fluent Spanish speaker and frequent contributer, to try to do it.  This is his report. By Dennis Rogers,  Special to A.M. Costa Rica Nov. 25, 2009  

To calculate the new solidarity tax on luxury dwellings, the Costa Rican authorities have produced an instruction manual to guide owners in determining the value of a dwelling. It is most useful in establishing if a property is subject to the tax or not, while finer levels of detail might require the attention of a professional.

 

Not many expats or even their local friends will manage the Spanish building terms needed, but with the instructions in hand it may be possible to get a rough estimate of Tributacion’s opinion. It’s a combination of factors that put a structure in a category with a fixed per meter estimate, which is then multiplied by the area of the building to get the basic sum. The value of the land is not included in the initial calculation. The exact value of each feature is not part of the appraisal, or is the present market value.

 

After adding additional value-added structures like perimeter walls, if the construction is over 100 million colons (about $175,000), an owner pays. If it’s not, the owner does not. It behooves anyone who thinks their property is worth well over that, even if it probably is, to check and see if the hypothetical replacement cost actually is under the threshold.

 

We set out to determine the classification of a 5-year-old house in a subdivision in a suburb of Heredia. It has four smallish bedrooms, three full baths, and ample living space.

 

This analysis only considers the VC (Vivienda de Concreto) categories VC6 to VC9 as those are the sort of structures most likely to harbor expats. There are similar scales for wood and even adobe buildings, apartments, condominiums, offices, churches, hospitals, and gas stations. 

Structure: Everything from VC6 up assumes poured cement posts and beams.

 

Walls: Concrete block, with fine repello, the smoothed mortar mix on the wall. For VC6 some gypsum walls (interior) are allowed. We have none. Any walls more than 2.8 meters edge into VC7, 3 meters appears to be what will push it over. VC6 (or VC5) for us.

 

Roof structure: steel beams (no wood) are assumed for everything from VC6 up. VC6 is normal pitch and design. Anything with unusual angles, peaked roofs, turrets etc. is in higher levels. VC6 for us.

 

Roof material: Ordinary coverings from ceramic tiles to shingles and in general galvanized roofing is allowed from VC6 up. Galvanized or PVC rain gutters and downspouts. If there are stainless steel or bronze gutters that will get the structure to the highest levels. VC6 for us.

 

Ceilings: At VC6 gypsum and plaster ceilings are allowed, or middle quality wood tablilla. At VC7 better quality woods and custom ceiling panels show up, with the finest woods well lacquered pushing it to higher levels. Probably VC6 for us though the molded plaster ceiling tiles hint at VC7, even though they are not much more expensive than the usual fibrolit plasterboard.

 

Floors: VC6 has “good” ceramics or wood, VC7 “very good.” If you don’t know what your floor and bathroom tiles cost, this is the most subjective and difficult factor. Carpet doesn’t even appear in the analysis. Any marble, now-rare almendro parquet (especially with polyurethane finish) or high-end porcelain will push the dwelling to the highest levels. Teak seems to be “very good.” VC6 for us, though there is a small area of parquet floor.

 

Bathrooms: VC6 can have one large bathroom with high-quality fittings for the main bedroom (even a jacuzzi), one regular bath, a half-bath without shower with good ceramics and fittings, and a shower in the maid’s quarters. The number of baths matters less in pushing to higher levels than the luxury of ceramics and fittings, with a whole section of instructions dedicated to details. VC6 for us though it’s actually three full baths and no maid’s quarters.

 

“Others:” VC6 allows windows with aluminum or quality wood frames, can be arched etc. Kitchen cupboards and counter top “very good.” There are instructions about evaluating kitchens at the end of the manual. Closet doors are prefab lattice type. Front door custom-made of cedro or similar. Interior doors prefab pressed wood or similar. If two stories, stairways of concrete with wrought iron railings. Two-car garage.

 

Increases to higher levels are not so driven by these details, requiring worked solid interior doors, good woods in closets, luxury kitchen furnishings, and a three-car garage with good ceramics to even make it to VC9. For us VC6, though the fact that there is a small kitchen on the second floor could kick it to VC7. Also the stairway is good wood not concrete, even if incompetently done.

 

Depreciation: VC6 and VC7 are given a useful lifespan of 60 years, VC8 and VC9, 70 years. Our house is 5 years old. According to the formula given, D(age)= ½(age/useful life + age ²/useful life ²) our house then has a depreciation factor of .955. Essentially a five-year-old house can be depreciated 4.5 percent.

 

There is also a depreciation allowance for the house’s condition. However, if the house is less than 10 years old and hasn’t required any significant maintenance beyond paint and filling cracks in the repello, the allowance is negligible. In the case of our house, the allowance would be less than one-tenth of 1 percent and not worth adding to the calculation.

 

The scary formulas included in the instruction manual are all related to depreciation and not valuation. Especially complicated are those where remodeling has changed part of the useful life of the property while not affecting the rest. Depreciation is described in plain Spanish with a table on the side.

 

Additional structures: All other improvements to the residential property, including swimming pools, tennis and basketball courts, fences, perimeter walls, retaining walls, gates, sidewalks, driveways, decks, saunas, barbecues, etc. will figure in the final calculation. For example, a basic pool is 215,000 colons per square meter. A 2.5 meter wall with repello is 25,000 colons per meter and can be depreciated over 30 years. Window bars (rejas) are 60,000 colons per square meter for the fanciest metal.

 

Outdoors at our house:

Walls: Walls made of cement blocks without repello 20,000 colons per meter and we have eight meters so 160,000 colons.

 

Lawn: Natural grass tops out at 1,100 colons per square meter, synthetic at 31,000. We have about 30 m2, so another 30,000 colons.

 

Overall appraisal? No point in saying exactly but well below the 100 million threshold if VC6. VC6 is classed at 270,000 colons per square meter, so without significant secondary construction, the house at VC6 can be 370 meters (about 3,980 square feet) before reaching 100 million. That’s fairly generous for a structure that cost $90,000 to build five years ago and could be three times that now, or 150 million colons.

 

Even playing it safe and declaring the house as VC7 (325,000 colons), it can be up to 307 square meters (about 3,300 square feet); ours is still far below that. With climbing levels of luxury of course the allowable size decreases, but theoretically even at VC9 the house can be 222 square meters (2,390 square feet) without reaching 100 million ($175,000). So we don’t pay.

 

But suppose we did make it to 100 million for just the construction, then there is still the matter of the land. Tributación has on its Web site maps of about half the country’s municipalities with land values. Conspicuously absent are Cartago and Turrialba, Liberia, and all of the coastal Pacific municipalities except Quepos and most of Nicoya. At least the Central Valley areas with many expats are covered here, otherwise you are directed to your respective municipality for the land values. Good luck.

Fortunately we can look at a map that shows fairly recent values for our area and see that the lot is worth 70,000 colons per square meter, times 187 meters for about 13 million colons.

 

The total taxable amount is then 113 million at which the rate is .25 percent, or 282,000 colons (about $504). This has to be declared and paid electronically, though a court challenge is likely on the grounds that to own a computer is not required in the Constitution.

Thousands of Luxury Homes Owners Miss "Luxury Tax" Deadline  Jan 17, 2010 Inside Costa Rica 

Friday, January 15, 2010, was an important day for owners of luxury homes, a day to pay up their "luxury tax" that is imposed on every home valued over ¢100.000.000 colones ($175,000 but not including all the land it sits on) .

 

The ministerio de Hacienda (Revenue ministry) estimates between 10.000 and 12.000 homes are subject to the tax, whose owners face a penalty of up to 10 times the taxed amount for non paying up on time.

 

Although there was are exact numbers, however, Francisco Fonseca, Director de Tributación, estimates several thousands of home owners did not pay up by the 8pm deadline on Friday. Fonseca said that the exact number of late payers will be available this week.

With the tax, Hacienda expects to collect some ¢10 billion colones in new revenue.

 

The tax can be paid directly at the "oficinas de Tributación" or at any of the 16 banks and financial institutions authorized for the tax collection.

For more information on the tax, call 2547 0069 or the Ministerio de Hacienda website www.hacienda.go.cr/.

     

 

 

This means every ₡ 1000 equals $1.78  
To buy 1 dollar costs (₡ 571) $1.75

Costa Rica's economic activity shows hopeful signs   Nov. 20, 2009 Tico Times   The Monthly Economic Activity Index (IMAE) for September showed signs that the Costa Rican economy has begun to recover. Though the economy contracted 0.1 percent, the miniscule decrease in activity is a significant improvement from the past year's monthly average decrease of 3.6 percent.The improved outlook was based on a better showing by the manufacturing sector, which reported a small 1.1 percent decrease in the annual rate during September. The improvement in manufacturing came thanks to increased exports by businesses located in free-trade zones.  Other increases in economic activity during the month of September included sales of electric energy and hotel revenues, which sparked by improved tourist spending.

 

3G Is Coming To Costa Rica In December!
Nov.8, 2009 Inside Costa Rica
The Instituto Costarricense de Electricidad (ICE) said it will begin selling 3G cellular lines in the second week in December and away from its traditional practice, there will be no need to register before going to an ICE agency to get connected. The announcement was made by Adolfo Arías, director of ICE's División de Servicios.  To get the most out of the 3G service, a user has to have a 3G phone.
Retailers in Costa Rica are readying their stock of 3G phones to be connected to the 950.000 lines ICE will be making available.
A 3G phone is basically very similar to a GSM phone, using the same bands for transmission. Where it differs is in its ability to transmit large volumes of data and at high speed, which allows the sending and receiving of video files, video chat, photos and music, among many other features.
3G phones also include WiFi allowing connection to the internet and use "Windows Office" tools, as well as being great entertainment devices to play music, watch video, high resolution cameras for photos and videos and play video games.
 

Wal-Mart To Open 11 New Stores, Add 500 New Jobs   
Nov. 6, 2009 Inside Costa Rica 

Wal-Mart announced that it will be hiring an additional 500 people and opening 11 more stores in 2010 inCosta Rica, half of the company's investment in the region.

 

The announcement comes amid economic uncertainty where some companies have decided to decrease staff, some even closing entirely.

Marcos Samaha, president of Wal-Mart in Costa Rica, confirmed the expansion and hiring, saying that the company is committed to service and low prices and the expansion demonstrates a sign of confidence in the country's investment climate.

 

The announcement was made at the inauguration of the company's new offices in Forum 2 inSanta Ana and in the presence of Costa Rican president, Oscar Arias.

 

Samaha said that the majority of the new stores will be the Palí, the company's chain of warehouse style supermarket and low prices. Wal-Mart in Costa Rica also operates the Maxi Bodega, Más X Menos and Hipermás stores.

Last February, Aquileo Sánchez, director of communications for Wal-Mart, announced that the company would be opening 22 new stores in the region (Central America) and hiring an additional 1.000 people. Yesterday's announcement confirms that Costa Rica will receive half of the company's investment in the region.  Samaha said that the company will invest $29 million dollars in Costa Rica to open 7 Palí, 3 Más X Menos and 1 Maxibodega stores. No details were given as to where the stores will be located.

 

Costa Rica Leads Latin America in 2009 Prosperity Study

2009 Legatum Prosperity Index – Fact Sheet

Costa Rica was the top Latin American country, coming in 32^nd position, others were Argentina  38, Brazil 41, Panama 42, Mexico 43, Nicaragua 72.

The Legatum Prosperity Index uses a holistic definition of prosperity to include both material wealth and quality of life. The Index finds that the most prosperous nations in the world are not necessarily those that have only a high GDP, but are those that also have happy, healthy, and free citizens. Now in its third year, the Index builds on the previous versions with expanded data and refined analysis and assesses 104 nations covering 90 percent of the world’s population by their performance in nine fundamental areas.
More in depth information can be found on our Retirement Jaco page.
The full Index and accompanying reports are available at www.prosperity.com

 

Costa Rica Foreign Investment to Rebound

Nov 6, 2009   Fabiola Moura of Bloomberg News

Costa Rica’s foreign direct investment will return to 2008 levels after falling about 30 percent this year, boosted by tourism and investments in ports and telecommunications projects, said Marco Vinicio Ruiz, the country’s minister of foreign trade.

 

 Ruiz, 55, is in New York for an event to attract money to the telephone industry, which opened to private investments this year.

Foreign direct investment will be about $2 billion next year, in line with 2008, after plunging this year as the global recession reduced tourism and spurred companies to halt spending plans, Ruiz said. These investments, which account for 7 percent of gross domestic product, is the main driver of the Costa Rican currency, he said.

 

Foreign direct investment has the biggest effect on the colon because Costa Rica isn’t dependent on exports of a specific commodity with fluctuating prices, Ruiz said.

“The only thing that goes up and down is the amount of foreign direct investment,” he said. “That is something we have to control, because it is very important.”

Costa Rica probably will conclude a trade agreement with China, its second-biggest partner after the U.S., by the end of February, Ruiz said. It will likely sign a trade accord with Singapore by early January and an agreement with the European Union is on hold until the Honduras political crisis is solved, hopefully by May, he said.  

After the accords are completed, 84 percent of Costa Rica’s exports will be made under trade agreements, he said.

 Costa Rica Focusing On Eco-Tourism To Weather The Economic Storm 
Oct. 24, 2009 Inside Costa Rica by By Juergen T. Steinmetz, eTN 
An interview with Costa Rica's ministro de Turismo (Tourism Minister), Carlos Ricardo Benavides, who says that tourism in Costa Rica, like the rest of the world, has dropped a little bit and still focusing on the US market.
 
eTN: How is the current situation when it comes to tourism in Costa Rica? 
Carlos Ricardo Benavides: Like the rest of the world, it has decreased a little bit, because our main market is the United States, and North America itself is almost 62 percent of our market, so when North America comes down, our tourism also goes down a lot. But we have maintained also a very high-class tourism, the one that goes for example to the Hyatt or to the Four Seasons, that still comes, it doesn’t matter what the crisis is at this point. We have been in a small recuperation in August and September, and we hope to maintain our progress, and probably help us a little bit with vacationers coming for December so we can have maybe a negative loss for the whole 2009 around -6 or -7 percent; that is what we are forecasting right now.

 

eTN: The air links from the United States, they decreased or they stayed the same? 

Benavides: Well, some of them decreased, but not because of lack of people flying, but for example, in the case of Delta, it was because of the power of the fleet, and it was not very fuel efficient itself, so long trips, for example the ones from New York to San Jose, over a 5-hour trip, were very positive for them with all planes. Other airlines have decreased the size of the planes, trying to bring full planes and not at all require planes from different parts. But all of them are still flying. We have not lost any kind of carrier. As a matter of fact, we added two new carriers from the United States. We added JetBlue that initiated flights from Orlando direct to San Jose, and we added Spirit Airlines who also initiated flights from Ft.Lauderdale in the United States, and last year we initiated Frontier Airlines from Denver.

 

eTN: You mentioned 5-star tourism to Costa Rica is a big issue. Did you see the prices coming down for hotels? 

Benavides: No, not much, not much. We have a philosophy – when you make your product very cheap, and people get accustomed to paying $1 for something that you know that is worth a hundred dollars, when you got back to charge them the $100, they will turn to you and say, but that was worth $1, and you will tell them, no there was a crisis, I’m sorry. If you will charge $1, it is probably because it was worth $1 not $100.

 

eTN: I love this philosophy, but is it realistic that the hotels follow your philosophy? 

Benavides: They didn’t go so low as to make the destination extremely cheap. They went down a little bit, but what we made was another thing – we made special packages. For example, if you stay 3 nights, we will give you 2 nights free; if you stay 5 nights, we will give you a complimentary night or a complimentary free meal at the spa, and a complimentary tour. In other words, what we wanted to add was not a cheaper product, but add more product to what you are paying. In that way, your product will always have a normal price, but people will feel that they are getting more for what they are paying.

 

eTN: Besides North America, United States, Canada, what other targets are there for you? 

Benavides: Our main targets are Spain, Germany, France, England, and then regional tourism from Central America, and United States, Canada, and Mexico. I would say from the big pie that would be like 75 percent of the graphics.

 

eTN: A lot of destinations have told me they see an enormous difference in the number of stays between Europe and North America. Have you experienced the same thing? 

Benavides: Yes, because in all across the chart, the expenditure has always come down, so that means that the income from tourism will also come down – it’s inevitable. But I think we will recuperate that next year. I think we are seeing that – the numbers coming up.

 

eTN: What are your air links currently from Germany?  

Benavides: We have Condor. Condor is making two weekly flights, and we were trying to make Lufthansa maybe try one flight directly to San Jose, because most of the people have to go to Madrid and get by way of Iberia or go to the United States by way of Continental and then come down. But the market is there. We are very aggressive in Germany; a lot of marketing going on in Germany, a lot of cooperative campaigns especially for tour operators like Tui, and we are very, very, very strong in Germany. It’s a good market.

eTN: Besides the classical idea, is there any niche market people should know about?

Benavides: Especially, what we have promoted always eco-tourism – beaches, volcanoes, nature – that is our main goals. And I always tell people, we are not perfect in eco-tourism, but at least we give the fight. So to keep eco-tourism as our main market, we have 25 percent of our country protected. We have 4.5 percent of all the bio-diversity in the world are present in Costa Rica. So we are protecting that part that is nature. So, if you want to see nature, if you want to see hotels contracted with nature in mind, with a maximum high level, you go to Costa Rica.

 

eTN: When you compare the GDP to tourism, how important is tourism to Costa Rica? 

Benavides: Excluding inter-continental, because there is no way to measure inter-continental, tourism is number one.

 

eTN: What does the government do?  Are these all interesting developments for you? 

Benavides: Yes, but, what we have done especially is to promote local tourism; try to keep the tourism that we already have.

 

eTN: Our readers are travel industry professionals – these are travel agent, tour operators, PR agencies, journalists. Is there anything you want them to know about Costa Rica? 

Benavides: When you get in Costa Rica, you are getting a way of doing tourism, and in the end you are betting for the future – for your future and the future of your sons and granddaughters and grandsons, because we are trying to keep the message that you can do tourism by respecting nature, and in the future, if we don’t do that, then nothing else will matter than what we have done with nature. We know that in the future, as many have said, the big fight will be for water and for food, so when you get to come to our country, we believe in this form of doing things - that everything can be on a balance with nature and with progress and with tourism. 

 

Costa Rica's Economy Doing Better, But Unemployment Levels Worrisome Oct. 23, 2009 Inside Costa Rica  

The Banco Central de Costa Rica (BCCR) - Central Bank - says the Costa Rican economy is recuperating from the economic crisis of the past year, however, unemployment continues to be a stickler. 

The bank's Índice Mensual de Actividad Económica (IMAE) - monthly economic activity index - shows a marked improvement in the economy, though it is still lower than levels recorded last year. 

The worrying point is the high rate of unemployment, especially in areas of construction, hotel industry and agriculture, which are still showing levels of activity lower than August last year. 

The report predicts the inflation rate to close this year at 5% and drop of the Producto Interno Bruto (PIB) - Gross National Product - by at least 1.3%.

According to the Central Bank, the challenge next year is to keep inflation low, reduce unemployment and invest in infrastructure.

 

Costa Rica Tourism Drops in 2009 After 2008 Record Increase

Oct 21, 2009 Inside Costa Rica

After a record for arrivals of 2.51 million in 2008, a steady annual increase since the 2.06 million in 2006 and 2.29 million in 2007, Costa Rica recorded a drop to 2.29 million for 2009. Arrival numbers are forecast to tick up again in 2010, and to grow at an average rate of 2.2% until the end of our forecast period in 2013.

 

The majority of tourists visit Costa Rica during the peak season (January-May) and come from the Americas - the United States, Canada, Mexico, Central and South America .

 

Arrivals from the country’s three most important source markets – the US, Nicaragua and Canada – increased steadily during 2004 to 2007. However, looking at the inbound tourism data by region, although 2008 continued to trend upwards in North America and Latin America, the report is forecasting arrivals numbers from both regions to decrease by 9.73% and 7.81%, respectively.

The next most important source markets in terms of arrivals are, in order, Panama, Mexico and Spain.

The main growth drivers for the industry are ecotourism and health tourism.

 

Costa Rica has 32 national parks, eight biological reserves, 13 forest reserves and 51 wildlife refuges. That said, the industry is forecast to suffer slightly in 2009 due to the ongoing recession, particularly in the US, and the AH1N1 flu virus.

 

The planned development of the Caribbean Limón province, the continued expansion of the Daniel Oduber Quirós International Airport in Liberia and the growing amount of chartered flights from Europe all have the potential to drive growth in the market.

 

Costa Rica’s tourism industry is a major contributor to the economy, accounting for about 7.8% of GDP in direct terms in 2008 and nearly 3% of total employment in 2006 – 49,000 individuals – according to data from the World Tourism Organization (UNWTO).

 

Collective government expenditure on tourism was an estimated $29.7 million in 2008, a 4% increase year on year. Collective government expenditure is forecast to slump slightly in 2009 to $27.9 million, bouncing back to $29.6 mill. in 2011. Expenditure is then forecast to rise to $33.1 million by the end of the forecast period in 2013.

 

The government has created a tax on inbound airfares to the country. The fee is $15 per airfare and replaces the 3% hotel tax. Part of the revenue from the tax, which is expected to be more than $80 million per year, will fund some of the activities of Instituto Costarricense de Turismo (ICT) - the Costa Rican Tourism Board, including marketing, promotion and planning.

The change in taxation came about due to the increasing amount of condominium and other private rentals that were not included under the umbrella of the hotel tax. New hotel developments are ongoing in the country, with major international companies including Marriott Hotels & Resorts and Barceló constructing hotels near the beaches and in urban centers.

 

Foreigners who own homes may get Temporary Residency        (Jeff says: More info on this coming!)
Oct 2, 2009 Tico Times   
When Costa Rica's immigration reforms were approved in August, there was one change that seemed to escape the headlines of local newspapers and media reports.  Nevertheless, it could be the most significant reform for foreigners.

Under the new law, non-residents who own more than $200,000 in property can apply for temporary residency as an investor, allowing them to take advantage of the country's public health care system along with other services not available to them as tourists. The clause is expected to take effect March 1, 2010.  
Unlike the United States and some European countries, where the governments have introduced homebuyer programs to stimulate the market, Costa Rica has seen no such programs.

The opportunity to become a temporary resident through owning a home doesn't just apply to new buyers, according to the communications office of the Immigration Administration. Current homeowners can also take advantage of the change.

Temporary residency lasts one year and is renewable. After five years, residency can be renewed every two years.

Other reforms to the immigration law include higher fines for undocumented foreigners, the ability to apply for residency entirely within Costa Rica and the opportunity to renew a tourist visa without leaving the country.

Temporary residence for investors is applicable to those who can prove: Investments equal to or above U.S. $200,000, according to the official exchange rate determined by the Central Bank of Costa Rica, whether in real estate, shares, stocks or in projects of national interest. For renewal of immigration status, a person needs to prove that the investment is properly registered and taxed.Source: Memorandum from the Immigration Administration . 

Olympus Sets Up Shop in Costa Rica
Oct 23, 2009 Inside Costa Rica 
Olympus, the Japan-based company that manufactures optics and imaging products, is setting up shop in Costa Rica to serve the Central American and South American markets.
From Costa Rica, the company will providing marketing and distribution services for Central America and Colombia, Ecuador and Venezuela.

 The International Monetary Fund (IMF) has made an additional $65 million available to Costa Rica,
Sept 29, 2009     The new money brings the total amount of IMF funds available to Costa Rica to $585 million, pursuant to an arrangement created in April that offers funding of as much as $735 million from which the country can draw as needed.

 Following the meeting of the executive board, Murilo Portugal, the fund's deputy managing director and current chair, explained the reasoning for the increase in available funding.“The 15-month standby arrangement is expected to remain precautionary and will continue to support confidence through the availability of a substantial liquidity buffer,” Portugal said. “The program has been revised to partly accommodate lower-than-expected fiscal revenues through higher deficits in 2009-10.” 

According to the IMF, Costa Rica has done well to weather the effects of the global economic and financial crises, although, given declining manufacturing output and diminished revenues from exports and tourism, the funds are a necessary precautionary measure to ensure buoyancy for the slowed economy. 

The review also found that the historical lows in the inflation rate that Costa Rica presently enjoys has allowed the Central Bank to achieve more lasting price stability and praised the bank's cautious policies regarding inflation and the exchange rate. The IMF also reported that Costa Rican banks are sound and that the repayment of loans continues to contribute to stability. 

“Overall, the near-term prospects for Costa Rica's economy have improved and external vulnerabilities have declined,” Portugal said. “The incipient global recovery should boost confidence, help lift export-related activities, and restore investor risk appetite. Continued strong implementation of the policies under the IMF-supported program will help insulate Costa Rica's economic recovery from these downside risks.”

 

Costa Rica traffic law curbed until March

09-09-09 Tico Times  UPDATED SEPT. 18, 2009
It's official, the new Ley de Tránsito-the implementation of a controversial traffic law designed to eradicate bad motoring habits and reduce the accident death toll- will take effect on March 1, 2010, following approval by 39 legislators last night. Four legislators voted against the postponement.

Offending motorists were liable to be fined and, in some cases imprisoned, as of Sept. 23 had the law not been postponed following a vote Monday at the Legislative Assembly. Forty-six out of 57 legislators voted in favor of suspending the law so that Congress can modify its sanctions, deemed by the majority to be too severe. 

Under the proposed law, drivers were liable to be fined between $39 and $388 for a range of offenses which included driving while talking on a cellular and performing a U-turn. 

 Intel Is Good Neighbor in Costa Rica
Oct 24, 2009 Inside Costa Rica   
Intel Corporation, with headquarters in California, has a large presence in Costa Rica, where it strives to prepare local students for the high-tech job market. The company, which makes integrated circuits for computing and communications industries worldwide, is the largest company in Costa Rica.  To help students with an aptitude for science and technology, Intel has worked with the ministries of education and science and the University of Costa Rica to create a national program of science fairs for elementary and secondary students. About 60 percent of the student population now participates in such fairs.  About 75 percent of Intel's approximately 3,000 employees in Costa Rica volunteer. In 2008, they contributed 32,000 volunteer hours to their communities. For every hour an Intel employee volunteers to help an organization, the company donates $4 to that organization. Intel's success in Costa Rica and its good relations with local communities have made it a magnet in attracting other large companies, helping the Costa Rican economy by employing Costa Ricans and by purchasing as many inputs as possible from local suppliers. In 2008, Intel bought products from 300 local vendors. The company also works with suppliers to help them understand the expectations of a global company in doing business and with progress and with tourism.

 

Inflation Rates Hit Record Highs and Lows 
Sept. 18, 2009 Tico Times Staff 
 (The inflation rate from January to August of 2009 was 2.81 percent, the lowest inflation for the first half of a year in Costa Rican history.) For the 12-month span from September of 2007 through August of 2008 the inflation rate on consumer prices reached 15.4 percent, the highest rate in more than 10 years. This year, during a similar 12-month stretch, the rate of inflation dropped to 5.71 percent, the lowest rate recorded in more than 10 years.  

The dramatic swing in the inflation rate is representative of the economic fluctuations in Costa Rica during the past year. Traditionally, a country's rate of inflation reflects a country's economic prowess, stability and dependence on foreign raw materials, gasoline and oil.

From Highs to Lows

The soaring highs of the inflation rate in 2008 was the result of a mixture of both positive and negative economic circumstances.

On the positive side, the 13.9 percent inflation rate in 2008 meant prices were up, reflecting increased consumer spending. This, in turn, meant that more money was being pumped into the economy. On the other hand, because the increased inflation rate was driven in large measure by higher oil prices, much of the money generated by the elevated costs went toward the purchase of gasoline produced abroad. Such is the lot of countries that are dependent on foreign oil and petroleum products.

But 2008's high inflation rate was not driven solely by gasoline and transportation costs, according to the National Statistics and Census Institute (INEC), which calculates the inflation rate each month. Throughout the first 11 months of the year, before the foundations of the world economy were shaken by the financial crisis, Costa Rican expenditures were high and the economy experienced healthy growth.

“Typically, in the past, a dynamic Costa Rican economy has been accompanied by elevated rates of inflation,” said Eric Vargas, strategy director at the consulting firm Aldesa. “Thus, the decrease in the inflation rate this year is a reflection of the downward effects of the economy.”

In 2009, the inflation rate plummeted. The inflation rate from January to August of 2009 was 2.81 percent, the lowest inflation for the first half of a year in Costa Rican history.

The low inflation rate this year also has positive and negative causes and impacts. The good news for consumers, of course, is that prices are reasonably fixed and they show little increase. The downside for the overall economy, however, is that the reason prices have remained unadjusted is because of diminished demand.

In that regard, Costa Rica's inflation rate, like the rates of most other Central American nations, differs from the rates of more developed economies. For example, the United States rate of inflation hovers around 3 percent, and, when the inflation rate shows small

increases, it is usually perceived as positive and means the economic output of the country is closely aligned with consumer demand.

In Costa Rica, this is not the case.

The slump in the Costa Rican inflation rate this year, including an increase of only 0.65 percent for the month of August, is an indication that consumer demand is low. This means prices remain fixed. In August, of the 12 sectors INEC charts to gauge inflation, only the transportation sector showed growth of more than 1 percent. Other goods and services – such as food, alcohol, clothing, living expenses and other goods and services – reported minimal price increases.

High Inflation Is a Constant in C.R.

Over the past 10 years, the Costa Rican inflation rate has averaged about an 11 percent increase each year. In general, this has been a positive circumstance, meaning the economy has continued to grow and that consumers, in general, have been able to afford the hike in prices.

However, as more U.S. dollars enter the Costa Rican economy and pump up reserves at the Central Bank (BCCR), the exchange rate of the colón continues to rise. The continued increase in the exchange rate, which has grown annually at a rate of 27 colónes per year over the past 10 years, also drives inflation.

“The BCCR is trying to defend the exchange rate against continued upward pressure,” said Vargas. “To avoid this, it has to sell dollars. When dollars are sold, it puts colónes back in the economy. If there are more colónes in the economy, it slows the pressure of inflation, because colónes carry less value than dollars.”

Trade: Costa Rica Improves, Brazil More Expensive  
September 16, 2009  Latin Business Chronicle 

Costa Rica has made dramatic improvements in its trade regime and now ranks fourth in Latin America in terms of ease of trading across borders, according to a Latin Business Chronicle analysis of the 2010 Doing business report from The World Bank. 

The report looks at various factors in terms of doing business, including trade. Other factors include labor, property, construction and tax regulations, contract enforcement, credit and investment environment and ease of opening or closing a business. The World Bank looked at the environment in 183 countries from June last year to May this year.  

Latin America saw mixed results. While costs went up, the waiting time for cargo containers was reduced. Meanwhile, the number of documents needed to export was practically the same.

Most countries saw no changes in their trade rank. Only three saw an improvement and six saw a decline. The three are Costa Rica, Peru and Venezuela. The six that saw a decline in their global rank are Colombia, Honduras, Mexico, Panama, Paraguay and Uruguay.

September is a Month of Independence in Costa Rica Sept 13, 2009 by Claire Saylor  costaricapages.com
September is to Costa Rica what July is to the United States: a month filled with patriotic displays and celebrations of the country’s Dia de Independencia, which officially takes place on Sept. 15. Costa Rica is a country brimming with national pride thanks in part to the fact that its Independence Day traditions that are highly centered around the younger generations. For the nation’s work force, Sept. 15 might be just one day off work, but for the school children, it marks the culmination of months of preparation and time to show off their artistic talent.

Central America actually declared its independence from Spain collectively from the colonial seat in Guatemala in 1821, meaning Sept. 15 is a day of celebration up and down the isthmus. As with most colonial government affairs, Costa Rica had little to do with the decision, and the region didn’t even learn of its independence until a full month later when a delegation arrived from Guatemala to pass on the news.

Every year, a flaming torch is carried from Guatemala starting on Sept. 11 all the way to the former colonial capital of Costa Rica in Cartago, symbolizing the arrival of the news of independence. The runners are selected from the local schools throughout Central America to carry the torch an average of 500 meters, a task that serves as a great source of pride. The torch crosses the Nicaraguan border into Costa Rica each year on the eve of the day of independence and arrives in the northern town of Liberia in time for a sunset ceremony on Sept. 14. Runners and bikers follow the torch route for varying distances, occasionally getting lost as outlying townspeople join the crowd to light their own torches to carry along their own divergent routes.

As the torch makes its way through Costa Rica, local townships kick off the two days of celebration with parades, mascaradas, concerts and cultural shows. School children are required to participate in their town parades in marching bands or by carrying “Faroles”, or elaborate homemade paper lanterns. Their designs sit atop or hang from a wooden stick with candles inside to light the way. It is a tradition for the children to make their own lanterns in patriotic colors, often in the form of a house, animal, vehicle or other creative representations of national symbols.

As the torch arrives in Cartago on Independence Day at 6 p.m. before the Basilica de Los Angeles, the entire country joins together in singing the national anthem “Noble patria, tu hermosa bandera”. The night is capped off with more parades, fireworks and local concerts. While visiting Costa Rica in September, you are sure to stumble upon a festive display of Tico pride and patriotism just about anywhere you go. Don’t forget to wear your red, white and blue and compliment the children on their faroles!

Fitch Assigns New Ratings to The Instituto Nacional de Seguros in Costa Rica Sept.10, 2009 Topix Costa Rica
NEW YORK--(BUSINESS WIRE)--Today, Fitch Ratings has assigned a 'BB+' local currency Insurer Financial Strength Rating (IFS) and a national scale long-term rating of 'AAA(cri)' to The Instituto Nacional de Seguros in Costa Rica (INS). The Rating Outlook is Stable.

INS' ratings reflect the company's very strong capital position, strong profitability, highly dominant market position, adequate reinsurance protection, liquidity and the explicit support the company receives from the government of Costa Rica (local currency Issuer Default Rating [IDR] rated 'BB+' by Fitch). On the other hand, the need to enhance its operating platform, a more diversified investment portfolio, dynamic underwriting techniques and effective cost control policies are key to preserving its financial profile going forward, while a less benign operating environment could challenge its business plan.

The Rating Outlook is Stable. INS' rating is highly tied to the rating of its shareholder, the Costa Rican government. Changes in the rating of the former could result in changes to INS' ratings.

INS was founded in 1924 and has been in full control of the insurance monopoly in Costa Rica since that date. According to the Insurance Law of 2008, the company's insurance operations in Costa Rica are guaranteed by the full faith of the government but not its financial debt or insurance operations held abroad. Despite the fact that the current regulatory framework (reformed on 2008) is constructive and promotes a free market, it is new and untested, and some specific regulatory pieces are still in the process of being approved.

INS is the largest insurance company in Central America and among the largest insurance companies in Latin America. Despite the relatively low penetration of the insurance business in Costa Rica, INS' market dominance and relative size is explained by the benefits of the insurance monopoly created in Costa Rica in 1924 and the substantial size of the Costa Rican economy. The opening of the insurance market in the country since mid-2008 allows new players to participate, which may result in some competition for INS, but its market dominance is expected to persist in the medium term while new players start their operations.

Operating performance has been improving thanks to a more controlled claims ratio, good acquisition costs and high financial income despite rigidities in terms of operating costs and some mandatory expenses outlined by the previous and current regulatory framework. With this, the ROAA ratio has averaged almost 7% in the last five years. Despite the expected increase in competition, a less benign operating environment and lower interest rates, INS' profitability should remain strong in the short to medium term.

Capital is ample and not encumbered, although it is expected to remain as one of INS' main strengths in the future. Conservative profit retention and high profitability have allowed INS to enhance its already strong capital ratios. At the end of fiscal 2008, the liabilities-to-equity ratio stood at 2.0 times (x), and the net-earned-premium-to-equity ratio averaged less than 1.0x in the last five years. Total leverage is adequate at 2.9x.

Costa Rica ranks 55th in global competitiveness

09-09-09 Tico Times  

Costa Rica jumped four spots to 55th place in a new competitiveness survey released Tuesday by the World Economic Forum.

The Global Competitiveness Report is calculated by an Executive Opinion Survey, which is conducted by the World Economic Forum, as well as research institutes and business organizations in the 133 countries surveyed. The survey measures each country across 12 central pillars and analyzes over 100 criteria to create a final ranking.

The Global Competitiveness Report is a comprehensive 492-page document that details the analysis behind each ranking and provides a synopsis of the positive and negative elements of each country.

Costa Rica has improved from its rank of 59th place in the report's 2008 edition and it is the highest ranked Central American country, with Panama receiving the next highest ranking at 59th. Since 2006, Costa Rica has seen a 13-position improvement, one of the largest ranking improvements among the surveyed countries.
According to the World Economic Forum, Costa Rica's commitment to education, good governance standards and production and export diversification, such as high-tech products and eco-tourism, continue to improve the country's global competitiveness ranking.

Costa Rica's highest ranking was in the sector of primary education, where it ranked 29th. The country earned a No. 1 ranking in the category of “Primary Enrollment,” which is under the Health and Primary Education pillar.

The lowest rankings were in the areas of macroeconomic stability, where Costa Rica ranked 101st, and in infrastructure, in which it was ranked 82nd. The report also said “red tape and rigidities in different sectors continue to affect the country's business environment.” The most problematic factors for doing business in Costa Rica were listed as inefficient government bureaucracy, inadequate supply of infrastructure and difficulty in acquiring financing.

Costa Rica is also considered in Stage 2 of economic development, meaning it is considered a developing country. Underdeveloped countries are considered to be in Stage 1, while developed countries are considered to be in Stage 3.

Costa Rica's rankings with 12 measured pillars

Institutions – 47

Infrastructure – 82

Macroeconomic stability – 101

Health and Primary Education – 29

Higher Education and Training – 44

Goods Market and Efficiency – 47

Labor Market Efficiency – 36

Financial Market Sophistication – 79

Technological Readiness – 62

Market Size – 77

Business Sophistication – 41

Innovation – 34

Top 3 ranked countries: Switzerland, U.S., Singapore

Increased Imports Push Up Trade Deficit Sept. 4, 2009 Tico Times  
Costa Rica imported over $15.3 billion worth of goods and services in 2008, the highest level of imports in the country's history. At the same time, Costa Rican exports, valued at $9.5 billion, also reached their highest level ever.  

These increases are representative of the country's place in the global market. While there is a steady external demand for Costa Rican goods and services, the demand for expensive foreign goods causes the deficit (the difference between imports and exports), which stood at $5.8 billion in 2008, to continue to expand.

“We have to import the products we don't produce,” said Emmanuel Hess, president of the Foreign Trade Promotion Office (PROCOMER), in an interview with The Tico Times this week. “And unfortunately, Costa Rica doesn't produce any gasoline. With the increase in the price of gasoline last year, we saw a larger deficit than in previous years.”

From 2007 to 2008, the national trade deficit jumped $2.2 billion, the biggest spike ever recorded in this area in Costa Rica.

According to the Foreign Trade Ministry (COMEX), the importation of refined gasoline, the most costly commodity imported by Costa Rica, in 2008 totaled $1.59 billion, a cost increase of 47.4 percent. The importation of crude oil, the third most costly commodity imported into the country, also grew significantly, by 33.8 percent. Gas prices peaked in June and July of 2008, when the average gas price in the United States was over $4 per gallon. Hess said that as long as the price of imported gasoline remains high, the trade deficit will continue to broaden.

While gasoline was a primary cause of the increased spending on imports, the importation of raw materials used for construction, textiles and manufacturing – such as iron, gold, silver, copper, nickel and zinc – account for the largest slice of the import pie. According to COMEX, 52 percent of all Costa Rican imports in 2008 were raw materials and products used in production.  

“As we continue to build and improve infrastructure, there is pressure to import more raw materials,” Hess said. “We cannot produce certain raw materials here and, as the demand for them grows, we spend more on imports.”  

Costa Rica's total expenditure on imports grew from $12.95 billion in 2007 to $15.37 billion in 2008. This represents an 18.7 percent increase in one year.

Optimism in the Export Market

Although exports increased in 2008, the sector has suffered somewhat in the first six months of 2009. On July 23, PROCOMER reported that exports had brought in $4.27 billion during the first six months of this year. That total is $706 million less than during the first six months of 2008, and represents a 14.2 percent decrease.   

Despite this year's contraction, the Costa Rican export market continues to display savvy in developing new products and markets to bolster exports. According to PROCOMER, through the first six months of 2009, the export of Intel Pentium computer processors generated $910.84 million, which accounted for close to 22 percent of all exports. Intel reported exports during the months of April, May and June totaling $449 million, or $32 million more than during the same period of 2008. Hess said this success is due to the utilization of free trade zones, which house international companies such as Intel and allow for the production of goods in high demand.

“The free trade zones allow for a great deal of foreign direct investment for the purpose of exports,” Hess said. “What is produced there are goods of high quality, such as microprocessors for computers, medical equipment and technology and pharmaceutical products. Free trade zones also allow for the outsourcing of services, such as call centers, contract centers and shared-service locations. These are all very important areas of growth for the export market.”

The continued development of free trade zones has bolstered investment and exports in Costa Rica and, especially, in the Central Valley. In the past months, Boston Scientific, St. Jude's Medical and Moog Inc. have committed to investing a combined $80 million in the free-trade zone of Coyol, near Alajuela, northwest of San José. These companies are just beginning to build their facilities, and the assumption is that when they begin production, the export of medical equipment will flourish.

Another area of the export market that continues to see gains in Costa Rica is in services and outsourcing.

Many international companies have created call centers or service centers in Costa Rican free trade zones, bringing investment to the country through building construction and support for infrastructure. They also hire many local workers. In this way, the “services” provided can be considered exports. Hess said that services – which include medical tourism and construction services and even production and audiovisual services for images and movies – account for over $4 billion of exports. This means that for every dollar earned in the export market, almost half of it stems from the services sector.

Aside from technology, medical equipment and service exports, Costa Rica remains a large exporter of agricultural products, especially fruit. “We are the number one exporter in pineapples and number two in bananas,” Hess said. “We have also seen an increased demand for melons (cantaloupe) in recent years that continues to grow.”  

The two Costa Rican export staples, coffee and bananas, experienced decreases in exports during the first six months of 2009, but Hess expressed confidence that they will improve in the final six months of the year. The export of melones rose 11 percent compared to the first six months of 2008. 

Where Imports Come From:

Around Costa Rica, U.S. name brands are abundant in supermarkets, shopping centers and on office and home computers. The reason for the omnipresent U.S. name brands stems from the fact that the U.S. accounts for 40 percent of all Costa Rican imports. Mexico and China are the second and third leading sources of imports to Costa Rica, respectively, each accounting for around 6 percent of total imports.

Of the 15 most-imported products, the U.S. provides 90 percent of integrated circuits and electronic devices, 51 percent of telephones, 99 percent of corn, 93 percent of paper, and 88 percent of computers.

The principal imported product, refined gasoline and other petroleum derivatives, is imported from various places, including Aruba (30 percent), the U.S. (26 percent), the Holland Antilles islands (17 percent) and Venezuela (13 percent). The leading source of crude oil, the third most costly import into the country, is Venezuela, which accounts for almost 80 percent of all Costa Rican crude oil.

Where Exports Go:

Foreign Trade Minister Marco Vinicio Ruiz said that during the first six months of 2009, Costa Rica exported more than 4,000 products to 150 different markets. Of those markets, the U.S. received the majority of Costa Rican exports.

Hess at PROCOMER estimated that 36 percent of exports were shipped to the U.S., 19 percent to the other Central American nations, 15 percent to Europe and 15 percent to Asia. Hess also indicated that Costa Rica is negotiating with both China and Singapore to establish free trade zones. Of the products exported, most are shipped, taking advantage of the ports on both Costa Rican coasts. “We ship about 70 percent of our products, mostly fresh products, to save costs,” Hess said. “Products of high value, such as medical equipment and computer processors, are sent by plane.”

Market the Benefits and Hope for the Best:

Although the rising costs of the import market cannot be controlled, Costa Rica can continue to market the products offered here in hopes of generating more funds through exports. Next week, PROCOMER will host an event for 270 Costa Rican companies to meet with 210 international buyers in an attempt to create opportunities for potential exportation of products. At a time when external costs remain high, the promotion of Costa Rican goods to foreign markets appears to be the only option that could bring more revenue into the country and eliminate the swelling deficit.

Oracle opens new offices in Costa Rica  

 Sept 10, 2009

Santa Ana is the place where the new offices of the multinational Oracle are functioning in Costa Rica. In the new building of Forum II in Lindora, Santa Ana, more than 32,000 sq.ft, with an investment of more than $1.2 million, Oracle hired 230 people in their commercial operations center for Central America. There will be support in the following matters: legal area (hiring management), credit and money recovery processes, and consulting.

The official inauguration was made on Tuesday August 4th with the presence of executives from the enterprise and Costa Rican President Oscar Arias Sanchez, who thanked Oracle for choosing this country as the center for their expansion.  
Eric Brenner, vice president of the Industries of Oracle Corporation for Latin America, assured that the expansion in Costa Rica demonstrates that “Costa Rica has given us the conditions to offer a world class service” and he emphasized that the quality of Costa Rican human resources, social stability and jurisdictional security, were important factors. 

 Costa Rica Exports Its Model for Green Tourism Certification
Sept 1, 2009 Terramerica   Costa Rica's Sustainable Tourism Certification program (known as CST) puts this Central American nation at the forefront of ecological tourism, and its policies are beginning to attract followers throughout Latin America.

Costa Rica is "the first country in the region to develop such a program," making it a pioneer, Alberto Salas, coordinator of CST for the Costa Rican Institute of Tourism, told Tierramérica.

The project was highlighted during the World Tourism Organization conference held last year in Bahia, Brazil.After that meeting, an initiative was launched to create a network in the Americas for sustainable tourism, using CST as a model. Participating in the network so far are Belize, Guatemala, Costa Rica, Ecuador and Brazil, said Salas.

By governmental mandate, the Central American countries are already working on setting up the certification process, but it has yet to be consolidated.

Certification is voluntary in Costa Rica, and so far 50 hotels have signed up, 80 percent of which are small operations.

The idea of certifying profitable tourism businesses that are environmentally friendly and respect social rights emerged in 1993 as an initiative of the Institute of Tourism, the Central American Institute of Business Administration (INCAE) and the University of Costa Rica.

Certification takes into account sustainable development based on four aspects, INCAE spokeswoman Andrea Prado told Tierramérica. These are the physical-biological environment, the utilization of the service establishment, the external client and the socio-economic environment.

The first entails the interaction of the business with the surrounding natural environment, and includes wastewater treatment and the protection of flora and fauna.

Waste management, as well as the awareness that the business creates among its suppliers in terms of care for the environment and the relationship with the community are determining factors for obtaining certification.

"Hotels see direct benefits like significant savings in energy and water, improved waste management and better relations with the community," Salas said.

Once an applicant business has complied with the requirements of the four areas it can set its sights on achieving five-star quality, in the same style as stars are used in the international hotel industry.

In Costa Rica there are only two five-star environmentally certified hotels, the Rosa Blanca Country Inn, in Heredia, 25 km west of San José, and Lapa Ríos, in the western town of Puntarenas, on the Pacific coast, 100 km from the capital.

There are three hotels that have achieved four stars, 12 with three stars, 18 with two stars and 13 with one star. "The fact that only two hotels have reached level five says a great deal about the demands of the program, and the efforts that the hotels must make to improve their score," Salas said. The lack of financial resources and the novelty of the concept itself were stumbling blocks that the program had to overcome initially. 

The major hotel chains operating in Costa Rica have so far shown little interest in certification. "The big hotels attract segments of the market that are not yet interested in sustainability, in contrast to what is happening in lodging specialized in ecotourism," said the CST coordinator.

Prado, of INCAE, acknowledged that the certification project has not advanced as rapidly as its promoters had hoped. The established requirements in some cases are very difficult for smaller hotels to meet, because they demand investment and a great deal of effort, she said. But the economic benefits will gradually convince the business owners to seek certification. "Those who are attracted to sustainable tourism in general generate more revenues than those who are attracted to 'sun and beach' tourism," said Prado.

European tourists are the most likely to look for sustainable alternatives, as are some U.S. and Canadian travelers, said Salas. Sandra Jiménez, of the Costa Rican office for Rainforest Alliance, underscored the importance of ecological tourism, in which the visitor, the tourism business and the community all benefit from the fact that the environment is not harmed.

Jacó region scores big with 70,000-plus spectators at World Surfing Games

Aug. 31, 2009 Tico Times   

The International Surfing Association (ISA) 2009 World Surfing Games, held in Playa Hermosa and Jacó from Aug. 1-8, was officially the most attended and covered event in the history of Costa Rican sports.

During the eight-day tournament, more than 70,000 spectators visited Hermosa beach, on the central Pacific coast, to watch surfers from 35 different countries compete for titles in the Men's and Women's Open and longboard competitions. According to the ISA, the 70,000-plus audience was the biggest turnout ever recorded for a surfing event.

The Jacó and Playa Hermosa region reaped the benefit of the heavy volume of tourists. Hotels, restaurants and businesses in Jacó have reported earnings of more than $2.5 million during the eight days of competition. The money made during the competition is three times more than the average sales expected from a regular tourism high season in Jacó.

More than 100 different media outlets covered the event, including more than 50 international publications, news and radio stations. Coverage of the event was offered in Spanish, English, French and Portuguese.

“Today, the country of Costa Rica, thanks to the results that transcended our expectations for the event, has shown that it is a country that surfs at the highest level and receives great support from fans across the country,” José Ureña, president of the Surf Federation of Costa Rica and coach of the national team.

Costa Rica ranked second-best place for foreign investment in Central America and Caribbean
Aug. 27, 2009 Tico Times   
Costa Rica is the second-most attractive country for foreign investors in the Central American and Caribbean region, according to Foreign Direct Investment (FDI) Magazine.

In a report published Tuesday, FDI magazine released rankings of the region's “foreign direct investment countries of the future,” in which Puerto Rico placed first, with Costa Rica close on its heels.

A panel of three judges graded 31 Central American and Caribbean destinations across seven categories to determine final rankings. The categories scored were: economic potential, business friendliness, quality of life, human resources, infrastructure, cost effectiveness and FDI strategy. Each category was scored on a 10-point scale.

Of the seven categories, Costa Rica ranked in the top five out of five of them, including first in human resources. Costa Rica's lowest ranking was in cost effectiveness, the only category in which they did not receive a top 10 ranking.

This is the second consecutive top billing for Puerto Rico by FDI Magazine, which ranked the Caribbean island No. 1 in 2007, the last time rankings were tabulated. Costa Rica finished just three points behind the Caribbean island.

Costa Rica's rankings:

Economic potential – 3

Business friendliness – 4

Quality of life – 5

Human resources – 1

FDI strategy – 2

Infrastructure – 6

Cost effectiveness – Not in top 10

The Dominican Republic ranked third and earned the top ranking in the categories of economic potential and FDI strategy. Panama was ranked fourth and Guatemala fifth.

According to FDI Magazine, two programs, known as FDI Markets and FDI Benchmark, were used to generate scores for the rankings. FDI Markets is a database that tracks foreign direct investment on a real-time basis while FDI Benchmark is a database that ranks global locations on how appealing they are to foreign investors. FDI Magazine reports that the data compiled by FDI Markets and FDI Benchmark provided an objective measure to create the “Countries of the Future” rankings.The judges included Alfredo Coutino, the d irector for Latin America Moody's Economy.com, John Bowers, owner of Bowers Consulting, and Darryl White, head of investment banking at the RBTT Merchant Bank Limited, which serves Trinidad and Tobago and the Caribbean region.

 U.S. Federal Reserve chief predicts economic growth
Aug. 21, 2009   A.M. Costa Rica wire services
The head of the U.S. central banking system says the prospects are good for a return to global economic growth in the near future.

The U.S. Federal Reserve chairman, Ben Bernanke, told the world's top central bankers Friday that economic activity appears to be leveling out after contracting sharply over the past year. But he warned that difficult challenges remain.The bankers were at an annual meeting in the mountain town of Jackson Hole, in the western U.S. state of Wyoming, where they are reflecting on the global economic recession.

Germany, France and Japan have pulled out of recession, and the U.S. economy is showing signs of stabilization.

August 21, 2009, the National Association of Realtors said U.S. home sales rose 7.2 percent in July. That is its largest monthly increase in 10 years.

A slowdown in the housing market and problems with homeowners repaying their loans helped spark the U.S. economic crisis and the global slowdown that followed.

The Federal Reserve injected trillions of dollars into the U.S. economy to try to stop it from shrinking and to jump-start growth.

In Europe Friday, a closely watched survey showed the 16 countries using the euro currency are close to growing again.

The financial information company Markit said its measure of business activity — the composite purchasing managers' index — for the Eurozone rose in August.

The index climbed three points to 50, a number that marks the point between economic expansion and contraction. 

Costa Rica new bio-fuels research center  
Aug 20, 2009 Tico Times   A collaborative center that will link industry leaders and scientists in the search for biological innovation in the agro-industrial sector was opened Tuesday in the western San José district of Pavas. 

The facility for the NationalCenter for Biotechnological Innovation (CENIBiot) is meant to provide space and opportunity for companies to work with some of the leading biological researchers in the region, said Patricia Ugalde, a spokeswoman for the center.

“The idea, right now, is that the projects will be pursued through an alliance between the companies and the researchers,” Ugalde said. The agro-industrial sector will team up with researchers to increase productivity or by developing bio-fuels and pharmaceuticals, for example.

President Oscar Arias drew headlines for his appearance at the opening. It was his first public appearance since he secluded himself in his home a week earlier after discovering he had contracted the H1N1 flu virus. The antivirus had done its job and helped him with a swift recovery, he said.

The 1,690 square meter CENIBiot facility contains an administrative center and offices, but more prominent are the five laboratories, each with a separate purpose. 

The labs will focus on microorganism research, the cell structure of plants, analytical research, genome and molecular biology experimentation, and digital image analysis.

Twenty-five projects are already lined up to begin work, Ugalde said, and the facility provides more than enough space and equipment. 

The facility is the only one of its kind in all of Central America, and rivals Mexican and South American competitors in size and capacity, Ugalde said.

The Science and Technology Ministry and the European Union were the project's main funders. According to a statement, the European Union is the second largest market for the output of Costa Rica's agro-industrial sector, which is composed of close to 3,000 companies providing nearly 240,000 jobs across the country.

World Surfing Games; U.S. wins championship

Aug 10, 2009 Tico Times 

It was a week to remember for the Costa Rican national surfing team. Throughout the week at the International Surfing Association (ISA) World Surfing Games, the Ticos were showered with support from the home crowd, as they proved they were one of the top surfing teams in the world. On Saturday, the ISA World Surfing Games ended at Playa Hermosa, and the Costa Rican team left with their heads held high, earning a seventh place finish in the competition.  

“Seventh is a good result,” said surfer Lisbeth Vindas. “We would have liked to finish higher, but the competition here was very strong and, overall, we had a great tournament.”

The final Costa Rican surfer, Jason Torres, was eliminated Friday afternoon, finishing as the seventh best Open surfer in the ISA World Surfing Games. With only 16 surfers remaining in the Open competition on Friday, Torres entered with hopes that he could best the fifth-place finish he earned in 2008. In the first heat of the day, Torres finished fourth in his heat and was demoted to the repercharge competition. Torres bounced back, winning his first repercharge heat, much to the delight of the vibrant Costa Rican crowd lining the beach.

But less than two hours later, with only eight surfers left in the Open competition, Torres narrowly finished at third place in his second repercharge heat, eliminating him from the games. Torres started the heat slowly, but halfway through the 20-minute heat, he rode a long, hollow wave inside, and then finished a series of cutbacks with a 360-spin maneuver. The Costa Rican fans erupted in joy and Torres momentarily moved into second place.

The euphoria was short-lived, however. French surfer Jeremy Flores and South African surfer Brandon Jackson followed Torres with impressive rides of their own and, as the 20 minutes elapsed, Torres was in third place with a 12.94, 0.8 of a point behind Jackson's 13.74. If Torres had finished second, he would have advanced to the finals on Saturday.

Flores, from France, went on to win the Open championship on Saturday. In the four heats, Flores and Torres were pitted against each other. Torres beat Flores on three occasions.

“That's just how the competition goes,” Torres said. “The tournament is about survival. You can beat somebody one day and they beat you the next. Flores is a great surfer and I am happy he continued on and won the tournament.”

Torres was the last member of the Costa Rican team to be eliminated. Earlier in the day, Carlos Muñoz, a 16-year old who advanced through three repercharge rounds to reach the final 16 of the Open, lost in the first heat of the day. Muñoz' run through the tournament was one of the most dramatic and exciting of the competition, in particular his repercharge heat wins on Wednesday, which he carried despite incurring two interference penalties.

“I am disappointed I didn't get the waves I was hoping for (on Friday),” said Muñoz. “But I am happy with how I did and know that I can compete with the best in the world. I am already thinking about next year and setting my goals to finish higher.”

The U.S. team won the overall championship and ascended the podium Saturday to celebrate and sing the U.S national anthem. France finished in second place, the defending champion Australian team finished third and Hawaii took fourth. U.S. surfer Courtney Conlogue won the women's Open championship and French surfer Antoine Delpero won the longboard competition.

Although no final attendance estimation had been made available by the organizers this weekend, thousands lined the beach for the finals on Saturday, by far the biggest turnout of the week. Overall, the competition, which drew teams from 36 different countries, was a huge success for Costa Rica and the world of surfing.

“Costa Rica is a wonderful surfing country,” said U.S. coach Ian Cairns. “The fans were fantastic all week long and supportive of every team. The beach is beautiful and there were overhead waves all week. You couldn't have asked for much more from a surfing event. This was a world class tournament.”

 New immigration law may mean higher fees  
August 6, 2009 Tico Times     
A new immigration law in Costa Rica provides for fines of up to $100 to be levied against undocumented residents for their “irregular” status and the issuance of sanctions against employers who hire them. 

Local legislators don't see the changes as increased burdens on foreigners. Instead, they say the new law will help stem human trafficking and grant immigrants further protections under the law. 

Aug. 3, 2009 

Central Bank Reference Rate

$1 BUYS ¢581.65

1000 colones equals: $1.72

To Buy $1 pay ¢591.04

Costa Rica finance officials see rise for Economy
July 29, 2009 Tico Times Staff
The heads of the Finance Ministry and Central Bank of Costa Rica (BCCR) announced Tuesday that the economy is showing signs of recovery in the midst of the economic crisis.

Francisco de Paula Gutiérrez, executive president of the Central Bank, explained several reasons for economic optimism, including an anticipated 2.5 percent increase in the global gross domestic product (GDP) in the month of July, an expected increase in slumping tourism and a shrinking deficit.The announcement came at the “State of the Economy Review,” organized by the Costa Rican-American Chamber of Commerce (AMCHAM).
“We are in a much better place than we were 18 months ago,” Gutiérrez said. “The recovery from the crisis is not over, though the final six months of this year should show much improvement from the first half.”

Gutiérrez compared GDP figures from June and July and explained that, after the global GDP fell 1.4 percent in June, production and consumption levels worldwide were projected to improve in the month of July, and that the global GDP will have grown an anticipated 2.5 percent for the month. The GDP in Costa Rica fell 4.9 percent in the first six months of 2009.  Gutiérrez also commented on slumping tourism and hotel revenues, and explained that as the global economy improves, so will revenue in the tourism sector.

Guillermo Zúñiga, the Costa Rican finance minister, reinforced the feeling of economic optimism, explaining that a rise in production and manufacturing will bolster the economy through increased investment and the creation of more jobs. Zúñiga alluded to the port of Limón, which has received an $80 million investment in infrastructure and development, and mentioned hopes for further infrastructure investments in upcoming months.  Zúñiga also stated that the nation's balance of payments is in a healthy position and that an accumulated $710 million dollars in reserves has provided breathing room in case of need.

ICE Not Generous

July 17, 2009 By Dennis Rogers Special to A.M. Costa Rica

 Costa Rica’s incumbent telephone operator is resorting to all sorts of legal mechanisms to stymie the entrance of competitors big and small. Nonetheless the telecommunications regulator has authorized the first telephone and Internet operators. 

June 23 marked the end of the monopoly with the approval of six firms which intend to provide various services. After the cable television operator Amnet, these are minor companies which intend to offer Internet connections and IP international phone services.

The biggest stakes will be the arrival of competition in cell phones. This still requires a spectrum auction. A regulator report on spectrum use recommends that the incumbent Instituto Costarricense de Electricidad optimize its operations to free up space, especially in the desirable 850 MHz band. “ICE is not going to leave the 800 band to make space for competitors,” declared Pablo Pedro Quirós, the former monopoly's general manager. It plans to put the next set of 950,000 lines it’s purchasing on those frequencies. Much of the band is presently occupied by a TDMA system set to be phased out this year. The new system will make it even harder to get bandwidth away from the company, as recommended by the report. Overall, the government company has concessions to 78 percent of commercial spectrum, most of it unused or used inefficiently.

As the Instituto Costarricense de Electricidad, known as ICE, is the main electricity distributor for the country, it has also instructed subsidiary Fuerza y Luz to obstruct cable television companies’ use of power poles. Two small electric co-ops elsewhere in the country have already been fined for refusing access to their posts, apparently anticipating the opportunity to offer Internet and television services. The Cartago-area distributor Junta Administrativa del Servicio Eléctrico de Cartago was one of the first entities approved to sell Internet service, over the objections of ICE, even though the Cartago company expressed an interest in distributing ICE’s Internet product.

ICE resorted to a financial weapon when it refused to turn over a tax it had collected over the last trimester of 2008 and the first of 2009. This money corresponds to a tax on Internet and telephone service, and is part of the approved tariff, not a tax on ICE itself. The amount was about $850,000, and the telephone regulator nearly shut down, unable to pay salaries. ICE’s lawyers alleged that it was not authorized to pay the new Superintendencia de Telecomunicaciones rather than the regulator originally charged with telecoms. Following a series of court orders, ICE quickly turned over the money. 

 So far the approved companies are:  

• Dodona SRL, which is now doing business as Amnet offers cable Internet connections and seeks to provide transmission of data, voice-over-Internet, access to information webs, and value-added services like video conferencing and television by subscription;

• Intertel Worldwide S.A., which seeks to provide prepaid public telephone service using the Internet; 

• R&H International Telecom Services S.A., which seeks to provide voice-over-Internet services for homes and businesses; 

• Worldcom de Costa Rica S.A., which seeks to provide wireless Internet connections and by land line, voice-over-Internet and corporate networks; 

• Callmyway NY S.A., which seeks to provide many types of communication services; and 

• Redes Inalámbricas de Costa Rica S.A., which seeks to provide corporate networks with wireless technology. 

Amnet has said it would offer its own Internet services to its customers and cut out Radiográfica Costarricense S.A., known as RACSA, an ICE subsidiary set up for Internet use. ICE itself wants to strip RACSA of its Internet customers in favor of its own.  

However, RACSA vowed this week to continue offering service even if Amnet jumps ship. The television cable company provides a link between users and the RACSA computers. RACSA said it might run its own lines, use radio signals or rent cable space from Amnet. The Amnet contract runs until the end of the year.

 Big Mac Index says that colon is valued correctly
 July 17, 2009  By the A.M. Costa Rica staff 
The latest edition of The Economist magazine’s Big Mac Index is out and the Costa Rican colon is looking very close to its true value relative to the U.S. Dollar. At official exchange rates, China has the cheapest Big Mac and Norway the most expensive. 

In San José the hamburger costs 2,050 colons, or $3.52 at an exchange rate of 582. The average price in the United States is $3.57. Recent devaluations brought the colon to near parity. Six months ago it was at 554 per dollar.

The index is based on the concept of purchasing power parity, which says that a basket of goods, in this case the Big Mac, should cost the same around the world with the price converted to dollars. Differences in the result are then considered to be caused by exchange rate distortions.

If the price in dollars is higher than the average in the United States, that suggests the home currency is overvalued. If it’s less, then that currency is undervalued. The price of the Big Mac in China supports ongoing arguments that the Yuan is undervalued to promote exports.  While the authors admit that other factors like rent and labor play a part, they claim the index does predict movement of exchange rates towards parity.

from July 13, 2009

this means that every 1000 colones equals $1.73  

World Court sets rules for San Juan River traffic

2009-07-13 Costa Rica Wire  

THE HAGUE, Netherlands (AP) - The United Nations' highest court has ruled that Costa Rican vessels can travel freely on the San Juan border river. But it has upheld Nicaragua's right to regulate that traffic and even to require Costa Rican vessels to fly the Nicaraguan flag.

The decision by the International Court of Justice ends a four-year legal fight and sets the rules for navigation on a river that has been the subject of dispute for nearly two centuries.

Under an 1858 treaty, the river entirely belongs to Nicaragua up to the Costa Rican bank, but Costa Rican ships have freedom of navigation.

The 14 judges upheld Monday most of Costa Rica's objections to recent Nicaraguan rules, including a requirement to obtain visas and impose fees. But it affirmed Nicaragua's right to limit Costa Rican traffic.

Economists Encourage Revision of Shield Plan  
July 10, 2009 Tico Times
On January 29 of this year, Costa Rican President Oscar Arias unveiled the Shield Plan, or Plan Escudo, to help the country weather the effects of the global economic crisis. The plan offers assistance to four central sectors – families, workers, businesses and finance – and includes actions to help Costa Rican citizens during tenuous times as the economic slide persists.  

Arias proclaimed in his announcement of the Shield Plan that “every Costa Rican should be able to find in their government a real answer to the problems in this time of world crisis.”  

Although bold in his aspirations for the plan, many in the economic and business sectors find the plan tardy and Arias' expectations shortsighted.

“The problem is that the plan came out too late,” said Greivin Hernández, economist with the InternationalCenter for Economic Policy for Sustainable Development