Monday, June 11, 2007
Costa Rica: A Real Business Guide
Finally, a guide to the real business vocabulary in Costa Rica.
Alterra Partners, the consortium managing Juan Santamaría airport, has been fighting the civil aviation authorities for four years over its agreement. (Photo: Alterra)
A.M. Costa RicaWith more foreign companies coming [to Costa Rica] and more North Americans setting up small businesses, a brief review of important ... business phrases is in order:
1. "You don't need any more approvals or permits on this project."
Do not be surprised if the final, absolute, definite approval isn't. There always is another agency or permit that's needed.
Don't feel abused. Even the president faces this problem. Óscar Arias Sánchez thought that with a slim two-thirds majority in the Asamblea Legislativa he could get the free trade treaty ratified. Wrong!
He, too, was blindsided. It was the Tribunal Supreme de Elecciones that said a public referendum must be held, despite the Costa Rican Constitution giving full authority for approving foreign treaties to lawmakers.
But even the tribunal and its proposed Sept. 23 referendum date were blindsided by an appeal to the Sala IV constitutional court, which is now studying the document.
So a small contractor should not feel singled out if the local municipality comes up with a truckload of more hoops to jump through or more permits to seek via administrative procedures or tramites.
2. "Your contract is as good as gold!"
You thought the deal was a firm one, but he thought it was an invitation for further negotiations. Anyone who deals in business [in Costa Rica] knows that contracts are basically suggestions because there are few mechanisms to cheaply enforce one. No one wants to go to court for five years over a few thousand dollars.
But the poor expat with the rubber contract is in good company. Alterra Partners, the consortium managing Juan Santamaría airport, has been fighting the civil aviation authorities for four years over its agreement. The government has been trying to keep on-board the project's financial backers, including the International Finance Corp.
Harken Energy thought it had the right to explore for oil off the Caribbean coast. It said it invested $11 million. But environmental protests and an unfavorable court ruling caused the company to cancel the project. Now it is threatening Costa Rica with a $57 billion demand in international arbitration.
The Harken case was handled by the Abel Pacheco administration. It was President Pacheco who changed the rules and announced he was issuing a moratorium on open pit gold mines even as two were in the development stage. One near Puntarenas is now producing, but the Las Crucitas mine in northern Costa Rica still is controversial and has faced a multitude of legal challenges.
Then there is the San José-Caldera highway, 20 years in the building and not yet open. The roadway will be completed by a concessionaire who will receive money over an extended period to compensate for the construction work. Costa Rica says it has no money for major projects, and the Arias government looks to concessions to get important works done. So many eyes are on Alterra, Harken and Las Crucitas.
Indeed, one of the fears among some sectors of the economy is that the proposed free trade treaty will expose the country to many more international arbitration cases.
3. "It's not my fault!"
This could be the national slogan of the bureaucrat. From national banks to public agencies the rules are firm and you just can't do what you plan, no matter what it is. Want to see the boss and get a straight answer? Good luck. But it's not this guy's fault.
4. "Your signature does not match!"
National bank tellers suddenly become handwriting analysts when they do not want to reveal something. Although criminologists take weeks to validate handwriting, the local bank teller can do it in an instant. Usually this means you look like a crook, there is no money in the cash box or that the teller doesn't want to take a chance that you are who you say you are.
Other agencies like Radiographica Costarricense S.A. and the Instituto Costarricense de Electricidad also use this trick to stop a tramite cold.
5. "Your cédula is expired!"
The critical piece of paperwork for doing personal or commercial business [in Costa Rica] is the cédula de residencia or the carnet for pensionados and rentistas. Without these, you do not exist, and they have to be up to date.
These documents are issued by Dirección General de Migración y Extranjería. But don't hold your breath. They are a bit behind. A lawyer who went there seeking an interview for a pensionado application [on June 1] was given an August appointment date. August of 2008. That's about 15 months. Meanwhile, it's a cash economy.
6. "You have to pay more because you have more money than me!"
Finally it boils down to this, a personal international aid program that some Costa Ricans practice. It is the modern equivalent of Robin Hood. In almost every financial transaction, many Costa Ricans go for the last possible colon because he or she really and truly believes that North Americans are fabulously wealthy and will not miss a tiny bit.
Originally published in A.M. Costa Rica, a daily English-language news service. Republished with permission.
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While some of the observations in this article hide some truth, overall the article paints an overly pessimistic picture of Costa Rica. No surprise, since it was originally published in "A.M Costa Rica", a newspaper by and for American expats living or doing business in CR. The bottom line is that CR remains the most stable and attractive country in Latin America in which to do business. It boasts perhaps the strongest and most lasting democracy in the region. It is a signatory of the ICSID Convention and an active Member of the WTO. It has a well functioning (albeit slow) judicial system.