LEGALLY SPEAKING

By Adrián Peralta
	Adrián Peralta is a legal assistant at the law firm André Tinoco Abogados. Born in Guanacaste, Mr. Peralta is a law student of the Universidad Latina. He can be contacted at aperalta@andretinoco.com

Construction and the Economic Downturn

In the past five years, Costa Rica has enjoyed significant growth in its construction industry.

However, due to the economic downturn, which is being felt around the world as well as in Costa Rica, the construction sector has suffered a decrease in comparison with previous years.

It is regrettable that our government, instead of facilitating or harmoniously cooperating with the industry, seems to look for ways to make it more complicated and slow to obtain building permits.

Before builders can lay the first brick, they have to go through a myriad of procedures. These were put in force by the government to supposedly guarantee a certain control in the construction sector. Some experts are of the opinion that these proceedings trigger illicit means in order to obtain permits and are the reason, in the worst case scenario, why construction does not take place at all.

Some foreign investors then decide to invest their money into other countries, rather than deal with the tedious, lengthy and bureaucratic torment of obtaining construction permits in Costa Rica.

In order to get an idea of what the minimum requirements are to build a small development, you need: municipality permits, soil studies, permits from the National Institute for Housing and Urban Planning (INVU), environmental permits from the National Technical Secretariat of the Ministry of Environment (SETENA), permits from the Ministry of Public Works and Transportation (MOPT), permits from the National Water and Sewerage Authority (AyA) and from the State-run Costa Rican Institute for Energy (ICE).

The list entails more than 250 different steps to take and if everything is approved, it can take up to two years to get your construction permit approval. This list of requirements often takes away any desire to build in Costa Rica, but what is worse, it gives way to corruption. There are some who decide to pay under the table, which sometimes is more convenient than to do it the legal way.

The construction companies agree that the National Technical Secretariat of the Ministry of Environment (SETENA) is the slowest institution, one which really impairs the project. It is little wonder given the number of employees in SETENA who have to check construction projects across the entire country. There are plenty of projects which could have been built years ago if it wasn’t for the paper trail that needs to be presented first.

Lots of people ask themselves if all these permits really guarantee adequate construction. Some say that it isn’t so, since in many cases, buildings are put up in areas where the environmental law has been broken and where permits have been obtained illegally.

The idea is not that permits are made ready the next day. It is understood that a certain degree of revision has to be in place. It should however be less than six months, a year or even two years, since in all cases extended time periods generate losses, the budgets change and the construction contracts might be broken.

What would be the best solution for this problem? In 2002 a law was created to protect the Costa Ricans from excess proceedings. This law is based on the fact that Costa Ricans wanted to simplify their proceedings with the public administration. There are large numbers of requirements which people have to comply with before a municipality or any other governmental agency will issue a permit.

Besides the bureaucratic dealings, there is also the inconvenience of having to confront the excessive costs of construction materials. In 2007, the prices for these materials were affected by increases in other raw materials and by the end of the year, these increases were running between 13 and 18 per cent.

The fact that Costa Rica is still one of the Central American countries with the highest construction demand, does not translate easily to the pockets of the consumers — the higher the demand, the higher the costs, according to some economists. In reality the Costa Rican Construction Chamber is working on a price index for the entire Central American region and it is envisaged we will soon know the results per country included in the study.

There is no doubt that this lucrative activity is affected by many variables and the best for our country would be to look for a way to speed up permit processes and to look for alternatives in order to prevent foreign investment leaving Costa Rica for other countries.