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The Seven Commandments that Sink Papagayo

  • 46 years after the creation of the Golfo de Papagayo Tourism Development, its initial promises still haven’t been fulfilled.
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The magnificence of Bahía Culebra is concessioned to 40 hotel businessmen and other residents. The ICT has created more legal documents related to the pole that jobs for the community. ICT

This belongs to the rich now. I do motorboat trips, taking tourists out to see the seahorses,” tourist guide Jaime Pozuelo tells us at Playa Panama. “I leave from Playa Blanca, which is part of a hotel. Imagine, they built stairs to get to that beach, just to take away your desire to go.”

From here, he points at the Four Seasons hotel and the Papagayo marina, projects that were built in a zone that Costa Rica has dreamed of since the 1970s as an engine for investment in Guanacaste: The Golfo de Papagayo Tourism Development  (PTGP), today administered by the Costa Rica Tourism Institute (ICT).

 

READ: Largest Papagayo Investors Dealt and Stashed Money in Tax Havens

 

Why does this apathy for the Papagayo development exist among Guanacastecans? We investigated with this question in mind and we found that 46 years after its creation, the development drags on and creates “commandments” that impede its ability to bear the fruits that were expected with its creation.

 

1.   You will create laws and regulations about everything

At its beginning, the ICT made 2,000 hectares (4,942 acres) available to national and foreign investors to develop their projects. The state would license out the land, but it wasn’t clear how.

The creation of the development required laws, regulations for those laws, master plans, regulations for the master plans, contracts for licenses and other documents.

The country created at least three laws between 1975 and 1982 just to create the development and execute the project. It also defined the conditions that the development must operate within and the requirements for those interested. For that, it established a regulation 16 years later (in 1996) for the last law that was passed, law No. 6758.

It also developed a master plan to be able to clearly visualize what the development would look like and what buildings and works it should have. That plan was corrected on four occasions, until the most clear version of the text was passed in 2008.

 

 

 

Each new document was more important than the previous one and each one tried to fill a void that the previous document left open.

The master plan wasn’t enough either. It required a set of regulations to give instructions. The most recent was published in 2012 after multiple changes to its articles. By then, almost two decades had already passed.

As if that weren’t enough, add to it the license contracts, contracts between those interested in developing the development and the state, and modifications (addendums) to each one of those contracts.

For the Center for Responsible Travel (CREST), a think tank that focuses on analyzing international tourism, the constant reforms, modifications, additions and repeals of decrees only evidenced the lack of foresight by authorities and, above all, the improvisation in the decision-making process

2. You will never know who the licensees are

While the project’s legal framework was taking shape, the ICT issued its first licenses between 1991-1998. Among them was the project’s “master” licensee, or the “big licensee:” Ecodesarrollo Papagayo S.A, which received 851 hectares (2,102 acres), or 41% of the development’s total area (SEE timeline)

Including Ecodesarrollo, there are 40 companies that the ICT has licensed out land to, but how much does the state know about the temporary owners of its own land?

According to the law’s regulations, the licensees must present a sworn affidavit testifying that they have the economic capacity to build the projects. The other document is a certificate that shows that they have no criminal history.    

“We ask ourselves, is this opportune, is this convenient? If that is answered, the licenses are granted,” said Henry Wang, director of the project’s office for implementation. “For our purposes, the important thing is that the project is developed.”

A licensee also has the right to transfer a part of their license to a third party. What the state requests of this new tenant is minimal. The licensee must notify the ICT ahead of time and declare that the third party  has the economic capacity to develop its plans.

 

“We have the certainty that companies have the resources when they receive a license, but that’s as far as we go,” Wong said. “What the companies agree to among themselves, or internally, or with the institute [the ICT], we don’t get involved in that. That way the path is open for all, for anyone.”

READ: Link a la historia de Schwan

3.    You won’t develop what you propose

While ICT assures that 97% of the total area of the development is licensed out, this isn’t synonymous with success since the temporary owners often don’t finish developing their projects even though the majority of licenses were issued more than 10 years ago.

Of the development’s 40 licenses, only 12 report their projects as complete.

Another big promise that hasn’t been fulfilled is the construction of a “tourist town” in Playa Panamá that has been under consideration since the first law was passed. Ecodesarrollo assumed a part of that task in its license contract and, in one of its addendums, the company assured that it presented the plans, but there is no document that details what that town will look like.

“There’s an obligation to build it,” Wong said. “It could have a bull ring, a church, retail spaces, parks, but there is not a specific definition of what kind of town” it would be, recognized Wong, who doesn’t make the decisions.

The same thing is happening with the law’s requirement that the ICT build a recreation center for the elderly from the communities within the development, another project that never began and that the institute does not know when it will be complete.  

4.    Blame the water

There are various justifications that the ICT provides as to why the licensees don’t meet their goals. One of them, and the most important, is the lack of water in the province.

According to the institute, at least 13 licensees have their projects paralyzed over a lack of water. They aren’t issuing new licenses until this problem is solved.

 

READ: Playa Hermosa Residents Organized to Resolve Salt Water Problem.

So, have water shortages limited the development ever since the 1990s when the first licenses were issued?

“Yes, yes, you are right. The issue of water hasn’t always been present. That’s right,” Wong said. “But the global recession also hit us and investors couldn’t continue with their projects,” he justified.

The ICT places its hopes in the new aqueduct in Papagayo Sur known as Trancas, which would cost approximately ¢3.5 billion ($6.25 million), largely paid for by what the ICT has charged in fees for licensing out the land. In the past, the institute only invested 10% of this money in works for the community.

READ: ICT Invests 10% Of Earnings From Papagayo Concessions In Community-Oriented Projects

 

5.  You will make the same mistakes over and over again

At least two studies by state institutions strongly criticize the ICT’s job at the development. In 2008, Costa Rica’s Comptroller’s Office (CGR) in report No. DFOE-ED-5-2008 criticized the institution’s lack of oversight of the licenses that had been granted and pointed out another series of weaknesses in the execution.

“It lacks an efficient planning system (...) that would allow us to know when the licensing of open lots at the project would be done, when the ICT would finish pending works and when the current licensees would finish the tourism projects that they committed to,” the report indicated in its conclusions.  

The Comptroller’s Office said in 2012 that its recommendations had been fulfilled. But in 2016, an internal audit of the ICT points out the same mistakes again.

According to the document, the institution doesn’t have updated timelines for infrastructure projects, it doesn’t have automated management systems that ensure efficiency and security of information, nor does it have evidence of inspections of the licensed areas.

“How does the ICT plan to execute a project of this size if it doesn’t have a roadmap to follow?” said National Liberation Party congresswoman Maureen Clarke during a plenary session speech. Her office has been investigating the project.

READ: Why should we tell the secrets of Papagayo and its shell companies?

6.   You will cut deals for those who do not need it

 

The objective of the ambitious project that politicians imagined in the 1970s was to benefit the community above all else. Despite the creation of jobs in the zone and the social responsibility programs that some hotels have implemented, the money that the ICT and communities collect for their own planning is in doubt.

For example, the licensees pay a one-time fee of ¢1,800 ($3.04) per square meter. For former lawmaker José María Villalta, who criticizes the development’s true benefits, that amount is way below what it’s really worth.

“We are giving benefits and privileges to licensees that don’t need it,” he said. “There are no small business there. There are mega-projects and they should pay a real value for the use of that land.”  

The former lawmaker, CREST and the Comptroller’s Office indicate that the effects of the development also impact the towns of Carrillo and Liberia, administrations upon which the development’s works are built.

The ICT shields itself with the argument that, outside of the license fee, tenants must pay the same as any other business owner that develops a project anywhere in the country. But the reality is different.

 

The local governments are in charge of collecting taxes and an annual fee for the use of the maritime-land zone. This fee substitutes the property tax that is charged on private properties.

 

Nevertheless, the administration of former President Oscar Arias in 2010 reduced the rate for this tax for local governments from $3.04 to $1, according to Executive Decree No. 35962 MP-TUR.

 

“The new regulation for the fee in Papagayo causes losses of more than ¢600 million ($1.07 million) annually for local governments,” Villalta said. “There is a bill that seeks to change this (bill No. 18.072) because we are talking about ridiculously low amounts that are calculated differently than they are in the rest of the country.”

 

7.   You will not know the impact of your actions

Other than a private investigations done by a few lawmakers, there is no way to officially know what the development’s social and financial impact will be on Guanacaste and on Costa Rica.  

The CREST report points out that it’s difficult to evaluate the impact of businesses that received licenses, and not even the ICT has studies on how tax breaks for integral and sustainable developments in the country have contributed.

The Finance Ministry doesn’t provide this data either since information about large taxpayers is deemed confidential under the tax code.

This general lack of knowledge is what creates uncertainty and feeds sentiments like that of Jaime in Playa Panamá, who feels that these lands no longer belong to anyone except the rich.

 
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