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(506) 223-1327           Published Tuesday, Jan. 23, 2007, Vol. 7, No. 16             E-mail us    
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Smart money still building
Taxes, uncertainty share blame in market slowdown

By the A.M. Costa Rica staff

The Costa Rican real estate market appears to have slowed over the last four months.

The situation is closely linked to tourism that began a downturn in May or June, according to those in that industry.

The problem is not isolated even though some areas have special problems. Manuel Antonio has a water shortage, and Tamarindo is overbuilt, for example.

The usual suspects are getting the blame: Bad roads, high prices, excess inventory, and the U.S. housing market. But there also is the instability caused by a central government that wanted to tax luxury homes and pass an income tax plan that might catch seasonal visitors.

Many of the homes on the market for North Americans would qualify as a luxury home and for the proposed tax.

The taxes apply to homes valued at more than 100 million colons, some $193,000 at today's exchange rate. Homeowners with property valued between 100 million colons and 750 million colons will pay a quarter of 1 percent in taxes. For a 100 million colon property the tax would be 250,000 colons or about $480.

For a $2 million property, and there are many along the Pacific coast, the tax would be 0.35 percent or about $7,000.

Then there is the tax package promoted by the Óscar Arias Sánchez administration. The plan still is not clearly defined, but would-be home buyers worry about global taxation that might snag part of their income elsewhere. There is uncertainty on who would be a resident and subject to the tax. Those who visit Costa Rica three or four months a year are among the most concerned.

Despite all the worries, real estate brokers report that some asking prices actually are higher throughout Costa Rica for property this year, but buyers are fewer.   Sellers of existing inventory are reducing prices to compete with the other

A.M. Costa Rica graphic


properties on the market.  Others fear they will not be able to sell when the many new projects up and down the Pacific coast come onto the market in the near future. Guanacaste businessmen estimate that new construction will be around $2 billion there this year.

Individual sellers say that brokers are encouraging them to reduce their asking price by 10 or 15 percent for a quick sale.

A number of projects are being constructed by large corporations with deep pockets. These are not being halted because company executives are looking at the long term, some five to seven years in the future. They see the current slowdown as a normal process in a free market that seeks to throw off the effects of a two-year feeding frenzy. They look at U.S. demographics that show waves of middle-aged workers facing retirement and seeking a warm place to live.


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San José, Costa Rica, Tuesday, Jan. 23, 2007, Vol. 7, No. 16

Costa Rica Expertise
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Our reader's opinion
Freedom is what is needed
to make an economy function


Dear A.M. Costa Rica:

The most recent Index of Economic Freedom was released last week grading and comparing about 160 countries all over the world.  The purpose of this annual study produced by the Heritage Foundation and the Wall Street Journal is to rank most of the countries of the world from the easiest in which to do business to the most difficult.  Each country is scored using the following 10 different criterion:

1.Business Freedom
2.Fiscal Freedom
3.Trade Freedom
4.Freedom from government
5.Monetary Freedom
6.Investment Freedom
7.Financial Freedom
8.Property Rights
9.Freedom from corruption
10.Labor Freedom

The country ranked as No. 1 or the easiest in which to conduct business was again Hong Kong with the U.S. coming in as No. 4.  The worse country was without surprise North Korea at 157.  Costa Rica came in a disappointing 51 — worse than Mexico’s 49.

There are a couple of things of great importance here that should be pointed out.  First is that even though Costa Rica and the other Central American Free Trade Agreement countries are seeking economic progress through a free trade agreement, economic progress (freedom) is not assured with only a written document.  It also requires a major modification of the existing laws and systems to allow the economic seeds to flourish. 

Mexico is a perfect example of this with North American Free Trade Agreement.  The internal economic growth which produces jobs, security and wealth for its people has been slow to gain traction in Mexico because of the poor report card grades it received in the above 10 categories.  President Fox failed over and over during his six years in office to get the necessary laws changed through a congress controlled by the old dinosaur Revolutionario Institutional party. 

All of the changes Fox tried to bring about pertained to one or all of the above categories to allow future economic growth.  Consequently very little job growth took place during his tenure and tens of thousands seeking a job to feed their families illegally invaded the U.S. looking for work.

Costa Rica is facing the same decisions today with the Central American Free Trade Agreement.  Even though a free trade agreement is passed, it will not bring the economic benefits that are possible without internal changes in the above categories.

The second most important correlation to come from the report is that the four left-leaning countries of Latin America gaining so much press lately with newly installed socialist presidents each have the following scores.
Venezuela, 144; Bolivia, 112, and Ecuador, 108.

And then there is Cuba burning up the tracks at a dismal, oppressive 156 ranking next to North Korea.  The recent hot rhetoric of the newly installed socialist presidents in these countries never passes up an opportunity to blame the United States and capitalism for their poor economic condition. 

The truth is that it’s their own failure in the above categories that continues their march down a well-worn road to economic failure for the poor they profess to protect.  The study shows a strong correlation between the level of economic freedom enjoyed in a country and the prosperity of its people.

More information about this study can be found HERE!

Phil Mattingly
La Paz, México


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San José, Costa Rica, Tuesday, Jan. 23, 2007, Vol. 7, No. 16







This scamster targets those selling homes in valley
By the A.M. Costa Rica staff

Another creative scammer has targeted North Americans who want to sell their home.

The scammer, who also could be a robber or worse, showed up Monday at the home of an older couple who had advertised their property in a local print newspaper.

The names are not going to appear here because the homeowners are frightened and fear they were lucky to just lose 25,000 colons, some $48.

The scammer probably is looking for another victim.

The couple thought the scammer was a legitimate buyer. They invited him into their home, showed him around and were overjoyed when he said he would purchase the home.

Quickly arrangements were made to drive to a lawyer's office to seal the deal. The scammer got in the car with the older couple, and they headed for an office in downtown San José.

Part of the way there, the scammer said he needed to purchase legal stamps of the kind that lawyers paste on documents. He needed 2,000 colons, nearly $4. He got
out of the car and was gone a few minutes. When he returned he announced he needed more money for stamps. The couple gave him 23,000 colons more.

Soon he was back again, claiming that the lawyer involved wanted his fee up front. By then the older couple were kicking themselves for getting involved in the first place, and they made a call to the lawyer. No one needed stamps, and the fee would be paid at closing.

The scammer vanished, and the couple found that their car was running badly. Immediately they thought that the scammer and friends would be robbing their house on the other side of the valley.

That didn't happen, but it was a possibility. Meanwhile, the man who was going to do the closing was kicking himself, too, for not asking more information of the scammer when they talked by telephone.

"They could be in a ditch now," he said of his older clients.

Real estate agents make a big point of qualifying their clients. That includes getting a positive identification before showing property. But the older couple were selling on their own.



Tourism institute will spring for road signs for country
By José Pablo Ramírez Vindas
of the A.M. Costa Rica staff


The government has tapped the tourism institute for 300 million colons, some $580,000, to hang 1,300 new signs around the country.

The Instituto Costarricense de Turismo will give the money to the Ministerio de Obras Públicas y Transporte. Employees of the ministry will do work with 195 million colons for materials and hang the signs for 111 million more, according to an agreement signed Monday.

The first step will put signs in Guanacaste on the Nicoya Peninsula, the highway between Barranca and Peñas Blancas; Route 32, the San José-Limón highway; national highways on the Caribbean, and around national parks.
Although many of the signs are what you would expect on highways, officials have created a special coffee-colored series for tourist sites. Some 225 such signs will be placed.

Many of the signs will just provide pointers to towns and cities along with the estimated number of kilometers to get there. In addition to national parks, the coffee-colored signs also will be near forest reserves, nature reserves and control points.

Costa Rica traditionally has been lacking on road signs, and tourists as well as residents have a hard time getting around. The project only needs approval of the Contraloría General de la República. The agreement was signed by Carlos Ricardo Benavides, minister of Turismo and Karla González, minister of Obras Públicas. Officials said they also were considering a plan where hotels and other tourist-related firms can purchase highway signage to attract visitors.

A.M. Costa Rica photos/José Pablo Ramírez Vindas
Signs for tourism sites will have distinctive coffee color


Rodrigo Arias Sánchez, minister of the Presidencia, displays proposed directional signs to Ms. González and Benavidas.


Arias to inaugurate administrative building for Colegio Universitario de Alajuela
By the A.M. Costa Rica staff

President Óscar Arias Sánchez is inaugurating a new adminstrative services building for the Colegio Universitario de Alajuela at 3 p.m. today.

Opening of the new building will free up classroom space and allow for a higher student enrollment, said the Costa Rican government.

Construction of the site cost over 280 million colons
(about $542,000) and occupies an area of 1,400 cubic meters (about 49,000 cubic feet).  Funding for the project was a collaboration the school's money and a loan from the Banco Popular and Desarrollo Comunal. 

The first floor of the two-story facility will host the offices of registration, finances, student loans, technical aid.

Above will be the offices of the adminstrative directors, executive council, deans office, marketing and finance, as well as the legal counsel.


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San José, Costa Rica, Tuesday, Jan. 23, 2007, Vol. 7, No. 16


Free trade foes warned to recognize constitutional order
By the A.M. Costa Rica staff

The central government is warning anti-free trade protesters that they better not resort to violence while in the Asamblea Legislative a bloc of 38 deputies, a two-thirds majority, is preparing a fast track for the treaty and related legislation.

Rodrigo Arias Sánchez, the minister of the Presidencia, said Monday that protesters must respect the constitutional order of the state. He was responding to press reports that anti-free trade demonstrators would be using everything they have to block approval of the measure.

Rodrigo Arias said the government would not allow road blockades or other efforts to paralyze the country. Universidad de Costa Rica students have blocked major roadways in the past.

However, Rodrigo Arias said he was confident that one announced march would be peaceful because Ottón Solís would be leading it. Solís is the former presidential candidate for the Partido Acción Ciudadana who lost a close election to the brother of Rodrigo Arias. He is highly respected and has met with Óscar Arias Sánchez on the trade treaty, although he opposes it.
The efforts in the legislature involve making a change in regulations. A committee has been asked to review the procedural change and report back in two days. Pro-treaty lawmakers also have created special committees to conduct the obligatory review of parallel legislation related to the trade treaty.

A spokesperson for the majority bloc said that the changes will not affect the right of other lawmakers to make amendments or the right of a legislative deputy to discuss the measure fully. The 17 members of the Partido Acción Ciudadana disagree, and there is talk of a Sala IV constitutional court appeal. In addition, amendments are not allowed on treaties.

The majority bloc is seeking to approve the free trade treaty in February after discussing it in 20 or more legislative sessions. The special committees are expected to expedite the measures to get them to the floor.

The Partido Acción Ciudadana will not just stand by. They may not be able to block a favorable 38-19 vote on the treaty, but they already showed last week that they are prepared to walk out to prevent a quorum, although failing to show will cost each lawmaker money.


Power cut is planned in the southern section of San José this morning
By the A.M. Costa Rica staff

The Compañía Nacional de Fuerza y Luz will be turning off power to south San José today at 7:30 a.m. The work is expected to last until 4 p.m..

There are government offices in the area, including the .
main headquarters of the Ministerio de Obras Pública y Transportes. That agency said that most of its offices, including the driver's license bureau, would be functioning normally.

The ministry officials are expecting the power to be fully restored by Wednesday.


Air travelers better have their passports handy to enter the United States
By the A.M. Costa Rica wire services

Starting today, air travelers with passports from the United States, Canada, Mexico or Bermuda will be required to show those documents in order to enter the United States when arriving from any part of the Western Hemisphere.
Before now, other forms of identification, such as drivers licenses, were accepted.
The rule change was suggested by the bipartisan commission investigating the September 11, 2001 terrorist attacks, and passed into law by the U.S. Congress.

U.S. officials say that next year Americans traveling in the Western Hemisphere by land or sea could be required to present a valid American passport to get back into the United States.


Boatload of illegal immigrants will come to Costa Rica to be returned home
By the A.M. Costa Rica staff

Some 57 more would-be illegal immigrants to the United States have been found on the high seas.

Immigration officials here said that the individuals were abandoned by the men they paid $4,000 each to bring them to the United States.
A U.S. warship encountered the craft Sunday, and the Servicio Nacional de Guardacostas is bringing them ashore. Eventually the boat occupants, Peruvians and Ecuadorians, will be taken to San José to be returned home. Some now require medical attention.

The boat occupants were expected to be on Costa Rican soil Monday night but this could not be verified.



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San José, Costa Rica, Tuesday, Jan. 23, 2007, Vol. 7, No. 16 


National sports competition kicks off with chants and songs
By Noel Dekking
of the A.M. Costa Rica staff


The openning ceremony of the 27th annual Juegos Deportivos Nacionales had some 3,000 young athletes packed into the Gimnasio Nacional at Parque La Sabana.

It was as though competition had already started Monday night during the inauguration of the youth national sport games, as regional representatives decked out in track suits of their team colors waved flags, whistled and chanted songs back and forth to see who could show the most enthusiasm.

President Óscar Arias Sánchez was on hand to deliver one of the opening speeches.  In it, he encouraged the audience by saying that overcoming adversity and challenges is important in sport as it is in life, and that making the strongest effort possible is what really counts. His speech was followed by a number of young dancer and gymnastic club presentations.

For the next six days the Costa Rican athletes have the opportunity to make such an effort and to compete against other regional representatives in one of the 15 disciplines.  Some of the popular sports include soccer, track, basketball, baseball. volleyball, tennis, ping pong, mountain biking, and weightlifting.  A schedule is HERE!

The event is organized by the Instituto Costarricense del Deporte y la Recreación.  This year a government contribution of 371 million colons (about $715,000) was needed to ensure the games could be held.  Arias said that the sporting event is important for Costa Rica and is one of the stepping stones in the dream of making it to the Olympics, a statement that was greeted with applause.

A.M. Costa Rica photos/Noel Dekking
Regional sports team sings one of their chants at the 27th annual Juegos Deportivos Nacionales.  The competition for the loudest team was a draw between Limón and Puntarenas.



Gymnasts perform for audience of athletes and officials


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