A.M. Costa Rica

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These stories were published Monday, April 19, 2004, in Vol. 4, No. 76
Jo Stuart
About us
Legal manipulations can protect property here
By Garland M. Baker
Special to A.M. Costa Rica

With so many people, ranging from the common property thief to the tax man, trying to take your property away from you, why not fight back and protect yourself with legal fences to keep the bad guys out. 

Here are a few ways:

Corporations or limited partnerships, called SRLs in this country, can be created to hold property and protect assets.  These two entities protect possessions from personal torts and accidents which can create liability for an individual but can not be transferred to the corporation for enforcement.  Corporations and SRLs are also easily sold because only the stock needs to be signed over to a new purchaser, thus saving some thousands of dollars in transfer taxes.

Mortgage Certificates better known as Cédulas Hipotecarias in Costa Rica can be registered over real property.  These certificates are very similar to bank CDs. In case the owner or holder needs a loan, the certificate can be endorsed over to a creditor as collateral.

The documents can save time and money because the normal appraisals and paperwork to borrow money are avoided.  Once the loan is paid, the endorsement is canceled.

More importantly, these certificates can protect property because once created they are in first place and no other liability can take precedence.  These certificates can be especially useful and provide an extra margin of safety for commercial property.

Family equity or patrimonio familiar is a great way to protect property in the name of a person, if that person is married or has children in Costa Rica.  No one can ever take the asset away from the person or his family, not even the tax man.

There are some restrictions to using this legal protection, and it can only be placed on one piece of property which has a house on a lot of no more than a 1,000 square meters.  Despite the limitations, it is well worth consideration if your home is one of your only worldly goods.

Usufruct or usufructo in Spanish can be used as rights of survivorship to guarantee succession of property to a loved one.  Normally, when a 

person dies and no recognized will exists, one needs to go through probate.  This process can take years and be expensive in Costa Rica and should be avoided at all costs.

To avoid probate some people decide to transfer property while they are still alive with the risk the beneficiaries will throw them out and sell the assets.  Transferring the property and keeping the usufruct, the right of use, you can never be tossed out, not even in a tax foreclosure or any other type of legal action. 

When the holder of the usufruct dies, the lien is automatically cancelled and the right of use moves on to the beneficiary, saving thousands of dollars in legal fees and taxes.

A more complex use of this legal strategy can be set up as a sophisticated tax shelter. A company losing money can give the usufruct right to another in a high tax bracket. The second firm can deduct the losses against its profits.  Usually this arrangement is made between family members or close business partners who can be trusted. It is perfectly legal. 

There are many ways to protect yourself and your assets in Costa Rica. Finding a competent adviser, legal and tax professional is a must.

NOTE: Lic. Allan Garro, provided much of the research in preparing this article. He can be reached at law@licgarro.com. Garland M. Baker is a local businessman who provides business services to the international community. He may be reached at info@crexpertise.com. Mr. Baker has undertaken the research leading to his series of articles in conjunction with A.M. Costa Rica.

'Make fish,
not war'
could be
slogan here
By the A.M. Costa Rica staff

Costa Rica is emerging as a tilapia powerhouse. The country is expected to ship nearly 4,000 tons of the farm-raised fish to the United States this year, a figure that will increase if the free-trade treaty with the United States is passed.

President Abel Pacheco paid tribute to the estimated 1,089 producers of the fish in a visit he made to the Caribbean town of Batán over the weekend. Among other duties, the president transferred title of property for some 200 families in the region. The celebration of the Día del Acuicultor was noted at a visit to the tilapia project at the Asociación de Mujeres Chirripó in Corina de Matina.

Casa Presidencial noted that by formalizing the title that the residents have to the land credit can be established and the businesses, including that of aquaculture, can be improved.

Tilapia is a mild-flavored, fast-growing freshwater fish that usually does well in tropical climates.

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Powell explains delay
on backing Rodríguez

By the A.M. Costa Rica staff
and special reports

Why did the United States wait so long before endorsing Miguel Angel Rodríguez as the next secretary general of the Organization of American States?

Colin Powell, the U.S. secretary of state, had this response when asked that question Thursday in Washington:

"This was the first opportunity I had to meet with President Rodriguez and notify him of the president's decision, and also to do it in a public way so that the hemisphere could see the strength of our support for President Rodriguez."

The secretary of state said that Rodríguez, now living and teaching in the United States, has been a good friend to the United States and has a distinguished background as an economist, businessman, teacher and political leader. Upon Rodríguez' assumption of office, Powell said, the United States "will support him in every way that we can." Powell conferred with President George Bush before meeting Rodríguez Thursday.

Rodríguez, who served as president from 1998 to 2002, has gained the support of 32 of the 34 voting nations in the hemispheric organization.

Keep sweater on
until it’s Tuesday

By the A.M. Costa Rica staff

Button up the overcoats or at least put on a sweater.

The weather prediction is for continued cold and wind in the Central Valley until at least Tuesday. The cold spell arrived Friday and brought with it sprinkles and cloudy skies with rain at higher elevations.

The Instituto Meteorológico Nacional said that the weather should begin to change this afternoon or evening as a cold front departs the region.

Of course when Costa Ricans talks about cold, they are not talking about frigid. The low temperature recorded for Sunday was 17.9 degrees Celsius. That’s about 64.5 degrees Fahrenheit.

Trip to remote volcano
on association agenda

Special to A.M. Costa Rica

The Association of Residents of Costa Rica is organizing a trip to Rincón de la Vieja Volcano sometime during the last weeks of May. 

The Organization for Tropical Studies that organizes bio courses to educate people about species and ecosystems, has agreed to specially organize a trip for 30 participants to Rincón de la Vieja, said Bob Miller, president.

The price is $140 per person, which includes three full days with two nights at the Rincón de la Vieja Lodge, comfortable bus transportation, meals at the lodge and a full-time instructor. 

The only extra expense will be the entrance to the Park (700 colons for residents) and 700 colons to Hacienda Guachipelin, said Miller. That’s less than $2 each.

 Persons seriously interested in taking the trip, should contact Elsa Miller at 228-1250 as soon as possible so further arrangements can be made.

According to the lodge Web site, the park is an active volcano draped with virgin forest some 12 miles northeast of Liberia. Hikers who get to the top can see Lake Nicaragua from the summit on a clear day. The summit at 1,806 meters is nearly 6,000 feet high.

The last eruption of the volcano was Feb.16, 1998, according to a Web site search.

Fight ends in fatal shooting

By the A.M. Costa Rica staff

A fight ended in a shooting that took the life of a Coronado man about 5 a.m. Sunday at a popular dance club in the Centro Comercial El Pueblo north of San José. Dead is a man identified by the last names of Vázquez Madrigal, 21. A suspect is a fugitive. El Pueblo, as it is known, hosts a number of tourist-oriented shops and a handful of popular dance clubs where activities go on until sunrise most weekends.

Thief takes safe from home

By the A.M. Costa Rica staff

Someone broke into a house in Curridabat Saturday night or early Sunday and took a safe that contained jewels valued at 15 million colons (about $35,000), some cash in dollars and a passport. The dwelling was south and east of Plaza del Sol. said the Fuerza Pública.

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Punch by pro-Castro Cuban continues to resonate
By the A.M. Costa Rica wire services

GENEVA, Switzerland — The United States is accusing Cuba of outrageous behavior at the U.N. Human Rights Commission, where a Cuban delegate at the conference site in Geneva punched a representative of a U.S. group opposed to the Fidel Castro government. The U.N. panel narrowly approved a resolution Thursday condemning Cuba for its crackdown on dissent. 

U.S. officials say the punch that floored the American activist in the lobby of the conference hall in Geneva, in full view of other delegates, was the most egregious incident in a pattern of harassment of U.S. diplomats and other supporters of Thursday's censure of the Cuban government. 

The representative of the U.S. group, Frank Calzon of the Washington-based Center for a Free Cuba, was reported to have been briefly knocked unconscious by a blow delivered from behind by the Cuban representative. 

The Cuban, who was not identified in news reports, was taken into custody by U.N. security guards, and a U.S. diplomat who witnessed the attack said he would seek to press criminal charges. 

At a news briefing here, State Department 


Spokesman Richard Boucher said the behavior of the Cuban official was unacceptable. 

"We think that other members of the commission should focus on these issues, and that the international community should make clear the need for the Cuban delegations to respect the rules of procedure and proper order," he said. 

The attack came after the 53-nation U.N. Commission voted by a 22-to-21 count with 10 abstentions Thursday in support of a resolution censuring Cuba for its arrest of 75 leading dissidents last year, and demanding that it permit democratic reforms. 

Boucher said Friday that Cuban delegates interrupted a speech on the assault incident by U.S. Ambassador Richard Williamson, who called the attack outrageous. Williamson said it was only one of a series of acts of intimidation, threats and aggression by members of the Cuban delegation and affiliate groups, aimed at the United States, its representatives and supporters. 

Cuba has accused the U.N. commission of double standards, and said it would push for a resolution condemning the United States for its detention of Afghan and other Muslim militants at the U.S. naval base at Guantanamo Bay, Cuba.


Drug cultivation soars in Mexican countryside
By the A.M. Costa Rica wire services

WASHINGTON, D.C. — Aided by good weather, Mexico produced a bumper crop of opium poppies last year. U.S. officials say the Mexican government has made major progress in the fight against illegal drugs. But drug cartels are responding by boosting cultivation and fighting eradication efforts.

A U.S. State Department report issued earlier this month says opium poppy cultivation In Mexico increased by 78 percent in 2003.

The report cites excellent weather conditions, but also observes that the narcotics cartels are planting more opium poppies. The report says marijuana cultivation also increased last year, by 70 percent. 

The Mexican Attorney General's Office says the government is determined to reduce the spread of drug crops, and fight those behind the cultivation, refining and international distribution. 

The Attorney General's Office reports a slight increase in the destruction of opium poppy and 

marijuana plantations nationwide by helicopters spraying herbicides. But cartels are responding by shooting at the pilots. 

Professor Jorge Chabat is director of International Studies at the Center for Research, Technology and Economics in México City. He specializes in research and analysis focusing on illegal narcotics. He says the increasingly aggressive tactics of the drug cartels show that Mexican authorities are succeeding in disrupting the cultivation phase, and cracking down on corruption among law enforcement authorities. 

"The impression that I have, and you have some other indicators of that, especially in terms of arrests of big drug lords, is that, probably, the Mexican government is becoming more efficient, and corruption has been fought by this government," he said. "And that's why the drug traffickers are becoming more aggressive, because their business is being affected."

Mexican President Vicente Fox has made the fight against the drugs cartel his number one law and order priority.

Colombians find big drug haul in navy sailing ship
By the A.M. Costa Rica wire services

CARTAGENA, Colombia — Colombian authorities say they have found a huge supply of cocaine and heroin hidden on board a sailing vessel known as "the pride of the Colombian navy."

President Alvaro Uribe said the incident was a stain on the honor of the nation, and he suspended the entire 75-man crew of the naval vessel Gloria. The three-masted ship had been due to leave next month on a six-month tour of the United States and Europe.

The head of the Colombian Navy, Admiral Mauricio Soto, said nearly 17 kilograms of heroin and 10 kilograms of cocaine were found hidden Friday in

the Gloria's engine room. The ship is docked in the Caribbean port city of Cartagena. 

Ironically, Peru's President Alejandro Toledo was scheduled to visit the Gloria over the weekend to meet with Colombian military commanders about increased cooperation in the fight against drug trafficking. The Colombian government says the visit would go ahead despite the drug incident.

Peru, which shares a long border with Colombia, has expressed concern about infiltration by Colombian rebels, who are heavily involved in drug trafficking. Peru is one of the Andean nations that grows coca, the source of cocaine, but Colombia is known as the world's biggest producer of the drug.

Indians in Brazil massacre many illegal diamond prospectors
By the A.M. Costa Rica wire services

BRASILA, Brazil — Brazilian police reported here that they have found the bodies of at least 26 illegal diamond prospectors who apparently were massacred in a bloody battle on a remote Amazon Indian reserve. 

Members of Brazil's Federal Indian Bureau discovered the bodies Saturday at the Roosevelt Reservation in Rondonia State, which borders Bolivia. The area is believed to be one of South America's richest diamond reserves. 

Reports have been circulating for a week about diamond hunters being killed during battles with Cinta Larga Indians. Accounts quoting union officials in Rondonia State predict that 30 or more additional victims eventually will be found.

There is no definite word on what set off the violence, but tensions between Indians and the prospectors have flared often in recent years. Brazil has outlawed the removal of any mineral wealth from Indian territory, but the Roosevelt reserve has been over-run for years by diamond hunters searching for valuable gems.

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Villalobos case
Lawyer's summary just repeats old arguments
By the A.M. Costa Rica staff

José Miguel Villalobos Umaña, the lawyer hired by creditors still loyal to Luis Enrique and Oswaldo Villalobos Camacho, has come forth with a 23-point summary of the 22-month-old case that is mostly repetition and nitpicking.

The document is said to run 31 pages, but it is available on a number of creditor discussion Web sites as a continuous document.

Lawyer Villalobos got the job last  Feb. 2 when he promised to uncover a widespread conspiracy that led to criminal action against the Villalobos high interest operation. In the latest document, the conspirators are limited to former fiscal general Carlos Arias, the current anti-drug prosecutor Walter Espinoza and the judge supervising the case, Francisco Sánchez.

The purpose of the so-called "White Paper’ may be to raise funds. The lawyer had collected $121,000 so far with some $7,037.86 awaiting collection, according to an April 1 posting on the Web site of the informal group of supporters of Enrique and Oswaldo Villalobos, the United Concerned Citizens & Residents. 
An analysis of the news

In his preface to his report, Lawyer Villalobos likens the treatment afforded the brothers and their investment firm to the treatment that Nazis gave Jews and dissidents. The lawyer is pretty confident of his statements. The English translation says: "The document that you are receiving is without error."

However, he repeatedly claims that the government closed down the Villalobos high-interest lending operation and the Ofinter S.A. money exchange houses when, in fact, that action was taken by the brothers themselves some three months after a July 4, 2002, investigatory raid. The lawyer, as have some creditors, claimed that Enrique Villalobos could not pay his debts because prosecutors froze his bank accounts. He makes no mention of the hundreds of thousands of dollars that Enrique Villalobos solicited, accepted and presumably deposited right up until the offices closed.

The report is titled "Justice Upside Down." Lawyer Villalobos makes much of inconsistencies in documents in the Villalobos case file. For example, his Point 22 is that some documents are incorrectly collated and pages are duplicated.

He also states that Prosecutor Espinoza took certain actions in advance of a request for investigatory help sent through diplomatic channels by Canadian authorities even though it has been obvious that informal contact had existed for months between Canadian detectives and Costa Rican officials.

Villalobos, the lawyer, is not as correct as he claims. For example, he repeats a frequent but incorrect defense of Enrique Villalobos, saying "the unprecedented incarceration of his brother prompted him to exit the country." Actually Enrique Villalobos closed down his borrowing business and vanished Oct. 14, 2002. Oswaldo Villalobos was not jailed for preventative detention until late November. That statement is the only hint that a casual reader of the document might get that Enrique Villalobos is an international fugitive facing allegations of fraud, among others.

The lawyer also says  "In November 2002 the SUGEF [Superintendencia General of Entidades Financieras] published a paid announcement in which it clearly indicated that in its opinion, the Villalobos brothers and the companies they own had not engaged in financial intermediation." Actually, the Superintendencia restricted its endorsement to Ofinter and the money exchange business, the limited area for which it had a license.

Intermediation is one of the allegations against the Villalobos brothers, and Lawyer Villalobos argues extensively that the brothers are not guilty of such a crime. The lawyer says intermediation in Costa Rica means accepting money from other persons and investing in money lending or stocks and bonds. However, if the Villalobos Brothers were not lending the money or making investments, the question is open how they managed to pay their creditors 3 per cent a month. In effect, the lawyer unwittingly is arguing strenuously for a more serious charge, such as money laundering.

Lawyer Villalobos told creditors at an open meeting that he himself does not know how the Villalobos Brothers made their money, so one has to take his analysis with a grain of salt.

That is the critical question, one that most creditors prefer to ignore. Some say the Villalobos Brothers were in the money exchange business with large corporations here. Enrique Villalobos told A.M. Costa Rica shortly before he vanished that he had no connection with the Ofinter money exchange house. A subsequent report by the Judicial Investigating Organization said that the borrowing operation and the money exchange were basically one business.

The Villalobos Brothers attracted perhaps as much as $1 billion from mostly North America investors. In exchange for money, they gave personal checks in the amount of the loan, and both the brothers and the creditor knew the relevant bank accounts did not have funds to back up the check. There was no contract or loan agreement. The business endured for perhaps as long as 18 years.

Although some creditors argue that the Costa Rican



government know all about the Villalobos 
operation and approved of it, even Lawyer Villalobos’ white paper notes that the Banco Crédito Agrícola de Cartago reported suspicious transactions in May 2000. The Superintendencia itself was investigating since 1999. These facts might undermine an unrelated effort by creditors who hope to drag Costa Rica into an international forum on allegations that the country did not protect foreign investors.

These initial complaints and preliminary investigations appear to be the reason Costa Rican officials were ready to raid the operation when Canadian officials asked for help on a cocaine smuggling case. Officials say the drug smuggler was a creditor of Villalobos. Lawyer Villalobos says there is no such evidence.

However, the lawyer in his white paper downplays the nearly 600 kilos of cocaine that Canadian authority seized in the Grenadine Islands of the West Indies as part of the same investigation. The key figure in the cocaine smuggling, Bertrand St-Onge, had a condo in Jacó which was searched the same time that agents raided the Villalobos Brothers’ operations. St-Onge had died of cancer before the raids, but six others were arrested.

It is St-Onge that officials say was a creditor of the Villalobos borrowing operation. The cocaine was purchased from the Revolutionary Armed Forces of Colombia, the terrorist group fighting the government there.

The goal of the United Concerned Citizens & Residents is to get any charges dropped against the Villalobos brothers. They assume that he will then return and pay them the money he owes them.

As Lawyer Villalobos puts it:

"The group called UCCR worked out a strategy based on demonstrating the non-guilt of the Villalobos Brothers in order to facilitate his return to the country and to achieve the reimbursement to investors of their legitimate resources."

The group also wants the estimated 600 creditors who filed complaints against Villalobos in the local court to withdraw them. 

The lawyer also states, again incorrectly, that:

"There never was a single complaint filed by any investor until Mr. Villalobos’ accounts were frozen, and it is obvious that under those conditions it is impossible to return the money."

A high-profile case emerged during the summer of 2001 when Canadian Michael Nash, the son of creditor and local resident Keith Nash, tried to recover his ailing father’s money. Villalobos had filed a legal action to have the father declared incompetent. The case still was in the courts here when Villalobos fled. Several other North American investors told the Spanish-language newspaper La Nación, as reported Dec. 22, 2002, that they tried to withdraw money for months before the raid took place.

Lawyer Villalobos bases his analysis on the case file, that is the series of document that have been filed with the court. Any comprehensive evidence of guilt would probably not be found there and will not become public until a trial begins.

Lawyer Villalobos states that Prosecutor Espinoza has not found any evidence or even sufficient indications to transform the charges made into an indictment. However, this is more hope than fact because no one except prosecutors know evidence exists. For example, the U.S. Attorney’s Office in Miami, Fla., and the U.S. Federal Bureau of Investigation conducted substantial inquires there, and these results have never been made public.

Some creditors believe that the prosecutor has to put up or shut up by April 27, although there is the possibility of further delays. Oswaldo Villalobos is under preventative custody until that date.

In all, more than 6,000 separate accounts were on the Villalobos books when the brothers shut down. 

Even if the Villalobos backers are successful in getting charges dropped, there still are active investigations in the United States and perhaps Canada, as well as tax concerns here and in the United States. U.S. citizens who failed to pay taxes on interest paid by the Villalobos operation can face felony charges.

Enrique Villalobos and his staff prided themselves on protecting their creditors' privacy. "If anyone asks about you, we don’t know you,’ said one handout. That, in itself, provides sufficient reason for a raid rather than a simple inquiry, as agents might make of a national bank.

Jo Stuart
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