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(506) 2223-1327         Published Tuesday, May 6, 2008, in Vol. 8, No. 89         E-mail us
Jo Stuart
Real Estate
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Homeland security

Arias' Guanacaste decree generates some confusion
By Helen Thompson
of the A.M. Costa Rica staff

Brokers and real estate agents are starting to express confusion about what the presidential decree to regulate all coastal development in the Guanacaste area really means.

Almost all say they are optimistic about the plan to limit the height and density of construction within four kilometers of the mean high tide mark in the Chorotega region, which includes most of the northwest coast of Costa Rica. But on deeper inspection the decree by Óscar Arias Sánchez leaves space for various uncertainties that could deeply affect the zoning plan's efficiency.

Published in La Gaceta April 30, the decree is now official but will not go into force for another six months.  The Ordenamiento Territorial de la Región Chorotega forbids construction in the 50 meters inland from mean high tide and states that no building in the following 150 meter concession zone may exceed a height of 16 meters (52.5 feet), about three floors.

Buildings in the next 800 meters inland are capped at 24 meters (nearly 79 feet), about five floors, and the following three kilometers will have no buildings taller than 36 meters (118 feet), about eight floors.

Two articles of the decree in particular have raised questions. Any project approved within the next six months will not have to comply with the rules, and any urban plan conceived and approved for individual coastal communities takes precedence over the decree.

Projects that have their building plans authorized by the Colegio Federado de Ingenieros y Arquitectos within the six months after the decree's publication in La Gaceta will not be restricted by the decree.

The process to achieve an authorization for titled land can take anywhere between four months and over a year. Plans are taken to the colegio about half-way through the process, after a ground use approval from the municipality and a water availability letter have been granted. This means that municipalities could technically approve a number of high-density projects within the next few months.

Many residents in the coastal area are unsure whether to expect a sudden influx of applications for concessions and project approvals that exceed the planned height.

“It'll be interesting to see in the next few months how the municipality reacts,” said Steve Broyles of real estate company Bratton, Broyles & Associates, in Tamarindo, who is also on the board of directors for the Associación Pro Mejoras Tamarindo. “There might be a free-for-all of approvals, depending on how much construction companies are willing to pay, or the municipality may realize that there is no inherent benefit to granting last-minute approvals.”

Various projects that outstrip the height limit are already under construction. These include the Pacific Park project, a seven-floor condominium building under construction well within the first kilometer, and Hermosa del Mar, the first seven-story construction in Playa Hemosa, Guanacaste, which boasts three buildings of condominiums.

Even those who are in the process of building high-density developments say they agree with the decree.

“I think it's a fair decree – it will contribute with nature,” said Álvaro Vargas, a sales assistant at the Hermosa del Mar development, which is Costa Rican owned. “Costa Rica is a green country. If you lose that you lose its identity. But I can't lie — I'm quite happy the decree didn't come into effect before this project was approved.”

Tamarindo has a number of high-density projects in construction and planned for the area, which has given rise to the “Save Tamarindo” movement, a community initiative to gather signatures on a petition to block high-rise constructions. Their prospective plan of how Tamarindo could look in five years' time — if the planned projects come to fruition — includes at least 10 new high-rise buildings.

But the economic situation in the United States has taken a toll on at least some of the developments that could change the sky-line of Costa Rica's beaches.
Tmarindo construction
A.M. Costa Rica/Helen Thompson
'No high density in Tamarindo,' says the sign

“There are about 6 or 7 projects that have started construction which would be taller than the decree allows,” said Federico Amador, director of Associación Pro Mejoras de Playa Tamarindo. “However, only one of these, Pacific Park, is still in the construction process. The others have stopped building because they are having trouble selling their condominiums.”

Further confusion has arisen from the clause that states that any plan regulador conceived and approved for individual coastal communities overrides the decree.

Currently, very few plan reguladores are in force in any coastal community, with the notable exception of the Papagayo peninsula.  Tamarindo is in the process of putting together its own plan.

“Our plan is more detailed. For example it states that there are to be no six-story buildings in front of the Tamarindo hills, even though in Arias' plan they would be allowed a kilometer inland,” said Amador. “If we had that kind of development so close to the beach, it would destroy the Parque Nacional de Las Baulas, as the lights would put off the turtles who come here to lay their eggs.”

The association is currently in the process of organizing an environmental study as the final stage in approving the plan, and explaining the intricacies to community members. Funds for zoning plans must be found from within the community, and this factor may hinder the development of similar plans in other areas of Guanacaste.

Tamarindo's urban plan appears to be stricter than the government decree, but the wording of the decree does not exclude the possibility that a coastal community may decide to embrace high-density construction in its own zoning plan.

“That question is unchartered ground at the moment,” said Scott MacDougall of Century 21, in Playa Hermosa. Amador, who has been instrumental to the development of Tamarindo's urban plan, said that if everyone compiling the plan agreed, there would be nothing to stop a plan allowing high-rises.

“Each individual community needs its own zoning plan,” said MacDougall. “Anyone who lives here will not want to authorize 15-story developments. Developers don't want their own projects' views blocked and residents don't want to live next to a tower block. But equally, the change to high density has been a function of economics. There is a need to go vertical, because each piece of land now costs much more than it did three or four years ago. Now that the precedent has been set in Playa Hermosa, we will probably be following suit.”

The decree is set to run out in four years, and the document also fails to include any indication of what will happen to the regulation of construction after this time.

The decree sets out further rules for density apart from the height restrictions.

• No development may build on more than 65 percent of the proposed lot.

• Hotels may only put 80 rooms per hectare on the restricted 150 meter zone, 120 rooms per hectare on the next 800 meters, and 160 rooms per hectare thereafter.

• Residencial developments are restricted to 100 people per floor on each hectare in all zones. There is a maximum of 30 houses per hectare in the restricted zone, 20 residential units per floor on each hectare of the 800 meter zone, and 25 residential units per floor per hectare of the three kilometers thereafter.

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San José, Costa Rica, Tuesday, May 6, 2008, Vol. 8, No. 89

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Environmental watchdogs
turn eyes to Guanacaste

By the A.M. Costa Rica staff

Mega-projects in Guanacaste are next to be inspected by the Tribunal Ambiental Administrativo, and one is already on its list to be shut down.

The tribunal, which is a department of the Ministerio de Ambiente y Energía has already shut down various construction projects on the central Pacific and Caribbean coasts for environmental damage, and now has its sights set on booming Guanacaste.

Environmental sweeps, as they are called, started in the region Monday, with a view to inspecting 20 large developments in the cantons of Santa Cruz, Carrillo and Liberia.

A release from the tribunal said that the “Mar Serena” project in Playa Zapotillal, in Cabo Velas de Santa Cruz, will certainly be closed down in order to stop the developers destroying 260 hectares of forest.

The project is said to include plans for two five-star hotels, 510 villas, a golf course, a commercial center and three swimming pools with a development cost of around $510 million.

Feds say ponzi scheme
used commodities as ploy

Special to A.M. Costa Rica

A Mission Viejo, California, man was arrested Friday on a federal wire fraud charge that alleges he orchestrated a Ponzi scheme that solicited more than $25 million from victims around the nation and that he used $1 million of victim funds to invest in a golf course.

The man, Jon G. Ervin, 61, who operated Safevest LLC in Mission Viejo and, more recently, in Laguna Hills, was arrested without incident by special agents with the Federal Bureau of Investigation.

In related actions, the Securities and Exchange Commission, as well as the Commodity Futures Trading Commission, filed lawsuits and quickly obtained orders freezing the assets of Ervin and Safevest.

A criminal complaint filed yesterday in U. S. District Court alleges that Ervin used Safevest to solicit victims to invest in a bogus commodity futures trading program. Many of the victims were recruited by a Virginia pastor, the complaint affidavit alleges.

Investors were told that Safevest had a historical average return of 0.5 to 1 percent every day, according to the complaint. Ervin maintained a Safevest Web site, where investors could log on and check daily “returns” — a setup similar to an earlier scheme involving Ervin that prompted a lawsuit by the SEC in 2003

Safevest solicited approximately $25.7 million from approximately 550 investors, the complaint alleges. None of the money was ever used to trade commodities, according to an analysis by the Commodity Futures Trading Commission. An accountant with the Securities and Exchange Commission has determined that approximately $18.5 million had been returned to investors. Safevest bank records also showed that more than $41,000 went to an Orange County car dealership to purchase a sport utility vehicle for Ervin. Safevest funds were also used to make purchases from airlines, retail outlets and restaurants.
Opposition party fires
salvo at Arias on environment

By the A.M. Costa Rica staff

The Partido Acción Ciudadana unleashed a stinging criticism of President Óscar Arias Sánchez Monday saying that his Peace with Nature iniciative was designed to enhance his image so he could get an international position at the end of his term in office.

The polical party release said that although the president promotes his environmental friendly project outside the country inside he is pushing policies that destroy the environment.

Rafael Elías Madrigal, a legislative deputy from the party, noted that Arias did not mention any of the many environmental problems facing the country in his May 1 speech to lawmakers.

The party release said that Arias had promoted the resumption of petroleum exploration in the country with the Chinese national producer and ended a moratorium on open pit gold mining. The party also listed a number of other actions members considered contrary to the environment.

Chinese official visiting

By the A.M. Costa Rica staff

Government officials are ready to welcome the vice prime minister of China this morning.  He is Hui Liangyu.

The Chinese official will meet with President Óscar Arias Sánchez and others. At 2 p.m. he will visit the Asamblea Legislativa. He is scheduled to remain in Costa Rica until Thursday morning.

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San José, Costa Rica, Tuesday, May 6, 2008, Vol. 8, No. 89

Miami's passport control is usually under-utilized in the morning. Officials say that the rush period is from 11 a.m. to 7  or 7:30 p.m. This photo was taken during a tour given by Customs and Border Protection officials.
passport control
A.M. Costa Rica photos/Elise Sonray

U.S. account of Dall'Anese's Miami visit differs from his
By Elise Sonray
and the A.M. Costa Rica staff

MIAMI, Florida — Significant differences have emerged between the account of Costa Rica's fiscal general and those of U.S. federal officials here.

The fiscal general, Francisco Dall'Anese, said last week he was treated so badly when he tried to enter the United States April 23 that he immediately booked a return flight and did not keep an appointment with U.S. prosecutors. “They treated me worse than a criminal” said Dall'Anese in a letter he wrote to the Costa Rican minister of foreign affairs. “They never respected my rights. They knew exactly who they were detaining.”

Dall'Anese returned to Costa Rica without completing his mission to continue the investigation of bribery allegations against former president Miguel Ángel Rodriguez and elevated his treatment to the level of an international incident.

A spokesman for the Department of Homeland Security said that Dall'Anese was processed upon arrival and admitted to the United States, which took a total of 31 minutes. During his processing U.S. Customs and Border Protection became aware of his position in Costa Rica and did everything possible to expedite our process, the spokesman added.

Dall'Anese, who does not speak English, said he was detained for at least an hour and 30 minutes and deprived of his liberty. The U.S. spokesman, Zachary Mann, declined to discuss specifically why Dall'Anese was brought in for more questioning and said that officials do not discuss any travelers processing in order to protect the privacy of those persons, and for national security and law enforcement reasons as well.

But Mann defended the immigration agency and said that "Our officers were/are very professional and attempt to treat all arriving passengers in a professional and courteous manner."

Dall'Anese was escorted into another room with others who were there for further questioning, said Mann. This is not at all uncommon, he added.

There are 20,000 to 25,000 visitors at the Miami International Airport on any given day, said Diane Loftus, another agency official. Each day about 1,000 of those are brought in for further questioning as part of the process. 99 percent of those 1,000 are admitted into the United States, she said.

“We're looking for that less than 1 percent bad guy,” said Mann.

As for the reasons behind the session of further questioning for Dall'Anese or anyone else, that is a private security matter, said Mann, but there are no ulterior motives in these cases.

“We treat everyone equally,” he said.

A statement released by the U.S. Embassy in Costa Rica, said Dall'Anese's questioning had nothing to do with the bribery case of Christian Sapizian, the Alcatel telecom company and former president Rodriguez or any cases Dall'Anese might have been working on.

“We can assure the foreign ministry and the Government of Costa Rica that Mr. Dall'Anese in no way was chosen for this security procedure for personal or professional reasons."

The U.S. Embassy in Costa Rica has made apologies to Dall'Anese, the government and the people of Costa Rica, presumably without getting the full story from Homeland Security. The embassy statement said that the incident was analyzed by the highest ranking of the Departments of Justice and Homeland Security, "and they have taken corrective action."

Mann, the main Miami spokesperson for Homeland Security, said he was unaware of any “corrective actions.”

Officials at the Miami airport said the job of border patrol is not easy but the goal is to make the country safer. “Anyone in the world would appreciate that fact,” said Mann.

Here are some differences between the Dall'Anese account, what the U.S. spokesman said and what a reporter learned while touring the Miami reception facility:

Dall'Anese: He was taken to another room where someone was handcuffed and obvious under custody.

Spokesman: Dall'Anese might have seen someone in handcuffs being escorted through the room from a detention area.

Reporter observation: There is a detention area in
Exterior of Miami International Airport

separate rooms adjacent to where Dall'Anese waited.

Dall'Anese: A Spanish-speaking immigration officer told him that there was confusion between him and another Costa Rican with a similar name.

Officials did not know who Dall'Anese was when he arrived. The processing was to confirm his identity. There are occasions where passenger processing may require an extra review to confirm one's identity and/or resolve any other issues due to many possible factors.

Dall'Anese: Once he said he wanted to return to Costa Rica due to the insult to his country, an immigration agent immediately put an entry seal on his passport and escorted him to the American Airlines ticket counter.

In his letter, Dall'Anese said after he told an immigration officer he wanted to return to Costa Rica, he was set free but accompanied by the officer in order to confirm that he really was buying a return ticket.

“So I told officer Vega that we would save time if he would give back my documents and we would go to the airline so I could immediately return to Costa Rica under the offense they were doing to my homeland," said Dall'Anese.

"Then came the biggest surprise of all: After a few seconds they returned my documents, stamped my entry to the United States, let me go, but accompanied me to the offices of American Airlines to be sure of our return to Costa Rica the following morning.”

Spokesman: Dall'Anese did not know where the ticket counter was and asked to be shown. He was not escorted. He was free to enter the United States.

Dall'Anese: He said he suspects he was put into a hotel room without international calling on purpose.

“Curiously the habitation 540, in which I stayed, in the Miami airport hotel, did not have international access, despite my complaints. I was never offered this service,” he added

Spokesman: After Dall'Anese was released he was basically on his own. “I don't know where he stayed,” said Mann.

Dall'Anese: He suggested that he was being picked on as the result of orders from higher U.S. officials and that an immigration agent said he was under orders not to discuss the matter. Dall'Anese said he may have spent as much as an hour talking with this agent, identified by the last name of Vega.

Reporter: There was no access to John Vega at the Miami arrival center.

Spokesman: "Bottom line we did our job, professionally, and once we knew who he was we expedited the process and he was admitted into the U.S.A. End of story."

After Dall'Anese returned to Costa Rica he appeared before magistrates of the Corte Suprema de Justicia. Most seemed to accept his version of the incident without question.

The magistrates forwarded a complaint to the foreign ministry to be sent to the United States and also complained about an unrelated case involving three judges who passed through New York.

Most passengers are not unhappy with their experiences
By Elise Sonray
of the A.M. Costa Rica staff

Passport control at the airport can be confusing and daunting for anyone, especially those who don't speak the language. A trip to the Miami International Airport this week, revealed  new procedures and general information any traveler should know while embarking on a journey and what passengers think about it all.

Although there are no secret tips for a fast, easy border crossing, it helps to know what to expect and the general border procedures, especially for first time travelers.

With 20,000 to 25,000 passengers daily at Miami International Airport, things don't always go perfectly. Friday morning, the large amount of people caused computers to shut down, said one U.S. Customs and Border Protection officer. 

Tired passengers complained and worried about connecting flights. Some were able to go to the front of the lines. Later a spokesperson announced the flights would wait due to the delays.

Foreign passengers should be aware that they will be fingerprinted and photographed.

For more than four years, U.S. Department of State consular officers and U.S. Customs and Border Protection officers have been collecting biometrics — digital fingerprints and a photograph, according to the Department of Homeland Security.  All non-U.S. citizens between the ages of 14 and 79, with some exceptions, when they apply for visas or arrive at U.S. ports of entry, are fingerprinted and photographed.

About three months ago, many airports, including Miami, installed 10-fingerprint scanners. Instead of scanning just two fingers, the system scans all ten.

The biometrics system checks fingerprints against  Department of Homeland Security records of immigration violators and Federal Bureau of Investigations (FBI) records of wanted persons and known or suspected terrorists, according to Homeland Security.

Saturday things ran smoothly at the Miami airport according to most visitors. Most agreed the process was fast and problem free. “Everything was perfect,” said María Molina, an elderly passenger originally from Quito, Ecuador. Molina who is now a U.S. resident, was on her way back to her Miami home after a visit in Ecuador. She and others were interviewed in public areas of the airport.

A group of five Costa Rican businessmen said they got through immigration and customs in about 15 minutes but that two of their friends got stuck in a long line. Adrían Valverde Retana, one of the group, said he wasn't concerned. “They'll be out in about 20 minutes,” he said glancing at his watch.

Throughout the day passengers from Bolivia, Argentina, Haiti, Brazil and the Bahamas all said their wait was less than 15 minutes, they were treated well and things went smoothly.

Some passengers were unhappy about the delays and amount of questioning they received.  
fingerprint machine
New 10-finger scanner is in use at Miami

Estefanía Fuentes Valenzuela from Santiago, Chile, said she had to wait in her line for an hour and was then asked a lot of questions. Her boyfriend, Patrick Grady, a U.S. citizen who was on the same flight, only had to wait five minutes at passport control, said the couple.
“I know a lot of people want to live here,” said Ms. Fuentes. But she said the questions were unnecessary and made her uncomfortable. “It's not fair for me,” she said. Grady said he saw at least one man from their San José flight being escorted into another questioning room.

After a passenger exits their plane at the Miami International Airport, they may walk up to 15 minutes until they reach passport control depending on the gate location, said officials.

Then passengers stand in the passport control line, usually separated into residents and non-residents. At the booth visitors present their passports and immigration document, Here is where foreigners must be fingerprinted with a scanner and digitally photographed.

If for some reason agents wish to further question someone, the individual will be escorted into a nearby room.

After passport control is passed, visitors retrieve baggage and bring it through customs where an officer may ask more questions or inspect the visitor's luggage.

Most passengers seem to leave satisfied, while some do not. Luis Espinel from Quito, Ecuador said he was tired after the process which he estimated took more than two hours. “They ask a lot. They took long for everything,” said Espinel sitting in a chair next to four large suitcases.

His wife, Yolando Granja, was busy asking yet another man for directions. The couple had reservations at the Hyatt. But had just learned that there are eight Hyatts in Miami.

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San José, Costa Rica, Tuesday, May 6, 2008, Vol. 8, No. 89

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scond taxista photo
A.M. Costa Rica photos by Saray Ramírez Vindas
   Eduardo Romero Méndez . . . a baby on the way                    Dennis Calderon Solano . . .two years as taxi driver
City taxi drivers scoff at a rate increase of  just 15 colons
By Saray Ramírez Vindas
of the A.M. Costa Rica staff

The persons who drive the red taxis uniformly think the government does not have their best interests at heart.

The drivers got a 15-colon raise last month, and that is about three U.S. cents. And the raise only applies to the first kilometer of travel.

Meanwhile, petroleum has reached record levels, and not only do taxis use gasoline but tires and other components are dependent on petroleum.

The double whammy is that Costa Rica's streets are a mess, and the taxis tear themselves apart just in the normal daily routine.

Then to add insult to injury, the taxi drivers have to take their vehicle to mandatory inspection not once but twice a year. And they have to have special insurance.

Then there is the competition from unlicensed drivers and more formal porteadores who work on contact.

The government sets many requirements but gives almost nothing in exchange, said a sample of drivers interviewed at various places around San José Monday.

Rigoberto Artavia said the government is giving drivers just a little taste of a raise and it is not even worth turning on the motor.  He is from Guadalupe and has worked as a driver for nine years

The drivers want the government to reduce taxes on fuel, said Dennis Calderon Solano of Cartago, adding that the highways should be fixed. He and the rest also spoke of the need for more security. Many of those interviewed try not to work nights and early morning.

Kenett Barquero Monge, also of Cartago, has 18 years working as a taxi driver. He was less judgmental. The raise ordered by the government is better than nothing, he said. At the very least, city drivers need at least 20 colons more not just for the first kilometer but for subsequent ones. That's about four cents more. He said that he works 14 hours a day from 6:30 a.m. to 8:30 p.m. He, too, was worried about security.

Each week one or more taxi drivers are robbed and perhaps killed by criminals.
first taxi photos
   Kenett Barquero Monge            Rigoberto Artavia

But the problem is not a one-way street, Barquero said. Some taxi drivers are crooks, too, he noted.

Eduardo Romero Méndez of San Pedro said the most recent raise was ridiculous. He thought drivers need at least 35 colons (about seven cents) for each kilometer as well as more security for their high-risk work. He has a baby on the way.

Carlos Sanchez of San Rafael Arriba de Desamparados has four others in his family he has to feed and provide for. The price of gasoline has gone up much more than the small raise given drivers, he said.

He hopes that a proposal by Óscar Lopez is passed. The measure that is in the Asamblea Legislative would eliminate taxes on fuel for public transportation. There is a similar law in force now for fishing boats.

If that measure is approved, Costa Rica will not have to give more raises to taxi drivers. In fact, drivers worry that increases sometimes cut down on their business.

Fuel and taxi rates are controlled by the Authoridad Reguladora de Servicios Públicos.

Jose Angel Godinez Godinez of Acosta has eight others in his family. He said that the rate increase was a joke. He has worked 21 years but now he says the business is not as good as it once was. But he said he feels trapped because of his age.

Another submersible smugglers' vessel caught in Pacific
By the A.M. Costa Rica staff

The U.S. Navy and Coast Guard anti-drug units have intercepted another submarine-type vessel transporting cocaine, officials disclosed Monday.

The Navy designates such craft as self-propelled semi-submersible vessels. The craft was intercepted in February.

The news comes as the navy announced that the USS Stephen W. Groves has returned to its homeport in Florida from six months in the Caribbean and Pacific on anti-drug patrols.

The location was not given, but officials said a helicopter
crew and U.S. Coast Guardsmen managed to pull 59 bales of cocaine from the sea that had been dumped by the crew of the submersible craft, which later sunk.

Last Nov. 29 crew members of the USS Simpson detained four crewmen after they had scuttled a similar craft.

About a dozen such craft have been confiscated. Most departed from Colombia's Pacific coast with loads of cocaine.  The smugglers hope to avoid radar by traveling at or below the water line.

In November 2006 Fiberglas craft was captured some 80 miles off the Costa Rican Pacific coast near the Isla del Coco. This vessel was capable of traveling below the water surface. Occupants obtained air from snorkels.

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Real estate
About us
San José, Costa Rica, Tuesday, May 6, 2007, Vol. 8, No. 89

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A.M. Costa Rica
users guide

This is a brief users guide to A.M. Costa Rica.

Old pages
Each day someone complains via e-mail that the newspages are from yesterday or the day before. A.M. Costa Rica staffers check every page and every link when the newspaper is made available at 2 a.m. each week day.

So the problem is with the browser in each reader's computer. Particularly when the connection with the  server is slow, a computer will look to the latest page in its internal memory and serve up that page.

Readers should refresh the page and, if necessary, dump the cache of their computer, if this problem persists. Readers in Costa Rica have this problem frequently because the local Internet provider has continual problems.

The A.M. Costa Rica search page has a list of all previous editions by date and a space to search for specific words and phrases. The search will return links to archived pages.

A typical edition will consist of a front page and four other newspages. Each of these pages can be reached by links near the top and bottom of the pages.

Five classified pages are updated daily. Employment listings are free, as are listings for accommodations wanted, articles for sale and articles wanted. The tourism page and the real estate sales and real estate rentals are updated daily.

Advertising information
A summary of advertising rates and sizes are available for display and classifieds.

A.M. Costa Rica makes its monthly statistics available to advertisers and readers. It is HERE! 

Contacting us
Both the main telephone number and the editor's e-mail address are listed on the front page near the date.

Visiting us
Directions to our office and other data, like bank account numbers are on the about us page.

Academic group sees danger
in bailout of homeowners

By the A.M. Costa Rica wire services

A group of mostly academic economists who formed what they call the Shadow Financial Regulatory Committee Monday offered its own proposal to assist low-income home buyers threatened with repossession. The group is opposed to the government idea of giving financial help to homeowners in distress.

Committee member Kenneth Scott of Stanford University said it would be a mistake for the government to provide financial aid to home buyers threatened with losing their homes. He said that action would be expensive and encourage others to demand similar treatment. A better solution, said Scott, is for the lender to take back the home and rent it back to the occupant with an option to repurchase at a lower price.

"This arrangement would not create incentives that would distort mortgage financing and induce even greater risk taking by borrowers in the future," said Kenneth Scott. "And that is an important point to keep in mind when you're talking about any kind of federal subsidy."

Scott's proposal addresses the problem of some 600,000 low-income, sub-prime borrowers who purchased homes with little or no down payments. Interest payments that were waived for an initial period are now being imposed, creating a burden that many purchasers cannot handle. Another committee member, Robert Eisenbeis, blames the Federal Reserve, the U.S. central bank, for keeping short-term interest rates artificially low in 2003 and 2004.

"I think it is fairly clear that when that happened that was a major engine that drove a lot of the ups and downs, and particularly the ups, that we saw in the housing market," said Eisenbeis.

The overnight bank lending rate, the fed funds rate, went to a 40-year low of 1 percent in 2003 and 2004. Home prices in the United States rose swiftly as interest rates on mortgages fell beginning in 2001. In 2007 home prices declined and they continue to fall in many parts of the country. Much of the current turmoil in financial markets would have been avoided, says Eisenbeis, if the central bank had pursued a steadier monetary policy.

"From a monetary policy perspective, the focus should be on the intermediate and longer term, and targeting rates that are consistent with equilibrium," he said.

Both the Federal Reserve and the U.S. Congress are facing political pressure to help problem home buyers. An estimated two million American families are threatened with foreclosure — the loss of their homes — in 2008.

A.M. Costa Rica
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Real estate
About us
San José, Costa Rica, Tuesday, May 6, 2008, Vol. 8, No. 89

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