Construction Industry Drowning in Paperwork

December 10, 2004

THE complicated and time-consumingpermitting process necessary for constructionin Costa Rica threatens foreign investment,is bogging down one of the country’smost important environmental-protectionagencies and may drive companies toresort to bribery of public officials, developershere recently alleged.In response, President Abel Pachecoand the Minister of Economy, Industry andCommerce, Gilberto Barrantes, this weekcalled on the country’s institutions toimprove their efficiency and competencein administrative procedures.Barrantes said it is “ridiculous” thatsome construction permits require the submissionof 37 different plans to governmentagencies.The Costa Rica Construction Chamberagrees.THE chamber published a full-pageadvertisement in the daily La Nación lastmonth calling the defective permittingprocess a “real crisis” in the sector, whichlast year accounted for an investment of$1.5 billion and 400,000 jobs in CostaRica, according to the organization.The result has been the closure of businesses,a loss of employment and adecrease in foreign and national investment,according to the advertisement.Tourism Minister Rodrigo Castro thisweek cited the lengthy construction permittingprocess as a reason for the shortageof hotel rooms during the approaching holidayseason.“A foreign business wants to open ahotel, but the permitting process takes fourto five years,” he said.This affects a company’s bottom line,as officials must keep financial interest inthe project during that wait, he added.According to other government officials,the long wait also causes some developersto proceed without permits.THE value of obtaining approved permitsalso has lead to accusations of corruptionand bribery among government officials.A financial crimes court last weekordered the Mayor of the Municipality ofLa Unión in Cartago, east of San José, andtwo Municipal Council members to threemonths of preventive prison while theyare investigated for allegedly demandingpayments in exchange for granting permitsfor urban development projects,according to La Nación.If convicted on bribery charges, MayorGuillermo Zúñiga, and council membersAsdrúbal Araya and Marcos A. Zúñiga,would face two to eight years in prison,according to the report.The preventive detention order came inresponse to accusations filed by an engineerof a development company who saidthe three functionaries conditioned theapproval a school renovation project on a“gift” of ¢12 million ($26,000), La Naciónreported.THE Construction Chamber maintainsthe permitting crisis stems from the factthat the institutions involved do not systematicallyprovide concrete answers oractions in a timely manner.Barrantes said beginning in January,2005, the government will begin traininggovernment agencies how to reform andreview regulations to avoid duplication ofprocesses, promote efficiency and reducecosts, regarding not only construction permitsbut all administrative procedures.The slow construction permittingprocess also received a boost with a newrule that the Technical Secretariat of theEnvironment Ministry (SETENA) nolonger has to give its environmentalapproval for houses smaller than 100square meters (1076 square feet) or for theremodeling of existing houses or offices,La Nación reported.Such permission will now be grantedon the municipal level.THE change is expected to reduceSETENA’s workload from 150 requests forpermission each week to 50 and greatlyreduce the workload that has bogged downthe agency. Because of the huge workload,lack of a computerized system and otherresources, approval by SETENA can takeyears.SETENA officials have told The TicoTimes in the past that the long waitprompts some developers to start withouttheir approval (TT, July 2).

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