San José, Costa Rica, since 1956

New Concessions Council Director Hopes for Smoother Roads Ahead

SEVEN years after the NationalConcessions Council (CNC) was formed tofacilitate the construction of highways andlarge infrastructure projects in Costa Ricathrough public-private initiatives, thecouncil has successfully processed onlytwo concessions. Construction has notbegun on either project, both highways.Despite this poor track record, thecouncil’s new director, William Calvo, isconfident that growth is on the horizon forCosta Rica’s use of concessions. Since thecountry’s first concessions law was passedin 1994, two laws have reformed the concessionsprocess and a third reform bill isin legislative commission. Calvo hopesthese latest reforms are the last step inmaking Costa Rica attractive to potentialinvestors, and smooth what has so far beena pothole-filled concessions road.Through concessions, the governmentcontracts private companies to build infrastructureprojects or provide services.Once the private company builds and operatesthe highway, airport, sewage system orother facility for a set period of time, usuallyseveral decades, it is turned over to thegovernment.PROPONENTS view concessions asa viable way of improving Costa Rica’sstruggling infrastructure without the governmentmaking a large investment of itslimited funds.So far, the only real experience thecountry has had in this area is the renovationof Juan Santamaría InternationalAirport outside of San José, which evenconcessions proponents admit has been amajor headache for the government. Amultimillion-dollar dispute between thegovernment and airport manager AlterraPartners halted renovation in March 2003.The dispute continued until last month,when officials said an agreement had beenstruck (TT, June 10). However, the agreementstill lacks the required endorsementof the Comptroller General’s Office.The airport contract was not directlynegotiated by the CNC; it is a project of theCivil Aviation Authority, Calvo told TheTico Times. He admits, however, thatprogress has been slow on the two concessionsthe CNC has negotiated – highwaysfrom San José northwest to San Ramónand from San José to the Pacific port ofCaldera. Construction on the former is dueto begin in April 2006 (TT, April 29), whilethe government may transfer the latterfrom one concessionaire to another, afterthe original concessionaire left the projectbecause of delays in expropriations.THE concessions council approved thecessation of the Caldera contract onWednesday and will send it to the comptroller’soffice for approval within 15 days.The office will likely take 30 days to makea decision, Calvo said.Calvo became the council’s directorlast month when the former director, RocíoAguilar, was named Comptroller General(TT, July 1). More than six people haveoccupied the director post since the CNCwas formed in 1998. While Calvo hopes tomaintain the post for some time, he said theelection of a new President in early 2006could result in the naming of a new councildirector.Calvo, 52, has worked on the councilsince its creation and for the Ministry ofPublic Works and Transport (MOPT),which oversees the CNC, for 34 years. Hespoke with The Tico Times recently aboutthe future of concessions in Costa Rica:TT: Is there still a long way to gobefore Costa Ricans view concessions asa viable option for the construction ofinfrastructure projects?WC: The state has to show that throughconcessions, Costa Rican society wins. Ifpeople continue thinking only the private(company) wins, it is a serious problem.The government must show that the publicworks concession is an option we have toprovide urgent public works and servicesthat do not currently have financing.What other challenges do concessionshere face?Experience shows that the country is notsufficiently attractive for these types ofinvestments; in the contests for concessions,we usually get just one offer. There is a lotof competition on the international level toget investments, and possibly investors seeother places as more attractive.Certain aspects of the current law are not up to par for those who want to invest.The bill in commission would make CostaRica more attractive, with greater guaranteeson both sides of the contract if noncompliancebecomes an issue.What is the concession process?For each project, economic feasibilitystudies must be presented, demonstratingthat the use of a concession is the bestdecision for the country, the best option forconstructing the project. Who makes thedecision depends on the project. If, forexample, they are highways, MOPT andCONAVI (the National Roadway Council)make the decision, based on these feasibilitystudies. The comptroller must approveall concessions.How have expropriations of landneeded for projects become a problem?The law allows concessionaires topay (for the expropriations), but it is thestate that expropriates. Various institutionsare part of the process – the concessionscouncil, MOPT, CONAVI, theGovernment Attorney’s Office, theappeals court… because so many areinvolved, expropriations are not done in atimely manner. (In the proposed bill) weare trying to allow the CNC to control thelargest part of the expropriations process.That will allow us to comply with ourcommitments to free lands so the workscan be constructed.What are some possible future projects?We have feasibility studies for (highwayprojects for) San José-Cartago and tocomplete the loop around San José.And San José-Limón (on theAtlantic coast)?San José-Limón is still missing feasibilitystudies.Generally, CNC does the studies. Butthere is another mechanism as well, whichis what happened in this case. They arecalled private initiative projects, in whichprivate parties can propose to the administrationa project for concession. The privateparty does the feasibility studies, and if theadministration approves the project, theproject goes to bid. Anyone can participatein the bid, and if the company that proposedthe project does not win the concession, thecompany who wins pays the company whoproposed the initiative project.Have any formal proposals for airportsin Limón, the Southern Zone, andLiberia (in the northwestern province ofGuanacaste) been made?It is perfectly feasible that these airportscould be developed through concessions,but at the moment we have receivedno formal proposal for the development ofworks or services in any airport.What other types of public worksprojects can be built through concessions?People tend to think of large works, butthe municipalities have works that don’trequire enormous investments and are veryimportant for their communities; treatmentof solid waste, water treatment, bus terminalprojects.Is the concessions system set up tofail, with constant conflict between theconcessionaires, the concessions counciland the Public Works and TransportMinistry?The problem is of coordination; it isimportant to understand the council visiblyhas its head out, but these are decisions ofthe Costa Rican state. We must establishmore effective relationships of coordination.In the end, the state needs to show itscommitment.Will Rocío Aguilar’s new position ascomptroller help in the coordinationbetween entities?Rocío has said she will not evaluateconcessions she worked on here. But ingeneral, later on, yes, I imagine that theexperience she had administrating concessionshere could mean that a more clearconception of the role of concessions willgrow in the comptroller’s office.People often cite Chile as an exampleof a country that has effectively usedconcessions as a way of completing publicworks projects. Is Chile a model forCosta Rica?Yes, precisely because Chile, whichnow has 49 roadway concessions, hasalso had to make modifications to its concessionslaw and has had similar problemsto ours, particularly with expropriations.The difference is they havebeen able to overcome their problems,and we are making the effort to overcomethem.

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