San José, Costa Rica, since 1956

Outages Spark Calls For Privatization

The rains have begun, and along with their umbrellas, Costa Ricans this week were still reaching for their candles and flashlights, thanks to continued rolling blackouts that prompted President Oscar Arias to call for broad reforms to the electricity sector.

The President, in his annual address to the Legislative Assembly Tuesday, blamed years of neglect for the current energy crisis and said that opening the doors for private electricity generation is essential if the state-owned monopoly on the sector is to improve.

The electricity rationing that began last week was in response to low hydroelectric reserves around the country, but the rain that began to fall this week wasn’t enough to solve the problem, according to Costa Rican Electricity Institute (ICE) spokeswoman Adriana Víquez. At press time, though, ICE was unsure whether rationing would continue next week.

The government, which last week declared a state of emergency to free up funds for ICE to purchase new thermal energy plants within the next year, is now demanding that every public institution come up with an energy-saving plan within two weeks.

Business leaders, private energy producers and Costa Ricans are tallying damages and looking to the government for a solution.

“It’s hard to operate without power. Hopefully there is a recovery plan in place,” William Swope, vice-president of corporate affairs for high-tech firm Intel Costa Rica, told The Tico Times via e-mail.

Ana Gabriela Alfaro, vice-president of the Costa Rican Chamber of Hotels, agreed businesses are the clear losers in the energy crisis.

“Without a doubt, costs have gone up for us to maintain lights with diesel generators,” said Alfaro, owner of Parque del Lago Hotel in downtown San José. She said that on top of the $12,000 investment her company made to purchase an electricity generator, her hotel has been paying $20 a day to keep the diesel generator on during the frequent outages.

Most hotels in Costa Rica are small and medium-sized and can’t afford big investments on generators, Alfaro added.

“The small businesses lose clients, and it could mean a loss of tourists to the country,” she said.

The Chamber of Industries this week estimated that the country’s businesses have lost $20 million because of the blackouts. Last week, it said as much as $400 million in production costs could be lost in the next two years if nothing is done (TT, April 27).

At least one business has emerged as a clear winner as blackouts persist. Sales of generators have spiked significantly, according to Manuel Balordano, brand manager of Matra Ltda., a certified distributor of Caterpillar brand generators.

“At this moment, we’re at our maximum capacity,” he said. “We’re benefiting from the situation.”

Dark streets led many to expect an increase in crime, but National Police Director Rigoberto Rodríguez said increased patrols by his department during blackouts have prevented crime sprees.

“These blackouts create a feeling of insecurity, but our statistics do not show a corresponding increase in crime,” Rodríguez said.

Though ICE posted schedules for the rolling blackouts on its Web site,, customers in some areas complained they’re not being followed. Wednesday, ICE launched a new hotline, reached by dialing 155, that residents can call to find out when they will be without power. The line has been busy constantly, though.

The energy crisis has revived calls for ICE, which oversees 80% of the nation’s electricity production and distribution, to allow more private participation – reviving an old debate in Costa Rica.

Arias made it clear this week that he fully supports increasing the role of private companies.

“At a time when petroleum has risen to almost $70 per barrel, ICE is obligated to generate more and more electric energy through thermal plants, because the law prohibits that it buy more energy from private generators that produce it through renewable sources,” Arias told the assembly Tuesday. He stated that the cost of generating electricity through ICE’s thermal plants is five times higher than purchasing it from private generators, and that the environmental impact “is much worse.

“Impeding private businesses from collaborating in the solution of the energy problem we’re facing isn’t a way of producing ICE’s purity,” he said. “It’s a way of sacrificing the Costa Rican people on the altar of the dogmas of a few union leaders. And we won’t permit that.”

The Central American Free-Trade Agreement with the United States (CAFTA) requires that Costa Rica open up its telecom sector to private competition, a proposal being discussed in the Legislative Assembly in the form of the Law to Modernize ICE.However,Citizen Action Party (PAC) legislator Leda Zamora, a member of the special commission discussing the ICE bill, told The Tico Times this week that because CAFTA has no direct effect on the electricity sector, the ICE law focuses mostly on the telecommunications sector and would affect electricity only marginally.

To give ICE greater power to buy privately produced energy as Arias suggested, new legislation to modify the institute’s regulations would have to be proposed, she explained.

Attempts to open up ICE two presidential administrations ago resulted in weeks of violent protests that paralyzed the nation (TT, March 24, 2000), and the Law to Modernize ICE has drawn similar criticism and opposition from labor unions and others who champion the institute, founded more than 50 years ago to ensure the services it provides are accessible to all Costa Ricans.

A host of business leaders and private chambers sounded off in favor of privatization initiatives this week. Carlos Federspiel, the Costa Rican Chamber of Commerce president, released a statement saying,“The nationwide blackout is the consequence of having allowed ICE to be a state monopoly and not allowing private competition.”

However, ICE unions say the energy crisis is the result of mismanagement by top officials, not the institute itself.

The ICE Internal Workers’ Front (FIT) Union publicly blamed the institute’s managers for not addressing what it claims was an impending energy crisis perceived more than two years ago.

It called ICE’s electricity manager Carlos Obregón a “militant” for the pro-CAFTA National Liberation Party (PLN), which brought President Arias to power, and criticized other ICE leaders for allegedly being in favor of privatization.

The Tico Times tried to contact Obregón for comment this week, but was told he has been out of the country since the blackouts began. No other ICE officials returned Tico Times calls.

Tico Times staffers Amanda Roberson, Blake Schmidt,Dave Sherwood and Katherine Stanley contributed to this report.


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