Construction Surges, Prices Rise in Labor-short Industry

February 15, 2008
Construction of houses and businesses surged in 2007, while raw materials became more expensive.
Gross domestic product in the construction sector grew 21% last year – a big jump from the 7% average growth over the past two decades. At the same time, prices for construction materials rose 19% for homes and 14% for other buildings in 2007.
“Not all the variables were positive,” said Miguel Tapia, financial director at the Costa Rican Construction Chamber.
Tapia said the growth was due, in part, to President Oscar Arias’ support for the Central American Free-Trade Agreement with the United States (CAFTA), which encouraged foreign investment. High security in Costa Rica – relative to other parts of Latin America – has also fueled the construction boom, he said.
More than 7 million construction permits were issued in 2007, with the most popular sites being San José and the Pacific provinces of Guanacaste and Puntarenas, in that order.
Tapia expects 2008 growth to be somewhat slower.With the weak dollar, prices for imported construction materials will likely decrease or remain the same, he said.
At Construplaza, a company that sells construction materials in the western San José suburb of Escazú, prices increased 10% for steel and 6% for cement in January alone. Miguel Marín, head of sales, said the company is considering importing steel directly from Mexico or Brazil to cut costs.
Construplaza now buys its steel from the Costa Rican company Abonos Agro. Rising material and labor costs have hit Victor Acón, manager of construction company Van der Laat & Jiménez. Acón’s contracts in 2007 were worth $100 million, about evenly divided between Guanacaste and San José.
The firm is now building a JW Marriott at the Hacienda Pinilla development on the northern Pacific coast, apartments in Guanacaste’s Playa Conchal and Playas del Coco, apartments in San José and offices in Escazú.
In 2007, Acón’s contracts were in dollars. Now that the U.S. currency has lost value (see separate story on page S19), he will ask that his 2008 contracts be in colones – at least for Tico clients.
Construction permits, which can take months to acquire, are among the biggest obstacles to new developments, Acón said. Labor shortages are another.
Costa Rica and Nicaragua signed an accord in late December allowing 10,000 Nicaraguans to cross the border to work construction jobs here. Still, Jaime Molina, president of the construction chamber, told the daily La Nación that number wasn’t enough.
“The agreement is really limited … 10,000 is very little,” Acón agreed. Nicaraguans make up 65% of Van der Laat’s 2,500-member work force. Company buses bring workers from throughout the country to the construction sites. They spend 12 days working and sleeping in huge company complexes, then get bused home for a three-day break.
Acón said he recruits in churches, where he asks priests to tell their congregations that the company is looking to hire.
 
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