San José, Costa Rica, since 1956

Crucitas ruling bad sign, say biz leaders

A landmark court ruling that last week struck down a major gold mining concession may scare away foreign investment, say some members of Costa Rica’s business and political communities.

“It’s a mark in the negative column,” said Lynda Solar, executive director of the Costa Rican-American Chamber of Commerce (AMCHAM), referring to a ruling that rescinded a concession the government had already granted to Industrias Infinito, a Costa Rican subsidiary of Calgary, Canada-based Infinito Gold, for operations at its site at Las Crucitas.

Shortly after the Nov. 24 ruling, shares in Infinito Gold lost more than half their value (TT, Nov. 26).

Some AMCHAM members fear that the court’s decision sends a bad signal to foreign businesses thinking of investing in Costa Rica. The court ruling not only annulled a signed contract, but also one that was backed by an executive decree that declared the Crucitas mine a national interest project.

Judges ruled last week that environmental viability studies needed to grant the concession were incomplete, rendering the mining contract illegal. The company claims the viability studies were valid.

“They did everything that was required, and then the rug was pulled out from underneath them with absolutely no justification,” Solar said.

While Infinito Gold is just one company, and their difficulties might not reflect all investment experiences here, they are not alone. Other companies have run into snags too.

In 1998, former Costa Rican President Miguel Angel Rodríguez, who is now on trial for allegedly receiving $800,000 in kickbacks from French telecommunications company Alcatel, personally invited U.S.-based Harken Energy to Costa Rica to begin offshore exploration work in the Caribbean (TT, Mar. 19, 2004).

Harken signed a contract with the government for exploration rights, but the deal was terminated by Rodríguez’s successor, Abel Pacheco, who banned petroleum exploration in Costa Rican waters in 2002 (TT, Jan. 16, 2004).

Harken requested arbitration from the United States, seeking $57 billion from Costa Rica for breach of contract. The Texas-based oil firm later withdrew their suit and filed an $11 million damages claim in Costa Rican courts (TT, Dec. 24, 2004).

“I wouldn’t recommend any company doing business with the Costa Rican government,” Solar said. “You never know the rules of the game and they can change on you at any minute.”

Reminiscent of the Harken Energy days, Costa Rica’s legislators voted unanimously on Nov. 9 to ban open-pit metal mining in Costa Rica, two weeks before the court’s decision on Crucitas. Costa Rican President Laura Chinchilla has not yet signed the bill.

If last week’s ruling withstands an expected appeals process, and Chinchilla signs the bill into law, Industrias Infinito would not legally be permitted to request a new mining permit.

Industrias Infinito has invested $127 million in infrastructure development at the mine, located in northern Costa Rica. Company officials say they expected to extract 800,000 ounces of gold in 12 years.

Judges also ordered a criminal investigation of former National Liberation Party President Oscar Arias, who signed a document stating the mine was in the public interest. Doing so without valid environmental studies is illegal, the judges said.

Although Arias initially declined comment on the court ruling, he later posted a statement on his Facebook page, saying the “court contradicted a ruling by the Constitutional Chamber of the Supreme Court (Sala IV) that had previously declared the national interest decree both constitutional and legally sound.”

Rodrigo Arias, former head of the Ministry of the Presidency, and Oscar Arias’ brother, told a local talk radio station that the court “went too far” with the verdict, and the decision could “cause a judicial conflict with the Sala IV.”

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