Costa Rican builders cautious despite sector growth

August 19, 2011

The first half of this year showed optimistic numbers in the Costa Rican construction sector.

But results have not been outstanding, and growth in the sector is far from reaching the levels of 2007.

Still, there are encouraging signs of steady improvement in a sector that suffered the most during the economic downturn.

Last month, the Institute of Economic Research at the University of Costa Rica (UCR) asked more than 500 entrepreneurs about their expectations for the next three months. In addition to construction businesses, the study also looked at other sectors, including agriculture and manufacturing. What they found was promising: Those that worked in construction were optimistic about the future.

The study suggested that 37 percent of construction companies consulted in the poll were looking to hire more personnel during the months of July, August and September.

In terms of sales and production variables, the study showed that the building sector was looking to increase sales volume by up to 54 percent.

Still, many remain cautious. The Federated Association of Engineers and Architects (CFIA) and the Costa Rican Construction Chamber (CCC) were less optimistic regarding the construction sector’s short-term growth capabilities.

According to the CFIA, during the first six months of 2011, 3.6 million square meters of new construction were registered. Although the number is positive in comparison to 2009, it is 5 percent lower than the number of square meters built during the first half of 2010. Last month the association published a press release calling for more flexible access to credit and more public investment in infrastructure to help ease out of the economic recession.

With the latest news of a potential economic storm shaking markets around the world, Costa Rica’s construction sector is once again feeling a tremble.

“The problem with construction companies is that they are extremely sensitive to the smallest market movements. Costa Rican construction projects are so dependent on investment, especially foreign investment, that when foreign markets quake, they are immediately affected by more cautious movements from investors,” said Randall Murillo, CCC executive manager.

According to Murillo, with bad news coming from the United States in recent weeks, companies and groups investing in construction in Costa Rica have started to put off their decisions until the U.S. shows a more stable economy. “We were only starting to see the sector have a slight recovery, and now we are talking about the possibility of a second crisis. All this speculation is definitely negatively affecting all investments,” he said.

Regardless of the speculation and the fall of U.S. markets, Murillo believes it is a good time to take over a building project, because “construction material prices are at reasonable levels right now, and there are plenty of qualified workers who are available to work.”

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