Chinese contractor says cost of expanding Route 32 could rise

May 7, 2015
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Barely two months after Costa Rica’s legislature approved a long-awaited loan for expanding the highway between the capital and the Caribbean coast, the project’s price tag is poised to rise.

On Wednesday, a representative of China Harbour Engineering Company Ltd. (CHEC), the Chinese contractor chosen to carry out the project, told lawmakers that the cost of expanding Route 32 could increase because of additional work requested by the Public Works and Transport Ministry (MOPT).

Company’s representative Teresa Wu said the cost of that work was not included in the original contract.

The $485 million project will expand from two to four lanes a 107-kilometer stretch of the highway, which connects San José to Limón. It’s expected to take 42 months to complete.

Lawmakers in February passed a bill authorizing a $395 million loan from the Chinese government to fund 85 percent of the project’s total cost. The loan stipulates that the project be developed entirely by CHEC using only Chinese workers.

The Costa Rican government will contribute the remaining $70 million for the road — or possibly more if costs go up. The legislature could also be forced to approve a supplemental loan to make up the difference.

MOPT officials want new bridges built along the route to comply with recent seismic technology parameters, and they want existing bridges along the road retrofitted. They also want CHEC to increase the width of both the road and shoulder.

Wu and CHEC representative Zhou Jingxiog spoke before lawmakers who sit on the special Committee on Limón Affairs. At a meeting also attended by Public Works and Transport Minister Carlos Segnini Villalobos, Wu said the company is still studying MOPT’s requests in order to estimate costs.

Segnini said negotiations with the Chinese contractor are still in progress.

“CHEC is still evaluating our requests. At this point they have not included any of them in the project and therefore they have yet to report what they would consider additional work and which requests would represent higher costs,” Segnini told legislators.

Before the Legislative Assembly approved the project in February, various professional and business groups warned that changes to the project would be needed and that those changes would inflate the price tag. Among the critics were the University of Costa Rica’s National Laboratory of Materials and Structural Models, the National Association of Engineers and Architects and business chambers gathered under the name “Grupo Consenso.”

These groups largely oppose the conditions under which the project was granted to the Chinese company. On various occasions, critics warned that approving a project without a draft proposal was a serious risk and that it was impossible to estimate the final cost of a project with no blueprints or even a description of the work involved.

The majority of lawmakers, nonetheless, ignored the warnings and passed a bill authorizing the loan. In February Segnini sent lawmakers a letter saying “the honor that’s characteristic of Chinese culture is a guarantee that project costs will not change.”

After the Limón Affairs Committee’s session Thursday, Broad Front legislator Gerardo Vargas Varela said he and his colleagues now had more questions than answers on the issue.

“It is not yet clear if costs will increase. It is unclear when work will begin. The only clear situation here is that there are serious problems,” Vargas said.

Social Christian Unity Party legislator Luis Vásquez Castro said that one of the clauses in the government’s contract with CHEC states that if changes are required, the parts should renegotiate project costs. Therefore, he said, “it is possible that costs may increase significantly.”

According to Transport Minister Segnini, once negotiations over cost are concluded, CHEC will have eight months to draft the project’s plans.

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