China to Costa Rica: "If You Dont Give to Me, I Wont Give to You"

The stagnation of the refinery project could be the reason for China's loss of interest in Costa Rica, after having stopped the disbursement of a $24 million "freebie", the purchase of $1 billion worth of Costa Rican bonds, the development of an industrial pole, and the extension of a road.

Monday, March 28, 2016

EDITORIAL

The diplomatic shift from Costa Rica which privileged mainland China over Taiwan - in contrast to all of its Central American neighbors- held the promise of an injection of Chinese investment and development in the country, in public infrastructure, energy, and manufacturing centers.

The visit by President Xi Jinping in 2013 and the construction - as a gift - of the the National Football Stadium, also confirmed the Chinese executive vocation and interest in making Costa Rica the base of Chinese interests in Central America. Overnight two major projects that the Costa Rican government contractually committed to with large Chinese companies: the extension, for more than $400 million, of the vital road between San Jose and ports in Limon, and a $1,5 billion refinery.

The problem was that in the heat of a sudden passion between Costa Rica and China, the signatories of the contracts of these large projects neglected various aspects of due diligence, which led to both projects being rejected by social groups and administrative bodies for reasons of excessive or undetermined costs, obvious conflicts of interest, and even for not being clear about the amount Costa Rica would receive to undertake them.

At the beginning of his term, President Luis Guillermo Solis tried to renew Chinas interest in Costa Rica, and after his visit to that country he returned with "Chinese" promises of $24 million "to spend on projects that the country may decide on without any conditions" and the purchase of $1 billion of Costa Rican debt, to relieve state expenses. But the Solis administration was unable to overcome the obstacles standing in the way of these projects involving large Chinese enterprises, and relations between the two countries went from being "carnal", to the cold detached state of "if there is no work and juicy contracts for my companies, I do not want you anymore. "

Today, the only resolution is to wait for the Chinese to make a decision, though it is obvious they have no desire to do so:

- The joint venture for the construction of the refinery is paralyzed, even though it is still costing millions of dollars because of the mere fact that it is "alive". The work was halted by the Comptroller General of the Republic because of "wastages in implementation, lack of transparency and consistency with the country's environmental ideals."

- The expansion of the road to Limon is drowning in the Sargasso Sea of the Ministry of Public Works which can not cope with the voracity of a Chinese concessionaire over a contract which it signed without having covered all of the essential technical specifications.

- Regarding the purchase of $1 billion of Costa Rican bonds by the Chinese government, the conditions are now "not appropriate".

- The development of a Special Economic Zone using Chinese capital somewhere near the Port of Caldera in the Pacific is still in the phase of "Chinese studies". Although a mission from China visited the area late last year, the Ministry of Foreign Trade (Comex), Alexander Mora, told Nacion.com that the country is still waiting for a report from that Chinese mission. The construction of satellites parks in four municipalities is also paralyzed.

- And the $24 million "to use for whatever you want"? The Chinese government has not yet sent a dispatch regarding the list of projects that Costa Rica's government sent for endorsement. Maybe, just maybe, the adoption of that list and the disbursement of $24 million is contingent on other (large) projects of interest to Chinese companies, being launched. And it could also be that legislative approval has not yet been given to the agreement between China and Costa Rica for the promotion and protection of investments signed in October 2007.

Nothing new under the sun...

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