The trust agreement between the government and Banco de Costa Rica for the implementation of the expansion project of the San Jose-San Ramon road, has received approval from the Comptroller General of the Republic.
The project, indispensable for the development of the northern part of the Great Metropolitan Area, has suffered from years of delay after successive setbacks with concessionaire construction companies, social protests because of the expected rise in tolls and the burdensome compensation paid by the State to these companies.
The law passed in first debate allows the government to establish trusts with state banks, to design and build transportation infrastructure, particularly railways.
From a statement issued by the Legislature:
Deputies approved this afternoon in the processing of the first debate, record 19497, a law authorizing the development of transport infrastructure through trusts, which aims to authorize the Executive Power and the Ministry of Public Works and Transport (MOPT) or the National Council of (CONAVI), or both together, to form trusts in the public interest.
Up to $372 million of the state pension scheme could be invested in public infrastructure projects in Costa Rica.
Funding public works using Costa Rica's national savings funds saw a new and positive development in matters relating to the management of resources in the economy. The Board of Directors of the Costa Rican Department of Social Security approved a policy that allows allocation of up to $375 million of the reserves from the regime for Disability, Old Age and Death (IVM by its initials in Spanish) to be invested in public infrastructure projects, reported Nacion.com.
A bill has been presented to finance, build, operate and maintain transport infrastructure using trusts.
From the Law project "An Act authorizing the development of transport infrastructure through trusts":
There is a need to rethink the model for financing infrastructure, taking into account the fact that these investments impact on growth expectations for competitiveness.
The Bank of Costa Rica has been selected to hold the trust which will be used to manage the project to expand the highway between the capital and the city of San Ramon, which will cost approximately $500 million.
The extension of this road is a long-standing project, and has faced a host of problems, including the cancellation of the initial concession of the work, which involved a payment of $35 million to the Brazilian construction firm OAS, which in turn had bought the contract from Autopistas del Valle.
The Costa Rican Social Security Department has approved the establishment of a trust fund for hospital construction and infrastructure equipment for the next 11 years.
The institution announced that in 2016 it will select the financial institution that will administer the trust and start the first project, which will be to build a new hospital in Turrialba in 2018.
The Costa Rican Banking Association is in possession of funding in the form of a trust for the construction of infrastructure and productive reactivation projects.
From a statement by the Costa Rican Banking Association (ABC):
The Costa Rican Banking Association is making available to the government $500 million to finance public works
• Escrow figure will be used for proper risk management and transparency.
With funds from the IDB managed in a trust by Banco Nacional, the Ministry of Education will build new schools.
Banco Nacional (BN) will be responsible for managing a trust worth $167.5 million to be used for the construction of 79 schools and 24 recreational areas. The loan was granted by the Inter-American Development Bank (IDB).
The only thing now pending is approval from the Attorney General of the Republic for the start of construction, which it is hoped will start in the middle of the year.
While essential infrastructure projects lack funding, the capital accumulated in pension funds only serves as a source of funding for state coffers.
In a country where the need for funds for projects that promote economic development is increasing, the resources managed by pension operators have to be invested in obsolete investment schemes, ensuring only low returns for contributors.
The Chairman of the Instituto Nacional de Seguros de Costa Rica says there is $13 billion available in domestic financial institutions that could be profitably invested in road infrastructure.
Prensalibre.cr reports that at a hearing of the Committee on Economic Affairs of the Legislative Assembly, the president of the INS, Guillermo Constenla explained to deputies "his opinion on the possibility of financing of the route between San Jose and San Ramon. "
The Ministry of Education has announced the construction of 79 schools and 24 sports centers.
The works will be financed through a trust of $164 million to be given to the Ministry of Public Education (MEP), and which is being discussed in the Legislative Assembly.
The works will take five years to complete after approval for the trust has been granted, and they will be carried out throughout the country.
Costa Rica still faces obstacles to implement this mechanism, regarded as the best alternative for funding public works.
Public works securitization is once again being discussed, as the upcoming Tourism Minister stated it will be used to fund a new National Conventions Center.
The procedure to do this for the Conventions Center was already started and even approved by the Comptroller, but it hit a wall against the securities authority (Sugeval). Sugeval did not authorize this mechanism for raising capital, arguing there are risks when investing in securities which depend on cash flows generated by future real estate.