• Costa Rica Real Estate

Costa Rica’s Solís administration seeks changes to $485 million China-backed highway contract

November 5, 2014

Costa Rica will send China a new proposal by the end of the month for a revised contract to expand Route 32, which connects San José with the country’s Caribbean port city of Limón, Public Works and Transport Minister Carlos Segnini said Tuesday.

Following a weekly Cabinet meeting Segnini said Chinese officials had agreed to consider renegotiating the terms of the $485 million contract signed by former President Laura Chinchilla’s administration. The plan calls for a four-lane expansion of 105 kilometers of the highway, the main access to the Caribbean.

Officials from the Public Works and Transport Ministry, or MOPT, traveled last week to China to discuss what President Luis Guillermo Solís’ administration believes are flaws in the contract that could jeopardize the project.

Costa Rican officials asked for an extension through February to provide a final evaluation. Costa Rica hopes to revise a loan agreement with the Export-Import Bank of China, as well as the deadlines for property expropriation and the relocation of public utilities.

Other problems include the terms of arbitration for potential legal disputes. The contract states that disputes would be settled in Chinese tribunals. Costa Rica hopes to appoint a neutral third country in such cases.

Costa Rica also now opposes waiving immunity for government officials during legal disputes, which Solís’ administration believes is unconstitutional. Segnini earlier this year said several provisions of the contract need further review, including clauses that set substantial fines if Costa Rica fails to comply with the terms.

Representatives of several professional associations and private sector chambers also say the agreement is problematic.

Transport officials are seeking to renegotiate provisions by Chinese contractor CHEC that require only Chinese workers and companies be used to carry out construction.

“We made ​​it clear to our counterparts in China that while this project is significant and important for our country, the [contract] provisions were negotiated by the previous administration under conditions that we believe are not appropriate for our country’s interests,” Segnini said. “Those conditions not only jeopardize final approval in the Legislative Assembly, but they also could be ruled unconstitutional by the Constitutional Chamber of the Supreme Court.”

The minister said China would respond by Nov. 30.

Members of a legislative commission focused on issues affecting Limón who met with Segnini before the Cabinet meeting appeared skeptical about the minister’s report.

Social Christian Unity Party lawmaker Luis Vásquez said, “Mr. Segnini made no progress and failed to bring concrete proposals from China.”

The National Liberation Party’s Danny Hayling said all 18 of his party’s lawmakers are willing to pass the bill to approve the contract in its current form, because “it is clearly beneficial for the country.”

A majority of lawmakers last week agreed not to discuss that bill until President Solís returns from a trip to China in January. Solís hopes to directly renegotiate with China’s Xi Jinping some of the contract clauses.

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