• Costa Rica Real Estate

Lawmakers could approve $395 million Chinese loan to expand Route 32 as early as this week

February 17, 2015

The administration of President Luis Guillermo Solís is moving to expedite approval of a Chinese loan to fund the expansion of Costa Rica’s Route 32, the main highway connecting San José and the Caribbean province of Limón.

Last Saturday, Presidency Minister Melvin Jiménez announced the decision to table from the Legislative Assembly’s agenda 16 bills currently ahead of the Chinese loan package to allow lawmakers to start discussing the measure.

On Monday morning, President Solís promised to include in the 2016 national budget approximately $20 million needed to pay for the expropriation of land and the relocation of public utilities along the route. Later that day, lawmakers passed all procedural motions regarding the bill, paving the way for its first round of voting.

Solís’ announcement eliminated the main obstacle for lawmakers to approve a $395 million loan from China to expand the highway to four lanes along 107 kilometers. The figure represents 85 percent of the project’s $465 million cost, with the Costa Rican government funding the remaining $70 million.

The deadline for approval of the loan in a second and final round of debate is Feb. 28, a date set by China to maintain the loan’s current conditions, including a fixed interest rate of 6 percent for 20 years.

Public Works and Transport Minister Carlos Segnini on Monday said he is confident the loan can be approved before that deadline to avoid driving up the cost of the project.

Lawmakers who oppose the loan’s approval have doubts about the conditions of the agreement. China has demanded the project be developed entirely by China Harbour Engeenering Company (CHEC) using only Chinese workers.

One of the loan’s most vocal opponents is Citizen Action Party lawmaker Otton Solís, who said he opposes hiring CHEC, which he noted has drawn scrutiny on several occasions by the World Bank for breach of contracts.

“I would agree that China has the prerogative to choose the company that carries out the project if they were donating the funds. But what we are discussing here is a commercial loan, meaning Costa Rica should be the one selecting the company to develop the project,” Solís said last week.

The expansion of Route 32 is key to the country’s business sector as some 80 percent of Costa Rica’s exports leave the country via Caribbean docks.

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