A court fight over the planned removal of 748 trees at Playa Panamá has grown into a broader dispute over tourism investment, jobs and the protection of state-owned forestland in Guanacaste. Hotel developers say precautionary measures imposed by Costa Rica’s Constitutional Chamber have placed about $700 million in construction and expansion plans on hold inside the Golfo de Papagayo tourism zone.
They warn that a lengthy legal delay could damage the country’s reputation among international investors and affect employment across the province. The figures come from tourism industry representatives and have not been independently audited. They estimate that the wider pipeline of planned development in Papagayo is worth close to $3 billion.
The immediate dispute centers on the Bahía Papagayo tourism and real estate project at Playa Panamá, near the communities of Playa Hermosa and Playas del Coco. The planned development includes hotels, residences, sports facilities and other tourism infrastructure.
Costa Rica’s National System of Conservation Areas, known as SINAC, authorized the developer to cut 748 trees during the project’s first phase. The permit covered approximately 7.6 hectares and was issued after environmental officials concluded that the construction area did not meet the legal definition of protected forest.
Environmental lawyers, university officials and community activists dispute that conclusion. They argue that the number, maturity and variety of trees on the site warrant a more detailed examination before clearing begins. They also contend that forest located on state-owned land may form part of Costa Rica’s Natural Heritage of the State, which carries stricter limits on development.
The Constitutional Chamber intervened in April, imposing a moratorium on tree-cutting permits connected to hotel projects in the Papagayo tourism zone while it considers a constitutional challenge.
The court also suspended construction approvals and changes in building density linked to a controversial rule that allowed developers to transfer unused building space from one concessioned plot of land to another. The court later clarified that the construction freeze applies specifically to projects that used or intended to use that transfer mechanism, while the broader moratorium on hotel-related tree cutting remains in place.
That distinction matters. Not every construction project in Papagayo has been stopped, but developers say the combination of restrictions, pending cases and uncertainty over existing permits has left major investments unable to move forward.
Arnoldo Beeche, president of the Costa Rican Chamber of Hotels, has warned that the dispute is being watched beyond Costa Rica. His concern is that investors may conclude that permits granted under one interpretation of the law can later become unusable after financing, planning and construction commitments have already been made.
Rodrigo Castro of the Association of Concessionaires of the Golfo de Papagayo Tourism Pole has made a similar argument. The association maintains that the government established the rules for development in Papagayo and that companies made long-term investments based on those rules.
Hotel representatives say the tourism zone currently supports between 4,000 and 5,000 direct jobs, depending on the season, along with thousands of indirect jobs connected to transportation, agriculture, fishing, construction, tours and other services. They argue that the largest effects may not appear immediately. Projects that remain unbuilt will not create the construction work, hotel positions and local purchasing that developers say would have appeared over the next three or four years.
Environmental opponents say investor confidence cannot take priority over determining whether the government legally authorized the removal of forest. Tree cutting is difficult to reverse once it begins, which is why Costa Rican environmental law frequently favors precaution while courts examine the evidence.
The dispute also raises questions about how Papagayo’s special tourism rules interact with the Forest Law and Costa Rica’s constitutional right to a healthy environment. The tourism zone was created under legislation dating to the early 1980s and operates under a special system of state concessions administered by the Costa Rican Tourism Institute.
The Environment Ministry has defended the permit, saying officials conducted field inspections and reviewed maps and a forest inventory before concluding that the area did not satisfy the legal criteria for forest. Opponents maintain that the site resembles a remnant of Guanacaste’s tropical dry forest and that the government’s analysis was too narrow.
The University of Costa Rica has called for technical and scientific studies to determine whether the land qualifies as forest. It has also urged authorities to reconsider whether rules written for Papagayo decades ago adequately reflect current environmental, social and territorial concerns.
The legal picture became more complicated in June when the government eliminated the rule that allowed building density to be transferred between separate plots. The change removed one of the main regulations challenged before the Constitutional Chamber, but it did not automatically resolve permits or approvals issued while the former rule was in force.
Separate proceedings also continue over the SINAC tree-cutting permit itself. The court has not yet issued a final ruling on the underlying constitutional questions. Until it does, Papagayo remains caught between two risks: losing investment and future employment through prolonged uncertainty or allowing irreversible environmental damage before the legal status of the land has been settled.
