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Big Changes Taking Place in Maritime Rules

by Garland M Baker on July 3, 2006

Slope of land can kill projects

There are some surprises in motion in the maritime zone. Few people are aware of them today. Foreign ownership restrictions are being challenged. And the environmental ministry appears to be preventing development because it rules that some land is too steep.

So an investment into planning parcels for concession may be money wasted.

Called in Spanish the zona maritima terrestre in Costa Rica, the area contains two parts. The first 50 meters inland measured from high tide is public land. Except for some exclusions, where the land is titled or part of a special government program like the Papagayo Project in Guanacaste, all Costa Ricans own the public land.

Behind the 50 meters is 150 more meters also considered public. But it is land that can be controlled by private parties via a concession. Municipalities and the Instituto Costarricense de Turismo, or Costa Rica’s tourism board, manage the grant, theoretically for benefit of the public.

Article 47 of the maritime zone law states only foreigners with permanent residency of more than five years and companies with a Costa Rican holding majority control can own a concession. However, in practice, foreigners have lost concessions based on the five-year rule because it conflicts with other rules and regulations. Therefore, foreigners skirt the company ownership restriction by placing a puppet Costa Rican in ownership of more than 50 percent of the stock of a company applying to qualify.

This is dangerous. When a puppet decides to take over, the courts have upheld the right to do so. The Second Civil Appealing Court Decree No. 228 of June 18, 2001, states that articles 20 and 22 of the Civil Code condone no abuse and that any actions based on falsehoods are irreversible.

The first surprise:

The “El Boletín Judicial,” the court’s official newspaper, reported June 15 that an Italian filed a constitutional court case against Article 47. He is arguing the restrictions violate the equality of rights among persons under Article 33 of Costa Rica’s Constitution and various international agreements. In addition, the case states the restriction is unreasonable and xenophobic, creating a division based exclusively on the nationality of the petitioner.

Anyone with a legitimate interest in this constitutional matter can attach themselves to the case as a coadyuvante or advocate by July 6.

A constitutional expert believes the Italian may win based on a 1998 constitutional case that voided the law restricting foreigners owning stock in pager and beeper services.

The second surprise:

Within the maritime zone, where areas have been designated forest zones, Executive Decree Nº 31750- MINAE-TUR of April 22, 2004, established a new designation called the ZDE, or the zona de desarrollo ecoturístico, the ecotourism development zone.

An executive decree is a legally binding command or rule enacted by the executive branch of the government. The resultant conflict surrounding this decree has frozen all concessions in the maritime zone for the past two years. Some people love executive decisions because they feel they are good for Costa Rica’s tourism growth. Others hate them because they believe it is anti-ecology.

Municipalities, the Ministerio del Ambiente y Energía, and the tourism board have also had their internal, heated battles over the decree to decide who is the king of the roost over the maritime zone.

As the flames died down, MINAE, the environmental ministry, ultimately decides what is the ecotourism development zone and what is not. In doing so, the agency is rigidly applying Section b of Article 3 of the decree that states “No se permite la construcción de infraestructura en zonas que presenten pendientes superiores a las establecidas en el decreto Nº 27998 y 30763-MINAE.” This translates into “construction of infrastructure is prohibited in areas with a slope more than decreed in Decree 27988 and 30763.” Even after studying the documents, the exact slope the article refers to is unclear but appears to be 40 percent. It is also unclear if this is an average of the slope of a parcel.

This slope rule also existed in deforestation laws, abused flagrantly by loggers. The environmental ministry apparently now believes multi-million dollar projects should be canned because they are going to be built on a hill with trees.

Concession approval has turned into a millionaire business for some bureaucrats who line their pockets.

In summary, there is good news and bad news for foreign investors applying for concessions in the maritime zone. The good news is they may be able to do so legally without using a ruse. The bad news is if they have already invested in expensive concession land on a hill they may be out mega bucks if the slope is too steep for environmental ministry approval.

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