—Vida y tiempo—
When I started Residencias Los Jardines, I started writing a weekly news letter -determined to tell all the good, bad, and the ugly. I knew some readers would be interested in the construction process. I expected others might be interested in the lifestyle of two people who had decided to live outside the box. For others, the adventures of Lita, the parrot and the cat took on an entertainment saga all its own.
Residencias Los Jardines is finished. We periodically have resales and rental availability. Some readers may be interested in this information.
Featured house this week
Paradisus Condos / Rorhmoser
Paradisus will consist of 4 towers in Rorhmoser, a suburb to the west of central San Jose. Not far from the US Embassy and shopping malls, Rorhmoser is a residential area that was developed in the 60's and 70's and is currently seeing significant re-development with high end condos. It is the area where the new stadium and a number of luxury high rise condos have recently been built with more on the drawing boards. Phase one of this development is nearing completion; it consists of two towers and the amenities -pool, exercise room, etc. Tower one is expected to be completed in January and Tower 2 should follow in February / March. The location of this development is superb... it's off the main traffic paths and sits on a ravine overlooking a river. To the east is San Jose / Heredia; to the west is Pavas / Escazu. With floor to ceiling windows and a wrap around balcony, these units offer fantastic light and views.
Each of the units consists of two bedrooms / two bathrooms, and a large living/dining/kitchen area. The floor plan of each of these units has eliminated the optional "den / office" divider. The result is a larger area offering more flexible furniture arrangements while still maintaining the option of including an office area. At 105m2 plus two parking spots each and storage locker, they offer a great opportunity for someone seeking views, security, central location, and first class, all round living...
Loma Real Escazu / Guachipelin, Central Valley
$325,000 now $300,000 / 3 bdrms + maids rm / 3.5 bthrms / owner financing
Beautiful house in residential area: 24 hours security. 274 m2 construction. 2 story, 3 bedrooms + maids quarters, 3 1/2 bathrooms, ample eat-in kitchen, six years old, immaculate condition, lot 264 m2 professionally landscaped, two car enclosed garage, 1500 L reserve water tank, electric demand water heaters, Independent office. Located close to all amenities. Taxes $500 yearly and security $80 monthly.
Appliances and built-ins included. Furniture upon negotiation.
Owner will take back a mortgage for up to 5 yrs. @ 12% interest only.
Residencias Los Jardines
Property Management, Rentals, Re-Sales
Sales: no new inquiries.
Rentals: a number of inquiries for two bedrooms but I don't have any available.
Unit #114: $235,000 / See Unit
Unit #116: $214,000 / See Unit
Unit #124: $900 mo. / RENTED / See Unit
HOUSES FOR SALE
FOR SALE $235,000
Total Area (Sq Ft): 1290
Total area (Sq M): 120
Floor(s): Single Floor
This 1,290 sf. (plus covered parking for one car and two lockers 67 sf.) single story, semi detached house, with garden terrace, two bedrooms is a beautiful executive style home. This home consists of two large bedrooms one with six piece en-suite bathroom with additional access to separate full shower. Each bedroom has large closets with extensive built-ins for personal organization. The vaulted living room and bathroom ceilings provide a feeling of grandeur while allowing the warmer air to rise and exit through the ceiling ventilating system. There are four TVs (one in each bedroom, one in the living room and one in breakfast / dinning room.) This is a beautiful well appointed home.
FOR SALE $214,000
Total Area (Sq Ft): 1290
Total area (Sq M): 120
Floor(s): Single Floor
This 1,290 sf single floor home includes a 300 sf front terrace plus parking for one car and a separate, secure storage locker. It is and end unit and therefore attached on only one side by a 6 inch cement demising (common) wall, which prevents sound transfer.
WEATHER: September has been living up to it's history of being a very rainy month. We've had hard rains virtually every afternoon and sometimes lighter rains extending into and through the nights.
The best time to buy a car is when someone has left or is leaving CR. My last two purchases were from Americans who had made mistakes in CR and had returned to the US and in the process, abandoned their cars here. Under these circumstances, the price is usually right and so it was with the 2007, Hyundai, Tuscon turbo diesel, automatic, all wheel drive SUV. The car I'm speculating on is ready for marketing... all the paperwork (which was the main issue) has been cleared up, body work, mechanical issues dealt with, new tires, etc... someone will get a great car...
News Items of the Week
Comment: a number of articles below refer to the country's fiscal situation. The executive summary runs something like this: The government continues to spend way beyond it's means and refuses to get it's house in order... the structural reforms necessary are being postponed. The international rating agencies have downgraded the sovereign creditworthiness of the country (by two points) to junk status. CR has about $650 mil. reserves from a bond sale last year; these funds will be exhausted early next year. A second bond issue has been approved but not yet sold... CR thinks the rate offered last time will be maintained; this assumption is questionable. A number of government entities -ICE and RECOPE have borrowed in US $ and are finding it hard to repay. Some feel that a sovereign default is inevitable; others feels CR will continue to muddle along. CR has a history of begging for debt forgiveness but given the current international climate and Argentina "default" or at least "debacle", I don't think this is likely to happen. Nor is it realistic to think that CR can sell more debt at an affordable price... who wants to hold colones? It could be that the government hopes that China will come to their rescue... note the fast forward on tax advantaged manufacturing zones or China... in the mean time, unemployment is up, wage expectations are down, government wages / obligations are up, new construction is tapering off, commercial buildings sit empty, inflation is up, interest rates are up...
1. Corporate alternatives to the traditional S.A. for doing business.
2. Moody's downgrades CR debt: due to "significant risk" resulting from over spending, lack of reforms.
3. Opposition calls for fiscal restraint: someone is thinking but Otto is not listening and it's already too late for the gang of three... Moody's, S&P, and Fitch...
4. Free Trade Zones for the Chinese: this is being fast tracked... While there is probably an opportunity here, the price for the country will likely be high.
5. First 100 day report: Solis beats up on the past administrations but provides no guidance for the future.
6. Increase in public works spending: too little, too late -CR lags way behind in infrastructure development but we are great on telephones- largely forced on CR monopolies due to the free trade agreement...
7. Dam Connection: I'm lost on this one... why drain the dam in the middle of the rainy season which is the time to fill the dam so the water can be used for generation in the dry season... some how the logic misses me...
1. What's the best way to frustrate property pirates?
By Garland M. Baker, Special to A.M. Costa Rica
Why do foreigners get hoodwinked and bamboozled out of their stuff in Costa Rica? Or, any place else in the world for that matter.
Usually, because people tend to be too trusting. Or lack knowledge. Why do attorneys get a bad rap? Because knowledge is power. Some legal professionals use their know-how to steal. And then they know how to weasel out of the crime.
When an expat comes to this country to buy a property for retirement or investment, he or she faces the need to make many decisions. One on the top of the list is whether to use a company to hold the assets purchased or to hold them in a personal name. There are positive tax implications for doing the latter, but most believe they are outweighed by security and liability concerns.
Thieves love properties held personally because when someone dies they get a dishonest notary to forge a signature and, voila, the asset is transferred to someone else. Dead people cannot fight for their rights. Heirs have a hard time proving fraud in court. Physical stock certificates of sociedades anónimas are easy to forge too. This is probably the second most common way to steal property in this country.
There are many different types of company structures in Costa Rica. However, only two are used in common practice: Sociedades anónimas or S.A.s; and, Sociedades de responsabilidad limitada, abbreviated as S.R.L.s. These company types pay Law 9024 taxes each year along with income and sales taxes, if they are in business.
Here is a refresher course on their use and an update regarding changes.
A sociedad anónima is similar to a standard corporation in the United States and other parts of the world. This type of entity has a corporate charter and four directors: 1. president; 2. secretary; 3. treasurer; and, 4. fiscal. Stock certificates are usually issued representing stockholder ownership, but they are not mandatory. The company also must have an attorney as a registered legal agent if the principal has a foreign address.
In the past, three legal and three accounting books were issued for a sociedad anónima by the tax department. This is not true today. Three are authorized by the national registry: stockholders, general assembly, and board of director’s minute books. The legal professional creating the entity usually prepares these items for a new company. The paper accounting books of the past are no longer required because the country’s tax department has modernized. Accounting still must be up-to-date in an accounting system, paper or digital.
S.R.L.s, are the second most popular structure. They are taxed on profits just like a sociedad anónima in Costa Rica. This is not true elsewhere. Taxes vary by country. They also pay Law 9024 income and sales taxes if they are in business just like sociedades anónimas do.
They are easier to administrate and safer than S.A.s. They have a constitution or charter like a sociedad anónima but do not have directors, only a manager or managers. Only two books are authorized by the national registry: Cuotas and, assembly minute books.
The most important aspect to an S.R.L. is shares cannot be transferred by simple endorsement, and any shareholder has the right of first refusal in the case of any share transfer. Any movement of shares also needs confirmation written in the shareholders’ book.
Liability is one of the most important considerations in choosing a company structure. If something goes wrong and a company runs into financial problems, the liability created should stop with the company.
This means one’s personal assets are safe because legally a properly formed company is a separate entity in the eyes of the law and solely responsible for its debts.
Many use S.R.L.s to hold assets, but they are used for doing business too. Even large companies in Costa Rica are changing their corporate structure from a sociedad anónima to sociedad de responsabilidad limitada because they are easier to administrate.
Allan Garro of Garro Law, a legal expert, found another company form, and it is raising interest in the legal community. It was hidden for years in the civil code, the sociedad civil. It is much like a sociedad de responsabilidad limitada with one big difference. It does not pay Law 9024 taxes each year. So it is a perfect vehicle for asset ownership. Even though they can be used for doing business, it is not recommended to use them for such. If a company gets into financial problems, a third party can petition the court to dissolve the company to cover its debts.
What is the best use for each of the company structures discussed here?
Sociedaded anónimas are best for business entities when there are many stockholders, and a board of directors manages it for them. That is why a special legal book is issued to these organizations. Directors write their minutes and decisions in the board of director’s book for shareholder scrutiny. Shareholders write their minutes in the general assembly book.
It is still common practice for attorneys to create S.A.s for property holdings with one or two stockholders. This is not recommended because the individuals are always asking their friends and strangers to be on the board.
Sociedades de responsabilidad limitada are great vehicles to hold assets. They have no board and are relatively easy to manage. This is not a good structure for many shareholders. Approval to get things passed in assembly meetings is more restrictive than S.A.s. However, it is bad news they must pay Law 9024 taxes, even if not doing business.
The best of all to hold property are sociedades civiles. They do not pay the new tax on companies. They are easy to setup, administrate, and protect against liability and fraud.
This is the key for most expats, fraud. What company structure works the best? They all do if they are managed correctly. The key elements:
1. Know who has powers of attorney;
2. Know exactly what the charter of the company says;
3. Have the shareholder books in a safe place held by honest people; and, most importantly,
4. Have a succession plan, which includes a will, trust or contingent power of attorney for an executor to manage life’s eventualities.
2. Moody’s cuts Costa Rica’s credit rating to “junk” status
September 17th, 2014 (InsideCostaRica.com) Costa Rica’s credit rating was cut to junk status by Moody’s Investors Service yesterday, based on the country’s widening deficit and large debt burden.
Moody’s lowered the country’s credit rating from Baa3 to Ba1, which represents “significant credit risk” and places Costa Rica below investment grade.
The firm cited political obstacles to comprehensive tax reform that could help rein in the country’s widening deficit. Moody’s said it expects the country’s fiscal deficit and debt burden to continue in the coming years.
“Several attempts in recent years to address Costa Rica’s growing fiscal deficits and debt have not brought these levels lower. The new Solis administration, which took office in May of this year, has indicated it will only gradually introduce fiscal consolidation,” Moody’s said in a press release.
“As a consequence of inaction, we expect the current large fiscal deficits and increasing debt burden are likely to continue for the next few years. The fiscal deficit has averaged 4.5% of GDP since 2009, largely driven by spending growth, and is expected to reach 5.8% of GDP in 2014 and 6% next year. The high deficits have materially worsened Costa Rica’s debt burden, with debt to GDP expected to rise close to 40% this year, compared to 25% of GDP in 2008.”
Moody’s said that material improvements to the country’s fiscal situation are unlikely in the short term.
“Today’s downgrade reflects our expectations that material fiscal improvements are unlikely in the next one to two years. A negative consequence of Costa Rica’s entrenched democratic tradition has been the cumbersome process of consensus-building. For the past few administrations, the government’s weak position in Congress has delayed approval of legislation because of the need to forge ad-hoc alliances. Consequently, efforts to approve significant fiscal reforms have been impeded.
We expect continued political obstacles to comprehensive fiscal reform during the Solis administration, in office since May 2014. The government aims to introduce new revenue measures by early 2015, but successful implementation will be difficult and the impact on the fiscal deficit insufficient to undo the rise in the debt burden. We expect that the current government will only gradually introduce fiscal reforms going forward,” Moody’s said yesterday.
Moody’s also cited the country’s large debt burden as its second reason for the downgrade. Costa Rica’s debt burden will reach nearly 40% of GDP this year, compared to 25% in 2008.
The country is already rated as “junk” (below investment grade) by Standard & Poor’s and Fitch Ratings.
Finance Minister, Helio Fallas stressed in an interview with Diario Extra that the fiscal situation was “inherited” by the Solis administration, but that actions being taken by the administration will ultimately improve the country’s outlook – and credit rating.
Moody’s warned Costa Rica in April that it could face a downgrade if the new government of Luis Guillermo Solís delayed fiscal reform until next year.
3. Comptroller urges lower public spending on ¢ 200,000 million
Marta Acosta said yesterday that Congress can apply a cut of 2.5% of the spending plan, by eliminating the resources the government usually left idle, without affecting service delivery
The comptroller general, Marta Acosta, yesterday urged the deputies to cut the national budget of ¢ 200,000 million in 2015, to prevent further deterioration of public finances.
Acosta argued that the measure would not affect the provision of government services, as this has proven to be unable to spend all of that budgeted in the past seven years.
The figure of ¢ 200,000 million is projected to remain idle money in 2015, according to the average annual underspend registered between 2007 and 2013.
An adjustment of this size would amount to a 2.5% reduction in the spending plan submitted by the administration of Luis Guillermo Solís for next year, which exceeds ¢ 7.9 trillion.
Also equivalent to 0.7% of gross domestic product (GDP) in 2015, where it is expected that the fiscal deficit will reach 6.7% of GDP.
Before the Subcommittee on Financial Affairs analyzing the budget, the comptroller stressed the need for the reduction.
"It's a technical input we are giving deputies. If cuts are made, we can face further deterioration of public finances as we announced a while. This becomes a spiral that can affect the operational capacity of the Government, the provision of services and, therefore, the quality of life of Costa Ricans, "Acosta said.
This spending plan is 19% higher than in 2014 it grew five times faster than inflation.
In previous October, the Comptroller General's Office warned that the country's fiscal situation will become untenable for both the current government to the next, unless decisions "high impact" be taken, such as increasing ¢ 900,000 million annual state revenue.
Last week, Otton Solis, deputy Citizen Action (PAC) and Hacendarios president, announced he would seek support for cutting about ¢ 300,000 million (1% of GDP) in areas such as overtime, annuities, dedicated, food and rent.
The discussion comes at a time when the international rating agency, Moody's, downgraded the sovereign bonds of Costa Rica for their inaction with the fiscal deficit, forcing people to pay more for loans.
Where to spend scissors? The comptroller said there headings where the government typically runs less than 80%. Such is the case of rental of buildings, machinery and computers. Only there could save almost ¢ 20,000 million.
¢ 120,000 million with only 4% cut that historically does not run in the salary category economize.
Acosta also questioned the executive budgeted a rotation of ¢ 410,000 million to the Fund for Higher Education, but in 2013 that state executed 63% of what turned.
However, yesterday the Minister of the Presidency, Melvin Jimenez, said that the Government applied a cut of 1.4% of GDP at the time of preparing the budget and that is just enough to operate.
At the same time, the president asked Solis cuts are made with a scalpel and not an ax. He added that those who do, they should take responsibility for possible effects on people.
Henry Mora, legislative chairman, said he can not suppress the Budget ¢ 2,000 million that than enough to Congress in 2015 because, although not implemented, the law requires you to ensure all the allowances, for example.
Analysis for Otton Solis welcomed the proposal of the Comptroller, "budgets are not executed because the leaders are often guided by inertia and execution come unprepared to inflate the numbers are requested."
Meanwhile, Victor Morales Z. lawmaker close to PAC president, said the proposed Acosta is an "input" to the blocs agree untaxed scissors discretion.
"The budget is subject to a reduction to the items, following an agreement between the different branches. You can not make a cut without distinction in the headings and affecting state investment, "said Morales, who on the eve Otton Solis struck by its position on this issue.
Rolando Gonzalez National Liberation, said that Acosta confirmed that they are on the right path and hope that the institutions indicate where to cut. "We are giving them room to say from a technical view what can be cut, otherwise we will use the legislative approach," he said.
4. Government hopes to accelerate Chinese Economic Zones, declared of “public interest”
September 17th, 2014 (InsideCostaRica.com) The Ministry of Foreign Trade (Comex) hopes to accelerate the development of special free trade zones for Chinese companies, known as Special Economic Zones (EEZs).
Foreign Trade Minister, Alexander Mora, said he hopes to be able to announce the names of companies who plan to call the EEZs home during the first half of 2015.
“We expect companies ranging from manufacturers of solar panels to electric vehicles,” Mora told the daily La Nacion.
Mora met with officials from the China Development Bank, which developed the initial conceptual designs for the EEZs, last week.
The plan calls for a central trade park in Puntarenas, with satellite facilities in Limon, Turrialba, San Carlos and Liberia. Future expansion could also take place in the south of the country.
Mora said that feasibility studies would be completed in a few months.
The government has declared the projects of public interest in hopes of speeding along the projects’ development.
5. Solís' 100-day report leads to criminal investigation of 4 government agencies
Casa Presidencial found itself among four government agencies under investigation by the Assistant Prosecutor for Probity, Transparency and Anti-Corruption (FAPTA) following President Luis Guillermo Solís’ denunciations in his 100-day report on the state of the government in late August.
The Prosecutor’s Office confirmed to The Tico Times by email that the FAPTA would open a criminal investigation in conjunction with the Judicial Investigation Police into allegations spanning Casa Presidencial, the National Power and Light Company (CNFL), the Education Ministry (MEP), and the Pacific Port Authority (INCOP). If charges are filed, they would be the first criminal prosecutions to follow the president’s campaign promise to root out corruption and mismanagement in public administration.
These are the four cases FAPTA decided to pursue after reviewing the 100-day assessment by the president’s office:
President Solís named Casa Presidencial in his jeremiad of government waste and possible crime on Aug. 28, lamenting that 117 vehicles registered to the president’s office had simply gone missing. “Frankly, I don’t believe, and neither should you all, that they have been stolen, but the truth is no one knows where they are,” Solís said during the presentation of the report.
INCOP is under investigation for spending ₡2.4 million — roughly $4,400 — every month to maintain a luxury beach home in the northwestern province of Guanacaste for the discretional use of the Port Authority’s president, Jorge Luis Loría. INCOP was also criticized for paying more than $110,000 annually for an office where only four people worked.
FAPTA also is looking into CNFL for paying some employees high salaries to lead departments that had no employees at a time when the public electricity company was running a ₡25 billion deficit – more than $46 million.
Under the leadership of former Education Minister Leonardo Garnier, MEP is under investigation for employing a group of consultants who allegedly charged so much overtime that they practically doubled their salaries. Garnier defended the hours billed in an interview with the daily La Nación.
Casa Presidencial and CNFL did not respond immediately to The Tico Times’ request for comment.
The president said that the country had lost $112 million to corruption during the last decade.
6. Government spent 50% more on public works this year
For the period 2015 budget contains 12% increase in investment Country's infrastructure shows lag, says Global Competitiveness Report
The new government maintained the impetus to investment in public works that began in the final stretch of the past administration.
In the first seven months of this year, two of which are within the term of President Luis Guillermo Solis central government spent on such projects about ¢ 248,000 million, an 50% increase over the same period last year.
The Central Government investment in construction is small relative to total expenditure, but has gained ground. In the first seven months of 2013, capital spending, as it is known, represented 6% of total expenditures, and in 2014 rose to 8.5%.
In addition, the 2015 budget also provides an increase in this line of 12%.
The fastest growing for next year are the "facilities", which includes construction, additions and improvements for contract projects for telecommunications, electricity, water supply and storm and sanitary sewers, pipelines and reservoirs, and irrigation works, etc.
Impulse. Deputy Minister of Finance in charge of spending, José Francisco Pacheco, explained that it is a government priority to increase public works to boost the economy, though, he acknowledges, this is not the only objective.
"The public works, infrastructure has significant effects on growth. Directly because when the expenditure is made is put people to work, and that would indirectly by solving aspects of roads, for example, which are important for the entire production of the country, "said Pacheco.
Two examples of works in which he invested in these first seven months is the expansion to four lanes of the North American Highway between Cañas and Liberia, and the resurfacing and paving part of Route 32 that connects San José to Limón.
The researcher Miguel Gutiérrez Saxe noted that a hypothesis is that this growth is typical in election campaigns, increase such expenses to show infrastructure.
In 2015, the Deputy Minister of Finance explained that the resources included in the new building for the Ministry of Public Works and Transport, the funds to continue the road to Chilamate Sarapiqui Heredia, a transfer to the Ministry of Justice to modernize some modules from prison reform and unfinished works project Puerto Limón City.
Inadequate. Victor Umana, deputy director of the Latin American Center for Competitiveness and Sustainable Development INCAE Business School, said that this effort is insufficient.
"Generally speaking, Costa Rica, in the last three or four decades, it has been a country that has invested little in infrastructure and when one observes the Ranquines efficiency in spending, Costa Rica appears very low," he said.
According to the Global Competitiveness Report 2014-2015, released last September 2, Costa Rica is located in position 103 total infrastructure at position 119 on roads, 115 on port infrastructure, 91 railroads and 120 in the efficiency in government spending, in a list of 144 nations evaluated the study.
Umana called attention to two factors: what is spent and the need for private participation in relatively poor countries because the government's ability to invest is limited.
7. Cachi Dam will be empty for 45 days to connect the new tunnel
Large hydropower to generate up to 60 megawatts; sufficient to 71,000 additional homes
The Instituto Costarricense de Electricidad (ICE) seized the maintenance scheduled this month in the Cachi Dam, to connect, in final form, the new tunnel to generate up to 60 megawatts (MW) additional.
For works, ICE decided to release all the liquid reservoir, an action that ended on September 1st. Since then stopped hydroelectric generating up to 100 MW.
This is the installation of gates, valves and gates at the ends of the tunnel four miles long and five meters wide located between the district Cachi Paradise and Tucurrique Jimenez, in the province of Cartago.
The works are part of the expansion project of Cachi plant, which started in 2010 and become operational in early 2015.
The electricity generated by the expansion is sufficient to benefit 71,000 new homes and reduce fuel use in the dry season.
Alberto Ramirez, director of the Electricity Production Sector ICE, said the dam was necessary to download to install gates to regulate water ingress to the new pipe and valve allowing passage graduating fourth power plant. And bars that will filter the flow.
"As the reservoir was full you could not enter the new tunnel to connect with the existing plant, to achieve this it had to release the water," said the director. This process began on 27 August.
It is estimated that the works at the ends of the new pipe will be completed on October 16. From that time the water level of the dam will be restored, which could take up to six weeks. However, the ICE says that in eight days the liquid will be sufficient to be operational the first of the three generators with the plant already has.
"These types of jobs are done in the rainy season, because it minimizes the impact on electricity generation," said Ramirez.
The director said that in November will begin the process of testing the new tunnel and hope to have the plant ready in mid February 2015.
Cachi Lagoon can store 38 million cubic meters of water. Lake Arenal between Tilaran, San Carlos and San Ramon, can store 2,400 million cubic meters of water.
Brian, Lita, the Late Hugo IV, irreverent Vicka, the pigeon toed parrot, Chico II and Chica II