Costa Rica can weather economic storm, says former finance chief

Costa Rica is in a good position to weather the global recession that many believe will last well into next year, says noted economist and former Finance Minister Fernando Naranjo.

Speaking yesterday before a Union of Private Sector Chambers and Associations luncheon, Naranjo said the country’s economic position is considerably better than it was during the severe economic crisis of the late 1970s and 1980s.

“We won’t have a crisis,” said Naranjo. “We are in a very solvent economic situation, with a budget surplus of about 1 percent of GDP.”

He said growth will slow to about 2.5 percent, as will foreign investment, but the government can stimulate the economy by spending the surplus on social programs and infrastructure.

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Introducing our Newest Agent Eric Kimura

In preparation for the high season, Eric has been keeping busy by familiarizing himself with the areas of Playa Negra, Playa Junquillal, Playa Avellanas and the Marbella area.  Our newest associate fully understands and recognizes the importance of embracing a high level of ethical standards and professionalism.

J.W. Marriot Set to Open in December

JW Marriott Guanacaste Resort & Spa in Costa Rica offers the ultimate sumptuous Costa Rica vacation and a lifetime of memories. With 310 luxuriously appointed guest rooms, including 20 Junior Suites, this Costa Rica resort already has been labeled as one of the most exclusive resorts in Latin America to come.

This beautiful resort is situated on a secluded beach in a prime location within Costa Ricas renowned central coast. The hotel features a free flowing pool that covers more than 25.000 feet of area and provides a combination of private alcoves for couples and fun filled excitement for families.

The resort’s full service Spa includes 23 treatment rooms, beauty parlor, serenity lagoon with deluxe palapas for outdoor massages and a state of the art two-level gym. An 18-hole championship golf course neighbors our hotel and features a challenging experience with breathtaking views of flourishing landscapes and the Pacific Ocean.

J.W. Marriot Website

Road Improvements Underway

Well of course we want the roads fixed, don’t we?

After years of minimal road maintenance and terrible road conditions, the Santa Cruz Municipality is now starting to make repairs from Paraiso all the way to Herdandez which is almost the entire way to Tamarindo.  They are adding new layers of lastre rock, grading the roads and they plan on adding new culverts to areas that wash out during heavy rains.

Does this sound great?  Of course it does, but there’s more good news. Recently, there’s been a buzz in the area about the municipality paving the roads from 27th of April to the town of Paraiso.  Just about the entire trip from the Liberia International Airport will be on paved roads, if these plans are carried out.

The municipality began the road improvements months ago by adding many layers of lastre as well as fine rocks to prepare a solid foundation on which to lay the pavement.  The paving process is just about underway, the “word on the street,” no pun intended, is that once the rains are finished they will begin the paving process.

This area has always been popular, but many visitors have abandoned the idea of coming back because of the pot holes and wash board road conditions.  We believe that with the new road improvements, tourists and visitors will find our area more inviting and comfortable.  We also anticipate opportunities to follow the influx of new tourists that the paved roads will bring.

What will the luxury of newer paved roads bring to the areas of Avellanas, Playa Negra, and Junquillal?  Well it’s hard to say!  Maybe it will become more crowded or perhaps it will stay the same.  One thing is certain, for now there is plenty of room for those of us who have always been here and if there are any major changes to come, they surely won’t happen over night.

Some of us enjoyed the ways the roads were because it prevented most of the crowds from discovering  just how wonderful and beautiful this stretch of paradise really is.  Well, sometimes you have to embrace change whether you like it or not.  I personally have chosen to accept this major change for what it is and will look forward to a smooth ride into the future.

Jarrod Guidry

Broker: Century 21 Tierras del Pacifico

Some Basic Ideas on the Purchase Formalization Aleternatives in Costa Rica

By: Lic. Jorge F. Baldioceda Baltodano (*)

Assuming that you have not yet decided -or simply don´t have enough information to decide- on which legal structure to use in order to register, develop and/or manage your real estate investment in Costa Rica, we have prepared the following guide with the hope that the information contained herein will help you to make that important decision.

(I)       THE MOST COMMON FORMS OF PURCHASING PROPERTY IN COSTA RICA: DIRECT TRANSFERS AND ACQUISITION OF CORPORATE STOCK:

1.       DIRECT TRANSFER OF PROPERTY TITLE: Traditionally, this has been the most used of all the options that are available according to our legislation. This purchase “structure” basically consists in having the owner-seller transfer the property´s title to the buyer – be it a physical person or a corporate entity – by means of a transfer deed which, in most cases, is subject to registration before the National Register´s Property Section. When dealing with this option, declaring the REAL VALUE OF THE PURCHASE in the closing documents will always be an important factor to consider.

Our tax laws establish the obligation to declare the real value of any purchase & sale operations, especially those that are subject to registration before the National Register. The reason for this being that in most cases everyone should pay a transfer tax and registration stamps, both of which are calculated on the declared purchase price. Non-compliance with this obligation could result in severe fines, and eventually, in criminal indictments (for tax evasion) that could adversely affect not only the buyer and the seller, but also the closing attorney. Also, bear in mind that the price you declare will not only define your eventual Capital Gains Tax (if and when you decide to sell your property), but will also affect your RIGHTS TO CLAIM INDEMNITY FROM THE SELLER.

2. ACQUIRING THE STOCK OF A CORPORATION: Sometimes you will be offered the possibility of acquiring the stock of a corporation under whose name the property´s title has been previously registered. Although this is a legally valid method of “assuming control” over your property, it’s very important that you consider the following scenarios:

a.) In most cases, when the property is initially transferred to the corporation, the declared value in that transfer - which in turn becomes the “registered value” - will serve as a basis for calculating the future Capital Gains Tax (CGT) which, potentially, you should have to pay in your country of origin if and when you sell your property. The CGT is calculated on a basis of the difference between the registered-at-the-purchase value and the sales price.  This may lead you to pay a tax over an amount that, technically speaking, IS NOT a capital gain; and furthermore, you cannot be assured that a potential buyer of your property will be willing to purchase it by accepting the shares of the company that owns it, thus replicating what you did in your own initial purchase.

b) When you acquire the stock of a corporation, you not only acquire this corporation’s assets, but also its liabilities and contingencies. And while it’s true that in most cases these corporations were created specifically for the purpose of using it as a property’s “holding vehicle”, take into consideration that a very specialized procedure (ie. Corporate due diligence) will have to be performed in order to guarantee that a company and/or its previous owner(s) are free of liabilities and hidden contingencies. This is especially true in case that this corporation has more than one owner and/or has been owned in the past by other unknown persons and/or corporate entities.  Equally important will be the signing of a private stock-transfer agreement that guarantees the buyer-assignee that the seller-assignor will assume any and all eventual contingencies that may arise long after the transfer of the shares has been executed.

c) Your rights to claim relief of grievances from the seller, in case any problems may arise with the property’s title and/or the purchase-sale terms and conditions, will also be based on the purchase of shares of a corporation and not on the purchase of a Real Estate asset. This is yet another reason why it’s so important to document – by means of the said stock-transfer agreement – the “real” purchase price and the other related terms and conditions.

3. -For your information, the “basic” transfer costs involving the purchase & sale of a real estate asset (whether it is to be registered in your personal name or in the name of a company), are:

4. – Although the method described as: “Purchase of a Real Estate asset through the acquisition of the stock of a corporation in whose name such property is registered” appears to be less expensive than a direct purchase of a Property Title (since the buyer will not have to pay the Transfer Tax (1.5%), nor the Registration Stamps at the National Registry (0.8%), take into account that you will still have to pay a Notary Public fee and additionally, you may have to pay for the corporation (when not included in the sales price) and also pay for the changes in its legal and administrative structure, such as the legal representation, powers of attorney, appointment of a resident agent and other related corporate reforms.

5. - Also to be considered is the fact that, when you purchase a property asset by (i) acquiring a title in your own name, (ii) in your company’s name, or (iii) by purchasing the shares of the company that owns the property; none of the abovementioned methods of purchasing real estate will help you resolve the potential INHERITANCE PROBLEM your heirs will have in the event of your death. If you have not yet granted a TESTAMENT, eventually you will have to create one; and if you have already granted one (probably in your country of origin and/or residence), at some point you will have to modify it in order to include your Costa Rican assets. When you die your testament will have to be executed in your country of origin and/or residence, and then, it will have to be validated by your heirs in our country. This will give rise to additional legal expenses, especially taking into account that your heirs will have to initiate the corresponding Judicial and/or Notarial proceedings in order to obtain legal domain of your assets in this country. For this to happen, such proceedings (testamentary succession) will have to be validated by the Supreme Court of Justice your country of residence and then ratified by the Supreme Court of Justice of Costa Rica. In the most favorable scenario, such a process might last between nine to twelve months and it will cost your heirs at least 20% of the value of the property, while a more realistic scenario would require up to three years time and its minimum cost will be no less than 35% of the property’s value, considering taxes and legal expenses.

(II)     A LESS “TRADITIONAL” PURCHASE STRUCTURE: INVESTING AND MANAGING YOUR PROPERTY´S TILE AND YOUR CORPORATION´S STOCK THROUGH A TRUST

The Costarican legislation provides you with the alternative of acquiring and managing your property´s title through a TRUST. This investment “vehicle”, which basically works as most “living trusts” would in the USA and Europe, will also provide you, among others, with the following advantages and benefits:

1.       The “TRANSFER IN TRUST” of a property’s Title does not generate the obligation to pay the Property Transfer Tax (1.5 %), nor the “standard” registration stamps (0.8 %). The only applicable fees to the “trust transfers” are those required to constitute the Trust (Trust Set up Fee – 1%), plus the legal fees to be paid to a Notary Public for the drafting of the corresponding transfer deed (1.5%). This means a reduction of approximately 40 % in your closing costs, which in turn, will enable you to pay the Trust’s annual maintenance fee for at least the first six years.

2.       The purchase price that is declared in the “fiduciary transfer” WILL BECOME THE REGISTERED VALUE OF YOUR PROPERTY´S TITLE, and consequently, it will be the base value over which the Capital Gains Tax will be calculated. This value will also serve as the basis for any eventual claims against the seller should any problems involving your property’s title arise.

3.       If you decide to purchase the property title through a Trust, IN THE VERY SAME TRUST AGREEMENT you will be able to designate your heirs WITHOUT THE NEED FOR A TESTAMENT. And when the day of your death comes (because all of us have to face such a moment), your heirs will receive the property IMMEDIATELY, WITH NO JUDICIAL AND/OR NOTARIAL PROCEEDINGS, with a cost of only 5% if your heirs should decide to liquidate the trust, or even 0 %, if they choose to keep the property in it. So as you can see, by choosing this alternative you immediately provide your heirs with a simple solution to their potential inheritance problem, not only by reducing years of legal proceedings to days, but also dramatically reducing the legal fees and associated expenses.

4.       If you were to invest in a property by using BANK FINANCING, you may also establish a Trust with your Property´s Title. Your trust will handle – in most cases at no cost for you – the credit´s formalization proceedings. Also, take into consideration that when you request financing from any financial entity, it will usually require you to subscribe a life insurance policy, which will pay off the loan in case of your death. Consequently, IF YOUR TRUST TRANSFERED YOUR PROPERTY TITLE TO THE BANK AS COLLATERAL FOR YOUR LOAN, THE BANK WILL RETURN THE TITLE TO THE TRUST ONCE THE INSURANCE COMPANY HAS CANCELLED THE BALANCE. So, even in this scenario if you were indebted and died, your heirs will still be protected by the Trust’s advantages.

(III)    WHAT SHOULD YOU DO TO ACQUIRE AND SAFEGUARD YOUR INVESTMENT BY MEANS OF A TRUST?

1.       If you have already hired a Costa Rican Lawyer or real estate agent, let’s arrange a meeting with him (them) BEFORE you decide to purchase. If you don’t have a Lawyer yet and/or are not being currently assisted by a Law Firm, we will be pleased to provide you with the legal advice that you may require. Through Global Legal Advisors® - the legal branch of the Global Group - we will take care of setting up your trust, formalizing the purchase of your investment and providing you with long term personalized assistance and management of your asset´s title. Our team includes professionals with Graduate Degrees in Law, Economics, Business Administration, Finance and Foreign Trade, emphasizing in Foreign Investment. We also have an Accounting Department, which not only specializes in the administration of assets held in Trust, but could also provide you and your project with a comprehensive tax planning service.

(IV)   WHAT ELSE SHOULD YOU KNOW ABOUT THE “TRUST FIGURE”?

Although the trust figure is much more than just a “title management vehicle”, with this brief note we have tried to provide you with the more relevant aspects and benefits that we believe you should consider when purchasing a property in Costa Rica. Please remember that the quality of your investment, as well as the enjoyment and peace of mind you get from it, will always depend on the analysis and decisions you make before you decide to purchase. This is why it’s so important that you take the time to review your options and always hire the services of a competent professional. If you should desire to learn more about the information and ideas we have included herein, we invite you to visit our web sites at www.globaltrustfirm.com and www.globallegaladvisors.com.

(*) Jorge F. Baldioceda B. is a partner of the Global Legal Advisors ® Law Firm with more than 10 years of experience in Real Estate, Corporate Law and Foreign Investment. For additional references you may check GLA´s web page www.globallegaladvisors.com or Lex Visio, the Lawyer´s Worldwide Directory (http://search.live.com/results.aspx?q=lexvisio.com&go=&form=QBRE).

Government Announces Plan To Pipe Water To Coast

The central government said this week it plans to bring water through existing canals from the Arenal Reservoir to the province of Guanacaste, virtually guaranteeing supply.

In the short term the project will bring water at a rate of 1000 liters a second (a cubic meter) but that could be increased to 1500 liters per second if demand warrants it.

The project could be completed for $8 million and would see water flowing within 12 to 15 months.
“There are three projects that will guarantee the supply of water to Guanacaste, and not just in the short term,” said the Minister of the Environment and Energy (MINAE), Roberto Dobles, during a visit to the Diriá National Park in Santa Cruz on Thursday.

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Costa Rica Tourism Still a Bull Market

During the first six months of the year, 1.03 million foreign tourists visited Costa Rica, an increase of 12.5 percent (89,178 tourists) over the same period last year, according to estimates by the National Chamber of Tourism (CANATUR).

In addition, 86 percent of tourism operators said the first half of 2008 was as good or as better for them than the same period in 2007.

Estimates on the number of visits to the country were generated using arrival data from the country’s two main international airports, Juan Santamaría west of San José and Daniel Oduber, in Liberia, the northwestern capital of Guanacaste province. Juan Santamaría reported an increase in traffic of 13.1 percent to 673,701 passengers. Traffic to Daniel Oduber grew by slightly less, 9.7 percent to 129,623 passengers. An estimate of arrivals through cruise ships was then added to this number.

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Costa Rica posts rising tourism figures — From January-May 2008 foreign arrivals to Costa Rica increased………. —

/24-7PressRelease/ - NOTTINGHAM, UK, July 15, 2008 - From January-May 2008 foreign arrivals to Costa Rica increased 16 percent from the same period in 2007, according to the Ministry of Tourism in San Jos .

The upswing represented an additional 133,000 foreign visitors over the period, taking the total to 987,000 arrivals.
The US remains the main country of origin, accounting for 54 percent of arrivals, followed by Europe with 17 percent.

The Ministry of Tourism stated that recession in the US had not affected the propensity of high and middle income earners visiting Costa Rica. Nor have increased airline prices dissuaded European travellers.

While the world economics forum has ranked Costa Rica as the number one nation in Latin America in terms of tourism - the second successive year that Costa Rica has occupied top spot.
Costa Rica registered 1.9 million foreign visitors in 2007, generating US$1.92 billion in tourism receipts.

And research from the overseas property specialist, David Stanley Redfern Ltd, shows that despite Costa Rica’s semi-mature market, wisely chosen property has plenty of growth potential.

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Liberia Airport Statistics For May 2008

886 tortugas han nacido en temporada de anidación

Centenares de tortugas baula salieron de sus huevos, en los últimos seis meses, en playa Junquillal –Santa Cruz, Guanacaste– en una de las temporadas de anidación más exitosa en los últimos años.

La mayoría de los 886 quelonios nacieron en un vivero del proyecto Conservación de Baulas del Pacífico, de la Organización Mundial de Conservación (WWF).

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