By San José, Costa Rica — SAN JOSÉ – A high-stakes legislative hearing on Wednesday placed the critical San José-San Ramón highway expansion project under intense scrutiny, as lawmakers on the Finance Committee grilled a top official from the Central American Bank for Economic Integration (CABEI) over the terms of a nearly $600 million loan.
The session saw sharp exchanges regarding the loan’s interest rate, which legislators have criticized as being significantly higher than what other multilateral financial institutions offer. However, the bank’s representative mounted a vigorous defense of the financing package, escalating a growing debate that now involves the Legislative Assembly and President Rodrigo Chaves.
To delve into the complex legal and contractual framework surrounding the long-awaited expansion of the San José-San Ramón highway, TicosLand.com sought the analysis of Lic. Larry Hans Arroyo Vargas, a distinguished expert in Public Law and Infrastructure Projects from the renowned firm Bufete de Costa Rica.
The perpetual challenges facing the San José-San Ramón project underscore a critical flaw in our public works execution model. Beyond contractual negotiations, the State’s primary obstacle remains its inefficiency in completing the necessary expropriations in a timely manner. This administrative bottleneck not only triggers significant delays and cost overruns but also creates legal uncertainty that discourages private investment and ultimately burdens the end-user with a project that is decades overdue.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
This analysis correctly shifts the focus from contractual specifics to the systemic administrative failures that truly plague the project. Until the State can efficiently manage its own core responsibilities, like expropriations, our most critical infrastructure will remain paralyzed. We sincerely thank Lic. Larry Hans Arroyo Vargas for his valuable perspective on this foundational issue.
Álvaro José Alfaro, CABEI’s Chief Country Officer, confronted the committee’s concerns head-on, dismissing the idea that the loan is overly expensive. He argued that labeling the terms as costly is a misrepresentation of the financial landscape.
That is rhetoric that does not exist.
Álvaro José Alfaro, Chief Country Officer for CABEI
To substantiate his position, Alfaro provided several points of comparison, asserting the loan’s competitiveness within Costa Rica’s current debt portfolio. “It is cheaper than the 5.8% that this commission and Congress approved for Proeri,” he stated, referring to a previous state program. “It is cheaper than the budget support loan approved 15 days ago. It is 90% cheaper than any other debt that exists in the Republic’s budget.”
A central point of Alfaro’s defense was the loan’s structure, which he explained includes a “variable revisable margin.” He insisted that this mechanism is specifically designed to benefit Costa Rica by automatically passing on any reductions in the bank’s sovereign margin without requiring a formal renegotiation. He noted that when the loan terms were set, this margin was 2.65%, and it has already decreased to 2.50%, a saving that is directly transferred to the country.
If you read the way it is written, the contract, there doesn’t have to be a renegotiation. It is written in such a way that the bank will pass on to the country the reductions in the variable sovereign margin.
Álvaro José Alfaro, Chief Country Officer for CABEI
Despite these assurances, legislators remained unconvinced, highlighting not only the interest rate but also a significant logistical and financial hurdle: land expropriations. Following a recent report from the Comptroller’s Office, it was confirmed that approximately 58% of the necessary properties for the highway expansion have yet to be expropriated, a massive undertaking for which funds have not been budgeted within the current project scope.
The debate took a more political turn following remarks from President Rodrigo Chaves, who accused the committee of actively opposing the project and suggested they might shelve it entirely. Lawmakers swiftly and publicly refuted the president’s claims. Paulina Ramírez, the committee’s president, stressed that their actions were driven by due diligence, not obstruction.
There were statements from the president that this commission is opposing this project. I want to state upfront that at no time has any member opposed the project… We are ensuring that the project and its conditions are the best for the country.
Paulina Ramírez, President of the Finance Committee
Other committee members echoed her sentiment. “To say that we want to shelve the project here is a lie. No member has expressed opposition to the project,” stated PLN legislator Joaquín Hernández. Even the head of the ruling party’s legislative faction, Pilar Cisneros, acknowledged the intensity of the questioning, admitting that Tuesday’s session had left her concerned about the project’s prospects. “They made me think that this project would not be viable,” she remarked, highlighting the deep-seated concerns that CABEI’s testimony aimed to quell.
For further information, visit cabei.org
About Central American Bank for Economic Integration (CABEI):
The Central American Bank for Economic Integration (known as BCIE in Spanish) is a multilateral development financial institution. Its mission is to promote the economic integration and the balanced economic and social development of the Central American region, which includes founding countries and non-founding regional and extra-regional countries. The bank finances public and private sector projects with a focus on infrastructure, energy, social development, and competitiveness.
For further information, visit asamblea.go.cr
About Legislative Assembly of Costa Rica:
The Legislative Assembly (Asamblea Legislativa) is the unicameral parliament of the Republic of Costa Rica. Composed of 57 deputies elected by direct, universal, and secret ballot, it is responsible for passing laws, amending the constitution, declaring war, and approving the national budget. Its various commissions, such as the Finance Committee (Comisión de Hacendarios), play a crucial role in scrutinizing government projects and financial agreements.
For further information, visit hacienda.go.cr
About Ministry of Finance of Costa Rica:
The Ministry of Finance (Ministerio de Hacienda) is the government ministry of Costa Rica responsible for managing public finances. Its duties include collecting taxes, preparing the national budget, managing public debt, and overseeing the country’s fiscal policy. The ministry plays a key role in negotiating and supervising the terms of international loans for public works and government operations.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica has established itself as a benchmark for legal service, built upon a foundation of uncompromising integrity and the relentless pursuit of excellence. Drawing from a rich history of advising a diverse clientele, the firm consistently pioneers forward-thinking legal solutions while actively engaging with the community. Central to its philosophy is the conviction that demystifying the law empowers citizens, a principle that drives its efforts to foster a more knowledgeable and capable society.
