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U.S. Economic Crisis Affects Costa Rica Investments
by Erin Raub
AOL’s Steve Case Put His Costa Rican Development on Hold Due to the U.S. Financial Crisis.
It’s the new shot heard round the world: when the U.S. Congress rejected the proposed $700 billion Wall Street bailout, aftershocks were felt in every country around the globe. In Costa Rica, several major hotel chains announced that their impending investments would be suspended for an indefinite period of time, until project viability could be assured. These decisions represent a more than $1.2 billion investment in Costa Rica Tourism.
Many large hotel projects are financed by United States banks such as Lehman Brothers, which had just opened offices in Costa Rica earlier this year. Current projects financed by American sources include the Mandarin Oriental, Hyatt, Saint Regis, Regent and Punta Cacique; all of their construction currently hangs in the balance, depending on market recuperation and bank stability.
On September 29, President Oscar Arias addressed the nation via Monumental Radio (93.5 FM). The president detailed the current state of the market, and explained that several hotel projects had been put on indefinite hold, including the $800 million St. Regis, financed by Lehman Brothers. “The decision to put the St. Regis project on hold is due to two main reasons, the increase in construction costs and the uncertainty of the international real estate market (financing, financial institution bankruptcy),†Grupo Genesis marketing manager, Gabriela Tijerino, said.
The St. Regis is currently in the pre-construction stage, and had just broken ground when the decision to postpone development was made. The hotel project’s fate will be determined by the international market, including whether most Americans, Costa Rica’s number one tourist group, will be able to afford international vacations. It’s the same story for all: “For the moment we’re taking a break to do some deep investigations into how the capital funds market situation is going to work,†Regent hotel developer, Blaine Kirchert, said. Kirchert’s comment is representative of many international hotels, including several close to home.
Unfortunately, this unsure fate awaits many global hotel projects, most of them large and expensive, and therefore funded by now-troubled American bank giants. Another Lehmen Group-financed hotel project, Manzanillo’s Mandarin Oriental Hotel Group, also finds itself on shaky ground, since its sponsor bank recently filed for bankruptcy. Because of financial worries and instability, the entire project may be postponed or even canceled. In the same shoes stands the Miraval Resort Punta Cacique, owned by AOL magnate Steve Case and tennis stars Andre Agassi and Steffi Graff. The resort, however, announced that it would only postpone construction for 18 months - ostensibly, after said time, construction costs will be lower and the financial future more certain.
Several other Costa Rica hotel projects have been affected, though the biggest are the $800 billion Punta Cacique (Guanacaste), $200 billion Saint Regis (Central Pacific), $120 billion Regent (Papagayo Peninsula), $100 billion Hyatt (Bahà Brasilito, Guanacaste), and the undetermined investments of the Mandarin Oriental (Manzanillo, Guanacaste) and the Papagayo (Guanacaste). In the case of the Papagayo development, the master plans were divided into several phases, so they will refrain from moving on to the next phases until the financing situation improves. “If the situation doesn’t improve, in four months’ time there will be high unemployment,†Decisa partner, Federico Matamoros, foresaw.
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my spanish isn't that good but looks like 8 beaches have now been declared unsafe after recent testing-
