by Rod Hughes

Exports of root crops to the United States, such as manioc root (yuca) destined for ethnic Latin consumption, are encountering problems of uncertain quality and volatile prices at their destination, according to the National Production Council. Some pumpkin types of crops also are experiencing the same woes.

The quality problem is blamed on a lack of organization on the part of farmers, some of whom are tilling small family plots. In some cases, areas that normally produce such crops are being diverted to the more lucrative pineapple. But one aspect is chronic: lack of modernization of traditional farming methods, says the council.

Costa Rica has been the principal supplier of tuber crops for Hispanic consumption for a long time. Some 90% of the starchy root used in the U.S. is grown here, mostly on small plots using rustic methods, although larger farmers have noted the profits in the crop and have brought some mechanization to the field.

In 2007, this country exported more than $61 million in root crops and another $2.4 million in the tropical ayote vegetable, a vine crop. But not all the farmers’ headaches are of their own making. Of late the market is suffering wild price fluctuations. The price for a 40 lbs. box of yuca has risen from $9 to $12 and soared to $29, drawing Nicaragua and Ecuador into the market as competitors. A larger supply may cause a disastrous drop in price.

The Miami office of the National Production Council warns that lower Costa Rican production caused the price rise as well, often failing to fulfill standing orders. Experts added that the shift to pineapple production may be counterproductive. That market will probably be saturated soon, says Costa Rican agricultural experts in Miami.

Competition is getting fierce. Panama, for example, has entered the ayote market, ironically using advanced techniques developed in Costa Rica to produce higher quality but often ignored by the small Tico farmer. Ginger, a non-traditional crop shipped from here in small quantities, is also finding a competitor in the U.S. market: Taiwan is now edging past this country as a supplier of the spice.

by Rod Hughes

In a perfect example of the right hand not knowing the doings of the left one, the national power and light company (CNFL) invested $4 million to buy land for the construction of a dam ruled not feasible by its parent company, the Costa ican Electrical Institute (ICE), the daily paper La Nacion revealed today.

ICE pulled the plug on the dam project 18 kilometers north of San Ramon but not before CNFL’s investment. ICE is the power and light company’s principal stockholder. Since 2003, CNFL had been urging the construction of the dam, to be roughly the size of the currently existing 132 megawatt producing Cachi reservoir, which produces enough power for 100,000 homes.

The completed Balsa Superior project was to have cost about $300 million and to have had 25 kilometers of expensive tunnels. The dam at Pirris near Turrialba, by contrast, has only 10.5 kilometers of tunnels but produces the same megawattage as Balsa Superior was to have generated. Said Pedro Pablo Quiros, ICE’s CEO, where so many tunnels are needed, it means there is less water available.

Yet, the project would have collected water from six rivers and CNFL engineering estimates optimisticly put the reservoir size at equal to Cachi. Quiros summed up the possible lack of generating flow this way: “It was sensible to stop something that lacks reasonable viability from the risk analysis point of view. This was the conclusion without blame nor glory.”

Quiros said that CNFL would have to sell the property so that it would not be (pardon the expression) money down the drain. “These projects are so expensive,” he added, “that $4 million must not be an excuse to say, ‘better we go ahead (with it.)’”

by Rod Hughes

The Central Bank dumped dollars on the money market for the second time in two weeks to try to halt the artificial rise of the U.S. dollar in the exchange of colones. The colon reached ¢527.85 per dollar yesterday, an all-time record. The colon rollercoaster is blamed on exchange speculators.

“When the dollar dropped, a lot of people changed their colones and now they’re converting to dollars again. But this isn’t good because if the dollar drops again, they can lose money,” cautioned Guillermo Quesada, manager of Bancrédito. The wild fluction began late last year when the Central Bank set the colon at the high 480s per dollar. But in the past two months that devaluation of the dollar exchange has been reversed.

Fortunately, the Central Bank has a healthy dollar reserve to use to stabilize things. And, with the prices of petroum rising to record highs of $120 plus per barrel, what has gone up recently is sure to fall. The exchange rate is related to inflation and rising food prices has already hit hard at the poor of Costa Rica, as it has in many other countries.

Central Bank president Francisco de Paula Gutiérrez also warned investors not to rush to exchange their savings based on temporary blips in the money market.

In other banking news, Banco de Costa Rica, one of the country’s oldest public banks, elected a new president, Luis Carlos Delgado, to replace Victor Emilio Hererra whose term expires June 1. Hererra admitted to the daily La Nación that he threw his support to Delgado. Others on the board are Percival Kelso, Roland Chacón, Alcides Calvo, Leonardo Ferris and Pablo Ureña.

<strong>by Rod Hughes</strong>

The Episcopal Conference of Costa Rica’s Catholic Church sent illegally obtained funds to Panama to escape the eyes of the government financial watchdogs, revealed the daily <em>La Nación</em> Thursday, in yet another article in a series that surely will win prizes for investigative reporting. Each new revellation of the use of Pastoral Services bank accounts to gather investor deposits has come as a blow to the Church’s prestige.

In July of 2005, Sugef, the national equivalent of the SEC in the United States, notified the Episcopal Conference that they could not act as a stock brokerage firm and ordered the body of bishops to cease and desist from doing so. To avoid these restrictions, the paper revealed, fund administrators continued to accept investor funds and to make loans through a Panamanian firm. According to one investor, a medic named Dr. Hugo Howell, he was notified of the move to avoid Sugef scrutiny. But the attorney for fund accountant, Minor Rojas, denies that his client remembers sending any such communications.

On May 14 of this year, Sugef formally accuse the conference of bishops for their offshore investment activities. But at least three bishops have denied they knew anything about the movement of funds. Yet an accountant, Jorge Sánchez, who has had an account with Pastoral Services since the 1990s says the move never was kept a secret. Sánchez says he worked directly with the fund’s administrator, the late Jorge Torres. Sánchez denied to the paper that Torres had ever instructed him to keep mum about the fund’s activities lest the bishops found out.

Dr. Howell also concurs that he was never sworn to secrecy and added, "It’s strange to me that they’re saying these things… I always thought Torres was an impeccable person."

Among the investors are family members of Church hierarchy. The list of investors was omitted from a report by Episcopal Conference lawyer Carlos Vargas gave <em>La Nación</em> on April 15. The Panamanian branch of Pastoral Services is closely associated with the investment firm Grupo Sama in that country.

by Rod Hughes

Alajuela’s Catholic bishop, Angel San Casimiro, lauded the Spanish-language newspaper La Nacion for uncovering allegedly illegal financial maneuverings with the use of its bank accounts. (See previous newsblog) Bishop San Casimiro continues to insist that the Episcopal Conference of eight bishops was unaware of any irregularities in the use of its pastoral funds.

Wednesday, the financial watchdog agency Sugef formally presented accusations that the Episcopal Conference had illegally acted as a stock broker without authorization of any regulatory agency. If proven, this violation of the Central Bank Codes carries a penalty of 3-6 years in prison.

San Casimiro thanked the daily paper on his weekly homily aired by the radio station Radio Monumental. In his radio talk, the bishop said the members of the Conference were not privy to the way the pastoral accounts were administered and are awaiting a decision of the courts on whether it will proceed with prosecution based on the Sugef report. Apparently, the watchdog agency warned the Conference in 2004 that its funds were being ullegally collected and administered as if it were an investment house but the violation allegedly continued.

by Rod Hughes

The Catholic Church’s Episcopal Conference has been accused of shady financial dealings by the financial watchdog agency, Sugef. Sugef general superintendent Oscar Rodríguez told the courts that his agency’s investigation has turned up evidence of “illegal financial intermediation,” the daily La Nación reported Thursday. The conference consists of eight Costa Rican bishops.

The 292-page Sugef report, based on several weeks of investigation, turned up evidence of violations of the Central Bank code that could entail, if conviction follows, penalties of three to six years in prison. However, it is unlikely that any cleric will go to jail. The Church does not choose its bishops on the grounds of their financial acuity and the conference denies any knowledge of illegal management of Church funds. (A good example of this was the plight of the Vatican Bank after the 1982, $35 billion collapse of Banco Ambrosiano in Italy, a near-disaster that had the Vatican scrambling for liquidity. The Vatican Bank is administered by the College of Cardinals.)

The violation of the code’s article 157 occurs, reported La Nacion, “when persons or organizations, without permission or controls of public financial authorites, acquire money from the public … with the aim of (selling) stocks or credit in some form.” In other words, the accusation is that they were acting like stock brokers without authorization of authorities. The Conference said in a press release that it is the victim, instead, of fraud.

In December, 2004, Sugef warned the Esiscopal Conference to stop acting as financial intermediaries. But on April 11 of this year, a La Nación investigative report revealed that bank accounts of the Conference’s Pastoral Services continued to receive funds from local and foreign investors, destined for the Panamanian investment house Grupo Sama S.A. The Conference owns 20% of Sama stock. The newspaper’s probing also revealed that money from Giovanni Bondaz had passed through the account. Bondaz is under investiagion by Italian authorities.

The case is complicated because the Pastoral Services administrator, Jorge Torres, died in June of last year. So he is unable to testify to why part of the funds he lent were to Anna Moscarelli, a Swiss businesswoman who, in the 1990s, managed funds for a high Mafia figures. Moscarelli’s company here administered three Costa Rican hotels and took out a loan for $3 million with Sama. But the flow of money from investors continued long after the Sugef warning, a Sugef investigation between April 21 and 30 this year discovered. Between March, 2005, and August of 2007, 168 deposits were made in the bank account.

One result is inevitable: it will take years before this cat’s toy of tangled financial dealings is finally sorted out and wound up in a neat verdict.

<strong>by Rod Hughes</strong>

Want to call ahead for reservations in Panama as you drive south on the InterAmerican Highway from San Jose to Paso Canoas on the Costa Rica-Panama border? Better make your call before you leave San Jose, even if you have your cell phone with you.

At least that is what a report by public services watchdog ARESEP indicates. The agency studied cell service in March and found that service, especially the GSM system, has deteriorated since October of 2006. Customer have serious problems getting a signal along the 350 kilometer stretch of highway, according to the daily <em>La Nacion.</em>

Only near major population centers such as Buenos Aires can one count on making a call. The worst appears to be the system installed by a subsidiary of the French firm Alcatel, the report indicates. But even the Ericcson system has suffered a slight deterioration, the report adds. Coverage of Alcatel dropped from 48% to 20% since 2006 while Ericcson declined from 45% to 39% during the same period.

Elberth Duran, spokeman for the telephone company ICE, blamed several factors, including vandalism by thieves who cut cables to steal the copper. usually to sell illicitly in order to buy drugs. In the case of Alcatel’s system, ICE had to assume the maintence role when it severed relations with the firm. ICE immediately began work to improve the Ericcson net, continued Duran, the moment the ARESEP report was passed to the phone company.

by Rod Hughes

The value of the dollar against the colon continued its rise yesterday but the trading frenzy of Friday has calmed. Yesterday´s hike of 3.87 colones per dollar was only slightly higher than the Monday rise of 3.44 and much less than the sharp jump of 9.50 registered on Friday, according to the daily La Nacion..

Conxulted by the newspaper, economist and former Central Bank president Rodrigo Bolanos considers that speculators are expecting a devaluation of the colon and not a hike in its value as it experienced late last year. “People prefer to have more of their assets in dollars,” he said. This change in attitude effects the market.

Previously, La Nacion quoted a prominant economist as saying that the Central Bank had $5.9 billion in dollar reserves. (This was quoted again yesterday in this newsblog.) But it appears that the figure is inflated. In early May reserves were $4.945 billion but this dropped to $4.926 billion on May 9. However, the difference in figures would not alter the opinion expressed by the economist—the Central Bank has a comfortable reserve in dollars due to continuing foreign investment, exports and tourism. The reserves are important so the bank can confront such problems as petroleum prices and exchange speculation.

by Rod Hughes

Internet money speculators are playing hob with the value of the colon. Late last year, Costa Rica raised the value of its colon against the dollar and for a time only about 487 of the local currency was needed to buy a dollar. Last week, it went up to 501 but that was just the beginning.

Monday, Banco Nacional raised the colon value unlaterally and drastically, surprising even the Central Bank. The buying model jumped from 505 Friday to 517 on Monday and the sale from 511 to 523. Bank spokesman Luis Carlos Mora said the move was to foil currency speculators who used the Internet overnight to manipulate currencies. He promised that today the colon would lose value by 5 colones.

Central Bank manager Roy Gonzalez commented, “It seems strange to us that Banco Nacional would adjust the exchange rate more drastically than the variation in Monex.” (Monex is the world currency market.) Economist Juan Munoz told the daily La Nacion, “The exchange rate shouldn’t be so elevated especially when Banco Central has $5.9 billion in reserve.”

Volume of trading colones vs. the dollar was a brisk $71 million on Friday but only $8 million yesterday. “Today, things were calmer,” said Gerardo Gonzalez of BAC of the trading Monday, “We don’t find any explanation for what happened.”

by Rod Hughes

It may not be any threat to Boeing yet, but a new consortium, Costa Rican Aerospace Alliance (Coraal), has signed a contract with Ad Astro Rockets to build a platform on which to test Dr. Franklin Chang’s plasma rocket engine, the daily La Nacion reported late last week.

Made up of six Costa Rican businessmen, the new firm will build a rectangual table-like structure to unite the rocket engine, its electrical and cooling systems and tie them in with the International Space Station still under construction. The engine, designed to free space rockets from costly and bulky chemical fuels, is the brainchild of Chang, a Costa Rican astronaut and physicist. The Coraal project will initially employ 187 persons.

The plasma engine prototype has been deveoped at Ad Astra’s facilities in Guanacaste province near Liberia. Chang told the press that, once the engine is tested in a vacuum at Ad Astra’s facilities in Houston, it would be ready to be hoisted up to the space station with a conventional rocket. Essentially, the engine heats a gas to such a temperature that an electron is released.

By being freed from the tyranny of chemical fuels, the engine will not only be cheaper to run but will accellerate more rapidly and make interplanetary (and later interstellar) flight more feasible. Chang thinks the more immediate use will be to hoist satellites into orbit or cargo to space stations. One suggested scheme on earth is to incinerate dangerous refuse and turn it into useful byproducts.