Are the days of El Dorado over in Costa Rica?

For those who have been in the country long enough, it is maybe a relief to see how the crazy pace of development and investment seems to have slowed down since the housing market in the United States collapsed. A trip to Jaco and along the coast all the way down to Quepos, a look at what is happening in Herradura, the development of a new Marina in Punta Leona, all indicate that on the contrary, things are as hot as ever.

In Jaco, it is possible to wake up in the morning to discover a couple of new condos have sprouted like mushrooms over night. Whenever there is a free spot, lets build on it, without worrying about the details too much! But just because building keeps happening doesn’t mean that buyers keep buying.

With the collapse of the U.S. market lasting a lot longer than first expected, people now are more cautious. The days of easy credit, easy buy and easy debts are over. U.S. buyers, who make up the majority of investors in Costa Rica, do not throw around borrowed money as carelessly as they did a decade ago, not only because current circumstances force them to think twice before doing it, but also because credit is no longer easy to get in the United States. Interest rates have also has shot up. People have been burned down, and others are scared.

Opinions vary greatly. Some say that this will help the market in the long run. Maybe quality will replace quantity! Maybe what looked like an inescapable ecological disaster will be avoided after all? Will a brand new era of developers take over in Costa Rica, bringing in projects with higher standards to replace what we have seen so far, construction with very little concern for consequences?

Now that the real estate free-for-all is over, builders may have to differentiate their products. Maybe an attitude that is more in tune with the environment will begin to appear. Maybe it will attract a different breed of buyers who choose to live in this country because of its beauty and peace, who want to live in harmony with nature instead of destroying it. Time will tell. But there is no doubt that what has taken place since the early 90s is nothing to be proud of.

Greed is everywhere and standards are low. What is now called ‘ecological development’ has in effect played the part of an ecological destroyer. The development in turn has brought on more crime, drugs and prostitution. Native residents found themselves living side by side with fast working investors, and while some benefited from it, the general picture is that it has brought little more than extreme envy and jealousy.

Fast growth is never good in a country, no more than it is good in a child. If the pace of development doesn’t slow down, what will be left of the flora and fauna of the country? What kind of a lifestyle will the country be able to offer? The consequences could be indeed very serious, and if it goes too far, irreversible. Let’s hope the effect of the recession is that everyone is forced to take a breather, look around, and invest less carelessly in the country’s real estate and environment.

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Filed under: Business on March 13th, 2008