Understanding the “Cementazo” the Latest Corruption Scandal Under Investigation in Costa Rica

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You’ve probably heard the term in the news over the past few months, or maybe a friend or coworker has mentioned it to you, but the amount of information is overwhelming and of course in Spanish, even for a Spanish speaker the craziness of this case has been hard to follow.

“Cemento” is the Spanish word for cement; and like with Odebrecht or the Panama Papers, “Cementazo” is just the term being used to refer to the latest corruption scandal that has kept the Costa Rican authorities and media outlets busy in the past 4 or 5 months as the country heads to Presidential elections this 2018.

As we mentioned before, the amount of information, data, facts and opinions is overwhelming, so we will make an attempt to summarize the most important aspects of this case so that you can understand it better and form your own opinion.

-Up until 2015 there were two companies in Costa Rica that were involved in the cement and concrete business, Cemex and Holcim, forming what could be considered a duopoly; the cost of each cement bag was determined in one way or another by these two providers. Both companies were taking advantage of a regulation in the Costa Rica law from 2005 that prevented the entry  of cement into the country that was over 45 days from the date of fabrication (cement can spoil with time).

-The Government, with the purpose (in theory) of bringing down the costs of this product in the country and to promote the competition looked for alternatives to open the market to other providers; however, there were concerns over the quality of the imported product specially since it would have to travel a long way by ship.

-Costa Rican businessman Juan Carlos Bolaños, president of JCB Group, had created in 2014 a corporation named Sinocem with the intention of importing cement from China if changes in the legislation were done. According to Bolaños the quality of the imported product would be evaluated by international certification companies.

-According to information provided by different local media channels, a study was done by the National Lab of Materials and Structural Models and the company Castro & DeLaTorre to determine the quality of the product that would be imported from China and it proved that it was of high quality and resistance. This report was used by the Ministry of Economy as base to modify the law and eliminate the 45 day restriction to allow the Chinese cement to be commercialized in the country.

-At this point and despite the complaints of Holcim and Cemex, many people praised the decision of eliminating the duopoly and opening this industry to competition, the product offered by Sinocem was offered at a price 20% lower.

-The problems began at the end of June this year, when information was released that Banco de Costa Rica (Bank of Costa Rica / BCR) had approved a loan to Sinocem for an amount close to US$30,000,000.00 for the import of cement from China, apparently the guarantee of this loan was the cement itself, which raised an alarm due to the short life cycle of this product, the high amount of the loan and apparently the concern of some members of the board about the intentions of Bolaños since it seems some of the funds came and went between different accounts.

-As questions come and go, different situations arise, among them the apparent influence peddling by different members of the government to get the loan approved, (there’s proof of different meetings of congressmen and even the President of Costa Rica with Bolaños days before the loan was approved); some of this questionings were even directed to President Luis Guillermo Solís who has categorically denied his involvement and insisted that matters are investigated to all their extent.

-Members of the board of directors of the BCR are being questioned; some have already resigned from their positions after feeling the pressure of the investigations (Paola Mora, former president of the board of directors and Mario Berrenechea, general manager).

-Investigations are currently open regarding this case, some have already been dismissed, one involves the General Customs Director who apparently authorized the 20 tons of cement bags to be released to Sinocem without the proper tax payment and justified under an extraordinary process. Others have to do with the contracts by the National Emergency Commission (CNE) granted to Sinocem.

-An audio was filtered were apparently Bolaños, in a meeting with someone that apparently could be a member of the management team of BCR, states that if he (the BCR officer) admits to have violated the bank secrecy, Sinocem would not have to pay the loan to the bank and could sue the entity for damages.

-Questions have also come from the fact that local news site CRHOY.com has been on top of this case and releasing different articles on it on a daily basis while other well-known newspapers and media channels have published only a few notes (why?). Some others have theories that all this drama was started by CRHoy due to their own interests in the matter.

-The commission investigating the case has gone through a high number of interviews and reports since Bolaños held many conversations and meetings with different congressmen including Otto Guevara and Victor Morales Zapata; he also had several meetings with Paola Mora, President of the Board of Directors of the BCR , the President Luis Guillermo Solís and the list goes on.

-The most recent casualty involves Attorney General Jorge Chavarría who was suspended this Friday for a three month period, pending the investigation to prove whether or not he made irregular decisions regarding this case.

As mentioned, many high-profile politicians and businessmen are part of this ongoing investigation, and at this point nothing has been really proven except that Bolaños had contacts in high places and there are many people with different interests in this case.

Here we just touch on the surface of this, but as more solid information is released we will update this story accordingly.

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