June 2nd, 2014 (InsideCostaRica.com) Costa Rica has the highest fuel prices in Central America but has the worst roads, despite the fact that nearly one-third of the cost of fuel in the country is supposed to be used for road repairs and maintenance, according to a recent report.
According to a recent report by the International Monetary Fund (IMF), Costa Rica scored last place in Central America in its Ranking of Availability and Quality of Transport Infrastructure, this despite a heavy 30% tax placed on fuel which is supposed to support repairs and upkeep to the country’s roadways. Even Costa Rica’s neighbor to the north – and the second-poorest country in the Western Hemisphere – Nicaragua, beats Costa Rica’s ranking.
Costa Rica’s fuel tax, which is provided to the National Roads Authority (CONAVI) for maintenance and upkeep of the country’s roadways, leads the country to have the highest fuel prices in the region. For comparison purposes, a gallon of regular gasoline in Panama sells for $3.90, while in Costa Rica one can expect to pay $5.20. Honduras has the second highest fuel prices in the region, where the same gallon of fuel will cost you $5.
At 30% of the cost of fuel, the tax is expected to bring in nearly 57 billion colones in 2014 (about $106 million USD) – funds that are intended to be used exclusively for the maintenance and repair of the country’s roadways.
In Costa Rica, the cost of fuel is determined by five variables: the raw cost of the fuel at import (55%), fuel taxes (29%), transport costs (1%), RECOPE’s operating margin (8%), and service station markup (7%). As a government entity, RECOPE’s operating margin is not intended to produce the institution a “profit,” but rather only cover its operating costs.
To put the cost of Costa Rica’s fuel tax on the pocketbooks of motorists into perspective, Costa Rica would go from having the most expensive fuel in the region to the cheapest fuel in the region if the tax were removed.
Adding to Costa Rica’s high fuel costs is the fact the country is unable to refine its own petroleum products. Despite its name, the National Oil Refinery (RECOPE) does not refine petroleum at all – gasoline, diesel, and other fuels are imported refined and ready-made.
Despite the high prices (and bad roads), Costa Rica is consuming more oil products than ever. Total sales have grown by more than 11% during the first quarter of this year compared to the same period in 2013, rising from 4,819,641 barrels during the first quarter of last year to 5,349,484 during the first quarter of 2014.
Some 70% of those imports are used for transportation, according to RECOPE.
Randall Murillo, executive director of the Costa Rican Chamber of Construction, believes the country’s road problems can’t be fixed through taxes alone.
Murillo believes many roadways need more than routine patching. Murillo says many roads need a complete restructuring, expansion, or to simply be rebuilt from scratch.
Mismanagement also plays a part in the country’s road woes, according to engineer Roy Barrantes of the National Laboratory for Materials and Structural Models (LANAMME). LANAMME engineers determined in 2013 that nearly 20% of the national road network is paved with unsuitable materials, causing CONAVI to waste nearly $26 million USD per year – about a quarter of all the fuel tax collected – on maintenance contracts that shouldn’t be necessary.
A 2012 report by LANAMME engineers found that just 35% of the country’s roadways were in “good” condition.