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Friday, January 29th, 2016  |  USD: Buy 531.29 / Sell 543.92
20 years

Hotel Europa agrees to pay former employees, blames Costa Rica business climate for closure

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November 20th, 2014 (InsideCostaRica.com) The Hotel Europa will pay the outstanding payrolls today of 300 former employees left jobless after the sudden closure of the hotel on Tuesday, Minister of Labor, Victor Morales said after a meeting with hotel representatives.  The former employees can expect their mandatory holiday bonuses to be paid next Wednesday, according to the minister.

 

However, the lawyer representing the hotel, Hugo Navas, admitted to reporters that the hotel does not have all the necessary funds to pay the holiday bonuses and may need to take a bank loan to cover the cost.  Navas confirmed however that the hotel does have the funds necessary to process the outstanding payrolls that are expected today.

 

It was also announced that a meeting would be held next Thursday to determine and plan the payment of all mandatory labor guarantees, including severance pay, outstanding holidays, and other benefits required under the law.

 

Navas said that the hotel was forced to close because of the struggling economy and business climate in the country.

 

“[The hotel] closed for the same simple reasons that Intel left, that Bank of America closed, for the same reasons that the newspaper Al Dia closed, why La Nacion fired 100 employees: there is a financial crisis in this country,” Navas told reporters after the meeting.

 

The Hotel Europa is owned by accused high-yield investment fraudster, Luis Milanes.

 

Milanes, a 63-year-old Cuban American accused of defrauding some 500 mostly American and Canadian investors out of $46 million when his Costa Rica-based high-yield investment program, Savings Unlimited closed down 11 years ago, will face a criminal trial in July of next year after failing to comply with the terms of a settlement agreement with his alleged victims.

 

The Hotel Europa was built in 1911 and claims to be San Jose’s oldest hotel.

 

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  • HONEST MAN

    I know that President Solis does not want to talk about the economy but things are getting really bad in Costa Rica. I mean so bad i hear stories of families having to move back in with parents that are retired. Some Costa Ricans say the tourism sector numbers are bull shit and really only highend resorts are getting any business. This hotel has been struggling for a long time. The spoke person for this hotel is right many companies are leaving and laying off very fast in CR. The goverment of Costa Rica needs to be honest there is serious problem in the economy. The country credit rating is killing business and high intrest on loans kills business. The goverment does not understand that 350.000 lazy goverment workers are killing the private sector. Its called to much spending on programs that do nothing but shuffle paper from one desk to the other. The economy can be fixed but public sector unions will never allow it. Expect more layoff soon in private sector. No private TAXES means no more economy. I guess the public sector unions will win and when the colon is worth nothing they will only get rice and beans no more import items from the world. I will bet that Amazon and IBM will pull the plug on CR after christmas. I know HP is bleeding aka laying off some staff off 10 staff one week and 15 staff the next. I expect HP to be gone soon. I do catering and have 3 clients that keep me going but they are starting to question CR goverment path and asking for lower costs to feed staff and guests. Always have a plan B and C if you live in CR

    • Derryl Hermanutz

      Like many other countries on Earth, Costa Rica built too much commercial infrastructure during the 25 year Great Moderation, which accelerated during the 2000s real estate bubble that popped in 2007-08. The US middle class, who had been CR’s major tourist market, was slaughtered by the RE bust. They’re not travelling anymore. Now Costa Rica is built to accommodate a boom market, but the world is in a bust. The bust is not a “Costa Rica” phenomenon. CR is still doing pretty well, compared to places like Ireland, Spain or Greece. All those “lazy” government workers spend their salaries in CR, which provides paying customers to CR businsses. If government reduces its spending, even more businesses will close due to lack of customers with incomes to spend. Global corporations move to any country where they don’t have to contribute anything to the country’s tax-funded social welfare systems. Corporate profits move out of CR. Local CR companies end up paying all the taxes, and suffer unequal competition with global corporations who get preferred treatment: because if they don’t get preferred treatment they leave. The real impediment to business investment is lack of customers to sell your products to. Taxes and bureaucracies are a nuisance, but if you find a way to make profit providing goods or services to customers, then you’ll do the business despite the nuisances. CR, like much of the world, is suffering a shortage of customers and an excess of businesses who need those customers. The government can’t fix the problem of lack of customers.

      • mhogan

        When I lived in Canada I used to think that if I were able to keep the money I paid in taxes and give the government what my take-home pay was instead, that’s a bargain I could live with. To your last sentence: People (customers) are still in Costa Rica but when your buying power is down (e.g. cost of living for basic needs–electricity, water, car inspections, new taxes and increases in old ones), what’s left in your pocket to purchase non-essential goods is diminished. Hence, businesses suffer. People downsize in their discretionary buying but the government of CR is not interested in downsizing itself, only growing in confiscatory ways that hurts the economy. Governments contribute nada to the GDP – they distribute what the private sector produces and eat up whatever they can to line their pockets before doling out what’s left.

        • Derryl Hermanutz

          Don’t get the wrong idea that I am “pro”-government. I’m just not anti-government. If you want to get into the issue of people consuming without producing, that applies to most of us. What do bankers, lawyers, teachers, accountants, retailers, stockholders, bondholders, managers of every kind, etc. etc., “produce”? We produce no electricity or food or clothing or houses or any of the other stuff we all buy with our money. In a barter economy where we trade economic value for economic value, we would have no “goods” to bring into the marketplace: we don’t “make” anything that has trade value. A relatively few farmers and workers “produce” everything that has direct economic use value. Yet farmers and workers aren’t “rich producers”; and all those other people get “paid” without actually “producing” anything. You can argue that their contributions are non-material but are “necessary” to material production, but the same argument applies to governments. Our wealth production and distribution system is unfair in a whole lot of ways, because most people get paid without doing any directly productive work at all, that they could trade in a barter marketplace. But we don’t produce and trade goods in a marketplace. We work for money. And the amount of money people get paid bears no direct relationship to their contribution to economic production.

          • mhogan

            Most of what you say is correct except I take issue with bankers, lawyers (well,maybe not lawyers), teachers, etc. They are part of the Service Industry and while it may not be a commodity it moves the engine of enterprise, so therefore it is productive. When I look at civil servants (also known as government employees), I am reminded that they are neither civil nor do they serve. I just get tired of all the “can’t do”–that huge list of no-no’s that the government comes up with. If they tell you what you can do, the list is so short to be put on a single sheet of paper. Ever read a law enacted by any government? Pages and pages of mumbo-jumbo when it would be far easier to scratch off from an already short list of “can do’s”.
            When was the last time you tried to open a bank account? GOVERNMENT REGS at every turn.

          • Derryl Hermanutz

            No argument on that point. Large enterprises — government or private corporations — that have monopolies or oligopolies on supplying necessities are typically bureaucratic, overpaid, and unresponsive to the people who buy their products or use their services. We recently got our cedulas and I recently opened a bank account, with all the “know your client” paperwork. That was demanded by the US, in their anti money laundering campaign that they impose on every nation that does business with the US. It used to be that you could register a CR corporation and open a corporate bank account no problem, but now the legal owner of the account must have a CR cedula. I’m also from Canada (Alberta) and I incorporated my business there. I did all my own corporate legal filings and tax accounting. Here you need a notary to do that kind of work, so doing business here is definitely more bureaucratic than Alberta. But trying to do any real estate development in Alberta has become a bureaucratic cash cow nightmare where all reason and logic is replaced by idiot “regulations” that serve no one except the bureaucrats who charge heavy fees to certify your “compliance”.

  • NorthendFool

    Just like the Villabos scenario, we have investors who are stupid enough to believe this pyramid scheme in hopes they can hide their money from their homeland to avoid taxes and at the same time make a great percentage on return. What a joke. This guy just like Villabos is going to run forever.

  • Karen Mata

    I guess we know where that record breaking number of tourists aren´t staying.

  • Passion4 Living

    This is a sign of what is to come in this country as it is the truth!! With how expensive Costa Rica’s gotten, added to tourism being down (in part because of the expense), added to how hard it is to do business here – I fear my more businesses will do the same thing – possibly quite a few before December 20 (Aguinaldos final payout date).

    I do hope they put a denuncio against the partners so they can’t leave the country until these are all paid up.

    • Karen Mata

      Reminds me of the old Hemingway quote on how he went bankrupt. “Two ways. Gradually, then suddenly.”

  • Ken Morris

    I don’t buy this scapegoating. The fact is that Hotel Europa has been poorly run for years, seemingly because its owner was indifferent to it, and indifferent perhaps because he expected to eventually lose it as a consequence of his other criminal activities.

    Yes, tourism is down in San José, but the hotel never targeted the typical North American tourist. Its market was rather more a Latino one, conventions and the like, so a decline in tourism as usually defined doesn’t explain Hotel Europa’s plight.

    I don’t know why Bank of America closed, but Intel left for cheaper labor in Vietnam. Since hotels can’t outsource labor, that industry simply isn’t as affected by labor costs as is manufacturing. Newspapers have been in a global tailspin for decades owing in large part to the rise of the internet, so newspaper closings and lay offs are simply not a sign country-wide financial crisis. Plus, La Nación had some financial problems of its own making.

    Hugo Navas is doing what good lawyers are paid to do, namely defend his client in part by placing blame elsewhere. However, this is pure scapegoating. The real problem is that the hotel was poorly run by an indifferent owner.

    And we should all be annoyed by this. The neighborhood where Hotel Europa is located is pretty sketchy, and the hotel has done nothing to improve it. At turns it has contributed to the sleaze. Since a better run hotel could have helped anchor a better neighborhood, I fault Hotel Europa for more than its own failure. I fault it for worsening the entire neighborhood.

    Let’s hope that whoever runs the hotel next will be more committed to it. It’s actually a nice old hotel and the neighborhood isn’t yet beyond improving. New owners could make some good money and improve the area for others.

    But I don’t buy that Hotel Europa is a victim of anything except poor management.

  • duke ster

    It’s just too expensive to live in Costa Rica and tourists have probably heard of the thieving that goes on with police doing nothing about it. I mean when you get your rental car windows broken into and all your stuff stolen in BROAD DAYLIGHT while in a parking lot of some tourist attraction or just parking on a street, the word gets around and the tourists who ARE left in this poor world economy, will simply go somewhere else. The line for filing of thefts of passports and all belongings at the downtown OIJ office was super long 8 years ago when I was there helping some poor tourists who had been robbed-I can’t imagine the length of the lines today . WE have warned and warned the Ticos about putting teeth in the theft laws here but as they are finally finding out–tourists are paying attention to what they hear from Travelers to Costa Rica. Every tourist who has come here and been robbed and had their vacation ruined by some thief on the bus or the hotel has spread the bad word about never coming to Costa Rica. Each theft story is told and re-told and believe me– it has come home to roost. Costa Rica has always been famous for it’s thieves and locals charging double to Gringos. Now the hotels are vacant-companies are leaving because of the incredible hostile attitude of the government toward businesses and especially toward Gringos in any way imaginable. The Ticos hate Gringos and are too stupid to realize the good life they HAD was due to the Gringos bringing their hard earned dollars down here. So the Ticos shit on the Gringo at every opportunity–from asking incredible ridiculous sums for properties to cheating the Gringo at every turn. Now that the world has tightened their collective belts– the Ticos are beginning to feel the pinch from people not coming here–and believe me–I have been saying this for years— this is just the beginning! Costa Rica is OVER and has been for a long time. Any Gringo with any sense will bail out now–while he can–because when the shit hits the fan ( very very soon) the Gringo will be a BIG TARGET!- Your lives will be worthless when their belly’s are empty of beans. Yes the U.S. is a police state but it is so much cheaper to live there and at least you know what neighborhoods to avoid if at all possible. To be a Gringo in Costa Rica will soon be a very dangerous thing because ANY Gringo is ( to them) a rich Gringo I.E. the ones with money.

    • HONEST MAN

      The system is out of control with coruption in Costa Rica. Many Business that invest in Costa Rica are scared to say anything about the coruption because the goverment of Costa Rica might put them in jail. Local goverment types have lots of power to pick on small and meduim size business because they are easy targets. Its maybe worse than the mafia the mafia ask for protection money the Costa Rican goverment want protection money or life can get very hard for small and meduim size business. I own a business and get upset of how much shit i have to go through to own a business in CR. I have registered product to bring into Costa Rica and have hade to wait 1.5 years to be able to bring products into CR. When i went to Ministry to ask what taking so long they said take me to dinner or pay for my kid to go private school. Like hell i am giving lazy goverment anything more. You see the middle goverment type are corupt and the elected official are more corupt because they know what happening and never do anything to help stop the coruption.

  • Michael Clarkson

    What is happening is that the rich elite and corrupt politicians are sucking all of the resources of this country and putting their money overseas, when things will get real bad here this people will live in other countries and will be rich for their rest of their life’s and the poor people left in Costa Rica will have to deal with the mess, the country will probably turn communist, people say oh no it will never happen here let’s remember history Cuba used to be like Costa Rica a gem then look what happened. Blood needs to be spilled the Costa Rican people are to cowardly to start a revolution.

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