May 2nd, 2009 fmorgan
One of the areas I think that baffles foreigners most when living in Costa Rica is what things cost. First of all, you have to deal with a new currency, the colon. On top of that, some things are much cheaper here (for example, we just bought a pineapple for less than 50 cents), and other things, much more expensive (imported goods mainly–an apple is about $1.50).
So, getting prices straight can be challenging, especially when you start talking in millions of colones. We just sold a used ATV for 2 million (about 3600 dollars).
We all want to know ahead of time what it will cost to build something, but the price always ends up being more than quoted. I finally figured out that contractors here give a bid for the best case scenario. Basically, if everything goes perfectly, it will be that price. In a country where even plans for meetings are preceded by “Si Dios quiere…” (If God wills), you can guess how often everything goes perfectly. You would think that the estimates would reflect the normal course of events, but it doesn’t work that way. Since everyone bids for the impossible ideal situation, anyone who gives an accurate estimate will not get the job. Cost overruns are therefore the norm, and you are responsible for adding your own buffer instead of the contractor tacking it on. The odds of you coming out at the original bid and getting to keep that buffer are worse than the lottery, but I guess it’s fun to try. We have seen that if you work the price down to below usual, what you pay in the end will be the same as if you accepted a quote for around the going price, what with one thing and another. It is very possible the lower bid will end up being the most expensive when you redo the rushed job.
Bargaining is practically a national pastime in Costa Rica, if not an art form. Where you live, are you accustomed to hearing an exchange like this in a retail furniture store? “I appeal to your conscience on the price you are asking me to pay.” “My conscience is perfectly clear, thank you, I know our prices are some of the best around.” That last said with a big smile.
It seems everything can be dickered over, and everything is considered for sale. People frequently walk up to our door and ask to buy equipment that we are using in our business. The above-mentioned ATV was in daily use, but somebody asked if we would part with it. It is always good when you are not the one trying to sell, but the other party is trying to buy.
If you come up to a farmer and say, “I like your farm, how much?” expect to be shocked at the price. The custom is to offer it at 3 times a reasonable amount, which is to say, “I don’t really want to sell, but if you really want it…” More than a few farmers have been shocked when the crazy foreigner paid what they asked, and more than a few foreigners have been very upset to discover they paid three times market value.
The best way to buy land is to locate yourself in the area for a while and give yourself a few months to learn what a good price is. Then let it be known that you will buy land for that price. Resist the pressure to go look at properties that are more than your asking price per hectare or square meter. Eventually someone will show up with a property in your price range, because that is what the locals are paying.
After seven years of doing business in Costa Rica, I can see us now on our next visit to the United States trying to appeal to the conscience of some baffled clerk in Home Depot.
Posted in bargaining, business in Costa Rica, buying land, campo, construction, culture, finca, investing | No Comments »
March 29th, 2008 fmorgan
We had a visit from a tree owner and spent a full day with them. They have been with us for a while and we have had numerous conversations with them. I always appreciate their visits because we have so much in common.
The good news is that after reviewing their trees they told us that there wasn’t anything they felt was wrong at all with them and they were thrilled at the size and quality. This of course was wonderful to hear. We do try very hard to do a great job and be diligent in following through with people, but as with all things that are part of nature, there are imperfections. I worry about imperfections. It is probably true that I don’t see the forest for the trees at times. If I see 5% of the trees not doing well it bothers me (and we replace them), and I can forget that means we have 95% growing very well. Our tree owners are always less critical than I am.
I think one of the reasons they gave us such high marks was that they visited trees that they own with someone else (people they bought with before they knew about us) and were much less pleased. In fact, nearly 50% of their trees were replanted after 2 1/2 years and it was obvious that the care just wasn’t being done. It appeared that their trees were planted and then ignored. Also, some trees were planted in areas that were not appropriate for those trees.
Worse yet, when they arrived, it was obvious that the area had just been brushed out, i.e. all the undergrowth removed, and all nearby trees owned by other people had brush about six feet tall, which will choke out the trees. An example is their acacia. Their acacia with the other people after 2 1/2 years is the same size as ours after 6 months! If there was ever a good example of the difference between growing trees correctly or not, this is one.
The bad news for them, of course, is that they have to deal with this, but also it is sad because we in Costa Rica need every bit of lumber we can get. To plant and not try your best to produce the best trees you can just seems to me to be so short-sighted. After all, it isn’t like there isn’t a good market — no, correct that, a great market — for the wood after it is grown.
On top of that, it is hard enough for people to have the confidence to have people in a foreign land grow trees for them, and to not do the job hurts everyone, not just your own business. Thankfully, we have many people who have visited us (and some visit yearly) and so have seen the plantations for themselves and can attest to our quality.
After all, it really is about quality. The price of wood is shooting up as the supply dwindles. For us, to achieve our goal of reforesting a significant amount of land, we have to make sure to meet the obligations we have to those who have trusted us to grow trees for them.
I am happy to be able to say it appears that we are acheiving more than they expected.
Posted in acacia, business in Costa Rica, conservation, finca, forest, forestry, investing, tree owners, trees, wood | No Comments »
March 20th, 2008 fmorgan
We have entered an agreement with Tropical Latitudes to be our importer of wood products into the USA. We were approached by Craig, who originally wanted us to plant trees for them from their profits and then found out that we also had products to sell.
To get to know them better, I flew up to Orlando to participate with them at a Home and Garden show. I was very happy at what I saw, and they survived having me as a guest for most of a week, which shows that truly they are cut out to survive in business.
What I most appreciate about Tropical Latitudes is their commitment to having everyone win. They will not deal with any company that does not treat their employees fairly nor do they work through brokers. In this way they can offer unique products to their customers at a very good price, and the makers of the products do well also.
It was very interesting at the show when a broker who wanted to be a supplier for Tropical Latitudes looked at a solid hardwood frog that our woodcarver had made that Craig was selling for 65 dollars. The broker said that the best he could sell it to Craig for was 60 dollars. This illustrates very well why it is so much better not to have several middlemen. However, because of the difficulty of getting things from the tropics to the USA, you are generally dealing with middlemen, and each one tends to want to double the price.
A positive thing for all those who have wanted to buy furniture from us is that now Tropical Latitudes can take the orders and arrange for the furniture to come up in the next shipment with everything else. This should make it possible to have furniture from us at a very reasonable price.
It is good news for our tree owners that not only are we doing great at producing products for the local market, but now we are selling into the USA as well.
Posted in business in Costa Rica, furniture, importing, investing, tree owners, wood | No Comments »
January 19th, 2008 fmorgan
Mixed species planting on one of our tree farms
One of our contract forestry engineers told us about a “plantation” that went astray. Many years ago in Guanacaste a person bought a lot of land, about 200 hectares or about 500 acres. He planted all sorts of different trees on it and then left it to grow, planning on coming back in several years to start realizing profit.
This is pretty much what you do up North, buy some land, plant some trees and go away for a long time because everything takes a long time to grow. Perhaps your kids will have a harvest. Here it isn’t that way as growth rates are up to 10 times faster.
Sadly, he never registered any of the land as a plantation, so MINAE doesn’t think it is. Now MINAE is rejecting his request to cut any trees because the “plantation” looks like secondary growth (it IS secondary growth because it wasn’t cared for) and he has no proof to the contrary. There are never permits issued to cut anything inside secondary growth.
This is so common down here. People assume that the laws of Costa Rica are the same as up North and go from the idea that if it is my land, I can do with it as I wish. This is not true at all here. In fact, Costa Rica now has a law in place that to start a business activity, you need to have it approved and how it will effect the waterways particularly. Even for us to build a modest workshop for building furniture and processing wood, we had to go through various steps.
Our plantations look like parks, all well cared for and no brush. I have had more than a few people wonder why, and this is why: If it doesn’t look like a plantation (i.e. rows of the same species), it is secondary forest unless you register with MINAE that you planted that way and it was the plan.
There are lots of abandoned plantations in Costa Rica. Around 1997 there were a lot of trees planted and not cared for. The plantations that are teak are pretty much a waste, and the few plantations that have natives, if they were left alone like this and not documented, are now part of the protected zone and untouchable. It is really sad, too, because there is not enough wood available in Costa Rica, in fact, only half of what is needed. If these investors had actually put in the kind of money and attention that is necessary to do it right, they would be retiring comfortably right now.
It isn’t like all of this information is not available. It is all documented in the forestry law, but a lot of investors just listen to their neighbors. You shouldn’t accept legal advice regarding plantations from anyone besides a registered forestry engineer, preferably two or three. Then read the law for yourself.
Posted in MINAE, buying land, finca, investing, trees, wood | No Comments »