Tuesday 29 November 2022

“If the banks, the INS and the ICE compete, why not RECOPE?”

Carlos Montenegro of the Chamber of Industries says "to be more efficient, the institution should cut its payroll"

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29 November 2022 - At The Banks - BCCR

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QCOSTARICA – At a time when state banks (BCR, BNCR, Banco Popular), the national insurer (INS) and the state power utility and telecom (ICE) have shown that they are solid institutions, it is worth asking, why not open the fuels market so that Refinadora Costarricense de Petroleo (RECOPE), the state refinery that refines nothing, can compete?, according to Carlos Montenegro, executive director of the Cámara de Industrias (Chamber of Industries).

“What must be done is to limit Recope’s role to what the law confers and what it can do within the framework of its technical and economic possibilities,” said Carlos Montenegro, executive director of the Chamber of Industries.

Opening a market to competition promotes efficiency in the provision of services and at the same time adds competitiveness to economic activities, according to the businessman, who added that the country should promote this discussion and warns that it would not be a good idea to close the state institution.

Following is an interview by La Republica with Montenegro, an economist from the University of Costa Rica and Master in Industrial Administration; as well as a business manager,  days after Partido Liberal Progresista (PPL) legislatorEli Feinzaig, announced he is working on a plan to shut down the RECOPE.

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Read more: Legislator working on initiative to close RECOPE

Do you think it is necessary to review RECOPE’s role in Costa Rica?

The law attributes to RECOPE the importation and distribution of oil and its derivatives, and yet the institution has not refined for more than ten years because it is not profitable to do so.

What must be done is to limit the role of RECOPE to what the law confers on it and to what it can do within the framework of its technical and economic possibilities; but nothing else.

Do you consider a closure, the opening of the market, or else, transforming RECOPE into something else?

At this time, RECOPE has the facilities and equipment to import and distribute fuels in the country, so its closure should not be considered, but it is necessary to consider opening the market.

\We believe that opening the market to competition will promote efficiency in the provision of services and this will add competitiveness to economic activities.

Already in the country we have as an example the public banks that compete in the market and do it well, the same thing happens with the INS and ICE with telecommunications.

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So why not think about opening RECOPE’s monopoly to private initiatives that, at their own risk, present price and quality alternatives in the supply of oil-derived fuels?

What do you think about the option of transforming RECOPE?

We oppose initiatives to transform RECOPE. In Costa Rica, we have already had terrible experiences with state interference in private sector activities. CODESA, for example, was the biggest failure of the business state, so thinking about projects that could be ruinous -remember the Chinese refinery-, and seriously harm the interests of all Costa Ricans and end up transferring costs to fuel rates.

Do you think that some of these solutions could help lower the price of fuels?

If the Single Fuel Tax (IUC) is removed from the fuels supplied by RECOPE, fuels will not be so expensive.

The tax in question represents the greatest distortion to have more competitive prices; however, we also understand that this tax is of great importance for the Costa Rican treasury, as it is the third highest collection tax.

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Something that can be improved is RECOPE’s operating margin. Undoubtedly, the opening of the market would help to optimize said margin and would force a more efficient provision of the service.

Is closing RECOPE a viable proposal in the Legislative Assembly?

We don’t think so. Today, a great polarization of political forces with different interests and representing different sectors converges in congress.

What do you think of the fact that RECOPE has not refined for more than ten years?

In tune with this decrease in its operations, this institution should reduce its payroll and focus on the search for alternatives that allow it to supply oil-derived fuels more efficiently. But it is imperative that it be understood that the purpose of RECOPE is to serve Costa Ricans and do it well, and not an end in itself.

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