news

Large fine adds to Grupo
Shahani's VistaMar woes
by Eric Jackson

The National Environmental Authority (ANAM) has imposed the second-highest fine it has ever handed down on the Grupo Shahani development consortium for a series of violations related to its VistaMar project in San Carlos. The $930,923 fine was for cutting 53.13 hectares of second-growth trees (mainly the scrub typical of the Dry Arc that runs along the western half of the Gulf of Panama littoral), damaging the local water supply, failing to comply with the original environmental plan that ANAM had approved and adding new elements to the project without bothering to deal with the environmental impact study and permit process.

Clear cutting of scrubland's a problem

The investigation of the Shahanis began in 2004, when it was clear to anyone who drove by that they were using an extreme version of the Panamanian concept "limpiar" on their land --- their "cleaning" mean the destruction of every living thing other than microscopic organisms on the land, scraping it down to the beige sand and sandstone substrate. People complained about it and the probe began.

The trees that were cleared from the site were generally not very large. Only scrub and grass tend to thrive in the sandy hard pan in that part of San Carlos. Still, although this sparse and relatively dry secondary forest is not to be confused with Panama's biologically rich rainforests, it is home to lots of birds and other wildlife and its wanton destruction is generally prohibited by law, at least when it's done without a permit from ANAM.

The method by which Grupo Shahani cleared the VistaMar site is common enough in Panama, where part of the traditional culture is the notion that wildlife is something undesirable and dirty, that must be "cleaned" off of a parcel of land before it becomes fit for human habitation. Bulldozers stripping away all vegetation and topsoil is often the first step in a housing construction project here.

That way of building, however, is discouraged by the environmental laws passed during the Pérez Balladares administration. It tends to create erosion problems that silt streams, and while all development tends to displace wildlife extreme clearance methods make the damage harder to mitigate.

The fine imposed on Grupo Shahani, then, can be seen as ANAM's shot across the bow of the entire construction industry. It's a warning that old presumptions and old methods are no longer acceptable in the environmental authority's eyes.

Water issues

VistaMar is a series of luxury home and condo tower projects with a golf course as its centerpiece, and water for that golf course is and has been a defining environmental problem for the developers. The original plan was for a series of artificial lakes and a peak need of some 10 million gallons of fresh water to water the course and feed the lake. Because of a series of difficulties in meeting this demand plans have changed, but there would still be a need for some 2 million gallons per day at the height of dry season.

Grupo Shahani and The Panama News have differed about the former's plans to meet that water need before. From sources within and outside of the development group at the time, we were told that a purported hydroelectric dam that was being built on the Rio Teta by Hidroelectrico San Carlos SA --- a company with no apparent ownership ties to Grupo Shahani --- was the intended source of VistaMar's water supply. That project was a sham as far as it was said to be an electricity generating facility, but went under that guise in order to escape regulation by ANAM and gets its environmental permits from the much easier utilities regulators instead. However, as it turned out that the dam was not being built at the specific point on the Rio Teta provided for in the permit from utilities regulators and there were other environmental complaints, ANAM asserted jurisdiction and the project, which is some 80 percent complete, has been stalled for more about two years.

(There is still plenty of mystery about that dam project. Due to Panamanian corporate secrecy it's not possible to identify the individuals who own Hidroelectrico San Carlos SA, but the persistent rumor from both supporters and detractors is that members of the Riande family with strong ties to the Torrijos administration are among them. However, any "PRD conspiracy" theory based on that grain of information would be offset not only by the fact that the Torrijos-era ANAM has stopped work on the dam but also by the fact that such permits as its developer had date back to the Moscoso administration. The dam project plan has a second phase that involves the damming of Rio Mata Ahogado, the source of the town of San Carlos's drinking water and the dam on the Rio Teta has generated opposition from downstream property owners and from surfers who argue that the disruption of sand flow down the river caused by the dam would destroy the sand bar at the waterway's mouth that breaks the ocean's waves in such a way to create prized surfing conditions. In the controversy the main opposition on the legal front has been by attorney Gretel Villalaz de Allen, formerly the Vice Minister of Public Works in the Moscoso administration, while the most prominent politician criticizing the dam from an environmental point of view has been Panama City Mayor Juan Carlos Navarro, the front runner for the 2009 PRD presidential nomination. Most of the PRD apparatus in San Carlos itself had supported the dam project, but with revelations about plans to extend it to the Rio Mata Ahogado prompting public concerns about the local water supply the area's politicians have distanced themselves from it.)

Despite what The Panama News learned and published about the dam, Grupo Shahani insisted to this reporter that water from it never played a part in its golf course plan, nor was there any intention to draw water from the sinking aquifer that which virtually all San Carlos area tap. Instead, the company's representative said, the plan was to drill some artesian wells to a deeper aquifer, with a backup plan being the planting of salt-resistant grass on the golf course, which could be irrigated by pumping seawater up from the beach.

It turns out, however, that the artesian wells drilled at VistaMar proved nearly dry.

There is a land scramble underway in San Carlos that's part of Panama's general real estate boom, but some local observers believe that some of the would-be buyers or grabbers are not so much interested in land as in spots to drill wells to provide the water that VistaMar needs.

One of the elements of damage for which ANAM has imposed the fine is alleged harm to the area's water supply. To the extent that anyone takes too much water out of the aquifer that everyone uses, the water table sinks and saltwater infiltrates into beach front areas and their wells. With or without VistaMar, this is a serious problem looming over San Carlos.

If VistaMar ends up watering its golf course with seawater, then there would be a danger, probably manageable with proper care, of salty runoff into surface water and saltwater seepage into the ground water.

Grupo Shahani admits that it violated permit provisions, but denies that it has done any significant ecological damage and is thus appealing the amount of the fine. At this point in the appeals process it's asking ANAM to reconsider, but after that it may appeal to the courts if it is not satisfied with the result.

Complaints from VistaMar buyers

Meanwhile, apart from the environmental issues, The Panama News has received complaints from buyers of property at VistaMar that the contracts they had include the developer's right to cancel the sale and that the Shahanis have exercised this. People who had put their money down on pre-construction purchases of condo units have been told that if they still want to buy the price is $100,000 more, and at least one buyer who had already taken possession of a house was told that the deal was off and the title that had been paid for would not be delivered.

Grupo Shahani is hardly alone in this practice. The Panama News has received similar complaints about this practice being used by three different promoters of Panama City condominiums, and in the various other media and the Internet discussion groups still others engaged in this have been mentioned.

The people most affected and most outraged by the practice are the flippers, people who buy residential properties never intending to live there but to sell to someone else at a higher price. Boquete developer Sam Taliaferro has estimated that with the higher-end properties in Panama City up to 90 pecent of the buyers are these sorts of speculators. However, since the cancellations of several highly touted Panama City residential skyscraper projects, the downgrading of this country as a retirement venue by some observers due to inflated real estate prices, the difficulties selling houses in the USA encountered by people who would like to move here, and word getting out about developers voiding sales already made in order to sell to someone else at a higher price, a lot of the flippers have abandoned Panama for greener pastures.

So why would developers risk harm to their reputations by canceling sales they have already made? For some it's just a matter of short-term greed and the expectation that the combination of the money they spend on advertising and Panama's criminal defamation laws that make it illegal to publish an unflattering truth about a person or a company will limit unwanted publicity. It appears that some other developers have begun projects without sufficient funds to finish them and that as the market frenzy subsides they must turn to desperate short-term measures to stay in business.

Legislation may change the picture for VistaMar

There are two high-profile bits of legislation in the works that may affect VistaMar.

One is a proposed real estate reform law that would curb some of the abuses we have seen in canceled construction projects, the most notorious wherein pre-construction sale deposits have been treated as low-interest or no-interest loans to promoters who may have had no intention of building what they said they were going to build. Another section would ban sale cancellation clauses like the ones that Grupo Shahani has invoked. There are also some court decisions striking down such contract provisions, but as Panama's Civil Code legal system places little importance on prior cases, it would probably take legislation to end the practice of sellers canceling contracts when prices go up.

The other is the controversial proposal to set up a national water resources authority that would take jurisdiction over surface and ground water resources from ANAM and allow the effective privatization of water. (The Torrijos administration strenuously objects to the word "privatization," claiming that the water would still be a public resource, only subject to 50-year exclusive concessions to private parties to exploit them.) If that passes and things are rigged the right way, it could be back to Plan A without the pretense of a hydroelectric dam, and the Rio Teta might be diverted to water the VistaMar golf course after all.