Country imports at the best price, but sells the most expensive liter in the Isthmus

Tax, subsidy, and RECOPE’s costs prevent buying cheap gasoline

Published on December 9, 2014

When buying gasoline, Costa Rica is the country which gets the best import prices in Central America; however, when sold to the final consumer, it becomes the most expensive one in the region.

Upon arrival at Port Limon, each 159-liter barrel bought in the United States cost $118.32 as an average last year. That is, $0.74 per liter, the lowest price in the Isthmus. That import cost represented only 53% of the final price to the consumer and was possible because RECOPE is the sole importer to the country and, thanks to the high volume it purchases, gets the best import prices in the region.

However, the high taxes, subsidies between products, and RECOPE’s own costs, wipe away the cheap buy and make of the price the highest in the region.

Thus, in 2013, the $0.74 per imported liter became $1.40 when paying at gas stations (¢709, mean price per liter of regular and super gasoline). The contrary took place in Panama, where the cost per barrel from the free zones was $125.02 ($0.79 per liter). However, when Panamanian drivers fill their tanks, they pay $1.07 per liter, the lowest price in Central America.

The results are part of an investigation by La Nación which makes evident why Costa Ricans pay for the most expensive fuels in the region. This means compiled official figures for taxes, import and bill of gasoline for 2013, at the ministries of Energy, statistics institutions, central banks, regulatory bodies and other responsible institutions in each country.

Also recorded are data from vendor associations and business chambers to approximate the distribution margins in the nations where that information is not wholly public.

Only in Nicaragua it was impossible to obtain those final figures. “That’s a secret and nobody is going to tell you, much less when you are dealing with semi-official businesses,” warned Alfredo Cuadra, chairman of the Nicaraguan Petroleum Trade Association.

Taxes and Subsidy. The cost per liter in Costa Rica starts becoming high with tax, the highest in the Isthmus. Last year, the tax was $0.45 per liter, as an average, which equals 32% of the global amount.

The revenues from this tax represent close to 2% of the national production (¢390 billion in 2013), funds which mostly go to the National Budget to pay for infrastructure, education, or welfare programs. They are so relevant that the Vice-Minister for Revenues at the Ministry of Finance, Fernando Rodriguez, stated: “We cannot lower that tax unless we can compensate by some other means.”

Hugo Ventura
“There are regulated markets which operate well, others don’t. There are also open ones which operate better than others. When one compares Costa Rica to Central America, those differences should be taken into account,”

VVictor Hugo Ventura, head of the Energy and Natural Resources Unit of the Economic Commission for Latin America and the Caribbean (ECLAC).

Another factor which burdens the consumer’s pocket is the cross subsidy, cestablished at the end of 2008 by ARESEP. Just as La Nación disclosed yesterday, that mechanism benefitted, mostly, asphalt companies and consumers of LPG, who have saved millions in detriment of those who, from that date, buy diesel or gasoline. For gasoline, that subsidy equals 1% ($0.01 per liter) and it cannot be ignored when comparing prices elsewhere in the region.

In addition, one must add the costs associated to RECOPE to pay for services, payroll, transfers, purchase of materials, investment and development, which go against Costa Rican consumers. These items equal 5.4% ($0.08)per liter and are higher than those of the other distributors throughout the Isthmus, that range between 2.7% and 5%.

Luis Carlos Solera, head of RECOPE’s Economic and Financial Studies, claims that this component does not weigh meaningfully on the final price. However, the institution announced a ¢6 billion cutback in its operation expenses for this year. “There is always room for improvement,” the official remarked in July.

Why the differences? From the time they are unloaded at the port and until they reach the consumers’ tanks, fuels follow different roads, depending on the Central American country. Each nation has its own market model, taxes, subsidies, commercialization margins, rate exchange, and quality demands. Those differences have an impact on the final price and make comparison between countries difficult.

In Central America, only Costa Rica keeps a monopoly on the import and distribution of fuels. Also, it has one sole price for fuels, something not present elsewhere in the region. In Guatemala City, for example, at the end of September, consumers paid $1.11 per liter of regular gasoline, 13 cents less than in the department of Quiche, at the border with Mexico (the difference in colones would be ¢71).

Other margins. The commercialization margin is also different in each of the countries in the region. In the Costa Rican case, it is 7% ($0.10) of the final price, the highest in the area. It is followed by Honduras at 6.6% and El Salvador at 6.3% of the final price.


The lowest tax in Central America ($0.16), that country also has the lowest price per liter ($1.07).

The type of service explains some of these differences. In Guatemala and El Salvador there are self-service gas stations; therefore, operation costs are lower. To the contrary, in Costa Rica the service includes attendants; therefore, payrolls are higher, as are social costs, explained Jose Miguel Masis, executive director of the Chamber of Fuel Business. The structure of the final price of gasoline is completed with freight and the subsidy for commercial fishermen (1.2% or $0.02 per liter, respectively).

Finally, another difference between Costa Rica and the other Central American markets is that a majority of the latter are run by private companies, with minimum state participation. Maximum prices are set by the state in Honduras and Panama, while they are not regulated in Nicaragua, El Salvador and Guatemala.

In spite of high prices, Costa Ricans keep flocking to gas stations

Even though they pay the highest prices in the region, Costa Ricans do not stop visiting gas stations, thus making the country the second one with the larger consumption per person in Central America. Each inhabitant uses an average 1.8 liters of fuel a day, an amount only Panamanians surpass: 4.6 liters.

The estimate includes all types of fuels, but it must be taken into consideration that gasoline and diesel equal 70% of the total fuel bill (more than 19 million barrels last year). The sales of both fuels have increased, as an average, 2% a year for a decade and its growth is related to more vehicles on the streets and a public transportation system that is not efficient.

From 2004 through last year, the car fleet increased by almost half a million vehicles, thus reaching 1.3 million.

The information comes from an analysis by La Nación using data from the U.S. Energy Information Administration (EIA), the Ministry of the Environment an RECOPE’s sales per product in 2013.

More cars per family. Of all the cars on the road, 830,000 are private (64%). Considering that the number of families is little over 1.3 million, at least 60% of them have a car in their garage.

Early this century, the percentage of families owning a car was 40%; there were 383,000 private cars and 960,000 households. “People like to have a car. Now credits are easier to buy a car than to buy a house,” said Eduardo Bravo, Fuels director at the Ministry of Environment and Energy.

Bravo added that the increasing purchase of cars is influenced by the liberalization of the importation of used vehicles and the improvement in the purchasing power of Costa Ricans in the last decade. With figures gathered at the World Bank, this daily confirmed that the gross national income (GNI) per person in Costa Rica double d between 2004 and 2013.

6 out
of every

10 families have a car in their garage, early in the century it was 4 out of 10.
It went from $4,500 to $9,500 in the period mentioned. This makes of Costa Rica the country with the second highest GNI in the Isthmus. The first one is Panama ($10,700 per inhabitant). The boom in private transportation is such that last year it used 6.5 million barrels, 35%of RECOPE’s overall sales of over 19 million barrels. In contrast, public transportation used 1.6 million (9% of the total) among its 28,000 buses and taxis.

“People are not going to leave their car at home as long as they are not granted safe and efficient public transportation. The easiest thing is to pay the cost and commute by car,” said Roberto Villalobos, assistant director of the National Meteorology Institute. In that regard, the country has suffered for over three decades with plans and projects which do not crystallize and solve the shortcomings of public transportation.

On the other hand, the State has invested little on new roads to improve the speed of vehicles. The construction of the last major work, the San Jose-Caldera road, inaugurated in January 2010, lasted 32 years. It is followed by the expansion to four lanes of the Canas-Liberia road, currently under construction.

Fuel-burning casts a shadow on green country

The burning of over 13 million barrels of diesel and gasoline a year leaves a wake of pollution that heavily impacts the environment. Only from the burning of those two fuels, the most sold ones, Costa Ricans emit 14,290 tons or carbon (CO2) a day; that is, 5.2 million tons a year.

If that amount of CO2 were distributed over the national territory, each square meter would be covered by 102 tons of pollutants. As an average, each inhabitant uses 1.8 liters of fuel a day.

CO2 is the greenhouse-effect gas which most contributes to global warming. It is measured through equivalent carbon tons.

The data surfaced from a query at the Climate Change Directorate of the Ministry of the Environment and from own estimates by this means.

The high dependence on fossil fuels as energy source for transportation and the generation of power increase the country’s ecological debt with the planet, concluded the Nineteenth State of the Nation Report when analyzing emissions of greenhouse-effect gases last year.

Costa Rica set as a goal to become a carbon-neutral country by the year 2021. In order to attain it, it must compensate all the gas emissions that it generates. It must reduce the emissions to the maximum possible and increase the forest cover to catch and store CO2.

This means seeking alternative fuel sources for transportation and the generation of power. However, projects such as mixing gasoline with ethanol, producing biodiesel and using natural gas have not become established.

“As long as there is no change in the transportation sector, there will be no chance for the country to become carbon neutral. We have to rub salt in the wound,” warned Roberto Villalobos, assistant director of the National Meteorology Institute.

In addition to efficient public transportation, “sustainable cities try to diminish the number of cars entering, in order to lower pollution,” emphasized Jorge Herrera, director of the Air Quality Laboratory at Universidad Nacional (National University).



Chief Editor: armando gonzález, Editor: Hassel Fallas, Investigation and data analysis: mercedes agüero y hassel fallas, Digital design and infographics: Pablo Robles y Marco Hernández, EDITOR of design and infographics: MANUEL CANALES, QA: Emilio Venegas, audiovisual producer: rené valenzuela, Scripts: adrian soto, mercedes agüero y hassel fallas, locution: Maria Luisa Madrigal, IT manager: polette brenes, programming: pablo robles, josué muñoz, Bryan Gutiérrez y Leonel López, Computer engineer: Daryl Zuñiga, text correction: ismael venegas, Photography: Alonso Tenorio, Luis Navarro, Carlos Hernández, Jorge Navarro

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