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Construction, Environment

Can’t we all just work together?

With the construction industry under siege by environmentalists, and community activists flexing their legal muscle to stop projects in court, leaders from all camps try to find common ground at a CARIBBEAN BUSINESS round table


December 5, 2002
Copyright © 2002 CARIBBEAN BUSINESS. All Rights Reserved.

Building trust: Activists seek more participation during the planning of their communities and demand their social needs be met, while the construction industry requests a faster, less bureaucratic process in which permits are honored and rules are clearly defined.

Imagine you live in a modest community where the call for basic infrastructure services (potable water, sewage system, electric power, roads, school facilities, etc.) has for decades been largely ignored by the various government agencies. Suddenly, a real-estate developer shows up and starts to dramatically transform your community’s landscape. The developer begins to build a housing project with the utilities and services you’ve been requesting for years. How would you feel?

Now imagine you’re a developer. After securing millions of dollars in private financing and investing time and money to get the necessary permits and the project started, you suddenly learn a court has ruled the government-issued permits are invalid. Community activists challenged the permits-approval process in court and claimed you are carelessly destroying their environment. How would you feel?

Although it might not seem like the classic tug-of-war between the haves and the have-nots, these two scenarios synthesize the challenges Puerto Rico’s construction industry and communities have been facing in recent years.

Community activists contend they feel betrayed by the government when infrastructure permits are approved for developers while the communities’ pleas for the same services are ignored. They also claim the government doesn’t involve them in the decision-making process of projects involving their communities.

Community activists often ride on the environmental bandwagon, not to challenge a project’s permits or to protect the environment but to protest against years of social injustice from government inaction--inadequate infrastructure, lack of educational and economic opportunities, and a decent and safe place in which to live.

Unfortunately, it’s usually the real-estate developer or the contractor who ends up being blamed. They are unwelcome in these communities and their projects are challenged in court.

At the same time, the lack of straightforward rules in the permitting process and doubts about the validity of complex environmental laws--as these are constantly being changed, challenged, or contested--have created a climate of uncertainty among developers, investors, banks, and financial institutions. This has had a negative effect on Puerto Rico’s construction industry and, consequently, on its economy.

Route 66, the Condado Trio, Princesa del Mar in Punta Las Marias, Madeira Condominium in Ocean Park, the Golden Triangle convention center, and, most recently, the Millennium Condominium in Puerta de Tierra are just a few examples of the numerous construction projects that have been delayed or paralyzed, or whose permits have been questioned and challenged either by the communities or by the government in the local courts and in other forums.

To better understand the complex questions and issues involved, CARIBBEAN BUSINESS invited community activists and construction industry representatives to a round-table discussion. Their comments were revealing, insightful, and surprising.

The participants

Members of our round table included Haydee Colon from the Citizens Committee for the Rescue of Caimito; environmental consultant & activist Alexis Molinares; Federico Stubbe, president of the Puerto Rico Home Builders Association; Jose Matos, president of the Puerto Rico State Society of Architects & Landscape Architects, and Jose Gonzalez Nolla, local chapter president of the Associated General Contractors of America.

Angel David Rodriguez, Planning Board president; Carlos Lopez Freytes, Regulations & Permits Administration (ARPE by its Spanish acronym) interim administrator, as well as the governor’s Construction Industry and Environmental Advisory Committees declined to attend, citing Gov. Sila Calderon’s request that the committees first meet with her before they meet with the other parties at the round table.

It’s not an environmental issue, but a social one

"We must first start by defining the terms ‘development’ and ‘infrastructure,’ and who participates in these processes," said Colon, a Caimito resident since 1975. "If one sector is left out, it will inevitably create conflict. Generally, the sector that is left out is the one that is being discriminated against, that is unprepared, that hasn’t been given a forum, and that is unappreciated."

Colon believes communities usually find a project or structure offensive or objectionable because they haven’t been consulted about it early in the process, if at all.

"That is very important. We must share Puerto Rico, not compete for it. Many times there’s the impression there’s competition to see who’s richer, but we all have to compete for the air we breathe, for the water we drink, even for a space on the expressway," said Colon. "We must start to share."

If we can’t live on a small island such as Puerto Rico with some sort of peace, the world is going to reject us, because we are starting to learn how not to coexist, said Colon, who added that in Puerto Rico we are coexisting but not sharing.

Colon was critical of the government representatives who declined to participate in the CARIBBEAN BUSINESS round table, saying that if they’d had any real arguments, they would have attended.

"Sharing a table is important for the discussion of ideas, because at least we can reach a consensus," said Colon. "Unfortunately, there are sectors that respond to other interests then later have the gall to show up in our communities to ask for votes."

According to Stubbe, the environmental issue is being used in the controversy, but that isn’t the problem. For the developer, the problem has to do with social issues, such as a lack of values and inadequate education.

"After several of the so-called environmental debates, I have realized they are really about social issues," said Stubbe, who for the past nine years has been the executive director of the Cantera Peninsula development project. "In Cantera, one of my biggest shocks was that more than half the students drop out after sixth grade. It gave me the impression the Cantera community accepted it as a way of life. But I realized it isn’t just in Cantera, one of the island’s poorest communities, but in Puerto Rico as a whole."

Part of the problem, said Stubbe, is a lack of self-esteem among community members, where the majority of the population feels they don’t have the capacity to compete against the rest of the world. Most of the blame, he said, lies in the education system.

"These are deeper problems. For decades, our public education system has been responsible for the education of 86% of the population. Of that, more than half are dropouts and those that graduate can’t follow a technical career. We are creating two Puerto Ricos," said Stubbe.

Of those two Puerto Ricos, one is better prepared and more intelligent, while the other--the majority--feels it is ill prepared, without the skills needed to compete, said Stubbe.

"That has created divisions among the people of Puerto Rico. Nearly 70% can’t pay for a $100,000-plus home. Nonetheless, current government regulations don’t prohibit such construction. So we have two systems: the Ay Bendito! substandard housing and the housing for the affluent."

According to Stubbe, there are 10,000 urban centers in Puerto Rico, and the problem isn’t just among ourselves but rather how we are going to position the island in this era of globalization, in this world with six billion inhabitants fighting for the same resources.

"If we don’t become a highly productive society, we aren’t going to make it under any system," said Stubbe. "In this highly competitive world which we all live in, if we don’t learn to balance happiness and hard work, everyone will pass us by."

Communities seeking justice

"How do you think it feels when the government approves the infrastructure permits for a developer but ignores the communities’ pleas for the same services?" asked Colon. "We aren’t excluded [marginados] because we want to be, but because we haven’t had the choice between being rich and being poor. We aren’t even consulted on developments in our communities," she said.

It’s not that the government didn’t answer the communities’ calls. They did, but the alternatives they provided meant dependence, Colon added.

The reason Colon’s organization asked for a construction moratorium in San Juan in 2000 was to give people time to think. The problem, she said, is that there are some willing to do so, but those that need to, namely the government, are stuck.

"When communities fall behind, the income of other sectors begins to suffer. An expensive property must close because it is in a community plagued by gunfire. Who wins? No one," said Colon.

"There is one lawyer for every 147 people, but only one architect for every 7,000 people. When we analyze the statistics, we see the priorities are wrong," said Matos.

Lack of trust

"There’s this general impression that the construction industry wants to cover the island with cement, when it’s actually the opposite," said local AGC President Jose Gonzalez Nolla. "There are needs to be fulfilled, places and community facilities to be built, and people needed to build them."

Construction projects go through a detailed and lengthy development and decision-making process involving developers, architects, engineers, government agencies, designers, planners, and other professionals before the actual construction can begin. Contractors, responsible for the actual construction, are usually the last professional group involved in a project, but the first ones to feel its impact on the community, Gonzalez Nolla said.

"Although we don’t participate in a project’s decision-making process, contractors are the first ones to get the blame [and are the most victimized] for what is planned and allowed to be built by the Planning Board," said Gonzalez Nolla. "Ironically, it’s thanks to our work that people receive the benefits of our industry through jobs and through our purchase of goods and services."

Many times contractors serve as social workers, listening to the concerns of the community, yet they are perceived as the bad guys, added the local AGC president. "The community goes directly to the contractor to pour out its woes, to find answers, and although we didn’t participate in deciding what would ultimately be done there, we are portrayed in the media as the bad guys," he said.

Gonzalez Nolla, who is also president of Nogama Construction, is advocating a more active Planning Board, one that truly plans and has better communication with those involved in the process, creating harmony among all parties. In short, he is asking for clarity and definition from the planning Board.

"It’s not easy to work where there’s disharmony. As contractors, we definitely are the first to feel the direct impact of the community," said Gonzalez Nolla. "We want it to be different. We want to go in and work and be convinced our job is good, that we are warmly welcomed by the communities."

Colon pointed out that when a community claims permits have been issued illegally, there is no government entity that will work with the community to review the permits. "It’s as if the government is afraid of the communities it is supposed to serve. They see us and start running the other way," said Colon.

Confidence in the permits process has been lost

"There’s no trust in the permitting procedures, or in the decisions made by the Planning Board," said Matos. "No matter how long it takes, three months or three years, once I obtain the necessary permits they should be respected."

Stubbe said investors are leaving because they find the island’s regulatory and permitting process too complicated and uncertain. "Puerto Rico’s image overseas has suffered tremendously because of what comes out in the news…it’s all negative," he said.

Stubbe added that the construction industry isn’t as concerned with how long the permits take as with the possibility they might be invalidated. Projects involve serious financial decisions, yet anybody can raise a flag and claim corruption or political favoritism were involved in the permits process.

"That’s not necessarily true. It creates a general distrust in all institutions and in their representatives, which is harmful to the industry," said Matos.

Gonzalez Nolla added that although some of these allegations may not be true or sustained, the damage is done once the seed of doubt is planted.

"It has created a type of psychosis that is causing a paralysis in many government agencies," said Gonzalez Nolla. "It doesn’t promote a trusting environment for government representatives to make the best decisions, and it is damaging to many private and public projects. The environment has thus become hostile."

Matos also pointed out ARPE employees are unmotivated, working with obsolete regulations and without the necessary human and technical resources to do their job. This makes their job extremely difficult.

Clearer rules

Gonzalez Nolla said that once the appropriate parameters are clearly established by the Planning Board, all parties involved must strive to meet them on the basis of mutual trust.

"There must be trust from all parties involved--the communities, the developers, the designers, the agencies that issue permits--so we may all carry out our functions in a construction project," said Gonzalez Nolla.

For environmental consultant Alexis Molinares, it all boils down to planning and to a better information exchange among government agencies. "If there’s something in Puerto Rico that definitely doesn’t work it’s the flow of information at the government level," said Molinares. "We have all the needed studies, all the required agencies with regulations for everything you can think of, but there’s no connection and no dialogue between them."

Molinares has seen this happening in the Agriculture Department, for example, where big reforestation initiatives in the mountains clash with efforts to plant coffee. "On one hand, a program provides money to plant trees and maintain them; on the other hand, another program provides the machinery to cut them down so you can harvest coffee in the open," said Molinares. "Who is harmonizing our public policies? No one is, and that’s a big challenge."

It’s ironic, Molinares said, that in a place such as Puerto Rico, with good roads, high technology, and a modern communications network, the government, with its contradictory regulations, is unable to harmonize its priorities. This, he said, is the result of a lack of comprehensible rules.

"The developer must have a clear set of rules. Why wait till the ninth inning to change the rules of the game? If everyone has a clear set of rules, we could all work in concert and there would be fewer conflicts," said Molinares, who besides being an environmental consultant is also executive director of the Enrique Marti Coll Foundation, which promotes harmony between nature and the urban environment through educational and reforestation programs.

"The time and energy wasted in fighting could be put to better use in the communities. No developer wakes up in the morning wanting to cut down a tree," Molinares said.

Planning and permits, just the tip of the iceberg

For Jose Matos, the outgoing president of the professional organization that represents the island’s architects & landscape architects, there are a series of actions regarding the island’s development that aren’t occurring in government--administratively, in the regulatory process, in the training of personnel, or in the education of our people.

Everything has a price--socially, economically, and environmentally--said Matos. And everything we do must have focus and be sustainable, meaning that whatever we do must be as good as or better than it was before.

"Anything can be accomplished, but at a price. Are we willing to pay that price?" asked Matos.

Matos cited the government’s rehabilitation plan for Santurce, where entire blocks will be expropriated and property owners relocated to make room for new apartment units costing $200,000 and up, as well as the construction of the new convention center in Miramar.

"I have yet to hear Tourism Executive Director Milton Segarra say what the convention center’s impact on Miramar, or on the hotels and the service sector in the area, will be," said Matos. "Because of the rising cost of land, the price of housing projects is skyrocketing. There is a need for housing, but not everyone can afford what the government is planning to build. We aren’t solving people’s social problems this way."

Everyone acknowledges government infrastructure must guide the physical development of the island, Matos said. However, we must start taking things more seriously and consider if we want to continue to build infrastructure projects that go against what the established public policy should be, he added.

"Who is guiding and setting the pace of infrastructure development? Where is it headed? There’s no vision," said Matos.

The government’s role and the price of its action

Colon said the government agencies that are supposed to prevent damage to both the community and the environment are the very ones that provoke it.

"Many times the government agencies responsible for rejecting certain types of projects are the ones that facilitate them," said Colon. "Government officials make bad use of the trust we have instilled in them. That ultimately translates into violent incidents and civil disobedience."

For Matos, the social contract between ordinary citizens and government agencies has become one-sided. "We have a Legislature that wants to plan through laws. That’s not its business; you can’t plan through legislation. How can the island’s planning be in the hands of legislators, who are basically career politicians?" Matos asked. "It’s got to be in the hands of a planning board that really plans and looks to the future."

According to Stubbe, one of the construction industry’s main problems with the government is its lack of clarity and vision. "There is none. They talk about completely developing the island’s urban centers as a solution to urban sprawl. The urban centers are just one solution. Puerto Rico’s solution isn’t in one but in several solutions, because we are a complex society," said Stubbe.

Another challenge is the island’s high demand for housing is mostly met through simple "lotification," where someone with a plot of land can build a home with a basic set of permits, said Stubbe. Nevertheless, it is estimated 60% of the island’s structures are built without the proper permits, yet the government agencies recognize them even though they threaten the public’s safety.

"People need a place to live; otherwise they will end up engaging in civil disobedience, which is what happened when entire communities invaded government land and took possession of it," said Stubbe.

Stubbe believes in order to bring stability to the system, several groups must get involved, including the Legislature, judges, and the various government agencies and professional organizations.

"Right now, where the balance of power lies is somewhat confused," said Stubbe. "Either the central government knocks your project down in Minillas or the community does it through civil disobedience."

Molinares raised the issue of the special communities and their impact on society and the government. "We have 78 municipalities, and now the government is setting up the structure for 636 special communities. We are adding factors to the equation. This is growing bigger, but we don’t know at what price," said Molinares.

Matos said no one is against the government having an environmental policy, but we must stop the innuendo and start transmitting the vision we want to realize, not just to government agency heads but also to second-and third-level employees.

"Who wakes up in the morning and decides whose trees they are going to chop down that day? We can’t continue like this, thinking everybody is out there to cause harm," said Matos. "We must find our vision and make sure it trickles down to all government employees so their work is in harmony with that vision."

Where do we go from here?

"The word ‘environmentalist’ is being used to divide people, when we all consider ourselves environmentalists. We aren’t developers; we are builders of habitats, where human beings coexist in harmony with nature," said Stubbe.

This is the best time to invest in infrastructure because of the low interest rates, said Stubbe, who added that it’s something positive that must be taken advantage of, not obstructed. Second, said Stubbe, we must build a more sensible, and therefore more competitive, Puerto Rico.

"Investors and tourists need to see our beautiful homes and pretty landscapes. We need to take advantage of the island’s natural surroundings," Stubbe said. "An empty habitat can’t sustain four million people. Humankind has proved it can coexist with nature."

For Colon, the focus should be on both the environment and education. "We must declare an environmental and educational emergency in Puerto Rico. Even though we can all say we respect the environment, there are sectors that don’t. We have someone, [Education Secretary] Cesar Rey, who knows where he is headed but doesn’t have the community’s support. That’s a big emergency," said Colon. "Who’s going to lead this effort?"

Gonzalez Nolla advocates the protection and promotion of the island’s local capital through a more efficient and trustworthy Planning Board.

"We must protect and promote local capital. We need government agencies to issue permits according to well-established parameters, to treat us fairly and expeditiously on everything related to contracts; contractors must be paid on time and their problems must be resolved; and those who deal with our projects must do so with trust and confidence. Whatever they do, they must do it correctly," said Gonzalez Nolla.

Now it remains to be seen whether the government will respond to these pleas.

Building trust

Activists seek more participation during the planning of their communities and demand their social needs be met, while the construction industry requests a faster, less bureaucratic process in which permits are honored and rules are clearly defined


Does the planning and execution of important construction development projects tend to leave out some stakeholders? The question begged to be addressed during the CARIBBEAN BUSINESS round table on construction, environment, and governmental red tape.

Although there was consensus among participants that issues of environmental protection are often used as an excuse to stop construction projects, all agreed a sensible development policy ought to be environmentally sustainable.

Alexis Molinares, executive director of the Marti Coll Foundation, has long advocated public awareness of the importance of natural resources and the need to balance development and nature.

"We must have clear rules for working on the issue so eco-urban theories become sound practices, even if it requires working toward consensus," Molinares said. He added industry, communities, government, and private-sector entities must converge toward eco-urbanism despite the differences in mindset characteristic to each.

"I know Puerto Ricans are mediators, who find a middle ground for progress, and so it should happen in these cases," Molinares said. "Whenever this doesn’t happen, we all end up wasting our energy."


Education, a top issue for activists and developers


According to Puerto Rico Home Builders Association President Federico Stubbe, people have realized protests and civil disobedience don’t work and are moving toward what is called a knowledge-based society.

"The big opportunity lies in educating your children," said Stubbe. "No one can take education away. You can lose your money, but what you have inside your head is yours. That’s the golden egg. Let’s educate."

Stubbe added that work needs to be done to solve the problems at the Puerto Rico Department of Education, but this hasn’t been brought to public debate as often as it should be, especially during elections.

"It’s useless to build costly school facilities if students don’t get an education," said Stubbe.

Community activist Haydee Colon of the Citizens to the Rescue of Caimito, said the reason the education issue isn’t debated is that the government system doesn’t educate; instead it makes people dumber on purpose.

"From an early age, public school students are taught about violence. There are government agencies, such as the Department of the Family, where you are penalized if you try to educate and commended if you complicate things. The government is afraid if people become smarter, they will vote to remove them from power," said Colon. "How can we solve the problems in Education if we have several agencies doing the opposite of education? This affects businesses, the culture, and coexistence."

Colon pointed out the Caimito community where she lives needs a school. As on previous occasions, however, there are no government officials available to whom she might present the community’s problems.

"We want fast, quick-fix solutions to what are fundamentally and intrinsically difficult problems," said local Associated General Contractors of America President Jose Gonzalez Nolla. "We talk about changing a society, yet as a society we are young. I think we are in a good position to start educating in that sense."

The island is a limited space, added Gonzalez Nolla, which means we must have a greater, more profound awareness of what we are doing. This, according to him, involves discipline and educating everyone in every aspect.

"This involves discipline and being able to accept that not everything can be the way we want it, when we want it," said Gonzalez Nolla. "We can’t educate to satisfy our parents’ egos, but to take society toward the planned development we all want for Puerto Rico."

On a positive note, Stubbe had words of praise for Education Secretary Cesar Rey.

"Rey is a terrific guy, but he can’t handle 50,000 teachers alone. It’s a system that has gotten out of control and out of our hands," said Stubbe. "On a long-term basis, we can do big things. Just the same way we can create great boxers and great baseball players, each person in Puerto Rico can be a competitive individual, a great asset to the world."


Banks more cautious in real-estate development lending

Blame court interventions to halt construction projects, reversals of issued permits


The days when banks would jump in to finance real-estate development projects at an early stage is over, said Puerto Rico Bankers Association (PRBA) President Jose Ramon Gonzalez.

Gonzalez lamented that the recent spate of court-mandated construction halts and the revocation of approved permits have generated new costs and new risks for bankers--and for the economy as a whole.

"The length of time you take and the expense associated with permitting new construction in Puerto Rico have increased dramatically," Gonzalez told CARIBBEAN BUSINESS in his first interview as PRBA president. "That means you pay a price in terms of both the eventual cost of construction and the price of the end product itself."

The PRBA president explained that more interest expenses as well as more upfront investment requirements are the natural inevitable results of lengthier preconstruction periods.

"You also incur an opportunity cost in terms of the reduction in the level of construction activity, which in turn impacts the growth of the economy," Gonzalez noted. "The longer development period means a more diluted impact on the economy."

Gonzalez indicated that banks are more cautious about assessing the permitting stage of projects, as well as the finality of the permits being issued. Clearly, they hope to ensure that there will be no contingencies once their financing role kicks in.

R&G ratchets up due diligence

"We’re giving more importance to all the documentation, and we’re using outside consultants who advise us not only on the permitting process, but also on the viability of a project from the angle of potential friction or problems with the neighboring community," said Victor Galan, R&G Financial Corp. chairman & CEO. He added that banks must ensure the permitting process is appropriate in every sense.

For Galan and other bankers, the prospect of a project becoming the object of a court case is tantamount to a major disaster. "The courts today are giving a lot of weight to these demands or challenges," Galan said. The situation is complicated by the excessive length of time involved in litigation and by the court-ordered construction halts that have become part and parcel of the process when a project is challenged, he indicated.

PRBA Executive Vice President Arturo Carrion warned that besides increasing risks & costs and extending projects’ construction periods, the specter of court-mandated permit reversals inevitably undermines investor confidence. Carrion said the association’s position is that once a permit has been approved, it shouldn’t be revoked.

The big picture

Gonzalez said much of the struggle surrounding new residential construction in Puerto Rico has to do with balancing the interests of new communities with those of existing communities. "The answer is never no growth, however," he said. "Our demographics require additional construction."

The PRBA president voiced hope that the Calderon administration’s special-communities initiative will ameliorate tensions arising from the encroachment of new communities on areas that border special communities. "It certainly helps to the extent that improving the living conditions in those special communities--with better infrastructure and a better inventory of housing--should ease some of the tensions," Gonzalez said.

This Caribbean Business article appears courtesy of Casiano Communications.
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