Trouble in Paradise: Stakeholder Conflict in the Paseo Caribe Project
Paseo Caribe project involved multiple parties with differing values and interests which resulted in the controversy and conflict. A collaborative approach in a transparent public platform would allow for better communication, free flow of ideas and the creation of a better product.
This project involved multiple parties with differing values, interests and opinions. A breakdown in communication, transparency, and collaboration delayed the project from the beginning. Each group fought for their own interests causing conflicts which hindered the progress of the project and negatively affected the reputation of both the country and the construction sector. Irregularities and revisions clouded the legality of the construction project as stakeholders squabbled to make their voices heard.
The territory of San Juan was purchased from the United States in 1991. Regulation 23 was passed two years later defining the zoning of the property as a tourism area. In 1999, Hilton International purchased the property with the intent to develop it into a tourist oriented center with apartments and hotel rooms. A year later, Arturo Madero purchased the land in as a third-lane good faith buyer and began the development process.
Arturo Madero’s project intended to construct near upscale tourist areas such as historical sites, convention center, and ports. The project was financed with $200mil. by the First Bank of Puerto Rico. Preliminary data anticipated the project would created 2,000 jobs during the construction phase and an additional 2,200 jobs following the completion of the project. After all the permits were issued and construction began, different parties voiced concerns about the legality and irregularities of the project plan. The first irregularity addressed the rapid change in the appraisal value of the property from 5 million to 48 million within the period of two years as well as the multiple mortgage modifications completed by the First Bank of Puerto Rico. The second irregularity addressed the legality of the land sale because it was located in the Maritime Land Zone and was under the protection of the Department of Natural and Environmental Resources. Moreover, the land in question was partially created by landfills and, therefore, it was designated as public property under Jones Act of 1917. Local residents and NGO’s questioned actions taken by the Planning Board that violated multiple rules and regulation (Regulation 23). The project was approved by the board before governmental agencies finished their appropriate evaluations. The original project plan was changed without proper revisions (commercial area was doubled, occupancy limits were raised and extra housing units were added). Building of the residential structures on the landfills should not have been approved according to the island’s laws.
Between 2000 and 2003, Madero was taken to court by local residents four times and was acquitted each time. In July 2007, he was invited to express his views at the “People’s Court,” a public event organized by several hundred people on the streets adjacent to the project. Madero refused to attend this hearing because it was not recognized as a legal hearing. After the Supreme Court decision to uplift the stoppage of the Paseo Caribe construction, it became known that Madero had made a 165k donation to the Supreme Court of Puerto Rico. Also, the wife of one of the Supreme Court judges in the case worked under Madero’s wife at Doral Bank.
Each stakeholder in this case represents different views on the project. The primary stakeholder in this project is Arturo Madero. His main priority is to make project profitable. According to the case, Madero’s purchase of the land as a third-lane good...