SAN JOSE: Costa Rica’s legal watchdog on Thursday cleared a billion-dollar contract the government signed with China to jointly build an oil refinery after it was held up in legal wrangling for months.

The Comptroller’s Office reversed its own earlier ruling in March, when it said an agreement signed in 2008 for the Costa Rican Oil Refinery (RECOPE) to form a joint venture with the China National Petroleum Corporation (CNPC) was invalid.

The government of President Oscar Arias, which severed diplomatic ties with Taiwan in 2007 to open ties with China, signed an agreement for the joint venture during the visit of Chinese President Hu Jintao.

The Arias administration insisted on the legality of the agreement, and reacted with joy on Thursday when the office cleared the contract.

“This is extraordinary news for the country,” said the president’s brother Rodrigo, who is also head of the cabinet ministers.

The Comptroller’s Office – an independent bureau that monitors government actions to make sure they are within the law – had said the joint venture would have violated the RECOPE’s legal monopoly on oil refining and distribution.

It was not immediately clear under what circumstances the Comptroller’s Office reversed its earlier ruling, but in April the office said the project could proceed only if legislators changed the law.

The agreement includes the creation of a joint venture bi-national company “in charge of developing and putting in operation the project to broaden the Moin refinery, to increase its production to 60,000 barrels a day,” the Comptroller’s Office said in a statement.

The refinery will be built in the town of Moin, on the Caribbean coast, and is expected to dramatically increase the country’s current refining capacity.

The refinery is expected to generate between 1,000 and 1,500 direct jobs, and some 5,000 more jobs indirectly in the province of Limon, according to the government.

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