sector wonders who
will be on economics team
By The CAFTA Report news staff
Luis Guillermo Solís is continuing what amounts to a victory lap
around Costa Rica. With runoff opponent Johnny Araya suspending his
campaign, Solís looks like a shoo-in for the presidency April 6.
What is troubling the business community is that the candidate has not
yet named an economics team. Without that knowledge business operators
cannot make informed decisions.
Solís refuses to characterize himself as the president-elect.
His Partido Acción Ciudadana is trying to
public employees but that he might make different arrangements for new
hires. Former president Óscar Arias Sánchez padded the
public payroll as a response to the world economic crisis.
|get a million Costa
Ricans to vote in the runoff as a way of validating the candidate's
The enormous fiscal deficit and an annual budget that is nearly half
borrowed money are the major concerns. Inflation also is beginning to
raise its head.
The Banco Central and the outgoing Laura Chinchilla administration
expected about 5 percent inflation through 2015. But in February the
U.S. dollar began showing strength. At one point this week the colon
price to buy dollars was more than 570. That is a significant jump from
500 colons earlier in the year.
Since utilities, motor fuel, imported goods and a lot of other
necessities are tied to the dollar, inflation is inevitable. The price
regulating agency already jacked up the cost of taxis based on an
change rate of 519.63 colons to the dollar.
The Banco Central helped keep the dollar depressed for years. The
decision by the U.S. Federal Reserve to reduce the amount of monthly
bond purchases also did not help.
So economics is very high on the new president's priority list.
Solís said in the campaign that he was not going to fire
Under Costa Rican law, discharging an employee can be very expensive.
Before the Feb. 2 election, the Solís campaign presented an
extensive platform. There seemed to be promises for everyone. He
supports going slow on new trade treaties.
He said in one interview that Finland was his ideal country, except for
that country's exportation of natural resources.
Finland's national taxes range up to 32 percent on earned income, but
there is a 24 percent value-added tax and a stiff municipal tax of up
to 22 percent. In addition there is a wealth tax, an inheritance tax, a
gift tax, and an asset transfer tax as well as a church tax, according
to the Web site expat-finland.com.
The Solís campaign also promised to fight corruption and listed
10 goals, including improving the transportation infrastructure and
strengthening the Caja Costarricense de Seguro Social.
Some business people became uneasy because neither the candidate nor
his campaign said from where the money was coming to do all this.
Partido Acción Ciudadana has many members who have opposed the
free trade treaty with the United States and other such treaties. But
Solís is unlikely to support a renegotiation of the document
unless other Central American states participate. However, he appears
to believe the treaty is unfair to Costa Rica. He opposed it when it
was being negotiated. He recently said he would not participate in the
Alianza Bolivariana para los Pueblos de Nuestra América, the
so-called ALBA, that was created by former Venezuelan president Hugo
The campaign emphasized a government and country of social justice.
That phrase is a buzz word for more state involvement. The party
pledges to protect food sovereignty, which is a form of protectionism.
The Chinchilla administration was trying to free the state-controlled
price of rice and make the product conform to free market forces. The
subsidized rice farmers do not want this.
As some commentators have noted, this form of protectionism is good for
big business because it keeps consumer prices higher.
The campaign also promises to guarantee an academic and technical
education of quality, but it really does not say how.
Everywhere, of course, politicians begin forgetting campaign promises
the day they are elected. And there is no way that Solís can
fulfill all the promises cheaply. For example, another is to put into
practice an environmental management compatible with human development,
whatever that means.
Solís would dispute his characterization as a leftist. He was an
adviser to Arias, and he was general secretary of the Partido
Liberación Nacional. Like many Costa Rica politicians, there is
no record of Solís, 55, having held a job in private
industry or in running his own company. He also is a university
professor in economics and has attended classes and worked at three
He left Liberación Nacional in 2009 over internal corruption
issues, he said.
More of what can be expected will become obvious as Solís
appoints ministers and advisers. Those in the tourism industry are
watching closely the appointment to head the Instituto Costarricense de
Turismo. There also is hope that a new minister of public works can
clean house there.
Solís faces challenges beside economics. There is the
territorial dispute with Nicaragua over the mouth of the Río San
Juan. There is the arbitration case with Infinito Gold S.A. over the
shutdown of the Las Crucitas open pit mine. The list goes on.
The nation's tax department has had a number of plans drawn up for
proposed new laws. The agency simply was waiting to find out who would
be the next president to begin work with the candidate's transition
staff. Officials hope to have documents to present to lawmakers early
in their term, which begins May 1.
That is a week before the new president takes office.
— March 13, 2014