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Business sector wonders who will be on economics team

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Business 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
get a million Costa Ricans to vote in the runoff as a way of validating the candidate's expected victory.

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
Solis
Luis Guillermo Solís
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.

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 Chávez.

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 U.S. institutions.

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








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