COSTA RICA BLOG — For those of you who follow politics in Costa Rica, you will know that the current “hot topic” politically is the 2015 Budget. The deficit is growing and prudent cuts in spending must be made in order to cover costs from the realistic tax revenue to be generated.
Greece had a novel approach a few years back, where they borrowed billions of Euros from France and Germany to finance public sector salaries, pensions, and other social programs, apparently believing that they would never have to re-pay the borrowed funds. How the Greeks were able to “hood-wink” the French and the Germans into lending them the money based on an economy of olive production and tourism, I’ll never understand; however, they did.
As most of you know, this all came to a head last year, when the Greeks, who had been living “high-on-the-hog” for a few years on all these borrowed funds, were suddenly faced with having to re-pay the borrowed money. The Greeks were cut-off from a lot of Government funding with imposed austerity programs, taking many from “riches to rags” overnight. The Greeks suffered and are continuing to suffer greatly from such imprudent measures taken by their Government to finance the public debt.
Now I hear our President, Don Guillermo Solis, making similar proposals of borrowing funds from some world financial institution that makes such loans, to cover the 2015 deficit in Costa Rica, based largely on a tourism, bananas, and coffee economy for the purposes of re-payment; sound familiar? President Solis is also proposing a world income taxation scheme to replace the territorial (income from Costa Rica taxed only) tax scheme that now exists.
This cannot be allowed to happen. It is false economics at its worst. Strangely enough and in spite of the theme of many of my past blogs regarding his pro-union stance and objections to development of the Moin, Limon Superport, I find myself in substantial agreement with many of the budget cuts proposed by Congressman (Diputado) Otton Solis (apparently no relation to the President, but is in the same Political Party). Terminating DIS (the Costa Rica Secret Service), at least as to its investigative powers, which are the preserve of the OIJ (the Judicial Investigative Police) would, in my opinion, be a good start, along with cutting the excessive pensions and benefits paid to particularly upper-level public servants, which in many cases exceed those paid to their counterparts in the U.S., or Canada, both much wealthier Countries than Costa Rica.
In addition, and as the Comptroller General (Controlaria) for Costa Rica has stated, that Public Sector wages have risen dramatically in the past few years, creating an unrealistic burden for public finances and must be trimmed. These increases started with Oscar Arias’ second term as President and continued to rise through the “do nothing” Presidency of Dona Laura Chinchilla.
Although I admire don Oscar as a Statesman, the effect on the Costa Rican Economy of this uncontrolled spiraling upwards of public sector wages was probably the single worst part of his Presidential legacy, along with recognizing Communist China over Taiwan. Public Sector wages are now considerably higher than Private Sector wages for similar work and positions. In my opinion, this is a very unhealthy position for any Country’s economy to be in.
I have lived in Costa Rica long enough to know that logical and prudent decision making by politicians is not their strong suit. You might say, “Is it anywhere?”. However, I believe that Costa Rica exceeds any expectations in this regard. Lip-service will be provided by the politicians to various economic proposals, aimed only at feather-bedding their political careers, but when it comes time to vote in the Legislative Assembly, they’ll all be “at the beach”, with no quorum to be found to pass anything into law. I’m afraid that political chaos will continue to reign unabated in Costa Rica.