(qCOSTARICA BLOGS) While China is hardly going broke, it is in one lot of pain and taking dramatic steps to stop a massive sell off of stocks and real estate. Twenty plus percent of the listed companies put an official halt to their trading and the overall market was down 30% by the end of June.
However, Greece and Puerto Rico simply cannot repay their debts.
Costa Rica, on the other hand, has been living hand-to-mouth for years and recently betting its good fortune on historically lower interest rates.
The national deficit, income less expenses, is a whopping negative 5.7%. In the event, as some economists say, the U.S. will unveil, albeit slowly, raising interest rates based on an improving economy, Pura Vida might become toast.
It is a question of “when” and not if.
What is interesting is that two Costa Rican politicos, each at the other end of the spectrum agree that millions and millions of colones are wasted on absurd bureaucratic salaries and perks.
They are, from the far left economist and founder of the ruling PAC part, Otton Solís and from the ultra right Libertarian, MBA Otto Guevara.
And, throwing gasoline on the fire is La Naciόn which has listed the exorbitant salaries and perks for those who work for the government and government sponsored institutions such as ICE, RACSA, RECOPE, CCSS, the cabinet, etc. A secretary in anyone of these types of organizations earns double what the same person would make in private enterprise.
And, what makes all this more horrible is the promise of transparency and yet public salaries, money paid by tax payers, is a well guarded secret. Some believe to publish that a UCR traffic cop earned 2.7 million colones in June was unconstitutional. Once again Sala Cuarta will tell us do we need to know.
In the interim Luis Guillermo Solís, our wanna-be president travel s abroad, encourages his large entourage of deputies to do the same and when time permits tries to figures out, “Should I raise taxes by decree, or reduce government costs, borrow more money to stay afloat a-la Greece and Puerto Rico or face the 600 pound gorilla, or perhaps make a lot of enemies and collect the taxes owed?”
In China, the government has been pressured into using its money to limit losses of stockholders and home owners, Greece got bailed out by the European Economic Community and the IMF with some pretty stiff conditions and Puerto Rico…lost. As a U.S. common wealth, PR cannot declare bankruptcy as did Detroit and Riverside who are legal states with that option.
Costa Rica? How in the world will we be able to pay back our loans, encourage foreign direct investment with the exception of money laundering and a socialization as we now are, who will fall on the sword of the many unions and their angry leaders?
It is good for employment that we have so many call centers and indeed these employees pay income taxes, but the companies they work for do not. How many whamo pharmaceutical centers can we host, sports books and on the more ethical side customer service companies can we afford? Why are the profits of these service centers tax exempt?
As to the mere suggestion that CR will tax foreign entities and income….give me a break. We can’t tax ourselves yet.