Wednesday 28 July 2021

Our Economy: Myth and Reality

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Q BLOGS – If you want good news about Costa Rica (CR), it is readily available not only from the travel industry but also from the government itself. On the other hand, the reality of living in this country and the news of national, Spanish-language outlets say something different.

I have yet to meet a person who has not complained that Costa Rica is very, very expensive. Yet the Government published reports show that we are doing just fine and inflation is even below 1% for all goods.

However, not true.

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For example, gasoline is the most costly in the entire Central America, ergo, another 1% increase can be pretty costly to the wallet. The same with this absurd war on avocados from Mexico. The Hass species now cost about US$1.50 each (¢850 colones) not per pound, but each, and those are home grown.

Based on many factors our Costa Rica credit rating has been reduced to “Junk Bond” category for lack to resolve to trim the budget, raise taxes and reduce astronomical sovereign debt. We are now BB rated. dropping from a BB+ rating by both Fitch and Moody. Translated that means the billions of dollars borrowed are now at super high-interest rates based on the risk of the default factor. Almost 60% of aa borrowings now go to nothing more than servicing foreign debt.

Why?

The Legislative Assembly (Congress) has rarely met to pass legislation and demand both tax increases and budget cuts. “Yes,” it hard to explain why we need to pay more in taxes while the executive budget has increased by 12.1%.

Personally, I do not mind suffering further if the damn bureaucrats suffer along with me. And, that does include the executive branch.

Only today, there is news that the BICSA a quasi-private (Costa Rica international) bank stiffed its own cooperative and employees US$4 million in a bad loan that was not underwritten by land as promised, but only paper promises to pay.

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What has failed to reach English language news outlets, not fake news, is that Banco Nacional (BN), the Bacno de Costa Rica (BCR), BISCA, Davidienda and Bac San Jose (BAC) are concerns for debt extension and liquidity.

Costa Rica has just about hit its limit and unless the legislators tackle this, understand the seriouness of the situation, Pura Vida might become “Poor-a Vida”.

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Juan Sebastian Campos
An expat from the U.S., educator and writer in English and Spanish since 1978 with a doctorate in business administrations (DBA) from the United States and Germany. A feature writer for ABC News, Copley Press and the Tribune Group with emphasis on Central America.

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