Thursday, 1 October 2020

President-elect Alvarado Faces Biggest Deficit In Three Decades

In the next four years, more than one-third of the central government's debt is due

The challenge facing the next government led by President-elect Carlos Alvarado, is a Costa Rica economy facing its biggest fiscal deficit in 30 years, when more than one-third of the central government’s debt is due and without many instruments to finance it, with permission to issue bonds abroad, and the pressure of a reduction in the risk rating.

In the next four years, more than one-third of the central government’s debt is due

In addition, it is possible that the next government may not even have an approved tax plan to generates new resources, including the Value Added Tax (VAT) proposal, which has so far not received the political commitment to approve the project.

Another negative outlook is that the economy, although it has recovered since December, is still slow, which means less tax collection and more uncertainty.

- paying the bills -

Consumption continues to decelerate, and this means that people are not spending, credit is stationary, and unemployment continues as one of the largest the country has, mainly in young people and rural areas. Needless to even mention the actuarial problem facing the regime of Disability, Old Age and Death Fund (IVM), in general.

To find solutions, the President-elect’s economic team will be led by Edna Camacho, who is part of the alliance with Rodolfo Piza, leader of the Partido Unidad Social Cristiana (PUSC), and Alberto Franco, Edgar Robles, Javier Chaves, Pablo Villamichel, Roxana Morales, Sol Echeverría, José Francisco Pacheco, Jorge Guardia, André Garnier, Ottón Solís, among others.

First challenge: Do not enter into defaults (impagos in Spanish)

The first thing that President-elect Alvarado must do is to have a plan so that the country does not go into default. If the Central Bank projection of a deficit of 8% of GDP in 2019 is reached, the red lights of a possible default would be on.

If with a deficit of 6.2% of GDP last year, we are already experiencing interest rate pressures, the uncertainty of consumers and investors, liquidity problems in the Treasury, warnings from risk rating agencies and a squeeze on resources.

- paying the bills -

What would the panorama look like if there is no fiscal solution?

Experts say the solution must start with lowering expenses. Income must be raised, the VAT is vital instead of the central government relying solely on a general sales tax on goods. With that there is a dire need to modernize the tax authority (Ministerio de Hacienda), to make tax collection more efficient.

Finding measures to lower informality (in labor) and contraband are two good actions that would provide the central government with added resources.

Among the experts pointing out the most critical points that President Alvarado will face are: economist and former President Miguel Angel Rodriguez and Daniel Sucher, financial expert and independent analyst.

Source (in Spanish): La Republica


- paying the bills --


"Rico" is the crazy mind behind the Q media websites, a series of online magazines where everything is Q! In these times of new normal, stay at home. Stay safe. Stay healthy.

Related Articles

“Risky to say how much unemployment we are going to reverse with new measures”: Minister of Economy

(QCOSTARICA) Asked about the effectiveness of reactivating Costa Rica's shared management...

Legislators bury possibilty of posponing VAT on basic basket

The bill presented on June 11 by the government to postpone...


Moments of anguish and terror after a pickup truck caught on fire at Escazu tolls

(QCOSTARICA) It was almost like watching a movie. Full of suspense and terror when a pick up truck catches fire, then rolls backward towards...

El Salvador: woman jailed over miscarriage freed

(Q24N) Authorities in El Salvador on Wednesday, September 23, released a woman who suffered an apparent miscarriage but was convicted of killing her baby. Cindy...

COVID-19 in Costa Rica: 1,233 new cases for Sep 26; hospitalizations down and R rate dropping

(QCOSTARICA) After a much needed rest on Sunday, I am back.  On Saturday, Priscilla Herrera, Health Manager, who has been filling in for Health...

Man would would drug 13-year-old girl and sell her for sexual favors

(QCOSTARICA) The Criminal Court of the First Circuit of San José sentenced Guillermo Esteban Avilés Valverde to 16 years in prison, who was found...

Dad raped and impregnated 11-year-old daughter

(QCOSTARICA) "My niece was very cheerful, she was always happy, smiling and playing. But from starting this year, things changed. She was in no...

Why is the ‘Aguila’ on its head? The marketing idea that confused Costa Ricans

(QCOSTARICA) You may or may not have noticed by the 'aguila', the iconic eagle logo of the Imperial beer brand, has been seen with...

Let's Keep This Going!

To be updated with all the latest news and information about Costa Rica and Latin America.

Log In

Forgot password?

Forgot password?

Enter your account data and we will send you a link to reset your password.

Your password reset link appears to be invalid or expired.

Log in

Privacy Policy

Add to Collection

No Collections

Here you'll find all collections you've created before.