QCOSTARICA – As the economic toll of the Covid-19 pandemic takes shape around the globe, the Costa Rican government finds itself in an increasingly difficult position trying to balance an exploding budget deficit with groups of protesters who oppose new borrowing or tax increases.
On Sept 30th a group known as Movimiento Rescate Nacional called for road blockages around the country to protest a government proposal to borrow US$1.75 billion in loans from the IMF to lessen the blow of the pandemic’s economic impact.
Since border closures began in March of 2020 Costa Rica’s unemployment has jumped to a staggering 23% in a country that relies heavily on the presence of 2.5 million visitors a year.
With Costa Rica’s GDP expected to suffer a -5% growth rate for the coming year, the prospects for a smooth recovery are increasingly slim.
Protesters have taken to the streets to voice their discontent by erecting barricades along highways and municipal roads, blocking local transit and commercial traffic with debris. The tactic is aimed at applying pressure to the economic arteries of the country.
In response, President Carlos Alvarado withdrew his initial IMF proposal on October 4th which would have raised taxes on high-income earners, bank transactions, as well as large properties. The administration has since invited opposition leaders to negotiate a new fiscal reform package.
However, within days of his announcement blockades in some locations turned violent with protesters hurling Molotov cocktails and rocks at police and even setting a patrol car on fire with officers inside.
In another instance, protesters broke the windows of a car where a pregnant woman in labor was trying to get to the hospital. Leaders of the Movimiento Rescate Nacional, like Célimio Guido, have since called for protesters to withdraw stating, “Let go of your pride, we are going to sit down and negotiate”.
Despite repeated pleas by the government and political leaders for dialogue, blockades remain in place around the country. Protesters in the country’s capital of San Jose met in violent clashes Monday wounding 11 officers in exchanges. Both Costa Rican authorities and the Movimiento Rescate Nacional claim that organized crime groups have instigated violence during the protests in recent weeks.
Mario Castillo is the organizer of a blockade in the southern region of Pérez Zeledón. He claims to not be affiliated with any political group or movement but rather represents “farmers, truckers and the people who have been abandoned by this government.” When asked about the negotiations planned for Oct 17th which draw on representation from each region of the country Castillo responded, “The problem is that the government does not want to negotiate anything. We have been to the presidential house and the government does not even meet with us and that is why we are on the street.”
On the list of demands from Castillo are: no deal with the IMF, no new taxes, lower government pensions, and lower the transport tax. Even though the President has signed a decree to lower pensions and to prevent taxation of the nation’s poorest citizens Castillo and his supporters remain defiant insisting the roads will remain closed “until the government listens to us.”
Castillo and his supporters express frustration with a sense of growing inequality and what Castillo describes as the “welfare state”. He says, “The government only wants to bring imported products”. One protester who works as a groundskeeper for a Canadian-owned farm expressed frustration at how “When I try to sell my cows now I have to lower the price because people can buy cheaper cows from Nicaragua and Panama. And on top of that, they want to charge me a tax for the sale. Meanwhile, there are government employees being paid $20,000 per month. This isn’t right.” For Castillo and his supporters Costa Rica is on the “track of communism along with Cuba and Nicaragua”.
Yet Castillo’s populist views at times echo the kind of right-wing extremism that has captured parts of the US and are similarly shrouded in a web of internet conspiracies. Castillo claims that, “The government is being run by Venezuelan cartels who funded their election. We will not become Venezuela”. News reports produced by Russian media circulate among Castillo’s followers lauding Putin’s strong leadership and criticizing the IMF.
However, criticism of the IMF is not limited to Russian news sources. At the end of the Cold War, the IMF offered Structural Adjustment Programs to low-income countries around the world, procuring loans in exchange for the privatization of public services in an attempt to reshape third world economies into free-market states. For Argentina and many other Latin American governments the result was disastrous; weakening democratic institutions and their currency. However, since the 2008 global financial crisis, the IMF has abandoned Structural Adjustment Programs in favor of more flexible agreements that give states more power in determining the terms of their loans.
Costa Rica has held a relationship with the IMF since the 1960’s. When the global price for coffee plummeted in the 1980’s Costa Rica found itself on the brink of economic collapse and used a series of loans from the IMF to pull itself out of the crisis. In April of 2020, Costa Rica was granted 500 million dollars in credit from the IMF’s emergency fund to ensure its public health care system could bare the load of Covid-19 cases. The move seems to have worked.
Since April Costa Rica’s intensive care and hospitalization capacity has more than doubled to meet the needs of infections. With just over 1100 fatalities the health care system has remained intact and has been lauded by the UN for its handling of the crisis.
But the country’s ballooning deficit is threatening their ability meet the challenges ahead. Negotiating a balanced budget that meets everyone’s demands will be a true test of strength for President Alvarado’s administration. Already Movimiento Rescate National has teamed up with evangelical groups and the political opposition party calling for a referendum to oust the president.
Prior to the pandemic Costa Rica was considered a top tourist destination for US and Canadian travelers welcoming over 1.7 million visitors a year. However, the IMF projects this year’s tourism revenue to be “73 percent below their 2019 levels.” In order to ensure that foreign dollars continue to pour into the Costa Rican economy a certain level of political stability and physical security is necessary.
In a country that is already fatigued from Covid-19, 6 months of border closures, and economic hardship the protests may be exacerbating an already tenuous situation. When asked about the potential for violence Castillo commented that “We don’t want blood to be spilled but if we have to spill blood then so be it.”
On Wednesday a vehicle carrying a family of tourists from Hungary plowed into Castillo’s protesters after a heated altercation. Three protesters were sent to the hospital and the driver was held in custody. Hours later police broke up Castillo’s blockade and a number of others in the region of Pérez Zeledón.
Negotiations that were to begin on Oct 17th with representatives from around the country to develop a new economic recovery plan have since fallen apart and protesters are calling for a general strike to begin on Monday.
It is unclear if going forward the government will continue to seek support from the IMF or enact major spending cuts. Either way, the road to recovery will certainly be bumpy, but hopefully not blocked.
Article is by guest contributor Annika Beaulieu, a journalist, filmmaker, and photographer from Los Angeles, CA. She has lived in Pérez Zeledón, Costa Rica for the last 3 years. Contat Annika at email@example.com