Business Sector Supports Austerity Measures

August 6, 2004

THE Union of Costa Rican Private-Sector Chambers and Associations(UCCAEP), an umbrella group that representsmore than 40 business associations,says it supports the tough-love economicmeasures taken by the Central Bank andthe Finance Ministry aimed at ensuringthe continued stability of the Costa Ricaneconomy.Samuel Yankelewitz, president ofUCCAEP, made the announcement lastweek, after Central Bank PresidentFrancisco de Paula Gutiérrez announced thebank would tighten the country’s monetarypolicy to curb rising inflation. The measuresinclude a rise in interest rates and anincrease in the colón’s daily devaluationrate against the dollar (TT, July 30).Finance Minister Alberto Dent alsounveiled a rough draft of the government’s2005 budget. To compensate forthe Legislative Assembly’s failure toapprove the proposed Permanent FiscalReform Package, the proposed budgetincludes drastic austerity measures thatwill freeze social spending at current levels.“The year 2004 started with greatoptimism because of the expectedapproval of fiscal reform and the negotiationof a free-trade agreement with thelargest economy in the world and ourlargest trading partner (the UnitedStates),” Yankelewitz said.“This optimism was present in the survey(UCCAEP’s quarterly business confidencesurvey) we conducted at the beginningof the year (TT, Jan. 23),” heexplained. “However, as the yearadvances, our expectations are diminishing.”Yankelewitz called the austerity measurespainful but necessary. He alsostressed the need for legislators toapprove “crucial economic reforms,”including the fiscal package, the CentralAmerican Free-Trade Agreement with theUnited States (CAFTA) and measures tomake Costa Rican producers more competitivein preparation for CAFTA.“Despite being optimistic by nature,as Costa Rican business people we feelfrustrated by the inability to enact thereforms needed to consolidate the country’seconomic stability,” Yankelewitzsaid.July 30 officially marked two yearssince the fiscal plan began being debatedby legislators.“Regrettably, 24 months later, we are inthe same place we started from,” he said.

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