San José, Costa Rica, since 1956

Tax Plan, CAFTA Tangle Worsens

PRESIDENT Abel Pacheco’s agenda advanced, thenstumbled to a seeming standstill this week as the CentralAmerican Free-Trade Agreement with the United States(CAFTA) continues to dominate the country’s politicalscene.The Executive Branch submitted the long-awaited package of bills known as the Complementary Agenda, designed to prepare the country for changes that would be brought about by CAFTA’s approval, to the assembly on Monday – only to be told the following day by Legislative Assembly President Gerardo González that work on the Permanent Fiscal Reform Package, the tax plan Pacheco has been pushing for more than three years (TT, Aug. 26), will be stalled unless Minister of Finance Federico Carrillo steps down.“Every day that the minister is there is a day that sets back the fiscal reform,” González, of the Social Christian Unity Party (PUSC), told reporters in the assembly hallway, according to the daily La Nación. He said Carrillo is a populist, is disloyal to his party and has made too many cuts to social spending.IF González sticks to his word, this freezes the CAFTA issue in a Catch-22 with the Finance Minister caught in the middle, as Pacheco maintains he will not send the trade pact to the assembly until the tax plan is passed, and González refuses to move on the tax plan unless Carrillo resigns from his post.The dispute is the latest battle between the Unity party and the minister, who has been at odds with Unity legislators and others in the assembly over his fiscal policies since he took office in September 2004 (TT, Sept. 17, 2004).Unity legislators complain that the 2006 budget unveiled yesterday (see separate story) does not assign enough resources to social spending. The same battle erupted over last year’s budget, which drastically cut back social spending to increase interest payments on the government’s growing debt (TT, Sept. 3, 2004).AS they did last year, administration officials say the assembly must pass the tax reform bill for social spending to increase.“They tell me that they want money for social programs. I tell them that gladly, but give me the money with the fiscal reform,” Pacheco told La Nación this week.Carrillo raised party ire preceding this most recent dispute with comments published in the Aug. 11 edition of University of Costa Rica’s weekly paper, Semanario Universidad.Unity, he said, “has no real possibility for reelection” following the corruption scandals that landed two former Unity Presidents in house arrest.President Abel Pacheco is a Unity party member, though he was not the presidential candidate preferred by the party leadership in 2002, and therefore “does not owe anything” to the party, Carrillo said in the interview.WHILE Carrillo took most of the heat from the assembly this week, the pressure on Pacheco to send CAFTA to the assembly continued to increase.The senate of the Dominican Republic approved the agreement 27-2 on Aug. 26. If the Chamber of Legislators approves the pact – as expected, according to wire service ACAN-EFE – Costa Rica and Nicaragua will become the only countries left out of the agreement.A subtle reminder of this came when it was announced that Pacheco has not been invited to a meeting to be held Oct. 20 in El Salvador with U.S. Commerce Secretary Carlos Gutierrez. According to ACAN-EFE, Antonio Saca, President of El Salvador, said the leaders of the other Central American countries and the U.S. official plan to discuss the free-trade agreement, which is expected to take effect Jan. 1, 2006.ADDING to the pressure, 38 of Costa Rica’s 57 legislators signed a letter sent to President Pacheco demanding he send the agreement to the assembly for discussion.The president remains committed to his stance, however: he will wait for the approval of the tax plan and the conclusion of the trade agreement’s analysis by a Council of Notables, five men chosen by the President for their supposed political autonomy, before submitting CAFTA.The council met with the President and press to explain its progress Monday after missing a self-imposed deadline to turn its second report of observations on the agreement.The council’s spokesman, famed astronaut Franklin Chang, said the group was unable to meet in time because he was not in the country, but added that he foresees no future delays and the final report will be turned by the Sept. 16 deadline.He said the group has consulted with approximately 30 people so far, including some of the negotiators of the treaty, as it analyzes the text of the document. In addition, council members have received “hundreds” of e-mails from concerned citizens, he said.THE council is focusing on 17 areas in their analysis of CAFTA, including telecommunications and insurance, labor, the environment and renegotiation. Chang said the council is particularly focused on infrastructure and the complementary agenda.“The agenda is something the country needs with or without (CAFTA),” he said. “It is extremely important that we all understand this.”The agenda comprises loans and initiatives aimed at making sensitive sectors of the economy more competitive before CAFTA takes effect.It would bolster small- and medium sized businesses, agricultural producers and rural schools with improvements to roads, technical support and training, and financing (TT, June 24).Though the presentation of the package to the assembly was originally scheduled as a public event, it was cancelled shortly beforehand and sent directly to legislators by the Executive Branch Monday.

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