San José, Costa Rica, since 1956

Tempers Flare Over Government’s 2006 Budget; Carrillo Insists Spending Cuts Are Necessary

IN the midst of a political battle of wills between the Executive Branch and the Legislative Assembly, beleaguered Finance Minister Federico Carrillo presented an austere budget for 2006 to the assembly last week, which did little to calm the feud.A group of assembly workers met Carrillo’s presentation with shouts and shoves, angry because of his assertions that a new building for the assembly is not one of President Abel Pacheco’s priorities.On Monday, legislators announced that they plan to make changes to the budget, directing more money toward social spending and roads.Carrillo’s budget outlines ¢2.76 trillion ($5.71 billion) in government spending, up from last year’s budget of ¢2.3 trillion ($5.18 billion) (TT, Sept. 3, 2004), and encompassing increases for education and public health, but cuts in other areas such as road repair, maintenance and construction. Much of the budget also addresses Costa Rica’s ballooning debt.CARRILLO said the 2006 budget reflects the country’s spending priorities in the face of the rising cost of living and an international oil crisis.“We have the same problem we’ve always had, which is that 80% of the tax income, before we can even think about what to do with it, goes only to salaries, pensions… and the debt,” Carrillo said at the budget presentation.In the proposed budget, the ¢1.5 trillion ($3.1 billion) in payments to control the public debt are more than the total collected in taxes, meaning nearly half (47%) of the government’s spending is financed with loans – putting the country further into debt. Carrillo called the situation a “vicious cycle” that grows exponentially and must be stopped.For this reason, Carrillo said, the government’s spending is prioritized according to fundamental rights, with education and health care first, followed by salaries and pensions. The remaining funds were distributed among areas that do not have their own sources of income.THE Ministry of Education would receive ¢533 billion ($1.1 billion) in the proposed budget, up 13% from what it received for 2005, and going beyond the constitutional mandate to devote 6% of the gross domestic product (GDP) to education.Included are 1,548 new teaching positions, 40 new elementary schools, with priority given to indigenous zones, and 10 new high schools. The budget also funds the opening of 20 distance-learning centers – facilities where high-school students, generally in remote areas, receive instruction by teleconferencing.The Public Health Ministry receives ¢56 billion ($115.8 million) under Carrillo’s budget, an increase of 42.9% over last year. The budget of the National Roadway Council (CONAVI), which is the department of the Ministry of Public Works and Transport that oversees the nation’s roads, would be sliced in half. CONAVI Executive Director Alejandro Molina reacted with dire warnings, telling The Tico Times that the new budget prohibits the council from doing anything more than the most basic maintenance.THE 2006 budget, he said, reduces money for the country’s roads by 60%, cutting it from the ¢53 billion ($107.6 million) CONAVI had expected to receive to ¢23.66 billion ($48.9 million). According to Molina, this will mean that much-needed projects such as the reconstruction of 80 kilometers of the Inter-American Highway will be postponed and many other roads that would have been paved will remain gravel, such as the tourist route between Santa Cruz and Tamarindo, in the northwestern province of Guanacaste.In addition, ongoing works such as maintenance of gravel roads and bridges and installation of signs would lack funding. CONAVI is supposed to receive 22.5% of the money generated by the gasoline tax of ¢127 ($0.26) per liter, and 50% of the property tax on vehicles, Molina said. However, this year, the government did not provide CONAVI with the constitutionally mandated funds, even after the Constitutional Chamber of the Supreme Court (Sala IV) ordered that it do so. Carrillo claimed that the government could not afford to hand over the funds (TT, Nov 19).CONAVI should have received ¢53 billion, but the ministry only transferred ¢20 billion, a figure later upped to ¢26.5 billion after the Sala IV ordered that CONAVI be paid in full.THE proposed 2006 budget cuts come at a time when both President Abel Pacheco and the President of the Central Bank, Francisco de Paula Gutiérrez, have predicted a rise in poverty for the next year.At last week’s presentation, Carrillo reiterated the importance of passing the Permanent Fiscal Reform Package, the tax reform plan that has been under consideration in the assembly for more than three years and upon which the President has conditioned sending the Central American Free-Trade Agreement with the United States (CAFTA) to the legislature for discussion.“Until (the tax plan is approved), the government, in particular the Executive Branch, will act in a very responsible way… trying to direct the scarce resources available toward the priorities we have established,” Carrillo said.AFTER apparent progress, the tax plan has been stalled again in recent weeks. Assembly President Gerardo González called for Carrillo’s resignation Aug. 30, threatening to hold up progress on the plan until the minister steps down, and complaining that Carrillo has cut social spending too deeply (TT, Sept. 2).The assembly then ratified a resolution presented by González to move the tax reform package from first to third place on the agenda, derailing it from the fast-track status it was given in May (TT, May 27).While the change in priorities is in line with González’s stated goal of delaying work on the fiscal reform, it stems from a Sala IV ruling that the assembly is required by the Constitution to vote on laws regulating popular initiatives and referendums before Nov. 19. The assembly was originally supposed to have approved these measures by June 20, 2003.ANIMOSITY at this year’s budget presentation ran particularly high because legislators and Legislative Assembly workers have been asking that the government build new assembly facilities, complaining that the existing buildings are falling apart and putting their health at risk. Carrillo has said new legislative buildings are not a priority.Workers from the buildings filled the seats of the small conference room where Carrillo presented the budget and periodically heckled, hissed and shouted down the minister as he spoke with the press following his presentation. They also distributed a manifesto demanding new buildings.Carrillo restated his unpopular position at the event, emphasizing that it was not his job to define the government’s priorities – a job he said belongs to the President – but rather to see that those priorities are financed. This did not seem to deflect the ire directed at Carrillo, however; the crowd surrounded him, shouting and pushing, as he attempted to leave the conference room.THE proposed budget will be sent to the assembly’s Finance Committee, and then to the floor for first debate. If the plan is not approved in first debate by Nov. 28, it is considered approved automatically and passes to second debate, which must be concluded by Nov. 30, explained Social Christian Unity Party (PUSC) legislator Olman Vargas, president of the committee.

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