San José, Costa Rica, since 1956

Pacheco Boasts Fiscal Stability

High oil prices and a bickering Legislative Assembly kept President Abel Pacheco from fulfilling all of his campaign promises over the past four years, the outgoing President said Monday in his fourth and final annual May 1 address to legislators and the nation.

But despite his shortcomings, Pacheco, whose last day as the country’s leader will be Monday, said he brought fiscal responsibility to the country and maintained economically stability.

“I did all that I could for this good people,” said Pacheco, whose 35-minute speech provided the 57 new legislators who took office last Monday with his perspective on the country they will serve.

 Pacheco acknowledged he failed to make the advancements in combating poverty he had hoped, and later admitted that infrastructure was his administration’s biggest failure.

To open his speech, Pacheco asked the new legislators to provide incoming President Oscar Arias a luxury he had not been afforded – working together to pass laws.

“Multipartisanship doesn’t have to be synonymous with blockage… it is possible to work together and make opportune decisions,” he said.

Pacheco holds the former Legislative Assembly responsible for not passing his Permanent Fiscal Reform Package, which sought to overhaul Costa Rica’s tax system and increase tax revenues. The fiscal plan, as it became known, was presented to legislators four years ago and Pacheco has said ever since that it is crucial to provide for the country’s needs.

“Unfortunately the myopia and the egoism of some blocked us from achieving advancements on this route,” he said.

Without the funds generated by increased taxes, the Pacheco administration made the decision to practice absolute fiscal austerity in what Pacheco called “an undeniable responsibility in the management of the economic situation.”

Rather than allowing the country to get further into debt, Pacheco said he was forced to make “painful” cuts and adjustments to allow economic stability and avoid a growing debt.

Pacheco boasted an average 4.8% economic growth rate, a 40% increase in the value of exports from 2001 to 2005 and a growth of tourism and foreign direct investment. In addition, the government’s deficit was 2.2% of the GDP in 2005, its lowest in seven years.

Pacheco also said he is leaving a country that is one of the three most competitive countries in Latin America and the Caribbean, although some indicators aren’t so positive.

But Pacheco warned against the dangers of continuing with his administration’s austerity strategy, and used his speech to continue his fight for the tax plan.

“A new legislative delay in this material will produce irreparable damages to Costa Ricans,” he said, adding that the reductions of social spending made by his administration “are not sustainable in the long term.”

With limited social spending, Pacheco was unable to fulfill his campaign promise to reduce poverty from 20% to 16%. More than one in five Costa Rican families continue in poverty, he said “with sadness and anguish.” The outgoing President also blamed high oil prices for the increased cost of living – oil increased from $27 a barrel in May 2002 to $72 today.

Furthermore, lack of investment in road maintenance has left roadways in their worst state in decades.

Despite the limited resources, Pacheco boasted improvements to education, with the construction of more than 230 new elementary and high schools and expansion of the National Training Institute (INA), saying 25% of all of the people educated by INA in its 40-year history, were educated in the past four years.

In environmental issues, Pacheco signed decrees blocking open-pit mining and oil drilling. However, these moratoriums could be at risk with the new administration.

Pacheco can also boast the negotiation of the Central American Free-Trade Agreement with the United States (CAFTA) during his administration. However, the President has not made its ratification by the Legislative Assembly a priority, prioritizing the fiscal plan instead.

“(CAFTA), to the extent that it consolidates and guarantees our products to the principal economy of the world that is, at the same time, our number one commercial partner, is very important for the future of the country,” Pacheco said.

He then passed the buck on to the next administration: “You have the opportunity to analyze it and make a responsible and opportune decision.”

Legislator Alberto Salom, of the opposition Citizen Action Party (PAC), told the daily La Nación following the speech Pacheco’s biggest failure has been his inability to provide an absolute direction for the country, and his wish-washy attitude towards CAFTA provides a perfect example.

Pacheco’s comments about the Legislative Assembly also sparked negative reactions from the new Libertarian Movement legislators, some of who walked out during his speech. The party is blamed for using delay tactics to block the tax reforms.

However, when newly elected president of the Legislative Assembly Francisco Antonio Pacheco, of the now-ruling National Liberation Party, took the microphone following the speech, he echoed many of the outgoing President’s statements and encouraging his fellow legislators to work together.

He also commended Pacheco for his ability to “think big” for Costa Rica.


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