Business Leaders Becoming Less Confident in Economy

August 8, 2008

Business leaders’ confidence in the Costa Rican economy fell in the second quarter of the year, but was still in “acceptable” levels, according to a study released this week.

The Quarterly Business Survey, carried out by the Union of Private-Sector Chambers and Associations (UCCAEP), signaled that the Business Perception Index (IEP), which analyzes economic trends in the second quarter of the year, registered at 5.94, lower than the 6.43 recorded the previous quarter.

Poll respondents are asked to rate various aspects of the economy on a scale of 1 to 10. The Business Confidence Index (IEC), which queries businesspeople regarding their expectations for the upcoming quarter, recorded a level of 6.82, down from the 7.26 registered in the first quarter.

“These results tell us that even if the indicators are above 5 (the number that represents a “neutral” response), there is a drop we should pay attention to,” said Manuel Rodríguez, UCCAEP president, in a press conference.

The export sector was the most pessimistic, marking an IEP of 4.87 and an IEC of 5.77, while other sectors such the finance and service maintained indicator levels above 7.

The surveyed sectors are the agricultural, service, commercial, tourism, export, construction, finance and industrial.

“We need the government to generate the same confidence (as) in May 2006 (when President Oscar Arias took office). We need clear guidelines because right now there is a lot of uncertainty,” among businesses, said Rodríguez.

The government must, for example, guarantee the availability of electricity for new businesses with greater investments in electrical grid infrastructure and allowing private companies to sell energy, he said.

Rodríguez noted the rise and fall of the colón in recent months has affected confidence among businesses, primarily in the export sector, which has registered losses.

He also said that external factors, such as the high price of fuel and raw materials, and internal factors, such as high inflation and lower credit lines for small- and medium-sized businesses, have influenced the economic confidence indicators.

Rodríguez said the new tax bundle the government is analyzing is not necessary because “there is a (budget) surplus.”

The study of 400 businesspeople, primarily presidents or general managers, was carried out the first week of July and has a margin of error of 5.6 percent.

 

 

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