San José, Costa Rica, since 1956

Economists Encourage Revision of Shield Plan

On January 29 of this year, Costa Rican President Oscar Arias unveiled the Shield Plan, or Plan Escudo, to help the country weather the effects of the global economic crisis. The plan offers assistance to four central sectors – families, workers, businesses and finance – and includes actions to help Costa Rican citizens during tenuous times as the economic slide persists.

Arias proclaimed in his announcement of the Shield Plan that “every Costa Rican should be able to find in their government a real answer to the problems in this time of world crisis.”

Although bold in his aspirations for the plan, many in the economic and business sectors find the plan tardy and Arias’ expectations shortsighted.

“The problem is that the plan came out too late,” said Greivin Hernández, economist with the InternationalCenter for Economic Policy for Sustainable Development (CINPE).

“All of the assistance provided by the plan was needed in 2008, not in 2009. None of the measures in the plan were able to help unemployment in this year.”

The lack of preventive measures to thwart further unemployment is echoed by many as one of the primary flaws in the Shield Plan.

Although it includes initiatives to curtail job loss, such as four-day work weeks and an investment in job training, a dearth in overall spending leaves businesses with limited


“The gross domestic product fell 5 percent last month,” said Luís Mesalles, economist and partner at the finance and consulting firm Ecoanálisis. “Even with the resources given to improve employment, it doesn’t really change anything. People will still lose jobs. The government must increase spending and invest in our own businesses. Spending less isn’t the solution. They need to spend smarter.”

As the rate of inflation has remained steady, rising only 0.17 percent in June, signs of spending in the near future appear distant. Critics say that hopes the Shield Plan would create or retain jobs were optimistic and flawed. Because that seems to be the resounding sentiment in the financial sector, many businesses have lobbied for a revised or new plan.

“A revision of the plan is necessary,” said Eric Vargas, manager of investment strategy at the financial consulting firm Aldesa. “There are many things that could be adjusted to improve the plan. There is no real growth right now. A revised plan could get some momentum going for the economy.”

The idea of a revision seems to have been around since the unveiling of the Shield Plan, but little has been done about it. Despite the criticism directed at the business and employment aspects of the plan, many people have applauded the grants given to high school students in the Avancemos program, as well as the investment in the development of the port of Limón on the Atlantic coast.

Although some elements of the plan have provided positive economic and social gains, in the midst of the global economic crisis, the idea of a revision seems to be at the forefront in the minds of many economists.

“There is not much time left in the Arias administration,” said Hernández. “It would be a nice grand finale for them to revise this plan before leaving office.”

What the Shield Plan Offers:

To Families

1. Fifteen percent increase in Social Security pensions

2. Weekend food program for lower income families

3. Increase in number of grants given to high school students (through the Avancemos program)

4. Forgive debts of 2,100 families in jeopardy of losing their homes

5. Increase maximum allowance for home loans by ¢335,000 ($585.00)

6. Two percent temporary decrease in interest rates in home loans

To Workers

1. Reduce number of hours without reducing minimum wages and maintain jobs

2. Increase telecommuting jobs

3. Restructure work code to permit a work week of four days

4. Provide monthly grants of ¢200,000 ($350) to workers in fear of losing their jobs. These workers must attend job training programs to receive the stipend

5. ¢100 million ($174, 523) invested in infrastructure of education

6. $80 million invested in the Limón project

To Businesses

1. Investment of ¢227 million ($396, 167) in small businesses, such as agriculture, dairy farming and local stores.

2. Decrease of 2 percent in interest rate on business loans

3. Provide 30-day grace period to pay invoices owed to banks

To Financial Sector

1. Provide additional capitalization of $117.5 million to the government owned national banks.


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