San José, Costa Rica, since 1956
Elections 2014

Villalta calls budget deficit focus 'alarmist'

Costa Rican opposition presidential candidate José María Villalta says he’ll cut tax deductions and boost salaries of police and teachers if elected president, calling concerns about the country’s widening budget deficit “alarmist.”

Villalta, 36, is seeking to force a second round vote with ruling party candidate Johnny Araya in the Feb. 2 race to succeed President Laura Chinchilla. Villalta has 26 percent support among likely voters compared to 39 percent for Araya and 18 percent for Libertarian Movement Party founder Otto Guevara, according to a Jan. 8-13 poll by CID-Gallup. A candidate needs 40 percent to win outright or face an April 6 runoff.

Central America’s second-biggest economy was put on negative outlook by Moody’s in September, citing widening budget deficits, a rising debt burden and a failure to pass fiscal legislation. The strength of Villalta’s candidacy is making it harder for the government to pass fiscal reforms before a second-round vote, Citigroup economists Jorge Pastrana and Jeffrey Williams wrote in a Jan. 7 report.

“It’s likely that the neoliberal economists who have led the country in previous years have blown the issue of the fiscal deficit out of proportion,” Villalta, who heads the Broad Front Party and is their only representative in Congress, said in an interview Tuesday. “But we do think it’s a problem that needs to be tackled in an holistic way.”

Chinchilla’s government has spent the past year drafting a plan to limit the growth of public sector jobs and salary increases. The 56-year-old Araya, who stepped down as mayor of San José to campaign, said he’ll boost financing for young entrepreneurs and consider scrapping the country’s 13 percent sales tax and replacing it with a higher value-added tax.

Moody’s said its negative outlook was justified by a fiscal deficit that climbed to an average 4.4 percent in the 2009-2013 period, up from about 1 percent in the previous four years. The ratio of debt-to-gross domestic product was headed toward 37 percent in 2013 from 25 percent in 2008, Moody’s said.

“Large fiscal deficits and a rising debt burden remain Costa Rica’s main medium-term credit risk and ratings constraint,” according to the Sept. 23 report.

Moody’s rates Costa Rica’s $45 billion economy Baa3, the lowest investment-grade level, putting it in the same category as Indonesia and Spain. Both Standard & Poor’s and Fitch rate Costa Rica below investment grade.

Costa Rican dollar bonds have lost 2.1 percent the past six months, compared to a 1.6 percent return for Latin American debt, according to JPMorgan Chase & Co.’s EMBIG index. The economy grew 5 percent in the third quarter from a year earlier, up from 3.8 percent in the same period of 2012.

As president, Villalta said he would seek to reduce tax deductions for companies and raise salaries for public sector workers near the bottom of the pay scale, saying senior managers in the government bureaucracy are overpaid at the expense of workers including teachers and policemen.

“There is a great lack of balance between salaries,” Villalta said. “Many are underpaid.”

Sitting in a sparse downtown office with a yellow party flag flying outside, Villalta said he wants to renegotiate parts of the country’s free trade agreement with the United States, Dominican Republic and Central America, known as CAFTA-DR, to improve intellectual property protections and labor rights and allow him to set price caps on medications.

Voters in the country of 4.7 million people have grown weary of corruption scandals in the government and are ready for change after eight years of rule by the National Liberation Party, or PLN, Villalta said.

Finance Minister Fernando Herrero resigned in 2012 after the daily La Nación said he avoided paying property taxes, a charge he denied. The transportation minister also resigned that year over alleged corruption on a road project. Last May, the communications minister resigned and Chinchilla fired her anti-narcotics chief and a deputy minister after questions arose about her use of a private jet to fly to Peru.

Ahead of next month’s election, the PLN has started an advertising campaign telling voters not to “vote left,” saying a victory for more liberal candidates would put private sector jobs at risk.

The 13-point gap between Araya and Villalta in the latest Gallup poll, which had a margin of error of 3.2 percentage points, is wider than a December survey which showed the two candidates just five points apart. That bolsters the prospects of a victory by the ruling party, allowing for fiscal adjustment, Jefferson Finch, an analyst at Eurasia Group wrote in a report Wednesday.

“Desire for change in the electorate is high, but it will be difficult for the fragmented and ideologically polarized opposition parties to build an electoral majority,” Finch wrote.

Villalta dismissed the PLN’s campaign ads and said the surveys show relatively weak support for Araya after his two PLN predecessors won with over 40 percent support in the first round.

“Those in charge of propaganda in the PLN saw a chance to distract voters from the corruption and mistakes this government has made,” Villalta said. “Campaigns based on fear never add votes. They’re done to destroy other candidates or boost abstentions and that’s what is happening in Costa Rica.”

© 2013, Bloomberg News

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If Villalta is elected the country will go into a downward spiral both economically and culturally. Yes we are in agreement to some of the comments that Villalta has made about the corruption in the government for many years now and the ruling class, but his brand of populism and social distribution of income and social justice is not the medicine the CR requires. Changes are needed but Villalta comes from the new brand of social populism like Obama where he wants to give to the ones that have not earned their way a piece of the pie. Equal opportunity is good and needed but not equal results, that is dependent hard work accountability and responsibility for your actions.

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It seems that one good word — at least for me — to describe the Costa Rican government is a kleptocracy.

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My Conversation With a PLN Surporter

ME asking Why do you Like Johnny Araya?

PLN says Johnny is really rich and like rich in Costa Rica.

ME asking PLN have coruption is that okay?

PLN says Coruption is okay because Costa Rican are passive and don´t get mad so we can steal from them.

ME asking The road and Caja are falling apart should we fix them?

PLN Says No we only help are friends the rich not the poor or middle class.

Me asking Does the PLN have a plan?

PLN say no not really we say one thing during election and do nothing when we get in power.

Me asking Why do you hate poor?

PLN say poor are there to pick coffee.

Me asking Who owns Costa Rica?

PLN say the rich family that help PLN

The truth about the PLN

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Colin Brownlee

My conversation with a Diehard Villalta Supporter

Me; What is your biggest complaint with the current government?

VS; Corruption.

ME; How much money did you make last month? ( he knows I know because he is a subcontractor)

VS; Approx $2000

ME; How much did you report and pay to CajA?

VS; I pay the voluntariio amount.

ME; Of course you do… So what u are telling me is you don’t report your $2000. ?

VS; No, I am allowed to just pay the minimum.

ME; Well, I am in business and according to your registration with Hacienda, you are too and I do not have option of paying my employees the minimum amount you pay. Oh and while we are on that subject, how much to you report to hacienda?

VS; I don’t feel comfortable or obliged to discuss my personal finances.

ME; No, I am sure you don’t. So, I will assume that given your example on how you approach your obligations to medical insurance, you feel the same way about the tax people.

VS; Look, you are a foreigner and you do not understand how Costa Ricans and our country works.

ME; Hmmmm…. Maybe it is you who do not understand? Because from where I sit, you are engaging in full scale corruption. I find it very odd, you clearly have no sense or responsibility for your views or actions and yet, the first thing that comes out of your mouth is that you have a big problem with government corruption.

VS; No answer… (Awkward silence)

ME; Listen, after almost 10 years here, what I can see is most local Costa Ricans are no different then you. The citizens are engaging in their own personal corruption just as much as the government. Why would you expect to have a squeaky clean government?

VS; I don’t want to discuss this anymore.

ME; I am sure you don’t.

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Everyone that call Villalta a Communist must be a US citizen. Stay out of Costa Rica. USA has done enough damage to Latin America and the rest of the world. How many countries has the USA attacked for nothing. Villalta is going to do very well for this Country. I wish all the USA citizen would go back to there country. Take your Call Center Jobs Back we don’t need USA Citizen in Costa Rica. USA is stealing Costa Rica. William Walker where is he?

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Billy Jones

Why are you quoting that old poll and not the latest nacion poll that just came out? Bias? Also Villalta is a commie and I’m done with Costa Rica if they elect him. Go Otto!

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Colin Brownlee

Actually economists from all spectrums wish they could do what Araya is proposing with scraping sales taxes and having higher value added taxes.

It is a way of taxing the people who consume. You consume more, you pay more.

It makes sense on so many levels. It will encourage people to consume less. It will have a good environmental impact. It is good for wealth distribution… etc etc

But you take a look at a country like US and you just mention the word taxes and half the population starts reaching for their guns. So, that obviously will not happen anytime soon in a country like that.

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All of these issue Villalta is very right on. There is a salary issue with this country. Very low Credit rating is hurting this country big time. Villalta sound like he surports small and medium size business that is a good thing. Villalta has change my mind I will vote for him.

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