San José, Costa Rica, since 1956
The Solís Administration

Business leaders critical of Solís administration's first months in office

Leaders of the Costa Rican Union of Private Sector Chambers and Associations (UCCAEP) said that a series of decisions made by the new administration of President Luis Guillermo Solís regarding employment, energy, public spending and legal certainty are affecting the country’s competitiveness.

UCCAEP board member Luis Mesalles said it is impossible for the private sector to create quality jobs in the current economic environment.

Employers also highlighted inconsistencies in government decisions on energy, saying recent increases in electricity rates will cause a drop in investment and the relocation of foreign companies to other countries.

UCCAEP President Rónald Jiménez said administration decisions are sending mixed signals that affect confidence.

“If there is no confidence, there will be no investment. If there is no investment, there will be no jobs, which clearly is a contradiction of the administration’s goals and their actions,” he said.

Business leaders also critized the government’s “inability” to lower the fiscal deficit, a promise Solís made at the beginning of his administration in May. The president at the time said he would seek to lower public spending as a way to control the deficit, but UCCAEP members believe this has not happened. According to estimates by the Central Bank, the government’s deficit this year will reach 6 percent of gross domestic product, the region’s second highest behind Honduras’ 7.7 percent.

During his campaign, Solís promised to cut public spending, but the increase in the fiscal deficit and a wage increase approved for the public sector for the second half of this year worries UCCAEP leaders.

Entrepreneurs believe fiscal deficit reduction is essential to improving government efficiency. They also want to see the “elimination of all abusive privileges for bureaucrats, such as unreasonably high pensions.”

Other important goals, they said, should be curbing the growth of public spending – especially salaries – and combating tax evasion. The business sector challenged Solís to target informal sectors of the economy instead of “chasing” companies that report low or no profits. Alan Saborío, UCCAEP’s Fiscal Commission coordinator, said the commission is still waiting for a comprehensive bill to reform the sales tax and convert it to a value added tax.

The recent lifting of a presidential veto that granted a group of vendors the right to use a public street in downtown San José also worries employers, who said they are concerned about legal clarity issues.

UCCAEP in coming days will file a complaint at the Constitutional Chamber of the Supreme Court to challenge a Solís decree that allowed vendors to keep their businesses on the street in front of the National Museum.

“This administration is not focused on actions needed to reduce the fiscal deficit. Instead, it has focused on a few bills that are not going to solve any serious problems, but rather make the situation harder for everyone,” Mesalles said.

President Solís addressed UCCAEP’s statements by saying only that recently he has held several meetings with other business groups. He added that he values all opinions and considers UCCAEP’s points of view as a “permanent reference.” Solís, however, lamented the group’s claims that he is not effectively communicating with them, adding that he is open to improving the situation.



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Why hasn’t h fixed everything! After all, the guy has been in office already for 3 or 4 months. The whole damn place if falling apart, it’s like there was a decade of bad policies that preceded him. Oh yeah, there was a decade of bad policies…

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Colin Brownlee

Oh and Pacheco before PLN was an effective government? I think you might do your research.

Maybe you can better explain a decade of bad policies?

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Ken Morris

I guess it’s fine for these folks to complain already, since early criticisms can sharpen the issues and avert later disasters, but I must say that I’m puzzled by the complaints.

Solís has been clear about how he will tackle the fiscal deficit–first by addressing tax evasion and government spending, and only later through new taxes. Well, he’s doing what he said he’d do first. Tax evasions are being targeted, there is a government hiring freeze, and the most egregious government pensions are being cut. It’s a cheap shot to complain that he hasn’t proposed a VAT yet, since he said he wouldn’t and business benefits most from predictability.

And I wish business would quit carping about tax evasion in the informal sector. Sure, the guys selling sunglasses and umbrellas on the streets probably aren’t paying taxes, but then again I doubt that many earn enough to owe taxes. And in those parts of the informal sector that really are cheating on taxes, like those who rent vacation condos, Solís is cracking down. Maybe there are other specific areas of the informal sector that deserve more tax collection oversight, but everytime business complains about the informal sector I smell some buck passing. Come on, investigation after investigation finds a lot of tax evasion among formally established businesses and professionals, and there’s nothing wrong with bringing them into compliances.

Neither does it make any sense to fault Solís for the hike in the minimum wages. This happens twice every year, it is always hotly negotiated, and there’s not a whole lot the president can do about it. Neither should the president do much, because the increases are largely pegged to inflation. Next to nobody receives a real wage increase because of these, and if the businesses felt so strongly about this issue, maybe they could decline to raise prices?

And actually, since Ben brought it up, Solís even went to Intel hat in hand and begged for new jobs. I felt sorry for him, since it has to be humiliating for the president of a country to have to beg for jobs from California yuppies, but he did and he succeeded wildly. Intel has committed to creating 200 good new jobs in CR. Sure, this is fewer jobs than CR lost when Intel moved much of its operation to Vietnam, but the new jobs are BETTER jobs. Indeed, while I doubt that Solís has any responsibility for the fewer North Americans in San José–that trend predates his election–I am glad that he isn’t focused on luring those drunks and lechers back. They are a lousy economic development model, unless CR wants to remain a country of bartenders, prostitutes, cab drivers, and maids. The Intel coup suggests that Solís may in fact have his sights set on a better economic future for CR.

Meanwhile, let’s remember that his top campaign promise was to fight corruption, and he appears to be doing this. Moreover, unless CR can get a handle on public corruption, no legitimate business will ever succeed. Battling corruption first is the correct priority.

Time will tell whether Solís will ultimately be bad for business, perhaps because he’s a “liberal government bureaucrat who never held a job in the private sector,” but I tire of this stereoptype. I don’t for the life of me understand why businesspeople believe that they have a better background for government service than anyone else. The two endeavors work very differently and according to very different rules. Then too, if we’re going to use US presidents as our models, what about Dwight Eisenhower? There was a guy who built a career as a government bureaucrat, yet is generally thought to have managed economic prosperity well.

Solís may yet screw up, but so far he’s doing exactly what he promised and in the order that he promised to do it. The sequence also makes sense. There’s nothing wrong with business folks complaining, and they can take their seats next to the cab drivers and others who are also already complaining. However, I’m not seeing much in the business complaints that merit a heartier response than a yawn.

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Matthew Frederick

Someone who gets it, said very well!

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Marcello Costarica

He’s a highly liberal government bureaucrat who never held a job in the private sector, much like Obama the community organizer and leftist junior Senator, I predict he will be a negative for business, growth and jobs.

He has issued promise after promise that he can’t possibly meet with the current revenues Costa Rica takes in, he will resort to high taxation and excess regulation, Costa Rica’s economy will fall because of his upcoming policies.

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Matthew Frederick

Did you not see his recent announcement of Intel hiring upto 1,200 new jobs for the research facility in CR, dam good start as well as the other 4 U.S companies moving to Costa Rica and some already set up and running…

Good start for only being in office for 3 months………

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The new prez has done nothing for business and has shown his lack of business experience. I don´t see North Americans anymore in San Jose and now resorts and hotels are laying off staff because they can´t keep there rooms full. Intel is laying off many and Bank of America and Hewlett packard has layed of lots. The end is near in Costa Rica and there is not much hope for Costa Rican. New Prez does not have a clue to fix anything. I hope Costa Ricans can start picking coffee again thats the only job that might be around.

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