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Business pulse

Energy prices and politics weigh down business confidence, Costa Rica private-sector survey notes

The halls were decked with lights and wreaths at the offices of Costa Rica’s Union of Private-Sector Chambers and Associations (UCCAEP), an organization that represents over 40 national businesses, but there was little holiday cheer in the group’s latest business survey. Over 60 percent of businesses surveyed in the report said that they did not plan to hire any new employees in 2015, according to results released Wednesday.

The business confidence rating continued to drop during the third quarter compared to the same period since 2011. The outlook for the fourth quarter was relatively stable compared to the same period in 2013 but did not break the downward trend seen in previous surveys. More than 60 percent of respondents said that they have seen a significant increase in their cost of doing business, especially the cost of electricity and fuel.

If it were up to the survey respondents, the Legislative Assembly and the president would both get coal in their stockings for poor performance tackling these issues. Some 73 percent of respondents opined that authorities were not taking sufficient action to curb the rising cost of electricity in the near future. Sixty-four percent said that authorities are not taking sufficient steps to “reactivate” the national economy.

“We’re concerned about the loss of confidence in the sector, because without confidence there’s no investment, and without additional investment it will be impossible to create the jobs this country needs,” said UCCAEP President Ronald Jiménez. The survey showed that 63 percent of respondents felt that it was not a good time to make new capital investments.

See also: Ex-President Óscar Arias says the country is on the wrong path

Job prospects for unskilled labor did not look positive from the survey. Twenty-eight percent of respondents said they planned to lay off employees before the end of 2014 with the planned cuts consisting mostly of unskilled and semi-skilled workers. Luis Mesalles, UCCAEP treasurer and economist, stressed that this is another sign that the government needed to continue improving high school graduation rates and technical training to keep Costa Rican workers relevant to the current economy and improve the country’s competitiveness.

Mesalles said that Costa Rica’s deficit and lingering questions about the 2015 budget, which the Constitution requires lawmakers to pass by Thursday, was one of the main causes of uncertainty in the business community.

“If nothing is done to address the budget — making cuts, generating new sources of income or better use of public funds — interest rates are going to rise, the country’s sovereign debt rating will fall, and this would pave the way for an important fiscal crisis if we do nothing,” the economist said.

UCCAEAP surveyed 460 business managers and owners from small, medium and large companies between the last week of October and the first weeks of November. The survey has a margin of error of +/- 5.6 percent and a confidence level of 95 percent.

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Jim Ryan

There is a war being waged at ARESEP/MINAE with respect to energy policy. Specifically, this is a critical time for Costa Rica to define its policies with respect to small-scale, private power generation (typically solar generation). On the one hand the government authorities espouse policies promoting carbon neutrality, sustainable development, etc. Certainly consumers are crying out for relief from record high electricity prices which damage the competitiveness of both families and businesses.
But the actions of government authorities are aggressively contrary to promoting ‘auto-generation’, ie the ability of consumers to use our abundant natural resources to generate part or all of their power requirements. And sadly, there is very, very little public awareness of this policy war, which is a highly bureaucratic process being conducted at the ARESEP regulatory office. But I think if the average Tico business or homeowner, or person concerned for their nation’s economy or environment understood what backward policies are being advanced by ARESEP, they would be appalled.
ARESEP, the agency which is charged with protecting consumers, is instead boldly protecting the powerful/influential electricity distribution companies, who are vehemently opposed to any consumer having the right to generate their own power (rather than buy expensive ARESEP approved tariff priced power). It is astounding that the ARESEP is acting in such an obviously biased way, directly damaging the consumer’s interests, and for the benefit of the distributors.
It seems so apparent that the ARESEP is acting contrary to consumer’s interests, and contrary to the nation’s stated policies of promoting renewable power generation, that the only solution seems to be if an official such as the Minister of MINAE or his Energy Director, or one of President Solis’s close advisors on environment and economic issues, made a bold political move and became a champion of the consumer and took a stand against the ARESEP’s misguided actions. Someone should be trying to hold ARESEP accountable for the damage they are doing, and the appearance of being a puppet of the electricity distributors.
Ask yourself, why are Panama, Guatemala, El Salvador, and even Honduras announcing large advances in the investment in solar power generation projects, BUT NOT COSTA RICA. Something is terribly wrong at ARESEP…..and I hope desperately that some powerful government official will exhibit the leadership required to correct the situation, or at least bring the public’s and media’a attention to this war. And in so doing. hopefully mitigate the electricity companys’ abilities to wield such powerful influence at the ARESEP.
Thank you for your attention.
Jim Ryan
ASI Power & Telemetry, S.A.

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Thanks for your excellent insight Jim. You are very right. Unfortunately the propblem is simply institutionalized corruption. The Oligarchies have taken control of industries for their own personal enrichment. This is simply about payoffs taking place behind closed doors. This country needs to incarcerate public officials. It is simple. Having a lead prosecutor like Jorge Chavarria is also a contributing problem. He is part of the “family”. He will NEVER go after the players involved. He was put into his position to ensure impunity. This corruption is widespread, and the PLN Oligarchs like Arias are now speaking out…making statements publicly about how President Solis is on the wrong track. President Solis is on the correct track, but just as Obama has had to face, he is fighting entrenched powers. It is sad. These Oligarchs have caused a major financial crisis in Costa Rica. It will become very bad before it can become better. Improving the atmosphere is contingent on one thing. Put government criminals in prison and break up this patronage system. Jorge Chavarria began his career with investigating La Penca. He never solved it! And his career has progressed from there in rank, but in actuality he has been a major detriment to this society. Now we are all paying for it. Remove Jorge Chavarria and put a real prosecutor into place. Someone who will go after these government criminals…otherwise the future of Costa Rica will be just more of the same.

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