IDB President: Ticos Will Benefit from Competition
By Fabián Borges
fborges@ticotimes.net

During a one-day visit to the country last Saturday, Enrique Iglesias, president of the Inter-American Development Bank (IDB), commended the government on its efforts to reduce the fiscal deficit and promote transparency in the negotiations for a Central America Free-Trade Agreement with the United States (CAFTA).

He also spoke in favor of eliminating the government's public-service monopolies, which he said hurt consumers.

"We respect the way in which governments administrate the companies that provide public services and have no doctrinal position on whether these institutions should be public or private," Iglesias told reporters. "However, we do believe in the need for efficiency in every branch of government, particularly public services. Experience has shown us that competition improves efficiency. Inefficiency is an unfair tax on the poor."

The announcement comes two days after Costa Rican and U.S. negotiators met privately in Houston, Texas, to discuss potentially opening certain sectors of the country's telecommunications market.

During the meeting, U.S. officials requested access not only to Internet and cell-phone markets, but also electricity, insurance and hydrocarbons - all of which are currently controlled by public monopolies.

Since U.S. Trade Representative Robert Zoellick visited the country last month and hinted Costa Rica could be excluded from CAFTA if it insisted on excluding its monopolies from the trade negotiations, the government gradually has been softening its position.

President Abel Pacheco, who at first refused to discuss the issue and later agreed to talk about it, said on Saturday the country was willing to sit down and negotiate "everything".

"We're willing to discuss every issue. There's nothing wrong with negotiating," Pacheco said Saturday. "We'll discuss the options with every group. The country's interests must prevail."

As part of his visit, Iglesias also met with members of Pacheco's economic team and Congressional leaders to get their view on the state of the economy.

Iglesias commended the government for imposing strict austerity measures at public institutions and managing to reduce the central government's deficit (excluding the Costa Rican Electricity and Telecom Institute (ICE) and other autonomous institutions) from 4.2% in 2002 to an estimated 2.8% this year.

"The country is doing well. It is administrating the present and preparing for the future," Iglesias said. "The present looks bright. Costa Rica will grow 5% this year, compared 1% for the rest of Latin America. The country also is preparing for the future and taking steps to overcome underdevelopment. Committing itself to fiscal discipline and negotiating a free-trade agreement with the U.S. will help do just that."

Finance Minister Alberto Dent used the meeting as an opportunity to again stress to Congress the "urgent need" for a new Tax Plan to increase government revenues. Congress has been studying the bill for the last three months.

Iglesias also announced the Inter-American Development Bank's board of directors was "very close" to authorizing a $350-million loan to help the Costa Rica improve its competitiveness and prepare to meet the challenges that will arise as a result of CAFTA.

The loan would be used to improve the country's infrastructure and regulatory agencies and to provide small and medium businesses with technical assistance to help them adapt, survive and thrive under the increased competition likely to develop if CAFTA goes into effect.

"It is a great privilege for the bank to work alongside Costa Rica on this kind of project," he said. "This is a pilot project. It is the first time we specifically help a country prepare for a free-trade agreement. Costa Rica is a great testing ground for these types of projects."