• Costa Rica Coffee Guide

To Spend or Not to Spend? President Seeks Consensus

February 11, 2005

Despite President Abel Pacheco’s years ofexperience as a psychiatrist, he may never havetaken on a more ambitious reconciliation thanthe one he is attempting now between those whowant to spend public funds on social programsand those who say there’s no money to be had.Battles over the country’s fiscal priorities haveassumed a particularly bitter tone here in recentmonths. In January, Social Christian Unity Partylegislator Federico Vargas, who says FinanceMinister Federico Carrillo has underestimated theamount of money available for social programs, toldthe daily La Nación Carrillo is “a little boy whodoesn’t know what he is doing.”President Pacheco scheduled a Feb. 2 meeting withVargas and Carrillo to mediate the growing feud.THE next day, Pacheco continued to advocate unityat the opening of a two-day conference designed to establisha Social Economic Council, which proponents saywill promote dialogue between unions, cooperatives,government officials, indigenous groups, consumers, educators and business leaders.While the outcome of the conflictbetween “the Federicos” – as the legislatorand the minister have come to be called inthe national dailies – and of the new councilare far from certain, it does seem thatPacheco, whose last 15 months in officebegan this week, has his eye on makingimproved communication and consensus apart of his legacy.“They ask how we can achieve this in15 months, but I’m not dying (at the end ofmy term),” he said this week, adding hehopes to continue the national dialoguebeyond 2006.CONTROVERSY surrounding theFinance Ministry’s policies may be themost obvious symptom of long-term conflictover how best to spend public funds.Carrillo is the third minister to head theoffice since Pacheco became President in2002. Carrillo’s two predecessors bothresigned under pressure from public workersdemanding higher salaries, which,according to the ministers, Costa Rica cannotafford (TT, Oct 15, 2004).Similar problems have plaguedCarrillo. In November, the ConstitutionalChamber of the Supreme Court (Sala IV)ruled against the ministry in a lawsuit filedby angry mayors who said Carrillo hadwithheld gas-tax revenues destined formunicipal road repair.Carrillo argued paying the municipalitieswould reduce the government’s abilityto pay interest on the national debt, ultimatelyimpoverishing the nation, but the court’sjustices disagreed (TT, Nov. 19, 2004).THE largest disagreement in recentmonths, one that has been years in themaking, deals with the 2005 national budget,approved in December 2004, and anambitious tax reform.The Legislative Assembly has not yetpassed a tax package drafted in 2002 by agroup of former Finance Ministers seekingto increase government revenues by creatingnew taxes and improving collection ofexisting ones.Pacheco, along with his successiveministers, say the country will collapse ifthe tax plan is not approved.Pacheco reiterated this now-familiarstance at his weekly Cabinet meeting thisweek.“If the rich don’t pay taxes… in four,five, six years the (national) debt will eatthis country up, and it will be finished,” hesaid.LAST year, his second FinanceMinister, Alberto Dent, threatened severecuts from social programs if theLegislative Assembly did not approve thetax plan.While many of those cuts were notincluded in the 2005 budget Dent presentedto the assembly on Sept. 1, 2004, the assembly’sFinance Committee decide more fundswere needed for social spending and redirected¢86 billion ($191 million) away frominterest payments on the debt.Legislators claimed the ministry hadoverestimated the amount to be spent oninterest payments to the tune of at least ¢73billion ($158.7 million)Carrillo told The Tico Times he wouldnot support the redirection of funds andthat the assembly’sbudget is only arecommendationfor the FinanceMinistry, not amandate (TT, Oct.29, 2004).THIS impasseprompted lastweek’s meeting.Participants,who included Carrillo,Vargas, Pachecoand Central Bank president Francisco delPaula Gutiérrez, among others, decided thatGutiérrez would examine the two sides’ calculationsand cast the deciding vote. He hadnot done so by press time.Some observers argue Pacheco’semphasis on consensus has left Carrillo,like his predecessors, out to dry.“The emperor of Costa Rican politicshas disposed, one by one, of his most valuableministers and his most belovedfriends,” columnist Jorge Guardia wrote inthe daily La Nación. “If you go, so toowill the illusion of breaking the fiscal-electoralcycle…. If you stay, you will have tosuffer in silence the rigors of fiscal pressureand accept the humiliation of seeingyourself undermined, again and again.”THE Feb. 3-4 socio-economic conference,entitled “Instrument for SocialDialogue,” brought leaders representing across-section of Costa Rica’s public andprivate sectors to the Hotel San JoséPalacio.Participating groups included theNational Association of Public and PrivateEmployees (ANEP), the SolidarityMovement, the Costa Rican Chamber ofExporters (CADEXCO), the Union ofPrivate-Sector Chambers and Associations(UCCAEP), the National CooperativesCouncil (CONACOOP) and the NationalCouncil of Rectors (CONARE).At the end of the meeting, Pacheco andother participants signed what Pachecorefers to as a “social pact,” a documentproposing the creation of a SocialEconomic Council (CES). The council,which must be approved by the LegislativeAssembly before it can take action, ismodeled after a similar organization inSpain, which Pacheco said this week haseased economic discord there and allowedthat country to “flourish.”THE group would have 36 electedmembers, including 10 from businesschambers; five each from cooperativesand workers’ associations; seven fromunions; two each from development andagricultural associations; one each fromindigenous groups, consumers, schools,public universities and the nation’s teachers;and Pacheco.The goal of the council, according to thepact, is to ensure that “multilateral proposalsand solutions emerge” and to “advancetoward a specific agreement about priorityitems on the national agenda.”The proposal to establish the councilwas not well received by all observers. Anarticle in the daily La República criticizedthe fact that 36 council members wouldreceive a per diem, increasing governmentexpenditures still further.

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