Third in a four-part series on Presidential Candidates’ Positions on the Issues
The four major candidates in next month’s presidential election agree that the road to economic recovery in Costa Rica winds around three “I”
words – investment, interest rates and infrastructure. When asked in separate interviews with The Tico Times to define what the country needs to recover from the current economic crisis, all mentioned one of those three issues in the first sentence of their responses.
Though the economic plans of the candidates differ considerably – from Libertarian Movement candidate Otto Guevara’s notion that the national oil market should be opened for competition, to National Liberation Party (PLN) candidate Laura Chinchilla’s hopes for “green jobs” – the consensus response to how to pump up the sagging economy generally pointed to a combination of stimulating and facilitating national and foreign investment and adjusting interest rates.
Of the candidates, it was perhaps Social Christian Unity Party (PUSC) candidate Luis Fishman, currently in fourth place in the polls, who best summarized the opinion shared by most.
“Basically, it’s very simple,” Fishman said. “Interest rates need to be lowered so that the people will begin to invest again and, from that investment generated, the economy will begin to recover.”
Though only Fishman and Citizen Action Party (PAC) candidate Ottón Solís mentioned the need for interest rates adjustments, all candidates alluded to the importance of government and direct foreign investment as vehicles to boost the economy. And, while all of the candidates were united on the need to generate investment, each touted different ideas for how to accomplish it.
On the far end of the spectrum was Libertarian Movement’s Guevara, whose ideas for economic reform strongly reflect the “change” slogan of his campaign.
Guevara criticized the Central America Free Trade Agreement with the U.S. (CAFTA) as too conservative, stating that his administration would push for a “true free trade agreement.”
“CAFTA was not a true opening of the market,” he said. “There are still some things hidden in the closet that would bring in much more investment. The ideas of our campaign are more modern.”
For example, Guevara said, the state-run National Oil Refinery (RECOPE) monopoly should be broken up to allow for competition in the refining and distribution of gasoline and diesel fuel. He also said he supports scrapping the national currency, the colón, and replacing it with the United States dollar.
“In our administration, we would be a government that truly opens a free market, with freedom for business, freedom from limiting taxes.”
Frontrunner Chinchilla took a different approach, using rhetoric similar to that of U.S. President Barack Obama in stating that a key to economic reactivation could be the creation of “green jobs.”
“There has been a strong push in the last few years to create clean energy in the country,” Chinchilla said. “We are hoping to increase the number of employees dedicated to (sustainable) energy. We have some of the best conditions in the world to make this possible; the time and opportunity to create environmentally friendly jobs has arrived.”
Another of Chinchilla’s principal proposals for economic recovery centers on investment in infrastructure and the service industry. Chinchilla said increased investment in infrastructure would provide a short-term remedy for unemployment, which rose to 7.8 percent in 2009, and also contribute to the much-needed construction and repairs of bridges, roads and ports.
Solís also stressed the importance of investing in infrastructure and, of all the candidates, his plans appeared to be the most thorough. Solís said he would propose a 1.9 billion package to improve infrastructure in 10 areas of the country.
Both Fishman and Solís said that lowering interest rates is their highest priority for economic recovery. Both candidates said high interest rates discourage investment in Costa Rica.
Fishman focused on free trade zones and claimed they are being mishandled.
“Investment is centralized in the free trade zones because all of the investment that goes into them is within 20 miles of Juan Santamaría International Airport (near San José),” Fishman said. “If companies were granted a break on interest rates for operating in Limón, Puntarenas or Guanacaste, it would improve investment throughout the country.”
Such incentives were officially put in place last week when President Oscar Arias signed a reform of the free trade zone law. Fishman applauded the reform and said his administration would commit significant energy to encourage companies to operate in the less-populated regions of the country.
Trámites and Tax Reform
Aside from their main proposals to boost the depressed economy, the candidates also voiced criticisms of the policies and perceived oversights of the current administration. Of these, the headaches of trámites – the bureaucratic hoops that those attempting to do business in the country must leap through – and dealing with the current tax system topped the list.
Both Solís and Fishman assailed bureaucratic processes as being lengthy, disorganized and inefficient.
“We will implement an efficient program for the simplification of trámites to facilitate the opening of the cellular and security markets and expansion of private business,” Solís said.
And Fishman mentioned the idea of a digital trámite system, which he said could simplify the current laborious process. In their interviews, Chinchilla and Guevara didn’t specifically mention the need to reform bureaucratic processes, but both said tax reform would be a priority.
“Costa Rica has pursued tax reform for many years,” Chinchilla said. “It is understood that the system needs to be changedand it is one of the important things on our agenda … if we want to invest and put money into things such as infrastructure, we must provide the country a better social standard for which taxes are paid in the country.”
Chinchilla said that her tax reform would center on creating a “progressive tax” to be installed amongst different income tax brackets.
The idea of a progressive tax has also been a pillar of the Solís campaign. In October, Solís told The Tico Times that “The income tax system we have now must become more progressive. The system is currently unfair to poorer people and to those without significant means of income.
They pay too much in income taxes while the rich pay too little.”
Guevara said that he feels the creation of a “flat tax” is the appropriate path to tax reform. With a flat tax system, a fixed percentage income tax rate is applied to all citizens, regardless of income level.