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Costa Rican trade minister cautions against fiscal plan

November 4, 2011

Foreign Trade Minister Anabel González became the latest critic of a fiscal reform plan promoted by fellow Cabinet members, saying on Friday morning that the plan is “very worrying” for foreign investment in Costa Rica. González, a former negotiator of the U.S.-Central America Free Trade Agreement, spoke to members of a fiscal reform commission in the Legislative Assembly. Several commission members support the tax overhaul, which includes increased taxes on companies setting up in Costa Rica’s free zones after 2015. González is the first member of President Laura Chinchilla’s cabinet, who designed the plan after negotiations with opposition lawmakers, to speak out against the reform package.

“For an investor, stability in a country′s legal framework is very important. It provides confidence for investments not only in the short term, but for future investment planning in the country,” González said. “A change in the current legislation could put further investment at risk, which is a very worrying prospect for the country’s economic sector.”

As Gónzalez spoke, employees of Panduit, a technology firm located in a free zone in the Central Valley town of Grecia, broke out in applause. Panduit and other foreign companies located in free zones, including microchip manufacturer Intel and HP, oppose the reform, mostly because of new taxes. Companies currently operating in free zones enjoy significant tax benefits.

González said the approval of the current version of the plan could weaken the country’s competitive advantage over other countries.

“Competition to attract foreign direct investment is very strong,” González said. “By establishing the attractiveness of our country’s offerings, we are giving companies a reason to consider other countries for investment.”

Lawmakers are expected to vote on the fiscal reform package in December.

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