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Costa Rica’s Fiscal Death Trap 


By Sofía Guillén

In July, Labor Unions in Costa Rica presented the President a proposal for an alternative fiscal reform.

The first contact was held at the Presidential House. I was there and helped build the delivered text. They were initiatives to start the dialogue.

The proposal had 2 parts:

PART 1. Changes on tax evasion and tax fraud, suggestions to fight corruption, tax reform that would help reduce poverty, fight customs fraud and offered changes in economic policy to give the economy a kick start.

PART 2. Decrease spending by political parties, limit expenses on subsidies to government workers, request temporary contributions to businesses such as casinos and eliminate pensions given to former presidents.

We shook hands, gave hugs and said goodbye. The answer given by the government days later was “thanks but no thanks”.

The Table and the End of the World

After a national strike began, a dialog group was set up between the government and labor unions delegations.

Neither the Presiddent, Carlos Alvarado, not the vice president Piza, attended. There were members of the Labor Unions and the Catholic Church as mediators.

This group’s goal was to establish the conditions to open an official line of dialog.

We spent hours participating in meetings that went until 2 or 4 in the morning trying to agree on the terms. I participated as an advisor.

The government insisted on seeing substantive issues at once. The Labor Union Movement demanded that the government party committed its votes in Congress so that what was agreed there would not remain in the air.

The Trade Union Movement proposed that the text be archived, but the Costa Rican government refused due to “lack of time”.

Then the Movement proposed that procedure 208 be modified to open a window that would allow any agreement obtained in the meetings to be presented as official.

The Costa Rican government refused because of “lack of time”.

The government presented October 23, as the deadline for the process to be completed.

On October 23, the text must be approved!, said the government.

That is the reason why it refused to open the window – hence the rejection of the Movement to the proposed agreement.

On November 25, the world is not over, the 3-day window requested by the Social Movement would have given time to spare and this story would have ended with a more balanced and consensual reform.

But, there was no time.

The Lock

In the following days I realized that the democracy in which I thought I lived had turned out to be deaf and violent.

I certify that I am a witness that the Trade Union Movement was not allowed to enter Congress to speak with Congressmen and women to negotiate proposals.

Entry to the main building was forbidden!

I worked in Congress before. There, powerful economic sectors lobby without restrictions. But to the thousands of people who went out to the streets, it was off limits.

Then came the decision by the Constitutional Court, that found no wrongdoings in the process in which Congress approved the fiscal package.

And now? To meditate

Without the resistance of the people on the street there would be less than 22 votes against the fiscal package

Without resistance, the argument would not have existed and God knows what they would have already approved.

Without resistance, so many different sectors would not have joined ideas and efforts.

Without resistance, people would not know today that basic items such as milk, bread and eggs will be taxed.

To whom the expression of “mortals” is annoying, understand that “the approval of the fiscal package means a 1% tax increase on basic goods, which will affect the poor the most.

The government will continue to borrow. Its representatives have already said so.

The problem of the deficit will not be solved and the snowball will continue to grow.

That is why the resistance must survive in our hearts and be reflected in our actions.

Sofía Guillén is an Economist, graduated from University of Costa Rica (UCR). She is a Research Assistant in Innovation at the International Economic Policy Center of the National University of Costa Rica (UNA).

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