By the A.M. Costa Rica staff

The Chamber of Commerce of Costa Rica has called for fiscal austerity after the government announced that the deficit of 2019 reached 6.96% of gross domestic product. This is the highest percentage in the last 40 years.

According to the chamber, the tax reform approved in July last year had as a main commitment a contraction of public spending and this is not negotiable.

"As it was shown at that time, and it continues to be evident, the increase in the income of the state, coming from the pockets of all Costa Ricans, would not generate more change in the fiscal deficit if spending continues to increase irresponsibly," said the chamber in its statement.

Government salary expenditures continue to exceed 90% of total expenses, reflecting the high cost in wages, salaries and salary taxes, said the chamber.

"This is not only the main trigger for the situation, but it also considerably limits investment in infrastructure, health, education and other social investment," said the chamber in its statement.

In addition to the increase in expenses, the chamber analyzed the increase in loans that the government has had.

The debt has proved not to be such a beneficial path for the country, especially when the advice by international organizations have already been exceeded, said the chamber.

According to the organization, the increase in loans requested by the government from international banks "would continue delaying the taking of important decisions and generate higher pressures in the medium term, especially when economic conditions have changed and loans would be more expensive."

The chamber called on the government to fulfill what it promised, and through responsible spending, reduce the deficit as part of the process of recovery of public finances; " process in which citizens and entrepreneurs have already done by our part."

According to the report on the country's balance, made by the Ministry of Finance last week, the primary deficit increased from 2.32% of gross domestic product in 2018 to 2.78% in 2019. The primary deficit involves the loss in paying direct expenses of the government. The full financial deficit includes an additional 4.18 percent of gross domestic produce that comes from paying interest on loans.

This primary deficit increase, according to the government, was due to:

- Increase in investment in new roads and maintenance of current ones.

- Increase in the cost of the Limón Port Administration Board to finance the restructuring.

- An increase in public education investment.

- Increase in investment in the Development Bank of Latin America to have access to a loan of $500 million to replace debt at a lower cost and better term.

- Loans with other international banks.

- Increase in the cost of capitalizing the Bank of Costa Rica due to the bankruptcy of Bancrédito.

Also, the ministry reported that the financial deficit also increased from 3.52% of GDP in 2018 to 4.18% of GDP in 2019.

In summary, the financial deficit went from 5.83% of GDP in 2018 to 6.96% in 2019, the ministry said in its statement.

The gross domestic product is the sum of all goods and services that were transacted in the country. A good estimate for 2019 is $90 billion, according to past estimates and economic growth.  That means the full governmental deficit was around $5 billion, about $1,253 for each of the nation's five million residents.


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What should the government do to reduce its spending?  We would like to know your thoughts on this story. Send your comments to news@amcostarica.com

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