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Published Tuesday, July 14, 2020

Government preps to
face economic crisis

By the A.M. Costa Rica staff


The government announced its plan to "save the country from the economic pandemic."

According to President Carlos Alvarado, the crisis has not ended and will not end in months. He called for acting together, because many lives, health and the economy are in the balance.

"This is a resistance fight that demands a lot of responsibility, a constructive attitude and patriotism," Alvarado said.

The International Monetary Fund, IMF, projects that the average decline in the economy in Latin America will be 9.4 percent loss. Although Costa Rica has a projected lesser economic loss than the regional average, "the punch will be very hard," said the government in its statement.

It is expected that in the country economic production will decrease, affecting employment and government income to meet its responsibilities. Income taxes are estimated to be reduced by almost 3.3 percent of Gross Domestic Product, the government said.

The following are recommended actions, according to the government, to help cope with the economic crisis:

Reduction of public spending. On Monday, the Ministry of Finance presented to Congress the proposal to reduce public spending, also called government spending, by around 1% of GDP. These cutbacks in spending will not affect social assistance programs and the so-called big investments.

Loans with international banks. The loans, after being approved by Congress, would help with the country's economic stability, cover government expenses and refinance the debt that the government already has to pay.

According to Alvarado, these loans are not new debts. “These are a way to remove expensive debt for cheaper debt for Costa Rica. It is similar to what a person does when they rearrange his debts, to have better interest rates or better payment conditions.”

International loans would solve government finances and stability for this year. For this reason, Alvarado asked Congress to approve the international loans to finance the country.

A loan with the IMF. If Congress approves a loan of $504 million with the IMF, it will allow a financial agreement, known as "Stand-By Arrangement" or SBA, essential to maintain the country's economic stability in the coming years.

Taxes. According to Alvarado, the government will try to avoid new taxes, especially for the most humble people. However, if the pandemic forces the creation of more taxes, these would be applied to the groups with the highest wealth, "from a solitary vision, and trying, at the same time, not to affect the production."

Incentives for national production. Among the projects to support national production, the Electricity Institute would reduce electricity rates.

Also, the public employment reform plan is under review in Congress to make hiring employees faster and more transparent.

Another type of production support would be developing infrastructure on roads, bridges, schools, aqueducts and hospitals. It will create more jobs and improve production.

According to Alvarado, with the unity of all sectors of the country, the pandemic could be defeated. "Only together can we succeed in peace, solidarity and democracy."








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What other action should the government take to improve the production of companies during the economic crisis? We would like to know your thoughts on this story. Send your comments to news@amcostarica.com

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