Last June the government relaunched its economic recovery strategy with the intention of generating economic growth and reducing unemployment, which already reaches 11.9% according to data from the National Institute of Statistics and Census (INEC). Some of the measures taken include the reduction to 12% of the legal minimum reserve; the Central Bank also lowered the Monetary Policy Rate to one of the lowest levels of recent years, so that the active rates for credits go down gradually.
In addition, they announced the creation of the National Employment Agency, which would start operating in 2020. In addition, they announced the simplification of procedures by the National Technical Secretariat (Setena) for projects with low environmental impact to complete processes digitally, more expeditiously than previously.
Recently, an important reduction of more than 10% in the electricity rates of the subscribers of the Costa Rican Electricity Institute (ICE) was announced. Initially, it was presented as a reactivation measure, but it was not true, since the rebate corresponded to a temporary issue.
And finally, so far, the government proposed salvage loans, a project in which state banks provide credit options to highly indebted Costa Ricans. However, analysts believe that with this proposal the country is still far from reactivation and this only reflects the populism of the Alvarado administration.
Have they been enough? Legislators, business sectors, economists and analysts say no. German Morales, Managing Partner of Grant Thornton mentioned the four areas in which the government has to emphasize its actions to achieve an improvement in the economy of the country.
1. The level of unemployment:
It’s the most drastic problem we have as a country,”
Morales said. According to him, the route in this area should be to streamline credit processes for new small businesses, as well as knowing how to provide good support for them to remain stable. He also clarified that encouraging the construction of public works is important because it generates jobs for people with both high and low schooling, in addition to adding value to the country.
2- The increase in public services:
The cost of services such as electricity makes the country unattractive to investors, since the bill is very high. An example of this are the 254 people in Cartago who lost their jobs after the Vicesa company decided to move one of the furnaces to Guatemala, because in the country the cost of electricity is 46% more expensive than in Guatemala. In this line, the expert mentioned that options should be sought to create clean energy with lower costs, as well as reduce the price of fuels.
3- The level of consumption:
People are actually buying less due to financial uncertainty, however, measures such as salvage credits are not sufficient or efficient, because they ultimately create more debt, Morales explained. He added that projects such as giving people their pension savings fund is not convenient, as the economy may be reactivated for a few months, but it would be somewhat spontaneous, when that money runs out, the economy would fall again; citizens would run out of money and won’t have savings.
4- Compliance with the Tax Reform:
Morales said it is essential to comply with the recently approved Law on Strengthening Public Finance, without exceptions.
I count on the fact that a minister (from the Treasury) will come to take the necessary measures, in the line of Mrs. Rocío Aguilar, who will pretend to follow the pending task,”
he concluded.