Costa Rica's 2011 Budget

More government spending -> more debt -> more expensive credit and more taxes. The State continues to fatten at the expense of the productive sector.

Friday, December 3, 2010


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Juan Carlos Hidalgo, in his blog at Elfinanciero.com, begins his article calling the 2011 budget approved by the Legislative Assembly as “illegal”. He explains that current expenditures are included as investments, which is specifically prohibited by the National Budget Law.

Hidalgo, project coordinator for Latin America at the Cato Institute in Washington D.C., outlines the consequences expected in the Costa Rican economy and particularly in the productive sectors, by increasing government spending, which grew 14.5% in real terms compared to last year's budget. The amount represents almost 30% of the Gross Domestic Product.

"Increased government borrowing also means higher interest rates because the state monopolizes the credit, leaving less available to the private sector. Just what you the productive sector needs at the moment as the economy flirts to relapse into recession: more taxes and higher interest rates."

More on this topic

Costa Rica to Finance 45% of its Budget with Loans

September 2011

Uncertainty about approval of the tax package in the National Assembly makes the national debt situation unsustainable.

The General Budget of the Republic for the Fiscal Year 2012 was presented by Finance Minister Fernando Herrero, who admitted that 45% of the $11,500 million to be financed will be provided by issuing public debt.

Costa Rica: Public Spending Up 18%, Revenue 5%

June 2010

In the first five months of 2010, the fiscal deficit was $670 million, 86% more than the same period of 2009.

An article in Nacion.com notes that “the deficit accounted for 1.93% of the country’s production. The Treasury expects the deficit to represent 4.8% of the GDP by the end of the year”.

Costa Rica: Measures to Reduce the Fiscal Deficit

May 2010

Finance Minister Fernando Herrero said that "our efforts should be focused on increasing tax income through administrative and legislative measures".

Herrero is working on a tax reform bill, which aims to unify previous projects into one update. Now, through a press release, the minister announced administrative measures: "a renewed effort in collecting the tax delinquent portfolio (which amounts to more than $ 13 million), a more intense audit of high-risk groups from an evasion point of view (liberal professionals, medium-commerce), informal businesses and combating smuggling. "

Fisca Deficit: Mother of All Evil

May 2010

Greece had a 13% fiscal deficit and made the world tremble. Costa Rica’s deficit could reach 10% by the end of 2011.

Heads of households know it well, but authorities sometimes forget: you shall not spend more than you earn; a sacred rule for good management and honesty. Because it’s very easy to spend without reserve on election year, and pass onto the next government a serious problem, one almost impossible to solve without heavy social tension. Just check out what’s going on in the streets of Greece right now.

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