Businessmen Concerns in Costa Rica

The slow opening of the telecommunications market and the exchange rate are key factors in the decline in business confidence over the previous quarter.

Thursday, December 9, 2010

• Perception and business confidence down for the second consecutive semester
• UCCAEP urges a national agenda to boost productive activities

Most businesses continue to show caution according to the most recent Trust Perception Index, measured by the most recent "Business Pulse" of the Costa Rican Union of Chambers and Associations of Private Business Sector (UCCAEP).

"The fall in perception indicators and business confidence should be an attention call to authorities to show positive signs with a short term project agenda and actions which promote development of productive areas in order to reactivate confidence in the local business community," said Manuel H. Rodriguez, president of UCCAEP.

Comparing Perceptions Indexes for the second quarter of 2010 the index indicates a decrease of 2% from 5.07 to 4.98 and places the flag below 5 driving entrepreneurs to express their disappointment while comparing to the months of April, May and June.

This decline in business sentiment coincides with the decline shown by the Monthly Index of Economic Activity (MIEA) calculated by the Central Bank, which declined by 3.4% over the previous quarter.

Meanwhile, in analyzing the business confidence indicator, which points to expectations by business owners during current quarter (October, November and December),it shows a decrease of 1% settling at 5.5, bringing the indicator to six months of deceleration since it has been dropping since July.

Data from the survey revealed that the most pessimistic sector is tourism, which compared to previous quarter fell 24% in the confidence indicator and is located at 4.5 versus 5.9 from the previous quarter.

In the construction sector entrepreneurs produced a trust indicator of 4.3 compared with 5.2 shown during the third quarter of 2010, down 17%.

This slowdown was also noted in exports, production and domestic sales which undermine business confidence.

The President of the Union of Chambers said that the trend shown by the UCCAEP survey indicator should appeal to the country to fly in the path of development and economic stability.

The productive sector considers it essential and urgent for authorities to promptly send clear signals about the actual opening of the telecommunications market.

Likewise, the government should activate the loan to Puerto Limón City, which was approved over two years ago and works in the city of Limon have not yet started. It is imperative to improve infrastructure making use of international resources the country has access to for this purpose and also the implementation of public works through trusts instruments.

Special Questions

One of the concerns of the business sector is the exchange rate policy thus business owners were asked about the exchange rate and the convenience of Central Bank reducing the margin of the bands in which the exchange rate fluctuates.

In this regard, 56% of employers said they should change the bands in order not to undermine the country's competitiveness. Similarly, 44% of respondents said they might be interested in obtaining exchange rate coverage contracts.

Another priority for the business sector is the future of the energy market. Business owners were asked what measures the country should adopt to prevent future blackouts. The three main responses were based on the need to incorporate all sources of energy production, increase investment and allow private participation.

For this reason, UCCAEP has made a call to National Assembly members to legislate for an energy bill which would allow for the development of a competitive electricity market, based on renewable energy, ensuring competitive prices, quality service and universal access as well as promoting sustainable economic development by regulated competition.

The Quarterly Survey of Business at the Union of Chambers, which started eleven years ago, aims to explore the views of the productive sector on behavior of key variables such as production, domestic sales, exports, employment and the overall business situation.

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