Costa Rica: There is No Free Lunch

After recognizing the serious liquidity problems faced, the government has announced it will borrow another $1 billion for a hearty lunch that others will pay for tomorrow.

Wednesday, August 2, 2017

The $1 billion that the Central Bank of Costa Rica (BCCR) has been negotiating since May with the Latin American Reserve Fund (FLAR) to strengthen its reserves will arrive in October of this year, according to the BCCR authorities. 

See: "Costa Rica's Economy to Grow Less This Year"

This announcement comes simultaneously with the recognition given by President Solis to the serious liquidity problem affecting State finances. Solis announced that the government "... faces liquidity difficulties in paying its obligations and guaranteeing the operation of essential services." notes that "... among the measures it plans to take in the short term, in addition to insisting that the Legislative Assembly approve the reforms to sales and income taxes, are: 

- Use a decree to put the brakes on budgetary modifications that represent an increase in expenses. The scope of this measure does not affect 95% of the state budget.   
- Put a stop on the purchase and rental of properties for the Government with public resources, except for those buildings destined for infrastructure works. 
- A moratorium not to issue new declarations of public interest that represent tax exemptions. 
- Repeal of the Law to Decrease the Entry of Capital, in order to promote the entrance of investments to the country."

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