Company In Problems Raises Owner's Salaries

While the "owners" of the "business" of the State of Costa Rica -public employees - are raising their salaries by at least 4%, their "workers" - the private sector - , were given an increase of 2.35%.

Monday, July 21, 2014


As if they lived on Mars, two senior level officials in the government of Costa Rica, the Deputy Ministers of Finance and Labor stated that there will not be any problem with adjusting the salaries of state officials at a percentage that will offset previous inflation - 4.14% - arguing that the increased expense "falls within the available budget."

The Costa Rican government has a growing fiscal deficit. Its expenses are a lot more than its income, and if not contained, these rising costs, especially that of the state payroll, will increase the "pressure on interest rates, thus affecting the growth of production and employment generation. In addition, an increase in the fiscal deficit would boost aggregate demand which would put pressure on inflation at the expense, expressly, of all wages, including those that they are now attempting to protect."

Moreover, as noted by the editorial, "Focussing on the wage adjustment of the public sector solely through the prism of 'budget availability' is wrong, inappropriate and contrary to the reality of wages of state servants. It is wrong because the existence of an expense item in the budget does not mean that resources are there in the revenue coming in. There is no such budget availability. In the case of the central government, there is a revenue shortfall of around 6% of gross domestic product (GDP) in 2014, with the potential to increase in 2015 if measures are not taken to prevent it. "

As imposed by the basic criteria of a healthy economy, no company, nor the state, can steadily spend beyond what their incomes allow. And even in terms of a collectivist economy is terribly unfair that when things go wrong, the cost is assumed by only one sector of society, the private sector, while the public sector wrapped in the aristocratic concept of "acquired rights" tries to keep living the high life.

More on this topic

A Country Corseted by the Privileged Few

September 2016

The 2017 budget drawn up by the government of Costa Rica is the result of an arithmetic exercise, where the political will of the Solis administration has barely reduced maintenance and has increased privileges in the dominant state corporations.


Costa Rica as Seen by the OECD

June 2016

The organization says there is an urgent need to raise revenue and reduce expenses, "including the public sector wage bill, which is growing rapidly."

The report "Economic assessment of Costa Rica 2016" by the Organisation for Economic Co-operation and Development (OECD) highlights the fiscal problem as the main challenge for the country on its way towards accession to the bloc. 

Main challenges and key recommendations for 2016-17:

Tax revenues are low and spending is increasing rapidly, pushing public debt to high levels. Public administration is highly fragmented and the Ministry of the Treasury has limited control of the total public expenditure.

Reducing the central government deficit by 2% of GDP during 2016-17 and then an additional 1.5%, approving and implementing the proposed tax reform, combating tax evasion, removing tax exemptions that have no economic or social justification, and containing expenditure growth.
Introducing a medium-term fiscal framework with a clear and verifiable rule for expenses.
Improving efficiency in public spending by strengthening the authority of the Ministry of Finance to control overall public sector spending and introducing a results-based budget.

Read full report "Visión General Costa Rica 2016" and "OECD Economic Surveys: Costa Rica 2016"

Fiscal Crisis: Children and Stepchildren

April 2016

As in old fashioned patriarchal homes, if there must be suffering, the first to suffer are the stepchildren, and only afterwards, if necessary, the legitimate children.


The announcement by the Solis administration that it has a plan B in case it does not manage to get legislative approval for the proposed tax increases designed to address the serious and growing fiscal deficit, highlights the existence in Costa Rica of first class citizens and second class citizens.

$2 Billion Deficit in Costa Rica

December 2012

In November, the balance between government revenues and expenditures showed a deficit equivalent to 4% of GDP.

In November the government deficit amounted to $ 1.82 billion, or 4% of the gross domestic product (GDP), the same level as in 2010. Nevertheless, in 2010 the shortfall was lower, at $ 1.52 billion.

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