In this regional context of economic crisis, falling fiscal revenues and increasing public debt, Costa Rica's debt level is expected to rise to 75% of GDP by 2021, and in the case of El Salvador, the indicator could exceed 85%.
The outbreak of covid-19 in Central America forced the government to declare severe household quarantines and to restrict several economic activities, restrictions that in some cases are still in place after five months of health and economic crisis.
The Guatemalan Chamber of Commerce opposes the special tax scheme for agricultural activity approved by Congress, arguing that it is unconstitutional and violates the principles of tax equity.
The new fiscal regime for agriculture, approved last September 24 by the deputies of the Congress of the Republic, has been surrounded by controversy, as from the beginning the chambers of industry and commerce expressed their opposition.
The Guatemalan Congress approved a bill that contemplates the creation of a special tax regime for agricultural activity.
Although this bill was involved in controversy days ago, as the chambers of industry and commerce expressed their opposition, Congress decided to approve the bill. See full bill.
In Guatemala, the chambers of industry and commerce oppose the bill that proposes to create a special tax regime for agricultural activity.
The project "Law on Simplification, Updating and Tax Incorporation", which has been in Congress for more than two years, was scheduled for final discussion until September 10. See full bill.
Arguing that the economy reports stable growth, and that a prudent management of monetary and fiscal policy has been made, the agency decided to maintain in Ba1, with a stable perspective, the country's credit rating.
The low fiscal deficit caused by strict controls on public spending and reduced indexes of public indebtedness, as well as a demonstrated economic resilience to extra-economic events, are other of Moody's arguments.
Insufficient resources to finance public spending and the accumulation of outstanding tax credit repayments are some of the problems that the government will face in Guatemala in 2020.
According to the Central American Institute of Fiscal Studies (Icefi), the new government should make an important effort to improve the effectiveness of the Superintendence of Tax Administration, since the percentage of non-compliance with Value Added Tax (VAT) has been growing since 2012 and the percentage of income tax and other taxes is unknown.
Between 2014 and 2017, the fiscal deficit increased to an average of 1.4% of GDP, and for this year the authorities plan to end at 1.6% and in 2019 it could increase to 2.5%.
Representatives of the Ministry of Public Finance informed that some of the increase in the fiscal deficit foreseen for next year will be caused by the fact that the General Budget of Income and Expenditure of the State for Fiscal Year 2019, which will ascend to $11,390 million, will allow assigning more resources for infrastructure maintenance.
Up to August, the external and internal public debt amounted to $18.463 billion, equivalent to 23.4% of the country's Gross Domestic Product.
According to figures from the Ministry of Public Finance, in the last nine years the debt to GDP ratio has slightly varied, between 23.3% and 24.8%.
Regarding the country's indebtedness level, Abelardo Medina, senior economist at the Central American Institute of Fiscal Studies, said to Dca.gob.gt that "... It is interesting to note that, although Guatemala reports the lowest level of debt in the region and one of the lowest in the world, the evaluation given by risk rating agencies does not reach investment level. This is a product of political instability but, especially, it is due to the limited size of its fiscal revenues."
Exporters resent the effects of five continuous days of demonstrations, blockades and widespread insecurity on the roads of Costa Rica.
Before the strike, which was started a few days ago by unions representing the country's public institutions, the Chamber of Exporters of Costa Rica (Cadexco) denounced the fact that companies in the sector are facing multiple difficulties in exporting their products.Puerto Moín, the main outlet for exports, is onlyoperating six hours a day, leaving close to 12,000 tons per day unable to be shipped, which is estimated to be equivalent to almost $10 million in daily sales abroad.
"Public debt in terms of simple average for the Central American region will continue growing, reaching 43.1% of GDP in 2018, after having registered 42.5% in 2017."
The Central American Institute of Fiscal Studies (Icefi) estimates that for the current year the size of public expenditure of the Central Government in relation to the respective Gross Domestic Product of each country will be 21.4% in Costa Rica, 20.4% in El Salvador, 20% in Honduras, 18.4% in Nicaragua, 17.6% in Panama and 12.1% in Guatemala.
Like lemmings running towards a cliff, Costa Rica repeats the kind of actions that underscore the definition of a society incapable of stopping on the road to a terminal crisis.
During the first quarter of the year, the country's trade deficit totaled $1.614 billion, which is 9% higher than the $1.479 billion reported in the same period in 2017.
The Banco de Guatemala reported that as of March 2018 "... The total amount of General Trade exports stood at US $2.8598 billion, lower by US $48.3 million (-1.7%) than the amount registered in March 2017 (US $2.9081 billion).The most important products according to their share in the total value of exports were: Articles of Clothing with US $346.3 million (12.1%); Sugar with US $249.7 million (8.7%); Bananas with US $196.0 million (6.9%); Coffee with US $191.2 million (6.7%) and Cardamom with $146.8 million (5.1%).These products represented 39.5% of total exports."
In the view of Fitch Ratings, despite the high level political noise of the past three years, economic growth has proved relatively resilient, supported partly by favorable external U.S. demand and strong worker remittances flows.
From a report by Fitch Ratings:
Fitch Ratings-New York-17 April 2018: Fitch Ratings has affirmed Guatemala's long-term, foreign-currency (LT FC) Issuer Default Rating (IDR) at 'BB' with a Stable Outlook.
In one of the regions that receives the least amount of taxes in the world, the tax burden remained relatively stable in 2017.
From the section Fiscal Outlook for Central America, from the report "Macro-fiscal Profiles: 9th edition", by the Central American Institute of Fiscal Studies (Icefi):
In 2017, the fiscal trajectory of countries in the region remained relatively constant with respect to what was observed in 2016.The following are highlighted as policy orientations: a) lack of political agreements, which transformed into a real impossibility of increasing tax revenues through tax reforms or strengthening the administrative capacity of tax administrations, and b) implementation of austerity programs, which in several countries had a greater impact on capital expenditures, in order to avoid an increase in the fiscal deficit and public sector debt.
Citizens are less than two months away from going to a ballotage to elect a new government without having discussed the country's priority issues, even though some of them require urgent attention and a deep national discussion in order to find a solution.
español
8280
