Home Uncategorized Financial problems and protests in Costa Rica – What happened?

Financial problems and protests in Costa Rica – What happened?

by rpetersen

Costa Rica erupted in protests in part due to the announcement of the government that they needed to raise taxes to cover the budget shortfall.

The financial mismanagement and the waste in Costa Rica go way back and even before Covid-19 hit in Costa Rica we already had an unemployment rate of 15.7%.  The economic effects of Covid have now jumped to  23.2% and it accelerated the financial pressure on the economy.

The government does not generate enough money to cover the 2020 fiscal budget. 

As such the President proposed making up the difference by increasing taxes and only making minimal cuts to government spending.  

Costa Rica had already had a tax increase in 2019 with the Law to Strengthen Public Finances and that increased the tax burden on every part of the economy. 

Despite that tax increase, the deficit continued and hence the new call for more taxes.   That request was met with people getting organized and taking to the streets to protest any new tax increases. 

Costa Rica has 320 government institutions for 5 million citizens.   That is the same population as cities such as Boston or Houston in the United States.   These institutions tend to be buplicative and inefficient yet the government refuses to make any cuts or changes.    The demand of the protesters are that the government back down from increasing taxes and not cater to the re structuring demands of the IMF and the OECD.  

 

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