Confidence still shrinking in central government

As the central government plans to present legislation to raise taxes, the private sector is circling the wagons.

Business leaders appear to have lost confidence in President Luis Guillermo Solís and his team.

The concern spilled over the legislature Wednesday when opposition lawmaker Sandra Piszk Feinzilber noted that foreign direct investment declined 20 percent from the second half of 2013 to 2014 and the exports dropped 18 percent from the first two months of 2014 compared with the same period in 2015.

In dollars that is a decline in investment of $261 million and $320 million in exports, she noted.

Observers have said that when the Ministerio de Hacienda submits proposed bills it will be to a fragmented legislature. Solís does not even have the full support of his own party to engineer approval. Many wish to see dramatic cuts in the central government. A long legislative battle is predicted.

The national budget is nearly half borrowed money, and although there has been some improvement in generating government income, the monthly deficit still is large.

The government is embarking on a campaign to show that the new taxes are needed. The major credit rating agencies of the world are believed to support higher taxes.

Wednesday the Cámara de Comercio de Costa Rica  released a report of its survey of members and said that the index of confidence in the economy had dropped to the lowest point since 2010.

The chamber also cited statistics from the Caja Costarricense de Seguro Social that said new jobs were 1,135 in 2014, a drop of 80 percent from the year before.

The chamber survey report said that only 19 percent of the member firms plan new investments in the next six months. About the same number expect to add employees.

The criticism was not confined to the executive branch. Some 68 percent of the firms surveyed characterized the work of the Asamblea Legislative as bad or very bad, said the survey.

Part of the concern is that Intel Corp. has begun laying off workers in anticipation of moving its chip production facility to Vietnam.

Sport fishing operators on the Pacific report they are losing customers because prices here are much higher than in adjacent countries. Other tourism operators have said the same.

Meanwhile, lawmakers are considering a bill that would legalize the deal the central government made with tourism operators when it decided to levy five years of back sales tax on their operations.

The deal is to phase in the sales tax and ignore the back taxes, which no one knew about in the first place.

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