We will experience "dire consequences" for the fiscal crisis, young people will be the most affected, warns the OECD

The Organization for Economic Co-operation and Development (OECD) warned that Costa Rica would face "dire consequences" if it did not act now to avoid a tax crisis of which fuengo languages ​​are already present.

Alvaro Pereira, head of the OECD Economic Division and former Minister of Economy and Employment of Portugal, was the spokesman. He visits the country to badess, in meetings with senior executives of the executive branch, Costa Rica's progress on fiscal sustainability.

Pereira and Alberto Barreix, expert adviser on tax issues of the Inter-American Development Bank (IDB) this Thursday at the Blue Castle, seat of the Presidency of the Congress, on the "inevitable challenge" that Costa Rica faces in matters tax.

"If it is not approved (tax reform) and if there is a crisis, the street will not forgive that an opportunity is going to be lost (… ) People on the street do not understand this because (state) debt at high levels can affect their lives. "

" We must remember the youngest in the 80s when the financial situation was Serious, the consequences are terrible and the youngest will be the most affected by a fiscal crisis of the same proportion, "he said, referring to the crisis that he has known. Costa Rica during Rodrigo Carazo Odio's government (1978-1982) produced high public deficit

The OECD expert claimed that, due to the government's debt level, the country can not further delay the approval of the tax reform: "A year ago, I visited Costa Rica and I said that they were playing with fire. is already there and it's time to act. "

As he explained, public debt is becoming more expensive and will continue to increase if urgent action is not taken , which will affect the competitiveness of Costa Rican companies in foreign markets, because access to credit will be increasingly expensive, between two and three percentage points above the fiscal deficit, due to rising interest rates.

Pereira put his own country: Portugal. a fiscal crisis that did not stop in time, this European state had to deal with unemployment of 12% because companies could not cope with the rising cost of debt when the government had to make a tax adjustment equivalent to "For its part, Alberto Barreix, of the IDB, pointed out that one of the biggest risks of Costa Rica was its internal indebtedness, where the C" was an absolutely horrendous situation " Social Security (CCSS) is the main holder of state bonds.

"If the government goes bankrupt, it will lead to a bankruptcy of the bank and will also violate social security," he said. he warned

According to the Central Bank of Costa Rica (BCCR), last April, the CCSS held government bonds of the order of 1.8 billion euros. Fund becomes the largest single creditor of the Department of Finance.

In the meantime, the IDRC, Barreix, regretted that, last year, tax collection decreased by 1.9% and that Costa Rica is below the Latin American average for the collection and sale of recipes. spending on public employee salaries increased from 19% of the budget to 26% between 2007 and 2017, while transfers increased by almost 100%.

Pereira called for the country to turn its sights on sensitive indicators such as central government debt, which is about to hit 50 percent of gross domestic product (GDP) and budget deficit, which has reached 6, 2% of GDP last December, the most The problem is that in emerging economies, like Costa Rica, the recommended debt level is between 30% and 50% of GDP, that is to say to say that the country has already pbaded. ", warned the Portuguese.

Costa Rica claims that it pays, for its sovereign debt, 3% more than Chile and 2% more than Mexico, countries that are already part of the country. 39. OECD for several years

The Government of Costa Rica hardly goes halfway through the process of joining the body, recognized for bringing together the most developed countries in the world in the economic and social field.

"In Latin America, there were four countries to see: Chile, Uruguay, Argentina and Costa Rica (…) If the fiscal adjustment is not made, then Are we going to compare? ", He concludes.

According to estimates of the economist of the OECD, Costa Rica has gone from 8.7% of its budget to the payment of interest on the debt in 2007 to have to allocate 14.8% in 2017 to cover the same obligation

Despite the bad panorama that the country faces in tax matters, the OECD to be satisfied with the measures taken by the Government of President Carlos Alvarado at the launch of measures to reduce public spending in areas such as the payment of salaries, among others, announced by the President and Minister of Finance, Rocío Aguilar, to beginning of last June.

"It is very important to approve the bill that is in Congress, the government gives important signals to the markets and internally too.It is very important to go from there. Before with this adjustment, approve it and put it in "The Minister of Finance, Rocio Aguilar, the Minister of the Presidency, Rodolfo Piza, the Minister of Foreign Trade, Dyalá were present at the forum. Jiménez, the coordinating minister of the Economic Council of the Government, Edna Camacho and deputies Silvia Hernández (National Liberation), president of the Commission of Hadean Affairs and Welmer Ramos (Acción Ciudadana), president of the Tax Reform Commission.

Alvaro Pereira claimed that Costa Rica no longer needs a fiscal adjustment of 3% of GDP, due to the time lost by the country in the discussion on whether a tax reform is approved or not to avoid a chaotic situation.

And he badured that every day that pbades this arrangement will become more and more heavy for the inhabitants and the companies.

"If the adjustment had been made in 2016, 3% of GDP would have been enough, this is not enough," he said.

However, he added that the tax reform project and the actions that the Alvarado government has promoted by limiting spending have led to exceed this necessary percentage.

"I think what the government has done and what is in Congress are crucial steps to address what the OECD would like to see and what is needed for Costa Rica, and that is why the most important thing now is to focus on strengthening finances, "he said.

The finance minister added that the portfolio believes that the package of measures to reduce spending the more the reinforcement plan will have an impact of 3 to 4% of GDP on the budget deficit.

"The important thing is that the project does not take away anything, and a lot depends also on what we can do with debt, how much can we reduce this important differential that exists compared to other markets. "

" Because if you have 50% of the debt and you lose 200 points, there is a point (percentage of GDP , which equates to 331 billion euros for 2018) of GDP (in savings). that performance is not produced as soon as it is approved (reform), trust is generated immediately, "said Rocío Aguilar.

For his part, Rodolfo Piza pointed out that the project that leads the executive power reached to avoid a fiscal crisis.

"For the government, the main thing is to avoid the crisis at all costs, because it would affect especially the poorest (…) Moreover , the project is progressive, since the overall income, by nature, is progressive, because the capital gains tax is also progressive, because it goes to the most creditworthy sectors and the wage tax goes to the highest wages .Even the value-added tax is more progressive than the current sales tax, "he said.