![]() Of the seven countries in Central America, only Guatemala and Panama bring in fewer relative taxes, said Molina. Taxes bring in only 13 percent of the country’s gross domestic product (GDP), largely due to tax evasion and exemptions. Unlike most countries in the region, much of Costa Rica’s debt is internal, with its own banking sector, which ends up costing more than foreign or multilateral bonds. In 2021, about 42 percent of the country’s $19bn national budget will go to debt and interest payments, the minister of finance told legislators last year. ![]() Thousands of public employees march during a strike against government’s economic measures in San Jose, Costa Rica, in April 2016 “That is a good thing because the state ensures people’s rights, but Costa Rica has gone around two decades without any fiscal reform,” she told Al Jazeera. ![]() “Costa Rica has had, unlike most other Central American countries, social spending that pursues rights, such as social protections, education, and health,” said Lourdes Molina, a senior economist at the Central American Institute for Fiscal Studies. Spending far outstrips the country’s income and little has been done to address the issue prior to President Carlos Alvarado Quesada’s current administration. ![]() What exactly is the problem?Ĭosta Rica’s debt crisis has been mounting for decades. The country’s social indicators are excellent, but the COVID-19 pandemic and ensuing recession have exacerbated income inequality and eroded government legitimacy – and brought a longstanding fiscal crisis to a breaking point. The government had been preparing an agreement with the IMF last year, but the terms for that deal were quickly rescinded after thousands of people demonstrated for weeks, marching and blocking roads to protest proposed tax reforms and spending cuts.Ĭosta Rica, which abolished its military in 1948 and focused instead on social spending and strengthening democratic institutions, is considered an oasis of political stability and development in Central America. Costa Rica’s latest effort to address a nearly $40bn debt crisis threatens to rekindle anti-austerity protests across the Central American nation, experts say, as the government began talks on Monday with the International Monetary Fund (IMF). ![]()
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