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Tuesday 28 October 2008, San José, Costa
Rica
Tight Credit May Result
In Massive Layoffs
The business
sector is warning that
the Costa Rica could
enter a crisis of
massive layoffs if they
cannot finance their
activities. The warning
is based on the scarcity
of credit both from the
public and private
banks, which is causing
many companies not to
have sufficient
financial resources to
continue operations or
expand.
Some 20.000 to 25.000
construction workers are
already without jobs due
to paralyzed housing and
hotel construction
projects.
According to Juan José
Castro, vice-president
of the Cámara
Costarricense de la
Construcción (CCC), some
40.000 more jobs are in
peril during the next
three months.
Castro added that
between 15% and 20% of
the projects under
construction will not be
completed due to lack of
financing.
The areas that will feel
the greatest impact are
in the Central Pacific (Jacó
area), Guanacaste and
San José, the three
provinces with the
greatest number of
construction projects
under way and in the
planning stage.
The result of the
slowdown in the
construction industry
will affect other
sectors as the economy
slows down.
Representatives of the
Unión Costarricense de
Cámaras y Asociaciones
de la Empresa Privada (Uccaep)
met with their
associates to explain
the urgent need for
credit.
According to the
entrepreneurs, the Banco
Central de Costa Rica (BCCR)
- Central Bank - and the
Superintendencia General
de Entidades Financieras
(Superintendent of
Financial Institutions)
have a huge share of
responsibility in the
labour crisis, because
before the international
financial crisis issued
guidelines to banks to
be more strict with
their credit portfolios.
Manuel H. Rodríguez,
head of the Uccaep, said
the layoffs so far have
been only in the
construction sector,
warning that thousands
more in other sectors
will see layoffs if the
strict credit guidelines
continue.
According to Rodríguez
the tourism industry is
next to follow with
layoffs. Rodríguez
explained that tourism
employees 110.000 people
directly and is
responsible for as many
as 550.000 indirect
jobs.
For his part, the
president the Central
Bank, Francisco de Paula
Gutiérrez, denies the
issuing of restrictive
credit guidelines,
explaining that the
reduction in credit by
the banks is based on
the international
financial situation and
the past history.
Another sector feeling
the credit pinch is the
textile industry which
has seen a reduction of
6.000 jobs this year
according to the
president of the
Asociación de Textileros
(Textile Association),
Miguel Schifter, who
explained that the bulk
of the sales are at the
end of the year, but
there is no money to
expand production.
"If the sales are not
good, there will not be
any money to survive
next year. If that
happens, I dare to think
that there will be
massive layoffs" said
Schifter.
For his part, Edgar
Marín, president of the
Cámara de Restaurantes
(Restaurant
Association), explained
that in some areas like
the Central Pacific (Jacó,
Puntarenas) some
restaurants only open on
weekends due to a
decrease in customers
that is caused by the
layoffs.
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