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President Solis won’t support tourism “bailout” bill as written

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Promoters of the bill say that funds would be used to help small and medium businesses that have struggled since the 2008 "Great Recession." Especially targeted for help, they say, would be businesses in rural areas such as La Fortuna de San Carlos, home of the Arenal Volcano. (ICR Archive)

Promoters of the bill say that funds would be used to help small and medium businesses that have struggled since the 2008 “Great Recession.” Especially targeted for help, they say, would be businesses in rural areas such as La Fortuna de San Carlos, home of the Arenal Volcano. (ICR Archive)

May 13th, 2015 (InsideCostaRica.com) Costa Rican President, Luis Guillermo Solis expressed his opposition to the current text of a bill aimed at providing a $15 million “bailout” of micro, small and medium enterprises (MSMEs) in the tourism sector during a Tuesday press conference.

 

“There are a number of conditions in the new text of the bill that are not what we had originally agreed to,” Solis said.

 

Among other issues with the bill, according to Solis, is that the text does not define any limits on individual disbursements of funds made by the Banking System for Development (SBD) as part of the program, and lacks proper assurances that funds would only be used toward the benefit of small and medium businesses.

 

“What this bill does, as it is currently written, is to undermine the Development Bank as well as [the Costa Rican Tourism Institute’s] funding which is intended for campaigns to promote Costa Rica to the world,” Solis said.

 

The bill is promoted as a bailout for small and medium businesses in the tourism sector that have struggled since the 2008 “Great Recession.”

 

Costa Rica’s tourism institute, ICT, and the development bank would both provide $7.5 million.

 

Promoters of the bill said last month that the funds would be used to assist around 100 businesses, primarily in the form of debt restructuring.  Tourism businesses in rural areas, such as La Fortuna de San Carlos, would be especially targeted for assistance, promoters of the bill said.

 

But President Solis isn’t alone in raising doubts about the text of the bill, which opponents say came after four years of lobbying by the tourism sector.  Costa Rica’s Chamber of Industry is also expressing its opposition to the bill, citing “significant” changes in its text as it has moved through the Legislature.

 

“We cannot squander resources and convert the funds of the Development Bank into a piñata,” Enrique Egloff, president of the Chamber, told CRHoy.com.

 

Other opponents of the bill claim its scope is too broad and would include state purchases of toxic assets such as defaulted debt.

 

Proponents of the bill, such as chairman of the local Association for Tourism Protection, Boris Marchegiani, believe business owners deserve the assistance, due to “inaccurate estimates” by the Costa Rican Tourism Institute (ICT).

 

Back in 2004, the Venezuelan-American businessman contends, companies miscalculated their investment projects after an inaccurate estimate of hotel occupancy rates by ICT. “Then 2008 arrived, and everything collapsed,” Marchegiani told the daily La Nacion.

 

When asked why the government should bail out private businesses, Marchegiani responded: “It’s the private sector, but things would have been different if the risk index was known… They [the government and ICT] said there would be a 75 percent occupancy rate of [hotel] rooms, and then there was only 35 percent; [knowing this], different decisions would have been made.”

 

Despite the opposition of President Solis, the text of the bill can only be changed if 38 members of the Legislative Assembly vote for a full debate.

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  • Ben

    So the goverment of Costa Rica is saying things are not going well in tourism now. Everyone has been saying that the numbers in tourism are misleading in Costa Rica. Unemployment in CR is 20% not 9% like the goverment says. Food costs are getting really kind of crazy. When is the Costa Rican goverment going to change when there is 40% unemployment. I know many Costa Rican that are now trying to leave the country because there is little hope to find a job. The media is not even talking about suicide rate in Costa Rica i have heard of a few stories of people killing themselfs over not able to find jobs and banks forclosing on homes and cars.
    Pres Solis has lost control of his cabinet ministers and now congress is under control of PLN corupt bastards. As long as there is rice and beans Costa Rican will never stand up against a corupt system.

    Melvin Jimenez ex chief of staff you are useless person.

  • disgsted

    Money will just go into their pockets and nothing change. Maybe some business need to go belly up, and pare down. USA did bailouts and many just filed bankrupts ask Solar company and a few other POOF money gone.

  • richard schlinder

    Any time there are funds dispersed to private businesses,it opens the door very wide for favoritism and corruption.Who’s to say who gets what and how much?? On another line.
    I was in the tourism business for 22 years.Tourism is always playing catch up. They have three or four good years followed by a recession for one or two years. This last recession since 2009 has been unusually long.The problem with this is it is the employees that suffer to most. Not the business owners.

  • Ken Morris

    It is an interesting line of argument to contend that when a government agency issues a mistaken economic forecast on which investors rely only to lose money, those investors are then entitled to a government bailout to compensate them for their losses.

    Would it follow that if a government agency forecast a lower unemployment rate than materialized, those who quit a job to look for another one only to be able to find one are entitled to government compensation?

    Would it follow that if a government agency forecast a lower inflation rate than materialized, anyone who invested in CDs and lost money is entitled to government compensation?

    Would it follow that if a government agency forecast a better job environment for college graduates than materialized, un- and under-employed college graduates are entitled to government compensation?

    I can understand holding government accountable for actual blunders, but since when are future forecasts actual blunders? Doesn’t everyone know that there is an element of guesswork when anyone forecasts anything? Doesn’t everyone also know that it’s up to them to do their own homework about their own businesses when it comes to making projections about the future?

    Of course, there’s an easy solution to all this: Shut down the tourism institute. If government is going to be held responsible for a mistaken forecast, maybe it shouldn’t be in the forecasting business to begin with. Let the private industry do its own forecasting.

    And if after liquidation of the ICT there’s any money left over, go ahead and refund to those who paid the taxes.

    Really, these folks keep carping about how they want more government support, only to turn around and complain that the quality of that support is so poor that they deserve more government support as compensation. I say get rid of all government support and let the industry stand or fall on its own merits.

    • mhogan

      Agree with the insanity of basing business activity on government forecasting and then asking for bailouts when they fail to materialize. I suspect there are a number individual cases where there is more to the story than meets the eye — like government broken promises. On a personal note, I believe the government of CR is one giant machine aimed to lure people into the country withs promises it has no intention of keeping. One case in point: when we invested (heavily) in Costa Rica under an “inversiones” program, we received residency with certain conditions in order to sustain that residency. They were clearly spelled out. Guess what? a few years down the road, a “new” condition was added: you must join the CAJA. This was not the written agreement specified under terms of our residency, just an add-on. How about the Pensionado Program where you could import a vehicle and personal belongings without duty — changed. When the government has no honor, what do you expect of its people. Projections are one thing; totally different are promises.

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