From the US, President Solis talks colón devaluation, tax reform, China (VIDEO)

October 1^st, 2015 (ICR News) As part of his week-long visit to the United States for the United Nations General Assembly and a visit with lawmakers in Washington, D.C., Costa Rica president, Luis Guillermo Solis took the time for an English-language interview with Bloomberg TV this week in which the president briefly discusses his administrations efforts at tax and fiscal reform, the call by some sectors in Costa Rica to devalue the colón, as well as a potential bond sale to China.

On devaluing the colón

Speaking to Bloomberg’s Joe Weisenthal and Alix Steel, Solis warns of unexpected consequences that could result from devaluing Costa Rica’s currency, adding that Costa Rica’s Central Bank “has all the studies saying that’s how much the money [the colon] is worth,” and that “if the currency is devaluated it would be for political reasons.”

A weaker colon would make the country cheaper for visiting tourists carrying dollars, as well as foreign residents who have savings or earnings in dollars. A weaker colón would also be welcome by the country’s export sector, as it would make their goods cheaper for their overseas customers. A weaker colón could also make the country more attractive for multinationals and foreign investment.

But Solis said that sectors in the country pushing for devaluation of the currency – namely, the tourism and export sectors – should realize that devaluation could have “unexpected impacts.”

Last month, acting Minister of Finance, Jose Francisco Pacheco told reporters that the Central Bank and finance officials were considering a devaluation of the colón.

Within hours, however, The Central Bank itself sent an official statement to ICR News stating that the Bank “has no plans, nor has it discussed” the possibility of artificially affecting the exchange rate since the Bank adopted a system of “managed float” of the currency versus the US dollar in February, and does not believe an artificial devaluation of the currency would promote economic recovery nor reduce unemployment.

The Bank said that Pacheco’s statements were made in “general terms,” in regards to issues discussed within the Presidential Economic Council, but that any decisions regarding foreign exchange rates fall under the exclusive authority of the Bank’s Board of Directors, thus limiting the possible influence of the Executive.

On China and tax reform

While confirming that the country is seeking to sell public debt to China – reportedly US $1 billion – in the form of a bond offer, Solis conceded that selling debt to China “is not the fundamental way” to deal with the country’s widening fiscal deficit, saying that fiscal reform and cost-cutting are more “reliable” measures than bond sales “to anybody, including the Chinese.”

Solis also expressed some optimism that his administration’s sweeping tax reform package would be passed by the country’s Legislative Assembly in full.

“The political conditions are there” to get the fiscal reform package “passed in total” in a “few months,” Solis said.