Today's Stories: Fitch Affirms Costa Rica Rating; Outlook Negative Increase in the Cost of Living President Refutes Michael Moore Jaguar Resorts, Inc. Targets Costa Rica Charges Unlikely for "Tico" Dad of Dead Marine Did you Know?

Costa Rica in Crisis One Day of Protest Continues, Picking Up Steam Protests Bring Costa Rica to the Verge of Paralysis Goodbye to Costa Rica on Foot

Did you Know? Approximately 300.000 foreigners from around the world have chosen to live in Costa Rica. The U.S. foreign community comprises some 25,000 residents and the Canadian community is increasing, as well as German, Dutch, Italian and British residents also have strong communities in Costa Rica.

The Negative Outlook and the ratings reflect Fitch's concerns over Costa Rica's persistently high fiscal deficits and the high level of dollarization of its banking system, which in the context of a crawling peg regime increases the country's financial vulnerability.

Since the Negative Outlook was assigned last year, the government has made efforts to prevent a further deterioration of its finances.

This, combined with higher GDP growth last year has prevented the government's debt from increasing sharply.

These positive developments have forestalled downward pressure on the rating for now.

Even so, stabilization of the sovereign rating would require inter alia the passage of fiscal reforms, as these are critical to improving public finances and sustaining a higher level of growth. A tighter fiscal stance would also lead to an eventual reduction of other weaknesses in the economy, such as large current account deficits, widespread dollarization, and relatively high inflation.

Last year the Costa Rican economy rebounded smartly, driven by higher exports and expansion in the telecommunication sector.

Its economy grew at 6.5% in 2003 and is expected to grow at nearly 4% this year. In 2003, higher growth, combined with greater revenues from the contingency fiscal package (CFP) helped to rein in the central government fiscal deficit to 2.9% of GDP.

In 2004, the government is exercising expenditure restraint to maintain the central government budget deficit at last year's level. Even so, a permanent reduction in the fiscal deficit will require the passage of a revenue-enhancing tax reform. The prospects of passing the comprehensive fiscal reform, which the authorities believe can raise over 2% of GDP, remain unclear, as smaller opposition parties are using delaying tactics to prevent Congress from voting on it.

Costa Rica also needs to consolidate its fiscal accounts to make room for contingent liabilities that could arise from the banking sector.

Although private participation has increased in the sector, public sector banks control over 50% of the system's assets and enjoy a blanket state guarantee on their deposits. Moreover, high domestic interest rates, in part driven by persistent fiscal deficits, have led to the widespread dollarization of the banks' balance sheet. Of further concern, a significant proportion of the dollar loans are being made to nondollar earners, exposing banks to significant credit risk.

Due to the low saving rate in the economy, Costa Rica suffers from the 'twin deficit' problem, whereby high fiscal deficits get readily reflected in the large external account deficits. Current account deficits have averaged 5% of GDP over the past five years. Fortunately, foreign direct investment flows have been robust, which have helped in financing over 50% of the current account deficit.

On the positive side, Costa Rica's rating strengths include its modest external debt burden, a successful diversification of its export base, and relatively strong social indicators, distinguishing it from other countries in the region. Costa Rica's vibrant democratic institutions reduce political transition risk, though the high premium that the society places on consensus building has delayed the passage of reforms.

Stabilization in Costa Rica's creditworthiness would depend much on the ability of the government to tackle its fiscal deficits and pass a revenue-enhancing tax reform. Measures to strengthen the banking system, including better scrutiny of off-shore banks, as well as reversal of dollarization would be viewed positively.

The implementation of Central America Free Trade Agreement (CAFTA) with the U.S. and passage of laws to improve the regulatory frameworks in the telecom and insurance sectors would also represent positive developments.

Increase in the Cost of Living
Propelled by the rising prices of oil, the costs of groceries, bus fares, utilities, education, and housing - to mention a few - have been steadily increasing in recent months in Costa Rica.

The inflation in July reached 12.44% percent - the highest for any given month in the last two years -, confirms the spiraling of prices.

Even though wages also increased, they did not so in a way to compensate for the upward trend in the prices of basic items.

Part of the response by those who depend on a salary includes doing without entertainment, vacationing, or even getting a second job.

On the other hand, while economy authorities have alerted the population about the harsh conditions, they also point out that there is little that can be done in a country subject to the ups and downs of the prices of oil.

President Refutes Michael Moore
President Abel Pacheco stated that Michael Moore's documentary Fahrenheit 9/11 lies if it claims that Costa Rica declared war to Iraq.

According to President Pacheco, what Costa Rica did was to declare her solidarity with a friend in its struggle against terrorism and a dictator.

In the documentary, Moore lists Costa Rica among the countries that joined in the coalition with the United States to invade Iraq.

The documentary briefly shows the image of a Costa Rican farmer driving an ox-cart and mentions that this country does not have an army.

Jaguar Resorts, Inc. Targets Costa Rica
Jaguar Resorts, Inc. announced that it is aggressively working on a new strategic alliance to develop a five star luxury resort in the Guanacaste region of Costa Rica.

This is anticipated to be JGRT's second project.

Jaguar Resorts is a developer of luxury membership resort & spa properties, primarily in Mexico and Central America.

The Guanacaste region "Costa Rica's HOT ZONE" is located in the North Pacific and serviced by the recently opened Liberia airport. The Liberia Airport has had an increase of over 800% in direct commercial airline traffic in 19 months.

Resort development in the region is on the rise.

The First Phase of a three phase Peninsula Papagayo project opened on January 15th. The Four Seasons Resort and Arnold Palmer Signature golf course are open.

The projected initial investment for the First Phase is just over $110 million. The remaining two phases will include two marinas, two golf courses, and two six-star hotels. The total projected budget to develop this property is expected to reach $400 million.

Ben Gallagher, Vice President of Jaguar Resorts states, "Costa Rica's Northern Pacific zone is experiencing tremendous growth, as a result, property values are increasing, and will continue to do so, which is creating very advantageous investment opportunities for those that are able to take advantage of them."

The mission of Jaguar Resorts is to be the leading developer of fractional interest in real estate resort properties throughout Latin America. The company has excellent hotel and spa relationships and a team in place to fully realize the company's strategic goals.

It is led by Clyde E. Culp III, former CEO of Embassy Suites and past President of Holiday Inns. JGRT's first property is the 5 star, 122 acre, Alta Mira Resort and Spa, and will be located in San Miguel de Allende, Mexico.

Charges Unlikely for "Tico" Dad of Dead Marine
They are highly trained, field-tested Marines, and like many in their number they have an unenviable task: to tell families that a loved one has been killed. But nothing could have prepared first Sgt. Timothy Shipman and the two Marines in his team for Carlos Arredondo's reaction.

Arredondo is native Costa Rican, immigrated to the U.S.

In his grief upon being told his Marine son was dead, Arredondo set their government vehicle ablaze and seriously burned himself.

Capt. Tony Rode, a Hollywood, Florida,  police spokesman, said it was premature to discuss possible charges against Arredondo, but said it was unlikely. "If you have any ounce of sympathy or compassion, you'd choose not to charge an individual who receives such horrific news about his son," he said.

The Marines arrived at Arredondo's door Wednesday afternoon to tell him that his 20-year-old son, Lance Cpl. Alexander Arredondo of Randolph, Mass., had been killed in combat in Iraq.

As they tried to console him, the father walked into the garage, picked up a propane tank, a can of gasoline and a propane torch. He smashed the van's window, got inside and set it ablaze, despite pleas from the Marines to stop.

The Marines, reservists who are members of a military Casualty Assistance Calls team, pulled Arredondo, 44, from the burning vehicle and extinguished the flames on him. None of the Marines suffered injuries. Wednesday was Arredondo's 44th birthday.

Military officials could not recall a similar incident from bereaved relatives.

Arredondo, had been upgraded to stable condition with burns over 26 percent of his body at Jackson Memorial Hospital. Arredondo's wife, Melida, told Marine officials he was doing "much better."

Neighbors said Carlos Arredondo had been a friendly and helpful neighbor since moving there six months ago. They responded by helping clean up debris from the charred street and putting his tools in the shed.

An American flag was draped over a bush and a small shrine was set out by the front door, including a photo of the young man in his uniform, a vase holding pink and white carnations and a small blue placard that read: "Tell the kids I love them. — God."

The Defense Department confirmed Thursday that Arredondo died in Najaf, Iraq. Arredondo, who turned 20 this month, was assigned to the Marine Corps Base in Camp Pendleton, Calif.

Some family members said they didn't agree with President Bush's handling of the war.

"I blame it all on Bush. He's 20 years old, he should not be at war because of someone else's vendettas. The whole situation is just a tragedy," said Priscilla Foley, a cousin in Boston.

U.S. forces in Najaf have been battling for nearly five months against Iraqi militiamen loyal to radical Shiite cleric Muqtada al-Sadr.