Costa Rica Economy May Slow
to Standstill, Arias Says
Costa Rica’s economy may
slow to a standstill this year as foreign direct investment drops
“severely” and demand for exports wanes, Costa Rican president Oscar
Arias says.
Arias is forecasting that the rate of growth this year will be as
much as 1%, less than half of the 2.2% forecast by the Banco Central
de Costa Rica (BCCR) - Central Bank.
The Arias plan "Plan Escudo" includes the government borrowing more,
raising pensions and building more roads and schools to create jobs.
Arias says that the government is analyzing the possibility of
inject more capital into the state banks, in addition the us$117
million dollars the state banks received at the beginning of the
year.
One of Costa Rica's main exporters, the US chip manufacturer, Intel,
reports that exports from the Costa Rican unit fell 32% to us$485
million dollars in the fourth quarter of 2008, over the same period
the year before.
Intel represents about 20% of Costa Rica's exports.
President Arias is predicting that direct foreign investment will
drop as much as 40%, however, the country's banking system is sound,
telling Bloomberg.com that "we don't have a financial crisis here".
Arias commented to Bloomberg.com that, unlike other countries,
"Costa Rica does not have to go through that long and sad process of
socializing losses and privatizing profit as most countries in the
industrialized world have had to do".
However, the financial situation up north is worrisome for the
president of the Central Bank, Francisco de Paula Gutiérrez, who
earlier this month said publicly that export markets are
deteriorating faster than expected.
Overall exports in Costa Rica dropped 19% in January 2009 over
January 2008, according to the Ministerio de Comercio Exterior de
Costa Rica (COMEX), exports to the US, Costa Rica's main trading
partner, dropped 17.6% during the period.
As such Costa Rica is look diversify, looking to sign trade deals
with China, Singapore and the European Union to expand its trade
markets.
Trade Minister, Marco Vinicio Ruiz, says that Costa Rica has a
diversified economy and more relations with Asia is part of the
government's strategy.
Ruiz is confident that trade negotiations with the European Union
will be completed by the end of July this year. The talks with
China and Singapore are in their early stages, however, Ruiz is
confident that there will be an agreement place by 2010.
Notwithstanding the minister's confidence any agreement has to be
approved by the Legislative Assembly that took more than four years
to approve the trade deal with the United States and Central
America.
Currently more than 60% of the country's exports are to countries
other than the US, down from the almost 100% back in the early
1980's.
Minister Ruis says that the government's goal is to have 90% of the
country's trade protected by trade deals, up from the 25% when Arias
took office three years ago. |
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