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These stories were pulbished Monday, May 12, 2003, in Vol. 3, No. 92
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It's part of the Bush reduction plan
Senate tax panel targets overseas exemption
By the A.M. Costa Rica staff

The chairman of the powerful U.S. Senate Finance Committee wants to eliminate a tax exemption for citizens working overseas in order to balance a tax cut urged by President George Bush.

The chairman, Sen. Charles E. Grassley, a Republican from Iowa, is taking credit for his committee’s decision Thursday.

"Grassley won Finance Committee approval of a tax-cutting package that in addition to providing tax relief for individuals, families and small businesses, is paid for in part by a series of reforms targeting corporate bad actors," said a release from the committee staff.

The committee voted, 12 to 9, to approve the package, with one Democrat joining the Republicans.  The full U.S. Senate is expected to vote on the $420 billion tax cut measure, perhaps as early as this week. A similar bill, but one for tax cuts amounting to $550 billion, already has passed the U.S. House. When the Senate passes its version, a joint committee of senators and congressmen will seek to iron out differences to be validated by a later vote in each chamber.

Three key points in the Senate version can hurt U.S. citizens living overseas. The first seeks to eliminate the earned income exemption. This year that exemption is $80,000. That means U.S. citizens can exempt from taxation up to $80,000 that they earn by work overseas.

Grassley called this an effort "to curb individual expatriation," according to the Senate committee staff release.

Grassley's legislation also would stop companies from avoiding their share of U.S. taxes by nominally relocating their headquarters overseas in a tax haven, said the release. This could have an effect on U.S. citizens who own corporations in Costa Rica and elsewhere.

The third concern is that dividends from foreign firms would not be covered by a proposal to eliminate or reduce income taxes on corporate dividends. Bush wants to eliminate the double taxation on corporations, so there is a strong mandate to Congress to either eliminate corporate taxes, the money companies pay on net income, or taxes on dividends, that is the taxes shareholders pay on the quarterly sums they received from the company.

So a U.S. citizen would not be able to duck taxes on dividends generated by a Costa Rican or other foreign corporation.

A main purpose of the Senate and House actions are to cut taxes with the idea that this will increase the number of jobs available. The 
United States is experiencing a severe economic recession and increasing unemployment. The 

U.S. Senate photo
U.S. Sens. Mack Baucus of Montana and Charles E. Grassley of Iowa discuss the administration tax proposal. Baucus is the ranking Democrat on the committe that is chaired by Grassley.

bills contain a number of reductions and changes in tax rates.

U.S. citizens are supposed to declare earned income no matter where they earn it. However, when they do their annual income tax report to the government, they can deduct the exempted amount from the income on which they pay taxes.

The exemption does not cover unearned income, that is interest and dividends earned overseas, just income earned from work.

Many U.S. citizens do not report all their income, but partly as a result of the Sept. 11, 2001 attacks in New York and Washington, the United States has negotiated tight tax treaties with many countries. Costa Rica, for example, will share tax information with the United States in cases of suspected tax evasion.

The final version of the tax plan is anyone’s guess. Sections can be added or deleted right up until both chambers have to vote on a compromise plan.

George Bush is a Republican, and the Republican Party controls both Houses of Congress, although by thin margins.

Want to send message?

Are you a U.S. citizen and do you want to express your views on tax proposals to U.S. Sen. Charles E. Grassley?

You can reach him via a Web form here:


Fendell will testify in Washington Tuesday
By the A.M. Costa Rica staff

James Fendell, president of Aerocasillas and a member of the Costa Rican-American Chamber of Commerce, is scheduled to testify Tuesday before the Subcommittee on Free Trade Area of the Americas, according to a release by the U.S. Senate Finance Committee.

The topic of the hearing will be the "Status of the Free Trade Area of the Americas: Negotiations and Preparations for the Miami Ministerial."

Fendell, who is well-known in Costa Rican business circles, will be representing the Association of American Chambers of Commerce in Latin America where, according to the group’s Web site, he is treasurer.

The hearing will be at 2 p.m. in 215 Dirksen Senate Office Building.

"If we want to succeed in our push for the elimination of tariffs and for the opening of markets, we need to do all we can to be prepared for the tough task ahead," said U.S. Sen. Charles E. Grassley, an Iowa Republican, in announcing the hearing.

Grassley expressed concern Thursday over findings by the General Accounting Office, 

which he asked to report on the status of the 
Free Trade Area of the Americas. The General Accounting Office is the investigatory arm of Congress.

"I’m concerned about a number of findings in the report," Grassley said. "The United States, as host of the November 2003 FTAA ministerial in Miami, has a special responsibility to ensure the ministerial’s success. 

"Part of the reason I commissioned earlier studies was to make sure the United States was fully engaged in the FTAA process and ready to assume its leadership role in making the vision of hemispheric free trade a reality. The need for strong U.S. leadership is only amplified by our role as host of the 2003 Miami ministerial and as co-chair of the negotiations with Brazil."

He said part of the reason for holding the subcommittee hearing Tuesday is to focus attention on what needs to be done to ensure the success of the Miami ministerial and Free Trade Area of the Americas negotiations, before it is too late for Congress to do anything.

The free trade area is supposed to include the entire hemisphere except Cuba by 2005. The Central American free trade negotiations that involve Costa Rica and are taking place now is part of that process.

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The maypole, that most British tradition, got a workout Saturday, giving way at times to morris dancers,  a piper and even Scottish reels.
A.M. Costa Rica photos
Ambassador unveils little surprise at benefit bash

Ambassador Butler and new husband, Robert Kelly, received a floral tribute from the British community Saturday.
By the A.M. Costa Rica staff

The English blended with Costa Rica seamlessly Saturday as the British community put on its Queen’s Birthday benefit for Costa Rican schools.

The event also was the time Ambassador Georgina Butler chose to announce her marriage to Robert Kelly, a Canadian. The ambassador did that at the end of a speech in Spanish in which she also thanked Costa Rican officials for attending. She said she had been married last week in Miami. Her new husband later said that to do so required wrestling with a considerable amount of paperwork. They were to leave on a honeymoon after the event.

Ambassador Butler has distinguished herself as the most publicly active member of the foreign diplomatic corps and has SCUBA dived to place a plaque on a reef and has participated in a celebration of privateer Sir Frances Drake.

The event was at the sprawling ambassadorial residence with perhaps 500 persons showing up for games, food, raffles and folk dancing.  The weather cooperated with blue skies for most of the five-hour event.

Miami is chilly toward visits by Cuban musicians
By the A.M. Costa Rica wire services

MIAMI, Fla. — Preparations for this year's Latin Grammy Music Awards appear to be striking a sour note. Officials here have decided to withhold most forms of municipal support if artists from Cuba take part in the September event. 

The Latin Grammy Awards show brings together the biggest names in Latin American popular music.

But the much-anticipated event is in danger of becoming embroiled in the politics and the passions of Miami's large Cuban-exile community, many of whom oppose the inclusion of Cuban artists who work within the island's Communist system.

Amid strong pressure from exile groups, Miami's city commissioners have unanimously voted to provide only minimal police and fire protection for the Latin Grammys if Cuban nominees attend. Commissioner Tomas Regalado said the measure is entirely appropriate.

"It sends a message to Cuba and to the world that their [Cuban] representatives are not welcome here. Those who want to come, well, let it be. And those who want to protest, we have to protect them," Regalado said. 

Miami campaigned energetically to attract the awards show, which is estimated to bring about 
$30 million in revenues to the city. Initially, no 

objections were raised concerning Cuban artists at that time.

But the atmosphere has changed in the wake of Cuba's recent crackdown on dissidents on the island. In March, the government of President Fidel Castro arrested scores of opponents and independent journalists and sentenced them to prison terms of up to 28 years. 

Cuban exiles say they cannot remain silent in the face of growing repression on the island, nor can they extend a welcome to musicians they regard as lackeys of Fidel Castro.

Artists and organizers of the Latin Grammys said they hope the controversy will not upstage what they hope will be an upbeat celebration of musical achievement. During a recent visit to Miami, recording artist Jon Secada said, "We live in a free country. This is a free country. Anybody who comes to this country is free to do what they want. I hope, and I would think, that all the artists who come to this country will be able to express themselves freely." 

Two years ago, Latin Grammy organizers moved the event from Miami to Los Angeles, after city commissioners granted Cuban-exiles permission to protest across the street from the arena where the festivities were to be held. 

This year, organizers say the event will go ahead as planned in Miami, with or without the city's full backing. 

Arias in Philadelphia
to talk to students

By the A.M. Costa Rica staff

Oscar Arias Sánchez was at Drexel University Saturday to participate in PeaceJam 2003.

The university is in Philadelphia, Pa., and PeaceJam is a program to bring students in contact with winners of the Nobel Peace Prize.

In a public talk, Arias expressed grave concern about the U.S. government’s impatience with diplomacy and said that he feared that the tendency to quickly resort to military force would lead to more anti-American feelings around the world, according to the Philadelphia Inquirer newspaper.

Arias has steadfastly opposed any U.S. use of force against terrorists and any military action in Iraq.

Agreement reached
in Caracas impasse

By the A.M. Costa Rica wire services

CARACAS, Venezuela — Negotiators for the government and opposition groups say they have reached a tentative agreement to hold a referendum on President Hugo Chavez's rule, although the government objects to international observers overseeing the vote.

Opposition members have been pushing for a referendum for some time. During talks in Caracas Thursday, government representatives said they would allow a referendum to go forward, but only if there would be no monitoring by international observers, on the grounds this would threaten Venezuelan sovereignty.

Government and opposition officials met separately Thursday with diplomats from the so-called Group of Friends of Venezuela — comprising Brazil, Chile, Mexico, Portugal, Spain and the United States. 

Since January, the six-member diplomatic group has supported efforts to negotiate a peaceful solution to the long-running turmoil that triggered a brief military coup last year against President Chavez. The latest negotiations come three months after an opposition-led general strike failed to force Chavez to resign and call early elections.

Kirchner on move
to promote trade

By the A.M. Costa Rica wire services

SANTIAGO, Chile — Argentine presidential candidate Nestor Kirchner has met here with Chile's president to boost regional free trade and integration. 

Kirchner arrived early Friday at the presidential palace. At the meeting, he and President Ricardo Lagos voiced support for strengthening ties between the two countries and with the Mercosur South American trade bloc. Chile is an associate member of Mercosur, which includes Argentina, Brazil, Paraguay and Uruguay. 

Kirchner was in Brazil Thursday, where he discussed trade issues with President Luiz Inacio Lula da Silva. Kirchner has been campaigning on the promise of strengthening regional integration ahead of the May 18 presidential run-off election. The latest opinion polls show the provincial governor is favored to beat former president Carlos Menem.

Three bombs explode
and three people die

By the A.M. Costa Rica wire services

CALI, Colombia — Police say suspected rebels have carried out a series of bomb attacks in southwestern Colombia, which left three people dead.

Officials said Friday an explosion occurred before dawn at a water treatment facility in this, the country's second largest city. The blast killed three security guards.

Meantime, an explosion damaged an electrical tower near the port town of Buenaventura late Thursday, leaving the city and several towns without power.

Police have not arrested any suspects, but rebels of the Revolutionary Armed Forces of Colombia are active in the region.
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Pittsburgh lawyer says he is off the Villalobos case
By the A.M. Costa Rica staff

The Villalobos case reached Pittsburgh, Pa., Sunday. That’s the city of a lawyer who threatened President Abel Pacheco with negative publicity.

The Pittsburgh Post-Gazette interviewed the lawyer, Peter K. Blume. The lawyer told the newspaper he no longer was working on the Villalobos case on behalf of an investor who lost $8 million in the high-interest borrowing operation.

Blume, a lawyer with the Pittsburgh law firm of Thorp Reed & Armstrong, told the newspaper that he had turned the case over to José Miguel Villalobos Umaña, who is also the lawyer for the United Concerned Citizens & Residents of Costa Rica.

Blume threatened Pacheco with bad publicity for Costa Rica if he did not intercede in the criminal case against Luis Enrique Villalobos Camacho and his brother Oswaldo. He was going to do that with an article denigrating Costa Rica that would be distributed to major news media in the United States. 

Blume defends his actions as a necessary tactic in a country where the rules are different, the Pittsburgh newspaper said in a Sunday story titled: "Investment operation in Costa Rica took in hundreds of millions, then it all fell apart." The article was written by reporter Torsten Ove with assistance from Garett Sloane, a free-lance reporter in San José who completed an internship recently at A.M. Costa Rica.

"When you don't seem to be getting anywhere in court proceedings or getting a response from prosecutors, which we feel we have not, then you
try to appeal to whatever higher authority you can," the newspaper quoted Blume as saying. It added:

"From my standpoint, you try [to] get anybody's help and interest that you can down there. Certainly, I wouldn't write a letter like this if it were [in the United States.]. Certainly, you wouldn't expect a [local] politician to get
involved in a court case."

Blume was representing an institutional client Cornerstone Investment Circle LLC, which the newspaper said was a California money-management firm that gave the Brothers 

Villalobos $8 million to invest.

Blume never replied to an e-mail sent by A.M. Costa Rica after his letter became public last month.

The newspaper said that Blume said he was no longer handling the case and had turned it over to José Miguel Villalobos. However, the newspaper said that José Villalobos reported that he had never spoken with Blume and had no plans to handle Cornerstone. José Villalobos was listed as the local contact in the threatening letter sent March 19 by Blume.

The bulk of the news story is a summary of the developments in Costa Rica since the Villalobos borrowing operation was raided by police last July 4. Enrique Villalobos closed up his Mall San Pedro operation six months ago on Oct. 14 and vanished. His creditors, perhaps as many as 6,500 accounts, have been up in the air since.

In another development, José Villalobos, in his capacity as lawyer for the United Concerned Citizens, filed a brief Friday seeking to reverse a judge’s decision made last April 25,

Then a criminal court judge in San José decided that the Villalobos case, involving the fugitive financier and his brother as well as some 6,500 creditors was a complex case. The net result was to give prosecutors six more months to investigate.

José Villalobos, in a 13-page brief, contests this decision, said the ad hoc citizens and residents group that is collecting money to pay the lawyer’s $100,000 initial fee.

The citizens group basically wants the Costa Rican prosecutors to stop investigating the case so Enrique Villalobos can come back to Costa Rica and distribute an estimated $1 billion to creditors. 

To accomplish this, the lawyer Villalobos and the citizens group want some 600 creditors to withdraw their fraud charges they have filed against Villalobos, the businessman. Enrique Villalobos is a wanted man internationally, and the allegations are money laundering and fraud.

The Pittsburgh newspaper article is here:


U.S. delegation said to be impressed by new Latin presidents
Special to A.M. Costa Rica

WASHINGTON, D.C. — The United States is "very impressed" with the sound economic policies adopted by new government leaders in Brazil, Ecuador and Colombia, says Randal Quarles, assistant secretary of the Treasury for international affairs.

Appearing Friday at a press briefing hosted by the Center for Strategic and International Studies, Quarles offered reporters a comprehensive overview of his recent trip to Latin America. He was a member of the U.S. delegation accompanying Treasury Secretary John Snow. 

The visit by Treasury officials to Brazil, Ecuador and Colombia "focused on highlighting the vital interests that the United States has, particularly in economic growth and in raising living standards in the region," Quarles explained. "We also hoped to underline our stakes in the success of three new presidents in our hemisphere."

Moreover, "the timing of the trip was especially appropriate," he said. "Markets in the region are stabilizing, market forces are favorable, so each of these countries now faces a window of opportunity." Of more significance, though, is the fact that "all three countries have elected new governments lately," Quarles added. "And all three of these governments are pursuing courageous policies — sound macroeconomic policies" combined with "an agenda of important social priorities."

The economic strategies of Brazil's President Luiz Inacio Lula da Silva, Ecuador's President Lucio Gutierrez and Colombia's President Alvaro Uribe will ultimately determine the viability of the social programs they hope to implement, Quarles said. So far, he indicated, the three leaders and their cabinets are on the right track. "All of these governments are seeking to reduce their deficits and debt stock," Quarles observed. "They are taking on economic and market reforms with an understanding of the most important pillars of economic growth: establishing rule of law, addressing corruption issues, and reducing trade barriers."

Lula, Gutierrez and Uribe "are committed to delivering poverty-reduction and job-growth programs," the assistant secretary said. "All of them see a tremendous potential for economic integration in the region, and all have a positive assessment of the importance of trade for growth in each of their countries -- which is very encouraging, from our point of view."

The U.S. delegation headed by Secretary Snow "had a two-way exchange with each of these presidents," Quarles noted, "and this, in turn, gave [Snow] a chance to discuss the Bush Administration's jobs-and-growth package" with the three regional leaders. According to Quarles, "officials in each of these countries were extremely interested in learning what steps President Bush is taking to promote growth in the United States," because a healthy U.S. economy fuels growth.

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