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(506) 223-1327       Published Tuesday, June 13, 2006, in Vol. 6, No. 116        E-mail us    
Jo Stuart
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But details still are secret
New tax proposals coming 'within a month'

By the A.M. Costa Rica staff

Top ministers held a strategy session Monday to figure out how to get a new tax plan passed in the Asamblea Legislativa.

A communique issued after the session said that the plan might go to the legislators within a month.

Little is known about the contents of the plan except that the measure is more streamlined than the 400-plus-page document promoted by the Abel Pacheco administration over the last four years. That document, the bipartisan product of a handful of ex-budget ministers, suffered a reverse when the Sala IV constitutional court ruled that legislative leaders rammed the document through the assembly in an unconstitutional way.

The new plan is expected to have at least a proposal for a value-added tax that would be equal to the 13 percent collected in sales tax now. The value-added tax would raise more money because more activities, such as professional work, would be covered.

The ministers who met were Guillermo Zúñiga of the budget ministry Hacienda, Francisco de Paula Gutiérrez, president of the Banco Central, and Marco Vargas, who is minister of Coordinación Interinstitucional, a new job.

Vargas said in the communique that an exact date to send the document to the legislature is not fixed but that it will be a short time, a month at the most.

Vargas said that what is needed is a fiscal plan that is defensible and acceptable to all the parties represented in the assembly.  For the last four years Movimiento Libertario used parliamentary procedures and thousands of separate amendments and motions to stall the fiscal plan.

In order to get the document approved, legislative leaders had to resort to a fast track procedure that the high court found insufficient. The Libertarians faced a lot of public and official pressure to withdraw their opposition.

Zúñiga, in the communique, said that the plan would first be presented to the legislature and later to other interested groups in society. He said all suggestions and motions would be accepted, but it is hard to see the mechanism for that because the plan by then would be in the hands of the lawmakers.

The country needs to face the structural problems of public funding, Zúñiga said. He cited tax fraud, financing the country's massive internal and external debt and public spending.

No matter what the executive branch proposes, the result, if passed, may be very

A.M. Costa Rica graphic
The fiscal plan process to begin again

different because the legislature has the power to redraft the bill.

Zúñiga also said that there are other projects of high importance in the legislature, including a redraft of the law for public concessions, loans, modernization of the Instituto Costarricense de Electricidad, opening the telecommunications market to competition, strengthening the Instituto Nacional de Seguros and opening the monopoly in the insurance market.

The government estimates that the country has a debt load of $7 billion. For every colon that flows into the Ministerio de Hacienda, the government spends two colons, financing the difference with debt.

The Central Bank itself has run up $2.8 billion in debt defending the value of the colon over the years. The central bankers want to hand this debt over to the central government, where there are more options for financing. Such a measure is in the legislature.

Officials at the Central Bank have begun talking about letting the colon float on the world market within certain limits by the end of the year. This possibility has caused concern in the expat community and would amount to a dollarization of the Costa Rican economy because hardly anyone would accept colons if they did not know what the currency would be worth tomorrow.

Recent disclosures of special benefits given public employees have irked some in the public. For example, a guard with 31-years of service on the docks at Caldera is getting a $26,000 payoff because the facility is being turned into a concession. The payoff is in addition to any pension benefits.

Similar disclosures were prompted by Sala IV rulings rejecting some benefits. The court acted on appeals filed by the Movimiento Libertario.  There also have been disclosures that President Pacheco funneled millions in cash through the Catholic Church to Limón dockworkers to buy labor peace. The church then was reimbursed by "donations" from owners of agricultural firms who had received settlements for storm damage to their crops.

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San José, Costa Rica, Tuesday, June 13, 2006, Vol. 6, No. 116

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Special pay from Taiwan
prompts legislative look

By the A.M. Costa Rica staff

A legislative commission will investigate why employees of the foreign ministry got special pay provided by the government of Taiwan.

The Comisión Permanente Especial de Control del Ingreso y Gasto Público decided Monday to looking into the payments at the Ministerio de Relaciones Exteriores y Culto.

Until at least October 2004 the executive branch made payments from a special fund, the Asociación para el Desarrollo de la Política Exterior de Costa Rica, to foreign ministry employees. The money originally came from the government of Taiwan.

Alberto Salom Echeverría, a legislator affiliated with the Partido Acción Ciudadana, was the lawmaker who initiated the commission action. He said that he had met with current foreign minister, Bruno Stagno, who promised to provide him with all the documentation, he said.

The payments were made during the administrations of Miguel Ángel Rodriguez and Abel Pacheco. They are members of the Partido Unidad Cristiana. The administration had argued that foreign ministry employees deserved the money because of the sensitive nature of their jobs.

Salom said that the payments might have continued longer — even while a law against illegal enrichment came into force. He said there were no external controls on the use of the money. The commission has the power to summons witnesses and documents.

Anti-corruption measures
to be studied in Managua

Special to A.M. Costa Rica

During a national workshop that will take place today in Managua, Nicaragua, high-level representatives of the Nicaraguan government and the Organization of American States will study measures designed to implement recommendations for strengthening anti-corruption efforts in the country.

The event, which will include the participation of the president of Nicaragua, builds on the Inter-American Convention against Corruption. Through this process, experts from the hemispheric member states examine progress against corruption in each country and develop concrete recommendations to improve efforts to combat this problem.

The Managua workshop will take place at the Hotel Intercontinental Metrocentro and begin at 8:30 a.m.
Nicaraguan President Enrique Bolaños will take part in the closing session, scheduled for 4:45 p.m., and he will be briefed on the results and conclusions of the workshop.

Some 28 organization member countries participate in the anti-corruption mechanism. Last week, the first Hemispheric Report developed through this process was presented to the region’s foreign ministers, who were meeting in Santo Domingo, Dominican Republic, for the organization's annual general assembly.
Arias says corporate rate
will be just single digit

By the A.M. Costa Rica staff

President Óscar Arias Sánchez told Germans over the weekend that foreign firms soon would only have to pay a tax rate here in the single digits.

He was speaking in Munich at the Costa Rica Arena, an exposition area of the country's products set up for the World Cup crowd. Arias pointed out that a magazine had listed Costa Rica third in the world in outsourcing after India and China.

"In fact, our salary structure is more competitive than that of India and the tax rate in force for foreign corporations soon will be a single digit," said Arias in a Spanish text released by Casa Presidencial. The corporate tax rate here is typically 30 percent.

Arias did not say how the low tax rate might be accomplished. However, he said that during his administration there will be more and more aid to foreign investment.

He said that he hoped an accord would be reached soon with Europe to eliminate import duties and that his aides are sending proposed laws to the Asamblea Legislativa to stimulate the growth of the high-tech sector. More importantly, he said, the amount of money for education is being increased.
Bids sought on four bridges

By the A.M. Costa Rica staff

The state highway agency says it will seek bids for four bridges destroyed by floods last year along the Pacific Coast. The bid deadline is July 7.

The bridges will be over the rios Portalón, Matapalo, Hatillo Nuevo and Hatillo Viejo.

The agency, the Consejo Nacional de Vialidad, has had trouble getting the money and approvals for the work.
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San José, Costa Rica, Tuesday, June 13, 2006, Vol. 6, No. 116

New Internet cafe has signal that covers Cahuita
By Annette Carter
Special to A.M. Costa Rica

After years of living in the dark ages, high speed Internet has finally come to the seaside village of Cahuita on Costa Rica’s Caribbean coast.  The community might be the first in Costa Rica to be  covered by what is called a wireless cloud.

Until now, Internet users have had only one way to get online — through a dial-up service at a maximum speed of 56 kbps. 

Radiográfica Costarricense S.A. provided that service. The company is a subsidiary of the Instituto Costarricense de Electricidad, the government-owned telecommunications monopoly.

Now users with their own laptops can go online using wireless or WiFi technology provided by the newly opened Jungle Internet Café.  Customers using the café’s computers have access to the same technology.  The Jungle Café is the second opened on Costa Rica’s Caribbean coast by California couple Jimmy Brake and his wife, Linda Lee, and their partner, Colombian Nicolay Bent de Armas.  The first café has been operating in Puerto Viejo de Talamanca since February last year. 

De Armas explained that the technology begins with a satellite dish.  The dish brings the Internet connection to a server for all the computers in the Café and an antenna provides the signal to other nearby computers that have wireless capability, he said. 

Currently the signal extends 400 meters (about 1,300 feet) from the café which is located in the center of Cahuita across from the city park and above the Restaurant Coral Reef. The coverage may be expanded later by adding repeaters throughout the area. The speed is a hefty 400 kbps compared to the 56k of a dial-up connection. Speed in Puerto Viejo runs higher at 1,000 kbps, de Armas said.

Brake and Lee have been coming to Puerto Viejo for two to three months each year for several years.  In their hometown of Oakland, California the couple operates DW Alliance, a web-based technology company, from their home and liked the idea of

These Internet users are in the cafe, but they could be 400 meters away instead.

A.M. Costa Rica photos/Annette Carter
Jimmy Brake and Nicolay Bent de Armas at their new Jungle Internet Café in Cahuita.

working from the Caribbean for part of the year.  But they soon found it wasn’t so easy. 

Users buy increments of time from 15 minutes to 10 hours which is metered on the Web site and can be used from either Jungle Café location or on a personal laptop computer. 

The Instituto Costarricense de Electricidad is starting to offer high speed DSL internet access known as Acelera to residents of Cahuita.  The service connects at speeds ranging from 128 kpbs to 4,096 kbps and costs from $28.25 to $327.70 per month depending on the plan purchased. The hookup requires a land-based telephone line and a special modem for the computer.

Several businesses in the Central Valley provide wireless systems for commercial customers. However, Cahuita is small enough to be covered by a single setup.

Elsewhere, whole U.S. counties are covered by wireless clouds that allow computers with wireless access to get on the Internet anywhere.

“We couldn’t run our business from here because the Internet was really really slow,” Brake said. “And we met other people who were in the same boat.”

A systems engineer, Brake knew what needed to be done.  At about that time, de Armas who moved to the Caribbean coast from the Colombian island of San Andreas two years ago had been working in computer maintenance for a dial-up Internet café in Puerto Viejo and began to think of opening his own operation using faster technology but he needed a partner. 

The two met each other and hit if off, Brake said.  Now de Armas handles all the management and day to day operations while Brake takes care of the Web site from California.  “Our plan is to unite Cahuita, Puerto Viejo and Manzanillo with WiFi,” said de Armas.  Brake said they expect to open the third Jungle Café in Manzanillo in the fall.

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San José, Costa Rica, Tuesday, June 13, 2006, Vol. 6, No. 116

Garcia's victory in Peru seen as setback for Chávez
By the A.M. Costa Rica wire services

The regional ambitions of Venezuelan President Hugo Chávez appear to have suffered a setback in Peru with the defeat of a presidential candidate backed by the leftist Venezuelan leader. Still, the past record of election winner Alan Garcia is cause for concern for Peru's economic partners like the United States and China.

Peruvian president-elect Garcia says his election is a clear defeat for Chávez, who had openly backed Garcia's opponent. “The majority of the country has defeated the efforts by Hugo Chávez to integrate us into his militaristic and backwards expansionist project he intends to impose over South America," Garcia said.

Garcia's rival, Ollanta Humala, called for a social revolution and campaigned against what he considered to be the exploitation of Peru by free market policies.

Humala was supported by Chávez who openly backed a presidential election victory by Evo Morales in neighboring Bolivia last December. Appearing in Bolivia with Morales recently, the Venezuelan leader disparaged Garcia and promised economic support for Peru if Ollanta Humala won the election.

By doing this he may have overreached according to Michael Shifter of the private Inter-American Dialogue organization in Washington, DC.  "Peruvians don't like people meddling in their politics, and they don't like it whether it is Venezuelans, or Americans or anybody else," he said.

Chávez has steered his country leftward since taking office in 1999. He has used its vast oil wealth to expand his influence while denouncing the United States.  Peru's election results may signal the beginning of a Latin American backlash against the Venezuelan leader.
"What we're seeing now is that he has reached his limit, perhaps.  I think there is a reaction in the rest of Latin America,” Shifter said. “Clearly he's a leader with a lot of resources, and governments want his resources, but they are not prepared to defer leadership to him."

Garcia's populist policies as president from 1985 to 1990 led to economic stagnation and runaway inflation.

That is why countries with trade and investment in Peru, such as the United States and China, are expected to watch Garcia closely to see if he goes back on his campaign promises not to make the same mistakes again.

Peru's vast tropical forests, its booming mining industry and rich fisheries have attracted trade and investment from China. Beijing is increasingly looking to Latin America for raw materials to fuel its manufacturing industries. Last year, China imported $50 billion worth of commodities from Latin America, a six-fold increase since 1999.

In his presidential campaign, Garcia, a moderate leftist, promised to preserve Peru's free trade economy. Shifter said he believes the incoming president will not follow Bolivia's example of nationalizating industries.

"I think Garcia has given all the signals that he is not going to make significant changes in the current investment environment in Peru,” Shifter said. “There may be some re-negotiations on the edges, but he has made it clear that what has happened in other countries, like Bolivia, is not a model that he wants to follow."

Peru's rampant poverty and underdevelopment will pose a challenge to Garcia as he tries to respond to the country's social demands while maintaining fiscal responsibility.

U.S. team falls to Czechs in first World Cup game
By the A.M. Costa Rica wire services

GELSENKIRCHEN, Germany — The U.S. Soccer team got off to a rocky start in the 2006 World Cup here, losing to the Czech Republic, 3-0.

Very little went right for the U.S. team from the outset of the match against the Czech Republic. Defender Oguchi Onyewu was given a yellow card for a foul in the fourth minute, and barely one minute later the Czechs had a 1-0 lead on a perfectly placed crossing pass that Jan Koller headed in the net.

Tomas Rosicky added goals in the 36th and 76th minutes, one on a powerful shot from several meters outside the box and another on a chip shot over the head of U.S. goalie Kasey Keller after he sped past the defense.

U.S. coach Bruce Arena said he was not pleased with his team's effort.

"Certainly a very poor start to the game," said Bruce Arena. "And to put yourself down a goal in the first five minutes of the game against a team of the quality of the Czech Republic that actually defends quite well. At that point we're very comfortable in sitting back
and absorbing any kind of pressure encountering us. We were really behind the eight ball from the start, so I'm very disappointed in our start. I'm very disappointed in the performance of a number of our players over 90 minutes."

The best chance the U.S. team had to score came in the 28th minute when a shot by captain Claudia Reyna bounced out after hitting the inside of the left post.

In the 3-0 victory, the Czechs saw their star forward, Jan Koller, go down with a leg muscle injury just before the half and he left the game.

Because of that, Czech coach Karel Brucker was a bit subdued after the win.

"It's obviously a very nice feeling to have won the first match," said Brucker. "However, we are going to suppress our over-satisfaction because there are two tough matches ahead of us, and we also suffered heavy losses, so to say."

After the 3-0 Group E win over the USA, the Czech Republic will face Ghana Saturday in Cologne and the United States will take on Italy in Kaiserslautern.

European Union declines to reinstate sanctions against Cuba
By the A.M. Costa Rica wire services

The European Union has adopted a new strategy on Cuba, but has postponed the renewal of sanctions for another year.

EU foreign ministers Monday deplored the state of human rights on the Communist island and urged Havana to free all political prisoners. But the diplomats did not reinstate the sanctions that were suspended in January 2005.
Support for a tougher stance on Cuba was strongest among new EU members from Eastern Europe who still live with the legacy of communism. Sweden and the Netherlands also were in favor of a tougher policy.
Cuba's colonial ruler, Spain, was among the countries opposing the renewal of sanctions.

The declaration concludes that the European Union would welcome renewed political dialogue with Cuban authorities. The ministers are expected to review the situation on Cuba again next year.

Jo Stuart
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