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(506) 223-1327       Published Tuesday, July 25, 2006, in Vol. 6, No. 146       E-mail us    
Jo Stuart
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Obstacle to social and economic development
Poor countries battered more by corruption
By the A.M. Costa Rica wire services

Bribery, nepotism, and other forms of corruption exist to a greater or lesser extent in all countries, but its corrosive effects hurt poor nations the most. The World Bank considers corruption one of the greatest obstacles to economic and social development because it undermines the rule of law and weakens the institutional foundations upon which economic growth depends.

It was a secret video of Peru's one-time intelligence chief, Vladimiro Montesinos, paying a bribe to a congressman that led to the downfall of President Alberto Fujimori's government. When the video, taped by Montesinos himself, was leaked to the media in September 2000 it unleashed such a scandal that the Fujimori government fell less than three months later, ending 10 years of autocratic rule.

The Montesinos bribery scandal is a textbook example of the corrosive effects of corruption on a country's political life, its institutions, and economy. Yet Perú is not the only country plagued by corruption.

"Corruption is something that afflicts all of us. There is no country that does not have a challenge in terms of controlling corruption," says Nancy Boswell, who heads the U.S. chapter of Transparency International — a group which monitors global corruption.

"There are always going to be people who are corrupt," she adds. " I don't think at the end of the day that any one of us believes that one country has more of that culture or less of that culture. It really is a question of have they been able to develop the institutional mechanisms to control it."

Corruption takes many forms — from bribery of police or government officials, insider trading in stock markets, nepotism in hiring for jobs. Groups like Transparency say it is extremely difficult to quantify the amount of corruption that takes place each year because of its secretive nature. However, some estimates put the global figure for bribery alone at more than $1 trillion annually. In just the construction industry, Transparency estimates, 10 percent of the $4 trillion industry disappears because of corruption.

Corruption expert Louise Shelley says the effect of graft is especially damaging for poor countries.

"If you have 5 percent of an economy being paid in bribes or 7 percent, a strong economy like in Italy can tolerate that. A weaker economy that loses a similar percentage of its assets will be much worse off," she says.

A country plagued by corruption also will have difficulty in attracting foreign investment — one of the keys in generating economic development.

"Companies, if they can help it, will not go to countries where corruption is rampant," says Boswell. "Survey after survey demonstrates that companies go where there is a hospitable environment and part of that is less corruption. So that is an important factor as well. For countries that want to attract investment and trade, focusing on fighting corruption is an absolutely vital element for that equation."

With some exceptions, it is the countries that rely on a single natural resource for most of their income that are most susceptible to corruption. Oil rich countries — like Venezuela and Nigeria — are examples of this. In its annual corruption index, Transparency International ranks these two nations as among the worst for corruption. Louise Shelley, who heads the Washington-based Terrorism, Transnational Crime and Corruption Center, explains why oil-rich countries are so susceptible.

"Because you have one natural resource that generates huge amounts of money and that natural resource is concentrated in the hands of a central elite or ruling figure and therefore it becomes a very close held group that controls this natural resource," she says.

"And because there is such an international 

market for it, there's just enormous corruption that accompanies it."

The United States is not immune from corruption. Recently, there have been several scandals involving misdeeds by U.S. lawmakers.

U.S. Rep. Randy "Duke" Cunningham, for example, was forced to resign his office last year and was sentenced to jail for taking more than $2 million in bribes.

But it is in dictatorships like those in Burma or Belarus where corruption flourishes because there is no transparency, no free press, and citizens have almost no rights. Louise Shelley points to the 2003 Rose Revolution in Georgia as an example where citizens mobilized to depose a corrupt, authoritarian government.

"You need citizens that are so fed up with the corruption that is in existence that they demand change," she says. "And that they are ready to change their ways and their behavior so they are not complicit in this corruption. There needs to be a social contract where the society decides it is going to do something about it. We've seen it in Italy, we've seen it in Georgia, where there are major efforts made with the society and the government in tandem to do something about a serious problem."

Anti-corruption marches have been staged in Perú and other nations where citizens are demanding change.

But ending corruption requires more than just demonstrations. Anti-corruption laws have to be passed and the judiciary must be empowered to enforce them. To this end, a United Nations convention signed by more than 130 countries went into effect in December, outlining a list of recommendations for how government, the private sector and citizens can help stop corruption.

Much of the focus is on business. Since 1977, the United States has had a law on the books, called the Foreign Corrupt Practices Act, which forbids U.S. businesses from paying bribes when operating abroad. The Organisation for Economic Co-operation and Development — which groups together 30 industrialized countries — has a convention that makes it illegal for the companies of member nations to engage in bribery.

Prior to the 1999 organization convention, some industrialized countries permitted their companies to engage in bribery abroad and even allowed those expenses to be tax deductible.

Transparency International's Nancy Boswell says she is hopeful measures such as the Organisation for Economic Co-operation and Development treaty will help curb corruption, but she adds a change of attitude is also required.

"Every time we see the damage, particularly in the poorest areas of the world, and we understand the disproportionate impact of corruption on the poor, then I think we remember it is really important for all of us to play a role," she says. "Business, for example, thinks about 'Am a going to get the deal?' and they think about competition. It is important that they also understand there's an impact to their actions that flows down the chain to the very poorest."

The stakes are highest for developing countries. Boswell and others agree that these nations must stamp out corruption if they hope to someday emerge from the mire of underdevelopment and poverty.

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San José, Costa Rica, Tuesday, July 25, 2006, Vol. 6, No. 146

Costa Rica Expertise
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Our reader's opinion

Ex-sportsbook worker
seeks decision by officials

Dear A.M. Costa Rica:

In reference to your analysis titled, “Sportsbook crackdown puts Costa Rica on the spot” [Monday], the silence in this country has become deafening.

While your online paper has taken up the story as well as almost all U.S., British and Canadian newspapers, not to mention global business publications, Costa Rica’s press, television and print seem to be in denial, to say the least. Even in English the more “tell me only good things” Costa Rican Web sites and online newspapers barely mention the sportsbook crackdown by the U.S. Department of Justice and the possible ramifications.

While my entire family is Costa Rican, I am not. My family is old school Costa Rican. On Saturday we had the usual sobre mesa with friends and only one of 11 people  knew anything about the sportsbook arrests or the U.S. Congressional bill now with the Senate waiting for approval. These are highly educated and involved people. It is if the issue does not exist.

Less than a year ago, I worked at Nine.com to see what it was all about. It is pretty much what you said in your article. No taxes, do what ever is possible to get rid of winners, absolutely no criminal background checks on employees, everyone uses a pseudo name (Even in management where a guy named “Rock” might really be “Peter”), Tico employees never reach management except in HR, everyone has access to the personal identity of thousands of customers including their Social Security numbers and tons of credit cards. 

Costa Rican banks never sees the wired in deposits. The money goes to more pseudo names in Panamá or Nicaragua.

You have to ask, where is the upside for Costa Rica? Especially when sportsbook employees tell U.S. customers not to worry because ". . . we come under the gaming laws of Costa Rica” of which there are none.

Do sportsbooks create a lot of jobs? Even that is questionable. I have read so many numbers from so many different sources that none seem to sound right. It only takes one computer and two telephones to be a sportsbook. (The second phone is to take incoming calls.)

If, as often tossed around, BetonSports has 2,000 and Bodog has 7,000 employees and there are 750 books in this country that adds up to more employees than all the casinos in Las Vegas. The MGM Mirage group, with 30 resort casinos and hotels only averages 1,800 employees each and that includes the kitchen help and parking lot attendants.

I guess the upside for Costa Rica is the long-held tradition that it is better to get a little bit of something than a lot of nothing. By not regulating and not taxing sportsbooks that strategy keeps the Costa Rican government from coming under fire by the U.S.

What Sportsbooks do well for us is to rent a lot, a lot of office space and pay a lot of money to ICE/RACSA for both voice and super broad band. As for jobs, just take a look at any La Nación Sunday edition and you can see hundreds of job offers for English-speaking people . . . and they do offer a future.

Costa Rica needs, once again, to face reality. It is time for us to take our heads out of the sand and either regulate and tax sportsbooks or get rid of them. And, “Yes,” the minute there is one tiny regulation, that is tacit legal recognition and now we will need to deal with the U.S. Department of Justice. Somebody created Frankenstein’s monster and he’s found freedom.

John Holtz
Firm picked to clean up
garbage-ridden Tibás

By the A.M. Costa Rica staff

The national emergency commission has selected a contractor to pick up the garbage in the Cantón de Tibás for six months. The firm is WWP, the trash hauler, and the contract went into effect Monday.

Tibás has been buried in garbage during a dispute of several years over municipal finances. Trash bags are stacked high in vacant lots. They are 10 deep along the canton's roads. Smart residents are smuggling their trash into San José for municipal pickup there.

The Comisión Nacional de la Comisión Nacional de Prevención de Riesgos y Atención de Emergencias will be investing 148 million colons, some $287,000. Commission President Daniel Gallardo said the accumulated garbage will be picked up in 15 days and then the company will maintain normal pickups.

The six months will give the municipality time to get its finances in order, he said.

The commission acted May 23 to end what it considered a health menace. The trash and plastic bags created pockets of water where dengue-bearing mosquitoes could breed. There also was an increase in rats.

The Ministerio de Salud termed the situation an immediate danger, not only for Tibás but for the capital to the south. It took two months to accept bids and get the proposed contract approved.

Ex-Hacienda minister
will be fellow at Yale

By the A.M. Costa Rica staff

David Fuentes, who took over as minister of Hacienda in the last seven months of the Abel Pacheco administration, has been named a 2006 Yale world fellow by the New Haven, Connecticut, university.

Fuentes joins a program that is designed to build a global network of emerging leaders and to broaden international understanding, according to Yale.

Fuentes served as vice minister before he took over when Federico Carrillo left for a job in InterAmerican Development Bank.  Fuentes was credited with maintaining economic stability during a time of rising oil prices.

Fellows are selected from individuals outside the United States, the university said.
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San José, Costa Rica, Tuesday, July 25, 2006, Vol. 6, No. 146

Local pastor was target of kidnappers
Hinkle, others plead guilty in Grenada bank scams

By the A.M. Costa Rica staff

U.S. officials have negotiated guilty pleas in two scams that were run out of the Caribbean island national of Grenada.

Rita L. Regale and Robert J. Skirving have pleaded guilty in Portland, Oregon, to one count of money laundering related to a fraud scheme that took in more than $125 million from mostly U.S. citizens.

In Wilkes Barre, Pennsylvania,  Richard H. Hinkle, a former pastor in Costa Rica, has admitted one count of wire fraud. His operation may have netted up to $8 million, according to a federal prosecutor.

The two operations were loosely connected, and as part of his plea agreement, Hinkle agreed to testify in Oregon trials of two remaining defendants in that case.

The operations were similar.  The Oregon defendants ran the First International Bank of Grenada, and various subsidiaries.  Their indictment alleged that defendants persuaded individuals to deposit money and otherwise invest in the banks by promising annual returns of up to 300 percent.  The defendants claimed the banks had assets worth up to $74 billion, and that their deposits were 100 percent guaranteed against loss by the bogus International Depositors’ Insurance Corp., said the indictment.

In fact, the indictment alleges, the bank had no investment income and simply used new depositors money to make purported interest payments to earlier investors.  In August, 2000, the First International Bank of Grenada was taken over by the Government of Grenada, resulting in losses to depositors at least in excess of $100 million.

Hinkle operated Cornerstone International Savings and Investment Bank, which also operated in Grenada. His targets were mostly elderly individuals in northeastern Pennsylvania and in Illinois. He stopped making interest payments and fled from Grenada to Costa Rica in late 2001, investigators said.

Hinkle was arrested at his La Ribera de Belén home in February 2004  by local investigators who acted on a request from U.S. officials based in Pennsylvania.

A federal grand jury had indicted Hinkle on 19 counts of wire fraud and 39 counts of money laundering in connection with the five-year scheme. The amount of the fraud was set at $3.5 million, but later, a U.S. government lawyer said the amount could be as high as $8 million. Hinkle formerly lived in the Pennsylvania town of Weatherly.

Hinkle offered investors from 2 to 3 percent a month interest and operated a ponzi scheme by paying interest with new money deposited for investors, according to the original indictment. The federal indictment says that he converted funds to his
personal use, including some that went into a Costa Rican corporation.

Hinkle was the target of kidnappers Oct. 22, 2003, when he returned to his home with his family. He was grabbed in what later was described as a heavy-handed debt collection effort or an effort to bring him back to the United States by force.

Three days later agents raided a dwelling in Los Anonos, Escazú, and freed him.

Here Hinkle was the operator or owner of Brand Fashions at the Real Cariari Mall. He was believed to have made a $200,000 investment to buy out business partners in the store shortly before the kidnapping.

In addition to his clothing business, Hinkle also is known to members of the expat community as a lay preacher in a Baptist assembly in San Pedro. He previously was a member of the International Baptist Church in Escazú.

The Scranton Times Tribune, a Pennsylvania newspaper, said at the time that a number of Mr. Hinkle's alleged victims attended a bail hearing and reacted with disbelief when his attorney said Hinkle is a pastor.

U.S. officials say that most of the money sent to Hinkle either was used to pay interest to early investors or ended up being sent to the United States or to a bank in Costa Rica. There was little for Grenada officials to recover.

The Oregon case originally involved five persons. Gilbert Ziegler, also known as Van A. Brink, the alleged leader of the scheme, died in December 2005, resulting in the case against him being dismissed, said the U.S. Attorney's office in Portland. Douglas Ferguson and Laurent Barnabe are currently scheduled for trial on this matter in February 2007, the office said.

In their guilty pleas, defendants Skirving and Ms. Regale admitted to a money laundering charge because they engaged in financial transactions in Oregon with the proceeds of the fraud scheme.  Both defendants agreed that the total funds laundered throughout the scheme exceeded $100 million, and that restitution owed to the depositors of the First International Bank of Grenada could exceed $125 million.

Both Skirving and Regale face maximum sentences of up to 10 years in prison, a fine of $250,000, and a three-year term of supervised release.  The plea agreement for Skirving, if accepted by the court, will result in a sentence of 97 months imprisonment. Sentencing for Ms. Regale is being deferred until after the trial of her co-defendants.

Hinkle faces up to five years in federal prison and a $250,000 fine.

Tamarindo will host a charity surf event for its Blue Flag Committee
Special to A.M. Costa Rica

The first Century 21 Coastal  Estates Charity Surf Classic comes to Playa Tamarindo this weekend. The event will be at the Tamarindo River mouth.

The surf classic is a non-profit event where all proceeds will benefit the Tamarindo Blue Flag Committee in its effort to maintain the ecological Blue Flag award recovered in 2005, said an annoucement.
According to Juanita Hayman, head of the Tamarindo Blue Flag Committee, the group is committed to continuing to improve the water quality, environmental management, and the area’s security.
“We think the Blue Flag Committee is doing a great job. With this activity we want to raise funds that will provide more support and better tools to the
primary entity that looks after Tamarindo`s environment,” said Nicholas Viale, owner and president of Century 21 Coastal Estates who is the host and main sponsor of the event.
Event organizers hope to raise sufficient funds to provide the Tamarindo lifeguards with a headquarters and new lifeguard chairs in order to optimize their vigilance in guarding the beach safety as well as its cleanliness.  The organizers also plan to allot money  raised towards the renovation and maintanence of Tamarindo’s beach accesses and also to buy water testing kits for the Tamarindo Chapter of the Surfrider Foundation.

The event will take place Saturday and Sunday from  6 a.m. until 6 p.m. in the Tamarindo Estuary. Registration will be open in seven different categories: Open 18-35, womens 18 & up, junior boys 12-18, junior girls 12-18, grommets 11 & under,  longboard, and masters, 35 & up.

Registration will be on Friday from 5 to 7:30 p.m, at Best Western Tamarindo Vista Villas Monkey Bar.

There will be an Expo Fair adjacent to the tournament for participating sponsors and local non-profits to present material to the public on their specific missions. 

You need to see Costa Rican tourism information HERE!

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San José, Costa Rica, Tuesday, July 25, 2006, Vol. 6, No. 146

Trade talk collapse a setback for developing nations
By the A.M. Costa Rica wire services

World trade talks have collapsed amidst recriminations as to who was to blame for the failure. World Trade Organization chief Pascal Lamy suspended the 5-year-old trade negotiations after failing to break a deadlock over farm subsidies.

The decision is a blow to developing contries who depend on trade with the industrialized world.

Lamy decided to call it quits after trade ministers from the European Union and five other powerful trading nations, known as the G-6, failed to reach a deal that would have allowed the global trade talks to continue.

Australian Trade Minister Mark Vaile calls this a very disappointing outcome, especially for colleagues in the developing world. But he says this does not mark the end of the World Trade Organization, nor necessarily of the talks, known as the Doha round.

"No, it is not the death blow of Doha. The round is not dead," he said. "The round is put in a state of suspension until we can find the ingredients that will carry it forward and deliver on the mandate of Doha. What I'm saying is that no member of this organization should be prepared to get an outcome that is anything less than what we set as an objective in Doha. We certainly are not."

The aim of the Doha Development Round was to boost the world economy and lift millions of people out of poverty by lowering trade barriers across all regions. The negotiations are called that because they were launched in Qatar in 2001. One of the major goals was to open markets to exports from developing countries.

In the end, countries could not agree on what steps
 were needed to let the trade talks move ahead. It did not take long for the blame game to begin. The European Union blamed the failure on the United States, saying it showed little willingness to compromise. EU Trade Commissioner Peter Mandelson said the United States had been unwilling to reduce government subsidies paid to American farmers.

But Washington said the EU and other World Trade members had not done enough to lower farm tariff barriers. U.S. officials also blamed Brazil and India for refusing to cut barriers on industrial imports.

U.S. Trade Representative Susan Schwab expressed her disappointment that the G-6 ministers were not able to reach an agreement when they met Sunday.

"While the United States was prepared to do more, yesterday's focus on the loopholes in market access, on the layers of loopholes, revealed that a number of developed and advanced developing countries were looking for ways to be less ambitious, to avoid making ambitious contributions," said Ms. Schwab.

"But that does not mean the United States is giving up. 'Doha Lite' has never been an option for the United States; it is still not an option."

Schwab says World Trade Organization members must figure out how to move forward from this setback. Otherwise, a unique opportunity to help developing countries and to spur global economic growth will have been missed.

Many countries believe it could take anywhere from months to years to restart the negotiations. The World Bank estimates a trade deal could pump at least $96 billion into the global economy and lift 66 million people out of poverty.

New communications system installed at Nicaraguan border crossing
By the A.M. Costa Rica staff

Law officers and immigration officials at Peñas Blancas are now in direct contact with other law enforcement offices in the zone, along the Nicaraguan border and with the central communications facility at the Ministerio de Gobernación, Policía y Seguridad Pública.
Fernando Berrocal Soto, the minister, inaugurated the system Monday when he toured the entry point and the Nicaraguan border.

"This is the first time that police in the zone had a modern communication system," said Berrocal.
The network will help police in controlling illegal immigration and drug smugglers, he said. 

This shipment of coke used a symbol of a comic book character
By the A.M. Costa Rica staff

Customers of Batman brand cocaine are just out of luck.

Police discovered 688 kilos of the drug in a truck Saturday at the Peñas Blancas border crossing with Nicaragua. The drug was divided in one-kilo packages, each of which bore a green Batman symbol.

Agents with the Sección de Estupefacientes of the Judicial Investigating Organization said they received a telephone tip about the shipment. They said they soon realized that the vehicle had a double floor and that the drug packages were hidden in that space.

The 40-year-old driver of the vehicle was held. The truck had left Pavas and was headed for a city in Honduras, agents said. The United States was the likely final destination.

It is not unusual for drug producers to mark their product with a distinctive symbol.

Ministerio de Gobernación, Policía y
Seguridad Pública photo
Batman symbol appears on assorted packages of cocaine confiscated by police.

Jo Stuart
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