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These stories were published Tuesday, July 26, 2005, in Vol. 5, No. 146
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New president must face economic reality
Despite winner, country running on empty

By the A.M. Costa Rica staff

As the country gears up for a February presidential election, the promises and plans of all the candidates run up against economic realities.

The highways are in disrepair, and many other governmental systems operate poorly simply because there is no money.

The Sala IV constitutional court ordered the executive branch to follow the law and use money obtained from fuel taxes to fix the roads. The government had been using the money for other pressing needs.

An analysis on the news

Federico Carrillo, the minister of Hacienda, says that for every colon that comes as income to the government, his ministry has to spend two colons. Salaries, pensions, health care and other big ticket items are financed by borrowing, and at least 25 percent of the annual budget is interest.

The administration of Abel Pacheco has pushed strongly for a new tax plan that would create a 13 percent value-added tax. The measure also would tax income for Costa Rican residents no matter where in the world they earned the money. In that way it would be similar to the U.S. tax system.

The plan seems unlikely to pass this year. Even if it does, the promised bonanza may be an illusion. People have a way of avoiding taxes.

Despite the crunch, some major party candidates are spending money the country really doesn't have. Ricardo Toledo got the official appointment from the Partido Unidad Social Cristiana Monday and immediately took the podium and promised a new computer to every successful high school graduate in the country.

He served as minister of the Presidencia and, better than most, he should know about the financial state of the nation.

Other candidates are less direct, although most can define the problems:

Continual inflation, unemployment, irregular prices for agricultural products, poverty, a rising crime rate, drug use, money laundering, narcotics trafficking, a decaying infrastructure, strong competition for foreign investment.
Óscar Arias of the Partido Liberación Nacional appears to be the favorite candidate. His Web site notes that a survey showed that  35.8 percent of the Costa Ricans prefer him.

He seems to have no clear philosophies or proposals except that he was president in the 1980s. Sections of his Web site designed to outline philosophies and ideology are empty. He has yet to expound a campaign platform, although he does support the free trade treaty with the United States.

Ottón Solís of the Partido Acción Ciudadana recently completed a tour of the southwestern part of the country where he outlined a number of incentives for rice farmers, palm oil producers, cattlemen, farmers, fishermen and workers at the tax-free stores in the community of Golfito.

The keystones of the Solís campaign are elimination of poverty and respect for nature. However, his party is refusing to accept at least half of what usually is given political campaigns by the government.

Solís suggests that the rich should be taxed more, giving perhaps one solution to the national problems. Solís has said the free trade treaty should be renegotiated.

In opposition to the socialistic oriented political parties is the Movimiento Libertario and its candidate Otto Guevara, who is against new taxes and thinks that the country can work its way out of its financial problems by cutting expenses, fighting corruption and reducing smuggling. The party strength is growing, but the libertarian ideas still are foreign to many Costa Ricans.

In truth, all the candidates and their promises are at the whim of the international financial system. A sharp rise in interest rates, and Costa Rica will be hit hard making debt payments.

Yet the country needs to make investments. The fatal fire July 12 at Hospital Calderón Guardia showed the deplorable state of the infrastructure. Free medical care itself is a time bomb because Costa Ricans have an open-ended promise of health care.  And although the society is much younger than that of the United States, there is a continually increasing pressure on government pensions.

Many of these costs are predictable and fixed. The next president —whoever that may be — has limited options.


 
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San José, Costa Rica, Tuesday, July 26, 2005, Vol. 5, No. 146

 
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Technology called key
to changing markets

By the A.M. Costa Rica wire services

Global trade and instant communications are changing the nature of business, says Mohan Sawhney, who teaches technology at Northwestern University's Kellogg business school. He says the companies that are thriving are those that are agile enough to respond to changing markets.

Once, he says, the automaker Ford set the standard for efficiency, when it mass-produced its early Model-T cars. They were cheap and reliable, but buyers had the choice of just one color - black. Today, he says, consumers drive the market and businesses must respond to customer preferences. He says technology lets them do that.

"The new business model is something like the Toyota Scion, where you can have it configured to your taste 40 different ways, assembled right there, made to order and delivered to you through an Internet-based ordering system," Sawhney says. "We are not there yet, but that would be the vision for how industry is evolving."

David Moschella of the research organization Leading Edge Forum says consumers can do their banking and buy airline tickets online, and the value of the technology they are using goes far beyond the cost of the computers and networks.

He says global technology is getting a boost in some unexpected places. The coffee giant Starbucks lets patrons in some outlets surf the Internet through wireless connections.

"Starbucks is a great example," Moschella says. "I mean, five, six, seven years ago, who would have thought that the leader in wireless marketing and promotion in the world, arguably, would be a coffee shop? It is quite remarkable, yet that is what has happened."

The two analysts shared their thoughts at a recent forum at the Anderson School of Management of the University of California, Los Angeles.

Sawhney said old business concepts need to be revised. The idea of "supply chains," he says, does not describe the complexity of the modern business world. He adds that the metaphor of a business organization as a "machine" is also outdated.

"And the new metaphors and the richer metaphors, I believe, are coming out of biology and ecology, where you start to think about the organization as a living, sensing, responding organism that exists within a larger ecosystem," Sawhney says.

He says today's businesses are linked in complex webs to suppliers and customers, and must sense and respond to markets by instantly altering products to meet the demand.

He says companies that are doing this include the U.S. retail giant Wal-Mart, which tracks inventory and adjusts orders from suppliers every few hours, and the Spanish retailer Zara, which changes its clothing designs every other week to produce more of the styles that customers are buying.

He says that even a leading cement firm, the Mexico-based Cemex, uses technology to cope with a difficult market. Cement, once mixed, has a short shelf life, and building contractors usually pay a stiff penalty if they must cancel an order on short notice. But builders are at the mercy of the weather, so Cemex has created a network of roving trucks, and uses computers and a global positioning satellite to get cement where it is needed on short notice.

The analysts say other companies that hope to compete in the global marketplace must make strategic use of the new technology.

Intel picks Arizona
for $3 billion plant


Special to A.M. Costa Rica

Intel Corp. said Monday it would build a new 300-mm wafer fabrication facility at its site in Chandler, Ariz.
The new factory, designated Fab 32, will begin production of leading-edge microprocessors in the second half of 2007. Construction on the $3 billion project is set to begin immediately.

Intel has facilities in Costa Rica for manufacturing computer chips.

“This investment positions our manufacturing network for future growth to support our platform initiatives and will give us additional supply flexibility across a range of products,” said Paul Otellini, Intel CEO. “For Intel, manufacturing is a key competitive advantage that serves as the underpinning for our business and allows us to provide customers with leading-edge products in high volume. The unmatched scope and scale of our investments in manufacturing help Intel maintain industry leadership and drive innovation.”

When completed, Fab 32 will become Intel’s sixth 300-mm wafer facility. The structure will be about 1 million square feet with 184,000 square feet of clean room space. The project will create up to 1000 new Intel jobs at the Arizona site over the next several years. During the construction phase, more than 3,000 skilled trades people will be hired to work on the project.

Intel currently operates four 300-mm fabs that provide the equivalent manufacturing capacity of about eight 200-mm factories. Those factories are located in Oregon, Ireland and New Mexico. The company also has an additional 300 mm fab currently under construction in Arizona (Fab 12) scheduled to begin operations later this year, and one expansion in Ireland (Fab 24-2) scheduled to begin operations in the first quarter of next year.

Manufacturing with 300-mm wafers (about 12 inches in diameter) dramatically increases the ability to produce semiconductors at a lower cost compared with more widely used 200-mm (eight-inch) wafers. The total silicon surface area of a 300-mm wafer is 225 percent, or more than twice that of a 200-mm wafer, and the number of printed individual computer chips is increased to 240 percent.

The bigger wafers lower the production cost per chip while diminishing overall use of resources. Three-hundred-mm wafer manufacturing will use 40 percent less energy and water per chip than a 200-mm wafer factory.

Separately, Intel said it will invest $105 million  to convert an existing inactive wafer fab in New Mexico to a component temporary test facility. The project will provide additional test capacity to the company’s factory network for the next two years and will result in an additional 300 jobs at the New Mexico site during that period.

America West and US Airways
will merge their operations


By the A.M. Costa Rica staff

The Air Transportation Stabilization Board voted Friday to approve a merger between America West and US Airways. 

Both airlines have numerous flights between North America and Costa Rica.  

A U.S. Department of Treasury press release said: “The business plan put forward by the companies provides for a more competitive cost structure...which should better both airlines' competitiveness.” 

However, the board stipulated that: “The Air Transportation and Stabilization Board has negotiated new loan terms that materially improve the collateral position of the Board, reducing the risk to the taxpayers under the existing loan guarantees.”
Professional Directory
A.M. Costa Rica's professional directory is where business people who wish to reach the English-speaking community may invite responses. If you are interested in being represented here, please contact the editor.


Real estate agents and services


MARGARET SOHN
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Member of the Costa Rican Real Estate Association, Lic. #1000

Member of
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margaret@greatcre.com
samargo@racsa.co.cr
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229-8/9/0
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Consultantes Río Colorado S.A.
James J. Brodell........................editor
Saray Ramírez Vindas...associate editor

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Plan to thin cars in city may have constitutional flaw
By the A.M. Costa Rica staff

An ambitious plan to cut down on vehicle emissions in the downtown area is supposed to begin Aug. 3, but a court appeal might derail the plan.

President Abel Pacheco and functionaries of the Ministerio de Obras Públicas y Transportes have used the increasing price of gasoline as an excuse to ban 20 per cent of the vehicular traffic during peak hours.

The plan is based on the last digit of each vehicle's license plate. Each weekday vehicles with two specific digits are forbidden to appear on the streets between Avenida 9 in the north and Avenida 10 in the south. The idea is to reduce traffic jams and waste of gasoline.

The rule seems to collide with a Costa Rican constitutional provision providing free passage for citizens.

Article 22 of the Constitution says:

Every Costa Rican may move about and stay anywhere within the Republic or abroad, provided he is free from any liability, and return whenever it may be convenient to him. No requirements can be demanded to Costa Ricans in order to prevent their entrance into the country.
Members of the Movimiento Libertario are believed to be preparing a Sala IV constitutional court challenge to the vehicular plan. The appeal will be based, in part, on Article 22. The administration is expected to argue that citizens may go anywhere they wish. They just can't take their automobiles on certain days.

The downtown area also is a key transit area for vehicles coming and going from the east and the west.  A car traveling from Limón on the Caribbean to Puntarenas on the Pacific probably would go through the downtown area unless the operator knew of routes through residential areas to avoid the center of San José. Traffic on the InterAmerican highway usually passes through the downtown, although savvy motorists take the circumvalación divided highway.

The fine for ignoring the prohibition is 5,000 colons, a bit more than $10.  It is not known if transit officers will excuse tourists in rental cars.

Officials have not said if they will crack down on double parking or taxis that stop in the middle of the road in order to expedite traffic. Some government workers will be asked to come to their jobs earlier to reduce the morning crush.

Casa Presidencial, the headquarters of the Municipalidad de San José and other key government buildings are not in the downtown area.


He's likely to meet with U.S. negotiator
Alemán released from house arrest in Nicaragua

Special to A.M. Costa Rica

MANAGUA, Nicaragua — Judge Roxanna Zapata issued an order of conditional release Monday for former Nicaraguan president Arnoldo Alemán.

The order essentially freed him from his 20-year sentence for fraud and money laundering. Alemán did not personally appear at the hearing but his lawyer Mauricio Martínez was present and received the order permitting Alemán complete freedom to travel and work within Managua and the suburban areas surrounding the city.

Alemán has been under house arrest at his sprawling hacienda.

The only restrictions are controls on travel outside of the Managua area and the prohibition against his presence in bars and casinos. He is permitted to travel in all other areas of the country for work or pleasure upon prior notification to the judge managing his case.

Aleman’s money laundering case is still under appeal and the Tribunal of Appeals of Managua must issue an order prior to a final decision in the Nicaraguan Supreme Court.

The freedom of Arnoldo Alemán completely changes the balance of political power in Nicaragua. Not only is Alemán free to begin fund-raising for his cash- strapped Partido Liberal Constitucionalista, but he is also able to engage in face-to-face political negotiations with a variety of forces.

For example, it is highly probable that Alemán will meet with former U.S. Ambassador Oliver Garza to negotiate a solution to the division in the Nicaraguan right wing political class.
Garza, who is serving as interim head of business affairs at the U.S. Embassy in Managua at the express direction of Assistant Secretary of State Roger Noriega is well known to Alemán. It is widely reported that Garza’s mission is to serve as a bridge to unification of the splintered right wing in Nicaragua. Garza also can speak clearly regarding the consequences of the potential criminal cases in Panama and the United States involving Alemán and his family.

Garza is present in Nicaragua due to the concern of the U.S. government for the growing power of the Frente Sandinista de Liberación Nacional and the disaster in the municipal elections last November which resulted in an overwhelming majority of mayoral positions ending up held by Sandinistas.

The obstacle to the reunification process is the agreement or “pacto” made by Alemán and former Frente president Daniel Ortega to rewrite the Nicaraguan constitution and restrict the power of sitting President Enrique Bolaños.

Aleman’s release is a body blow to the Bolaños government and the “fight against corruption in Nicaragua.” Bolaños has refused to negotiate with Alemán for over a year but the order of release creates new challenges and potentially new opportunities for the beleaguered Nicaraguan president.

However, the division between Bolaños and Alemán is very deep, and the government has devoted untold resources and effort to keep Alemán in custody. In the end Alemán must choose between making a deal with the government who put him in jail or taking his chances with a judicial system that is highly politicized and subject to influence by the Frente Sandinista.


Colombia offers to purchase coca plants from farmers
By the A.M. Costa Rica staff

BOGOTÁ, Colombia — The government is offering to buy coca plants from small farmers no questions asked. The government program to buy the plant from which cocaine is made is being criticized for being contrary to Colombia's professed effort to stop the illegal drug trade.

Colombian President Alvaro Uribe has offered to buy illegal coca plants used for making cocaine from farmers in an effort to stem the drug trade.

Uribe told farmers to go to the nearest police station or army outpost and turn over the plants to officers and soldiers. Prices for the crop will be negotiated on the spot.

The idea, according to Colombian officials, is to get the coca off the market so it cannot be processed into cocaine, while still providing farmers with an income.

Farmers can also turn over poppy, the plant used to make heroin.

The Colombian president said it is as simple as handing over the crop and taking the cash, no questions asked. The offer however is only available in Colombia's central Meta region.

Uribe said the decision to begin the program in the
region was made after the government found that an ongoing battle between the military and leftist rebels forced small coca farmers to seek new buyers for their crop.

The rebels usually purchased the coca for cocaine to finance their armed struggle against the Colombian government.

However the president said recent losses at the hands of the military have forced the rebels into hiding thereby leaving the coca farmers without buyers.

The controversial program has come under harsh criticism from lawmakers like Sen. Rafael Pardo, who says it will, in fact, worsen the drug trafficking dilemma in Colombia.

Pardo said buying the cocaine will not benefit the large drug cartels, but it will benefit small farmers who will be encouraged to grow more just to sell it to the government.

Over the last five years, the United States has spent $3.3 billion on coca plant eradication through equipment and military training for Colombian soldiers.

Despite the expenditure, a recent White House report showed that coca production actually increased in Colombia in 2004.


Green tea is extolled as protection against cancers
By the A.M. Costa Rica wire services

Green tea has been sipped for centuries in Asia, where it is used to treat anything from headaches and depression to arthritis and cancer. Within the last 20 years, scientific studies have found evidence for some of these claims. Some researchers believe green tea may prevent cancer, although the U.S. government is wary.

A growing body of research suggests that some teas may do more than than just please the palate. According to the American Institute for Cancer Research, drinking just a few cups of green tea daily can help prevent tumors. Spokesman Jeffrey Prince summarized the researchers' conclusions at a recent Washington meeting:

"The scientists we have brought together this year are talking about green tea. We seem to be getting some results about green tea. The studies have been accumulating and we're moving toward a greater understanding." Prince said. "Basically we think that people concerned with reducing cancer risk should consider adding green tea as one more potentially protective ingredient in a diet rich in plant foods."

Population studies have found reduced cancer rates in Asian countries where green tea is a major part of the diet. Scientists do not know what makes the tea so beneficial, but they have some promising theories. Most of their ideas involve powerful compounds called catechins that make up nearly one-third of green tea's dry weight.

University of Rochester researcher Thomas Gasiewicz says other teas have catechins, but the green variety has the most because its leaves are simply picked and preserved.

"Black tea and, actually, oolong contain some of these things as well, because some of the different varieties in terms of black tea, oolong tea may come from the exact same tea leaf, but the concentrations are much less because of the oxidation and processing of the tea leaves that occurs." Gasiewicz said.

Gasiewicz is particularly interested in a catechin in green tea called EGCG. His research suggests that
EGCG can stop cancer before it starts, but he does not know how. He thinks the EGCG may target and block a particular cellular protein that would otherwise interfere with genetic material and cause cancer.

"This particular research, as well as other research that's being done, indicates that we can find a mechanism whereby these things are actually working, so we can block cancer and cancer-causing agents," he said.

But not everyone agrees. U.S. government food and drug regulators believe insufficient evidence exists to prove that green tea prevents cancer. The Food and Drug Administration says some studies supporting the claim are weak. It concludes that, based on the limited research available, green tea is highly unlikely to reduce the risk of prostate, breast, or any other type of cancer.

Gasiewicz acknowledges that research on humans is inconclusive, but he is confident in the results of other studies.

"The epidemiology data are not very clear. There's a variety of difficulties in doing those studies. However, the animal data is very, very consistent among all different types of carcinogens, and it's hard for me to believe that at least at some dose there would not be a protective effect for human populations." Gasiewicz said.

Although data on proper dosage is lacking, Prince of the American Institute for Cancer Research says nothing suggests that green tea is dangerous.

"It is likely that moderate consumption won't hurt us a bit, and could, science may soon show, offer us considerable benefits." he said.

Prince said that green tea is most effective as part of a diet high in fruits and vegetables, which contain other compounds thought to reduce the risk of cancer. A joint board of the American Institute for Cancer Research and the World Cancer Research Fund estimated that diets like this could eliminate three to four million cases of cancer each year. As for green tea, they recommend drinking up to half a liter each day.

 
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