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These stories were published Wednesday, July 31, 2002, in Vol. 2, No. 150
Jo Stuart
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Pacheco's goals clashing with value-added tax 
By the A.M. Costa Rica staff

President Abel Pacheco came into office promising to eliminate poverty, which he estimated affected some 25 percent of the country. But he also wanted to eliminate the staggering fiscal deficit.

To attempt to balance the national budget, Pacheco’s administration has come forth with any emergency fiscal plan and a long-term fiscal plan.

A value-added tax is a key ingredient of both plans. The tax is much broader than the existing 13 percent sales tax it would replace, and administration experts estimate will raise some 100 billion colons (some $276 million) against the anticipated 2003 budget deficit of 250 billion colons. (some $691 million).

Just like a sales tax, the value-added tax will be something that the end users, the Costa Rican citizen or resident, will pay, thereby reducing their estimated disposable income in fiscal year 2003 by the same $276 million.

That would seem to reduce economic activities and the possibilities of reducing poverty by action in the private sector. Plus the tax may have an impact on companies that would locate here, although exported items would not be subject to the tax.

Star locates estimated quake center

Earthquake near David
rattles San José dishes

By the A.M. Costa Rica staff

Tremors from an earthquake made car alarms sing in unison in San José Tuesday evening. The temblor started at 6:20 p.m. and continued to shake the earth for approximately 45 seconds. Its epicenter was in the southwest region on the Costa Rica-Panama border, close to Golfito and David, Panamá,

The intense earthquake claimed the lives of four people and injured others in Panama, according to incomplete reports from there.  No fatalities have been reported in Costa Rica. Four residents in Ciudad Neilly sustained bruises and broken bones, and a handful of homes were damaged in Punta Ovita. 

The U.S. National Earthquake Information Center, located in Denver, Colo., recorded a preliminary magnitude of 5.9,  but local news sources said the quake had a 6.2 to 6.5 magnitude

The value-added tax, as proposed, would exempt basic foods, recapped agricultural tires, medicines, books and musical compositions, small amounts of residential electricity use, international transport, services provided by the Caja Costarricense de Seguro Social, loans and credit and low-priced housing rentals, among others.

But the tax would cover services that are not now covered, such as medical, legal and, it would seem, most services provided by business people.

Tax plan analysis

One argument in favor of the value-added tax is that many other modern countries have a similar levy. The European Union insists on a 15 percent minimum tax among its members. The United Kingdom has a 17.5 percent tax, and some countries levy a tax as high as 25 percent. Canada is 7 percent.

A similar proposal put forward in the United States has gained favor because its passage might eliminate the U.S. Internal Revenue Service, the tax-collecting agency.

A recent action in Europe resulted in an amendment that taxes digital materials that come into an EU country via the Internet. Software makers inside the EU said they were at a disadvantage from companies elsewhere that did not have to pay the tax.

The concern is that the tax will grow and grow from the original 13 percent in Costa Rica. In Colombia, a similar tax there raised an average of about 2 percent of the gross domestic product in the early 1980s, but this climbed to 12 percent in 1992, according to a World Monetary Fund report. That’s nearly one-eighth of the national income being diverted to the government.

A curious decision by Britain’s High Court raises similar interesting possibilities in Costa Rica.  The court ruled in a value-added case that escort services — which employ prostitutes — must render taxes to the Queen.

Prostitution is legal in Costa Rica, and there does not seem to be any exception in the proposed emergency law that would prevent sex industry workers from also paying the value added tax

The value-added tax typically is applied during the chain of production of a product. The raw material is taxed. The wholesaler pays a tax when he or she buys the raw materials. The retailer pays a tax to the wholesaler as well as a price reflecting prior taxes. And the customer pays all the tax because this is part of the final market price.

Each of the individuals and companies in the chain of production or importation must keep good records so they can show the tax auditors their actual cost of acquisition. That may or may not be a bigger headache than the current sale tax.

The economic effect of the tax might be obvious quickly. The Pacheco administration is trying to get the emergency legislation passed within the next month, and, as written, the law would go into effect upon publication in the official newspaper.

False mortgage scheme alleged by police
By the A.M. Costa Rica staff

Investigators say that a fraudulent mortgage business scammed Costa Ricans all over the country.

Agents raided two offices early Tuesday and arrested five persons they said led on homebuyers with the prospects of mortgages but only did so to snag advanced fees.

The Judicial Investigating Organization said that the men placed ads in national newspapers and other periodicals offering credit at low interest rates to finance housing purchases with either colons or dollars. They used two telephone numbers: 256-9696 and 256-6262.

When a would-be customer called, the men would present an effective sales talk and later send alleged experts to look over the house that would secure the mortgage. 

But, according to agents, the men would then seek a deposit to secure the deal. Later they would tell the customers that the loan had been approved but that additional fees were 

required for stamps and other expenses, said investigators.

Agents said there were at least 10 complaints filed against the men and that the cases cut across social classes and geography of the country. The complaints claim that the men took money but failed to follow up on the promise to provide loans. The money involved ranges from 250,000 colons ($690) to larger amounts.

The men maintained two offices, and these were the offices that were raided Tuesday. One was near the Banco de Costa Rica headquarters in the center of San José, and the second was not far away near the Plaza de la Cultura. Agents said they took a number of documents.

They identified the men by their last names: Cordero, Garcia, Medina, Castillo and Thompsom.

Agents said they thought that there might be more cases of mortgages that were not made and invited anyone who had experienced such problems to call the Sección de Fraudes at 295-3312.

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U.S. efforts in public relations being revamped
By A.M. Costa Rica wire services

WASHINGTON, D.C. — Efforts are under way to revamp the way the U.S. government communicates to citizens of other countries. These efforts have been prompted by the view that the United States is misunderstood, or even disliked, in many parts of the world. 

Faced with a widespread and growing mistrust of the United States and its policies, particularly in the Islamic world, policymakers are under increasing

A.M. Costa Rica/Christian Burnham
Writings on a wall in San Pedro speak volumes of the perception of the U.S. abroad.
pressure to do a better job of communicating U.S. government policies abroad. 

The term in bureaucratic language is "public diplomacy", which in plain English is simply "public relations." But whatever it is called, independent experts say the U.S. government has done a poor job of it. 

On Monday, the non-governmental Council on Foreign Relations released the report of an independent task force that sharply criticized U.S. public diplomacy efforts. Peter Peterson, task force chairman, said that even in the aftermath of the Sept. 11 attacks, public diplomacy efforts received scant attention. 

"The promise of America's public diplomacy has in our view not been realized due to the lack of will, the absence of an overall strategy, a deficit of trained officials, cultural constraints, structural shortcomings, and a scarcity of resources," he said. 

The task force calls for, among other things, a centralization of public diplomacy efforts and increased funding from Congress to support them. 

Ari Fleischer, White House press secretary, told reporters that the office will sharpen U.S. efforts to get the government's message out overseas. "The president does believe better coordination of international communications will help America explain what we do and why we do it around the world." 

The operation, he said, will "work shoulder to shoulder" with the State Department's Office of Public Diplomacy, and when needed, with other U.S. government agencies, such as the Commerce Department.

Internal report says State Department blameless on Chavez coup
Special to A.M. Costa Rica

WASHINGTON, D.C. — The State Department's inspector general has concluded in a new report that U.S. officials acted appropriately and did nothing to encourage an April coup against Venezuela's president.

The report, submitted Friday, said the actions of U.S. officials, both at the U.S. Embassy in Caracas and at the State Department here, complied with the Inter-American Democratic Charter of the Organization of American States to promote democracy and constitutionally in the Western Hemisphere.

Inspector General Clark Kent Ervin issued the report at the request of Sen. Christopher Dodd, chairman of the Senate Western Hemisphere, Peace Corps and Narcotics Affairs Subcommittee, in the wake of criticism that the Bush administration seemed to promote the coup, which ultimately failed.

Dodd requested a detailed chronology of the course of events that led to the brief ouster of Venezuelan President Hugo Chavez and the response by U.S. officials, including contacts by embassy and State Department officials with Venezuela's interim government and its supporters.

Dodd said in a statement Monday that he requested the report "because questions surrounding this matter continued to be raised, and I believe a full and accurate accounting of administration actions would help put them to rest."

He added: "The IG has now issued his preliminary findings, but as I understand it, has not fully completed his review of recently acquired documents and other electronic information. I appreciate the IG's expeditious handling of this matter. I look forward to discussing the report and the classified annex with him."

Ervin said both the State Department and the U.S. Embassy worked behind the scenes to persuade the interim government of Pedro Carmonato to 

hold early elections, and to legitimize its provisional rule by obtaining the sanction of the Venezuelan National Assembly and Supreme Court.

"When, contrary to U.S. advice, the interim government dissolved the assembly and the court and took other undemocratic actions, the department worked through the OAS to condemn those steps and to restore democracy and constitutionality in Venezuela," the report said, referring to the hemisphere's Organization of American States.

In response to Dodd's inquiry, the report said U.S. officials during the six months preceding the coup urged the Chavez government to conduct itself in a democratic and constitutional fashion, and also urged Chavez's opponents to act within the limits of the constitution of Venezuela.

"This policy was expressed orally in numerous meetings and occasional speeches and press statements throughout the period," the report said, adding that the policy was "fully consistent with the OAS Inter-American Democratic Charter."

On the question of whether Chavez's opponents sought help from the U.S. Embassy or State Department officials for removing the Chavez government through undemocratic or unconstitutional means, "the answer is no," said the report. It added that U.S. officials consistently told Chavez's opponents that they were against any unlawful effort to remove or undermine the Chavez government.

Philip Reeker, Deputy State Department spokesman, said in a briefing Monday that the Inspector General's Office interviewed for the report more than 80 officials from the department, the embassy in Caracas, and other federal agencies represented there, as well as officials from the National Endowment for Democracy, which works to strengthen democracy in Venezuela.

Under U.S. law, the State Department's inspector general is required to be an independent and objective overseer and "watchdog" with respect to Department operations and activities. 

Pope John Paul now
visiting Mexicans

By A.M. Costa Rica wire services

MEXICO CITY, México — Pope John Paul II is expected to canonize the Roman Catholic Church's first Indian saint during a special Mass here today.

The pontiff will elevate to sainthood Juan Diego, a 16th century Mexican farmer whose reported vision of a dark-skinned Virgin Mary has become a powerful symbol of Mexican cultural identity. 

Thursday the pontiff is expected to beatify two Mexican Indians martyred in the year 1700 for their religious beliefs. Beatification places them a step away from sainthood. 

The pontiff's trip to Mexico also was expected to place the spotlight on indigenous people, who have long been among Latin America's most devout Roman Catholics but are increasingly attracted to Protestant churches. The México visit follows an open-air Mass Tuesday in Guatemala, where John Paul canonized Central America's first saint, Pedro de San José Betancurt

Police checkpoints
set up in Heredia

By the A.M. Costa Rica staff

More than 80 uniformed officers and 40 agents were in Heredia Tuesday stopping and checking on the ownership of vehicles.

The 80 Fuerza Pública officers were joined by Judicial Investigating Organization agents from the Heredia headquarters. 

Tuesday was the second day of the sweep in Heredia. Four person were arrested Friday and one vehicle with altered identification was confiscated, officials said.

Similar sweeps have been conducted in San José and in Cartago, they added. The checkpoints were are various places in the province.

Three cars found
in raid on workshop

By the A.M. Costa Rica staff

Police located three stolen cars Tuesday in Barrio Bella Vista de San Juan de Dios de Desamparados. The vehicles had been stolen in San José, San Pablo de Heredia and Alajuela.

One of the three, a Suzuki Sidekick, had been taken in a violent encounter between robbers and its owner outside a bread store Sunday. The masked men hit the owner, identified by investigators by his last name of Varela, with guns and threatened him. A companion was hospitalized after the attack. said police.

Two of the cars had been repainted in the shop where they were found.

The raid on the shop was a combined one by elements of the Fuerza Pública and the Judicial Investigating Organization.

Threats on officials
leads to arrest

By the A.M. Costa Rica staff

Police raided a home in Ceiba de Alajuela at 6 a.m. Tuesday and took into custody a man with the surname of Salas for investigation in an assault on a prosecutor and another judicial official.

Agents said the investigation began July 9 after someone fired bullets at the prosecutor’s home in San Pablo de Heredia. Police confiscated three pistols and a rifle in the raid.

Investigators said that the prosecutor and the other official experienced telephone death threats, too. The man arrested Tuesday had been involved in a fraud case in the Alajeula courts.

Brazilians seek loans
as currency tumbles

By A.M. Costa Rica wire services

WASHINGTON, D.C. — A team of Brazilian officials is here seeking more assistance from the International Monetary Fund as fears over a debt default in Latin America's biggest economy surge. 

Paul O'Neill, treasury secretary, said Sunday on U.S. television that aid to Latin American countries has a tendency to end up in Swiss bank accounts. The comment sent Brazil's currency, the real, plunging to further historic lows against the dollar, taking its fall this year to nearly 30 percent. 

Brazil's government demanded a retraction of O'Neill's comments from the U.S. Embassy in the capital, Brasilia.

The currency's decline is making it increasingly difficult for Brazil to pay interest on an estimated $250 billion debt.

Left-of-center politician Ciro Gomes, who is steadily gaining in polls before October presidential elections, said he was outraged by the comments.

"There might be a problem of corruption in Brazil, but this problem concerns Brazilians," he said. "American officials should wash their mouths with soap three times and take care of their own problems before talking like this about corruption in other countries." 

A spokeswoman for the Treasury Department said O'Neill was not referring to corruption, but rather to capital flight.

O'Neill is scheduled to visit Brazil and Argentina next week, but is not expected to offer new IMF aid. Argentina defaulted on part of its debts in December, sparking an economic slump throughout Latin America.

A current IMF agreement with Brazil on a $15 billion line of credit ends in December. In Argentina, the IMF loan program was suspended last year, over charges of government mismanagement. Both Brazil and Argentina are now working to convince IMF officials they deserve help to avert a regional crisis.
Professional Directory

A.M. Costa Rica debuts its professional and service directory where business people who wish to reach the English-speaking community may provide a description of what they do.

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United States Dentist in Costa Rica: Dr. Peter S Aborn, Prosthodontics and general dentistry private practice. 25 years in New York City. 5 years in Costa Rica. Professor and director of postgraduate prosthodontics Universidad Latina de Costa Rica. Former chief of prosthodontics Lenox Hill Hospital, New York City. Education: N.Y.U College of Dentistry; Westchester County Medical Center; Eastman Dental Center; University of Rochester Graduate School of Medicine and Dentistry. Location: 300 meters from the U.S. Embassy. Telephone: 232-9225. Cellular 379-2963. E-mail: jopetar@amnet.co.cr


American/Costa Rican attorney located in Costa Rica. Specializing in business law, commercial law, real estate sales, immigration law. Lic. Gregory Kearney Lawson. KEARNEY LAWSON & Asoc. Tel/Fax: (506) 221-9462 gkearney_lawson@hotmail.com

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