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These stories were published Monday, Sept. 22, 2003, in Vol. 3, No. 187
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Taxes, trade, competitiveness are keys
Business owners keep a sharp eye on economy
By the A.M. Costa Rica staff

Turmoil in trade negotiations added to the many reasons business owners here are concerned with the direction of Costa Rica’s economy.

More pressing than World Trade Organization talks are the trade negotiations specifically for five Central American countries, including Costa Rica.  World Trade Organization talks suffered a setback, some say a collapse, last week in Cancun, Mexico.


An analysis of the news


But another round of Central American free trade negotiations ended last week in Managua, Nicaragua, and representatives of all governments put on a happy face. Yet there are still significant hurdles. 

Robert Zoellick, the U.S. trade representative, will be in Central America in the next two weeks to drum up additional support for the local trade talks. Agriculture, textiles, intellectual properties and telecommunications are all categories that could doom an isthmus trade treaty with the United States.

Add to that the uncertainty of exactly what a trade treaty means to individual producers and buyers. Some aspects of the draft trade treaty will not go into effect for 15 years, further complicating the planning.

More pressing, the current economic situation causes concerns. The traditional Costa Rican tax year ends Sept. 30, and business operators are faced with a special, one-time tax surcharge, thanks to an emergency fiscal plan that was supposed to provide a temporary bailout to a government on the brink of bankruptcy.

The commercial surcharge is on a sliding scale, but averages 6 percent in addition to the usual 30 percent tax on net income. That’s money taken out of the commercial economy.

Lawmakers are working on a permanent economic fix for the government, but the probable outcome will be a value-added tax and additional taxation all the way around.

One troubling note is the attitude of top government leaders. There does not seem to be any serious effort to cut government spending despite promises to do so. The Pacheco administration presented a 2004 budget Sept. 1 that is  10 percent higher than the current year. The measure must be approved by the Asamblea Nacional. The proposed budget has a price tag of some 2.2 trillion colons, some $5.3 billion. 

Later in the month, in a strong plug for the permanent tax plan, Pacheco said that he wanted a tax structure that would take more money from the rich. In that way the government will receive more income to put into housing, social security, education and health, said the president.

In other words, the government would spend the income on more social programs instead of paying off the nation’s debt.

The proposed 2004 budget has as much borrowing as income, according to some lawmakers. Meanwhile, the government continues to spend on its own infrastructure. The Instituto Costarricense de Turismo is moving into a building purchased in La Uruca. Legislators are planning to build an office tower. Work even has resumed on the complex  of buildings for the Instituto Costarricense de Acueductos y Alcantarillacos in Pavas.

Among the plan to tax the rich, as announced months ago, are proposals to tax income earned by Costa Ricans and residents outside the country. Expats fear this means the government is targeting their pensions and bank accounts based in North America or Europe. The measure remains a proposal in the legislative assembly.

The results of the emergency fiscal plan were not as good as the government had hoped. The concept of diminishing returns does not seem to figure into official planning. As taxes go up, individuals and industries take steps to avoid 
taxes or even evade them. So the preliminary figures on the emergency fiscal plan are less 

A.M. Costa Rica photo
Costa Rican onions hang to dry in Santa Ana, but agricultural products are bulky to ship and subject to buyers’ whims.

than the government expected. For example, a special tax on slot machines caused a lot of casinos to put in electronic devices instead.

Already, Costa Rica’s position in the world economy is being tested. Chiquita, the banana company, said it would stop taking Costa Rican bananas for 10 weeks because production costs are more and the fruit is taxed more than the same product from elsewhere.  Producers had to settle for fire-sale prices or endure a purchase freeze.

The nation’s competitive advantage is important because exports represent about 43 percent of Costa Rica’s $16.1 billion gross domestic product. The U.S. imports about $3.1 billion and exports about the same amount, based on 2002 figures with the U.S. Department of Commerce.

These numbers may explain why President Pacheco and his ministers took such a hard line with striking workers on the Moín docks. That facility handles 70 percent of Costa Rica’s trade. The government get-tough approach produced an accord after only five days of strikes.

In another example of competitiveness, some 1,500 clothing workers are losing their jobs in Barranca de Puentarenas and Alajuela because Carter’s, the international manufacturer, can get the same work done cheaper in China.

The world economic condition has given Costa Rica a break because interest rates are at historic lows. A significant increase in the interest rates with which the country finances it deficit-ridden budget will send shockwaves through the whole system.

And just how bad is the government’s financial situation? Well, the tax collecting Ministerio de Hacienda says it has run out of money to pay those who have made overpayments. In other words, no tax refunds until later. That’s an involuntary loan (at 26 percent) from taxpayers to the government.

Corporation owners
have new taxes

By the A.M. Costa Rica staff

Do you have a Costa Rican corporation? They are called sociedades here, and they are used for many reasons besides conducting businesses.

Some expats place their homes in a sociedad to avoid filing a new deed and estimated 10 percent transfer expenses every time the dwelling is sold. Instead, the seller simply endorses over the sociedad’s stock to the buyer.

Many vehicles are held by a sociedad for the same reason. And a lot of the sociedads, some 300,000 here, are set up simply as conveniences.

Regardless of their purpose, each corporate entity faces a new tax this year under the emergency fiscal plan. The tax is one-tenth of a percent of the corporation’s book value.

There are steep fines for failing to make the filing on a form D-175 by Dec. 15.

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End of strike a plus for Pacheco administration
By the A.M. Costa Rica staff

When workers in Limón and government officials signed an accord ending a five-day strike, both sides issued the statement: "Nobody won and nobody lost."

But the real winner of the settlement formalized Saturday night in Limón was the Abel Pacheco administration which showed it could get tough.

Leading the government negotiations was Ricardo Toledo, minister of the Presidencia. It was he who was accused of nearly giving the government away when he negotiated a settlement with communication workers.

This time the strikers got very little that had not already been planned. They will not be paid for the five days they took off. Strikers arrested for disorderly conduct will have to go through the judicial system.

A major investment into the national refinery here already had been budgeted. Still that was included in the settlement. Some workers were promised overdue overtime pay. Strikers did not get a promise for additional funding for the port facilities.

The strike was organized by Federación de Trabajadores Limonenses. The principal agencies targeted were the Junta de Administración Portuaria y de Desarrollo Económico de la Vertiente Atlántica (called JAPDEVA) and 

Refinadora Costarricense de Petróleo, often called RECOPE.

The government took strong action almost immediately when the strike was announced because the port facility handles about 70 percent of the nation’s imports and exports. The refinery is the only source of fuel.

Pacheco was on television Sunday night speaking glowingly of the accord. He was criticized for been too kind to striking teachers and employees of the Instituto Costarricense de Electricidad when they had lengthy strikes. For example, communication workers continued to receive their pay.

This time Pacheco issued warnings before the strike, mobilized nearly 1,000 Fuerza Pública officers and took control of strategic locations, including the ports and the refinery. He also imported refinery experts from Colombia who could run the plant if strikers would not.

The Pacheco administration also began a television and radio campaign stressing their contention that much of what the strikers wanted was either outside the hands of the executive branch or already promised. Faced with the government’s resolve and public relations, the strikers caved in, helped, in part, by some mediation by leading Limón clergymen.

And the government reports that neither the refinery nor the port facility had any down time as a result of the strike.


 
Baby survives trip
to the garbage heap

By the A.M. Costa Rica staff

A woman dumped a package that contained a baby about a week old near a garbage can in Parque España about midday Sunday, but a man identified as a vagrant heard the child cry and summoned police, investigators said.

The man was identified as Jorge Solís Castro, and police said he saw the whole episode. A short, dark woman simply walked up near the garbage can and placed a package there. The baby was reported in stable condition in the Hospital Nacional de Niños, police said.

It’s not from Bill;
It’s really a virus

By the A.M. Costa Rica staff

Costa Rican in-boxes are getting hit with another, more clever wave of virus messages. For the last four days virus-containing e-mails have been arriving from a fake Microsoft source.

The message contains a subject line that may say "current security update" or  "last update."

And the message is in HTML format so it resembles an official Microsoft Web page. The page even discusses system requirements and tells recipients to install the attached "patch" at their earliest opportunity.

The message even bears a Microsoft Corp. copyright.

Of course, the attachment is really a virus, not a patch to eliminate all security vulnerabilities, as the message promises.

Symantec Corp., a company that manufactures anti-virus software, identifies the virus as W32.Swen.A@mm, a worm that exploits a weakness in Microsoft Outlook and Outlook Express, two popular e-mailing programs.

The virus also tries to disable anti-virus software, said the company. Like other such worms, the virus tries to spread itself by mass mailing copies to those listed in the infested computer’s address book.

A.M. Costa Rica has received at least 30 copies of the virus message since Thursday.

Casa Alianza opens
shelter in Managua

MANAGUA, Nicaragua — Casa Alianza Nicaragua reports that it has inaugurated a new 94-bed facility in Managua for the homeless children there.

The funds to build the facility come from the Conrad N. Hilton Humanitarian Prize that was awarded by Queen Norr of Jordan to Casa Alianza in 2000, the $1 million award was invested in the construction of the 2,300 m2 (20,700 square feet) building. The facility opened two weeks ago. 

Two Germans held
on cocaine charges

By the A.M. Costa Rica staff

Anti-drug police have arrested a German couple at Juan Santamaría Airport and said they were carrying a false-bottomed suitcase containing 7.6 kilos of cocaine.  That’s nearly 17 pounds.

The pair were identified with the last names and ages of Klanener, 41, a woman, and Schroth, 44, a man.

Argentine judge
won’t extradite Astiz

By the A.M. Costa Rica wire services

BUENOS AIRES, Argentina — A judge has refused to extradite to France a former military officer accused of killing two French nuns.

Navy Capt. Alfredo Astiz, known as the "Blond Angel of Death," was tried and convicted in absentia by a French court for the murder of nuns Alice Domon and Leonie Duquet, who disappeared in Argentina in 1977.

A judge in Buenos Aires said Astiz would remain in Argentina to face trial for other human rights offenses.  The ruling follows a decision in August to repeal immunity laws that for two decades protected members of the country's former military dictatorship against prosecution.

Astiz is said to be one of the most notorious agents for the dictatorship during the so-called "dirty war" against suspected leftists. He is suspected of using a Navy school as a torture center during military rule.

He was recently arrested in Argentina for possible trial in Spain over rights abuses committed under the dictatorship, but was released on September first, after Spain withdrew its extradition request.

Bomb explodes near
presidential palace

By the A.M. Costa Rica wire services

CARACAS, Venezuela —  Authorities say an explosion smashed windows early Friday near the presidential palace, but resulted in no injuries. 

Officials say the bomb was thrown at a building across the street from the Miraflores Palace in downtown Caracas.  The country's Interior minister, Lucas Rincon, blamed the incident on people trying to create chaos and uncertainty. 

Caracas has been the site of several bomb blasts this year which have done mostly property damage. 

Special prosecutors
sought for children

By the A.M. Costa Rica staff

A lawmaker wants to restructure the budget of the Ministerio Público staff to create at least 20 new prosecutors specifically for cases involving minors as well as teams of psychologist and social workers trained in taking care of children under stress.

The lawmaker is Carlos Avendaño, president of the Comisión de Juventud, Niñez y Adolescencia. He said at a press conference that he would introduce legislation to adjust the laws governing the Ministerio Público to provide for one such prosecutor or fiscal in each of the 10 judicial districts. The Ministerio Público is the free-standing agency that prosecutes crimes.

Avendaño said that there was an alarming increase in crimes against children. He said that complaints of child sexual exploitation increased from 185 in 2001 to 345 in 2002 and that operators at 911 emergency telephones were getting 800 calls a month for crimes involving children and adolescents as victims.

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Baptist church members still back Villalobos
By the A.M. Costa Rica staff

The Council of the International Baptist Church and its Council of Deacons has given unqualified support to Luis Enrique Villalobos Camacho, the fugitive financier.

The statement in the name of the church was posted to an investors’ Web site. The church statement urges the Costa Rican authorities to "put an end to this affliction, both of Costa Rican citizens and of foreigners, who continue suffering discomfort and privation as a consequence of this situation not being resolved."

The statement means, of course, the more than year-long investigation into the Villalobos high interest borrowing operation that paid 3 per cent a month to customers.

The church statement says that "not one shred of evidence has been produced that would show any type of illegal activity on the part of Sr. Villalobos."

Villalobos made financial contributions that helped construct the New England-looking Baptist church just north of the Próspero Fernández Autopista in Santa Ana. He also obtained a number of loans from church members.

Luis Enrique Villalobos presented himself as a highly religious man and gave free Bibles to those who loaned him money. A small table in his Mall San Pedro office contained a stack of Bibles. The statement says he was a member of the church for 10 years.

It is partly because of his religiosity that church members and others cannot believe that he might have defrauded them of their savings.

Villalobos closed his office last Oct. 14 and vanished. His brother, Oswaldo, is in custody. Oswaldo operated the Ofinter S.A. money exchange house, which had other offices in the Central Valley. A recent report by the Judicial Investigating Organization claimed that Ofinter and the informal Villalobos borrowing operation were one and the same and that both brothers were involved in suspect financial transactions.

The Villalobos borrowing operation might have had as much a $1 billion on its books when the brothers shut it down.

No comprehensive criminal case has been outlined against either brother. In Costa Rica such evidence is not produced in detail until what amounts to a preliminary hearing. Prosecutors also have faced delays because they cannot interview Luis Enrique because he is a fugitive.

Some 600 of the more than 6,500 Villalobos creditors do not agree. They have filed complaints with the courts. A listing with the International Police Agency says that the 63-year-old Luis Enrique Villalobos is wanted on allegations of fraud and money laundering. 

Villalobos was fighting in court even before investigators raided his place of business last July 4. He successfully stalled paying an aging Canadian investor by questioning his state of mind.

The fugitive Villalobos might not have a great deal of money. He was on the telephone raising addition loans from friends and long-time customers right up until he closed his office. This causes some creditors to suggest that the whole operation was a long-running ponzi scheme where old customers were paid interest with the money loaned by new customers,

When investigators raided his offices they said they had been asked to do so by the Royal Canadian Mounted Police. The Mounties arrested a ring of Canadians, and more than half already have pleaded guilty to smuggling cocaine.

Costa Rican prosecutors believed there was a financial link between Villalobos and the leader of the Canadian drug ring who now is dead of natural causes. Investigators have written of faxed messages from and to Villalobos and the Canadian about an account there. But these messages have not yet become public.

But the church members are hedging their bets. The statement concluded by asking "that the abundant grace and forgiveness of God may prevail in this situation."


 
 
A review
The League of Extraordinary Pandemonium
By the A.M. Costa Rica staff

The tip-off comes at the beginning of the film "The League of Extraordinary Gentlemen." The movie, the voiceover says, is based on a graphic novel.

That’s graphic like comic book, not graphic like "All Quiet on the Western Front." And indeed, the movie has sprung from the mind of Alan Moore and his D.C. Comics 2002 epic.

Now there is nothing wrong with comic books. When the industry was accused of pandering to base tastes in the 1950s, it quickly came out with Classics Illustrated that took the best of Western literature and stuck them in 15-cent comic books with great drawings. Many a high school senior got through English IV with a secret stash of "Silas Marner" and "20,000 Leagues under the Sea."

Unfortunately, the movie version of "The League" is more for the MTV generation. The action is disconnected and the plot is, well, from a comic book. The show opened here last weekend.

The League is an assembly of characters from 19th century literature, including Alan Quartermain, the Indiana Jones of his day, and just about anyone else who comes to mind. Dorian Grey, Capt. Nemo of the above mentioned sea voyage, H.G. Wells’ invisible man, Dr. Jekyll and Mr. Hyde (two for one), a good  vampire, and others.

Sean Connery is Quartermain, and the other actors are first rate, too.

20 Century Fox photo
And hide their faces they should

The movie has too much disconnected action for mere mortals. Throw in a couple of trips on Nemo’s Nautilus, a carnival in Venice and a showdown in Siberia. You get the picture. Thin plot, lots of bullets.

The plot line is that secret forces have created advanced weaponry (like tanks) and are instigating world war to sell their products. So the League must stop this late 19th century corporate arms initiative. 

Nemo has laser-guided missiles on his submarine, but they, presumably, are good weapons even if they are light years ahead of anything the bad guys are making.

Basically, the assessment here is that the movie would be a good thing to see as light entertainment on a lazy afternoon if someone puts a gun to your head.

—Jay Brodell

 
Better basic services would help, World Bank says
By the A.M. Costa Rica wire services

DUBAI, United Arab Emirates — The World Bank says the poor quality of basic services in developing countries is hindering global economic development. 

The World Bank's development report for 2004 says better health, education, water and sanitation services would narrow the gap between the world's richest and poorest citizens. 

The report was released Sunday as the World Bank's annual joint meeting with the International Monetary Fund got underway here.

Meanwhile, a top Chinese banking official attending the Dubai summit has defended China's rigid monetary policy, saying a stable Chinese currency benefits the whole world. 

Speaking to reporters in Dubai, the Bank of China's deputy governor, Li Ruogu, said Beijing does intend to eventually loosen its exchange rates. Mr. Li's comments followed a Saturday report by the government-run Xinhua news agency which credited the fixed currency with helping to shrink the country's massive foreign trade surplus. 

China has fixed the yuan at a little more than eight to the dollar since 1994. Beijing has recently come under growing criticism by some U.S. lawmakers, who claim Beijing's fixed currency and unfair trade practices are damaging the U.S. manufacturing industry. 

The economic summit in Duabi follows the collapse of trade talks earlier this month in Cancun, Mexico, where rich and poor countries were unable to reach a compromise on agricultural subsidies and other issues.

México City marks anniversary of its deadly 1985 earthquake
By the A.M. Costa Rica wire services

MEXICO CITY, México — Thousands of people here have commemorated the anniversary of a deadly earthquake by participating in emergency drills.

Workers evacuated buildings in Mexico's capital Friday and emergency response teams rushed through the city, practicing their response to an earthquake like the devastating one in 1985 that killed thousands.

At a remembrance ceremony, President Vicente 

Fox told his audience one lesson is clear from that experience: preparedness is vital to saving human lives.

The Sept. 19 earthquake measured 8.1 on the Richter scale and flattened buildings throughout the city. A powerful aftershock the next day did even more damage. The quakes killed at least 6,000 people.

The disaster prompted Mexican officials to institute building safety codes so that more structures are able to resist seismic movement.


 
 
Rebels pick up tempo in Colombia to thwart hostage rescues
By the A.M. Costa Rica wire services

BOGOTA, Colombia — Colombia's President Alvaro Uribe says leftist rebels have stepped up attacks in the northern part of the country to hamper the search for eight kidnapped foreign tourists. 

Uribe said Saturday in Bogota that suspected rebels of the Revolutionary Armed Forces of Colombia (FARC) have increased attacks to divert security forces in the Sierra Nevada mountains searching for the tourists. 

Authorities say rebel forces have bombed a train carrying coal and blown up a pipeline and two electrical towers. 

The kidnap victims — a German, a Spaniard, two Britons and four Israelis — were exploring the archeological ruins of Ciudad Perdida, also known as "The Lost City," when they were kidnapped more than a week ago.  FARC has denied abducting the tourists.  FARC is the largest of two leftist rebel groups fighting Colombia's government and right-wing paramilitary groups.

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