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San José, Costa Rica, Wednesday, Oct. 16, 2002, Vol. 2, No. 205
Jo Stuart
About us
Interim tax plan now goes to full assembly
By the A.M. Costa Rica staff

The battle over a plan to generate new taxes now moves to the full Asemblea Nacional. A special committee that was designing a tax plan approved it late Tuesday night.

The plan now goes to the full assembly in a form that contains the new taxes that have been discussed in the past. In particular, the plan levies heavy taxes on every computer terminal at sportsbooks and also on gaming tables and slot machines at casinos.

The proposals are supposed to last for one year while the government develops a permanent tax plan to close the gigantic deficit between what the government spends and what it brings in. Many of the new taxes, such as a plan to sock every cooperation with a $200 annual fee, probably will be incorporated in the permanent plan.

The Movimiento Libertario did not join in the approval of the plan and may submit a minority report. Libertarians are publicly 

urging employees of sportsbooks to send e-mails to legislators to protest the burden of the new taxes. Sportsbook firms have said they will leave the country rather than pay the taxes.

An estimate by sportsbook operators released last week said that the top 10 firms would owe about $18 million in new taxes for a full year.

The plan approved by the committee has the support of three of the four major parties in the assembly and is favored by President Abel Pacheco.

The plan also raises cooperate tax and applies a surcharge on individual income tax when the salary is above $2,000 a month. Luxury cars selling for more than 10 million colons ($27,000) are hit with a 50 percent surcharge. Fees for banks operating offshore are doubled to $300,000 a year.

Cigarette and alcohol taxes would be increased, too.

Forget the interest, and try to get the capital
An A.M. Costa Rica analysis

The days of high-interest returns from investments with The Brothers seem to be at an end, and the best that investors can hope for is the return of all or most of their capital.

When Luis Enrique Villalobos Camacho gave pink slips to his employees this weekend he pretty much dismantled a team that has grown to, according to his own statement, 300 persons.

Yet old-timers in Costa Rica caution that Villalobos should not be counted out yet. They recall that he has survived countless investigations and negative economic impacts over the nearly 30 years that he has been conducting business here.

They remember a time when dollars were scare and money exchanging was frowned upon by authorities. The Central Bank could not keep up with the demand. That was when men like Villalobos skirted the law to provide much-needed dollars to a growing economy. And they took a significant profit. At one time, Villalobos paid investors monthly interest of 5 percent, said one long-time associate. 

The road was not always smooth. Others in the same business were gunned down in robberies or suffered from other crimes because of their high-profile dealings. Villalobos himself was the target of a kidnap attempt that resulted in the shooting death of a passing motorist.

Yet some feel that the aging Villalobos (He’s 63.) made a major career decision when he pulled the plug on his investment operation. He blamed the freezing of his bank accounts 
here as part of a money laundering investigation, according to his own statement released Monday.

Our first letter on Villalobos
Click BELOW!

The government has frozen at least 50 of his bank accounts, an act that Villalobos characterized as overkill. But he also hinted that accounts elsewhere had been frozen. Investigators still are going through paperwork taken July 4 in a raid on his offices.

Most long-time clients of Villalobos do not expect him to return to the investment field where he managed upwards of $500 million and made payments of 2.8 percent interest to most clients. But they also expect him to pay every cent he owes to his clients. Villalobos promised as much in his statement.

One fear of his loyal, local clients is confiscation of funds. Villalobos’ vast web of bank accounts and investments is vulnerable to government action, and both Costa Rica and the United States have laws that permit them to seize bank accounts if they can show that they contain a single dollar of money from an illegal source.

That’s how the investigation all started. Canadian authorities believe they have traced laundered drug money to the Ofinter S.A. money exchange house. Investigators here are looking into the relationship between the money exchange house and Villalobos, who maintained an office adjacent to the Mall San Pedro operation. Villalobos said Ofinter is owned by his brother. Agents are not sure.

More investors here were reported Tuesday to be seeking out local lawyers to understand their rights and the legal process they certainly will join. 

A.M. Costa Rica’s first Halloween story contest

Since Halloween is not really celebrated in Costa Rica, we thought we would help to get everybody into the spirit.
We are looking for your original horror stories of 1,000 words or less.

Sure, you can scare the bejeezus out of a group of boy scouts around a campfire, but can you frighten our readers?

The stories will be judged by the A.M. editor and staff on the basis of their originality and spook-factor. Extra points will be awarded to stories related to Costa Rica.

The scariest will be published in our Oct. 31 edition, and the winner will receive $25. The deadline for submissions is Tuesday, Oct. 29. Send your spooky stories to editor@amcostarica.com

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No, it is not one of the capital’s many casinos. The gambling here is part of an eight-day cultural fair sponsored by the municipality on the west side of the Plaza de la Cultura. The event ends Monday.
Anti-tourism patrol
gets more victims

By the A.M. Costa Rica staff

Three more persons have fallen victim to the gang of muggers that prowls along Avenida 1 in the tourist district of San José.

Reports from merchants in the area said that one Costa Rican was mugged Monday night and two tourists became victims over the weekend.

The tourists suffered the usual fate of being grabbed from behind by experienced robbers. The attacks happened about 6 p.m. along Avenida 1 between Calle 7 and Calle 5.

Most mugging victims do not report their attacks to police, and police generally do not believe that a problem exists in the area, which is where many of the tourist bars and clubs are located.

Air cargo laws denting Latin economies, says OAS
Special to A.M. Costa Rica

MIAMI, Fla. — Too many regulations governing the flow of air express cargo and consumer goods in the Western Hemisphere are hurting the economies of Latin America, according to the Organization of American States (OAS).

A new study by the OAS's Inter-American Agency for Cooperation and Development encourages governments in Latin America to reduce obstacles to allow for more efficient air express operations. 
The study, released at the sixth annual Americas Conference in Miami, said better air express operations "could greatly accelerate the economic benefits that air transport brings to the region."

Ronald Scheman, the OAS agency director general, said in a statement Monday that the air express industry historically has made significant contributions in the Latin American and Caribbean region by "facilitating expanded trade, economic output, and employment." But he added that regulations that negatively affect the air express industry also negatively affect the region's local businesses, foreign investments, and workers.

"Since trade is a major component of the hemisphere's agenda and of our own Agency's mandate, we look forward to a future partnership with the air express industry to develop cooperation with governments in the Americas that will bring more dynamism to this area," said Scheman.

The study said that four companies — United Parcel Service, TNT, Federal Express, and DHL — account for about 85 percent of the world's express shipments, handling more than 4.5 billion documents and packages annually. 

The environment in which these companies operate is characterized by intense competition and is influenced heavily by a myriad of government policies, practices, laws, and regulations, the OAS said. 

The organization said that while several of the air express industry's problems are being addressed by business facilitation measures adopted by the 34 nations participating in the Free Trade Area of the Americas (FTAA) process, "more needs to be done." 

Only 26 percent of the business facilitation measures related to express shipments have been fully implemented, while other obstacles to the operation of the air express industry are not addressed at all in the FTAA process, the OAS said.

The OAS study found that air trade is an increasingly important element of overall trade in Latin America and the Caribbean. By 2003, air express activity in the United States, Latin America and the Caribbean is forecast to generate total economic output of $125.9 billion and support 1.2 million jobs, the OAS said.

The trade association representing the air express transportation companies, which serve Latin America and the Caribbean (known by its acronym CLADEC), said that continued growth of international express services can contribute significantly to the ongoing economic recovery in the region. 

But for this to happen, said CLADEC, "the aviation industry, its customers and government leaders in the Americas must all work together to ensure obstacles to free trade and to the expanded, efficient flow of commerce are removed."

Mexican minister 
denies torture claims

By the A.M. Costa Rica wire services

MEXICO CITY, Mexico — The defense minister here is denying reports that soldiers detained for questioning about alleged drug trafficking have been tortured. Mexican human rights officials are investigating the case. 

In a rare televised appearance on Mexico's Televisa network, Gerardo Clemente Vega, defense minister and army general, denied reports that up to 600 soldiers had been detained at their barracks in the northwestern state of Sinaloa. 

He said only 48 of the 600 some soldiers in the unit were detained for questioning and drug tests. Of those, he said, 40 tested positive for drug use. He said the military investigation of the unit in Sinaloa produced evidence of marijuana and other contraband.

The defense minister denied that any soldier had been tortured as part of the investigation. 

Still, a team of experts from the Mexican National Human Rights Commission is traveling to Sinaloa to conduct its own investigation of the incident. Family members of some soldiers accuse the military police of using torture and "cruel and degrading treatment" in their interrogations of the suspects.

The soldiers detained for alleged drug use and drug trafficking are part of the 65th Infantry Battalion posted near the city of Guamuchil, Sinaloa. The state of Sinaloa is the source of both marijuana and heroin and has produced some of Mexico's most notorious drug traffickers. 

The Mexican military has played an active role in Sinaloa and elsewhere to help state, local and federal police combat the illicit drug trade. The 65th Battalion was involved mostly in operations to find and destroy drug crops in the rugged mountain areas near the base.

In other news, the prosecutor for electoral crimes here has opened an investigation into allegations of finance violations by President Vicente Fox's 2000 election campaign. 

The investigation was launched after several opposition groups filed complaints that the campaign accepted donations from foreign sources - which is illegal under Mexican law. 

International news sources say the money allegedly involved could range from $300,000 to $1 million. Fox's presidential win in 2000 ended 71 years of rule by the Institutional Revolutionary Party.

Chavez heads for Europe
amid resignation calls

By the A.M. Costa Rica wire services

CARACAS, Venezuela — President Hugo Chavez has begun a European tour, just days after hundreds of thousands of his citizens demonstrated here to demand he resign or call early elections. 

Chavez is expected to meet Tuesday in Paris with Jacques Chirac, the French president, and then travel to Rome to participate in World Food Day events. He is also scheduled to visit Britain and Norway. 

Meanwhile, opposition and labor leaders say a general strike will occur here Monday to pressure Chavez to call early elections or resign.

Extradited militia suspect arrives in Bogota

By the A.M. Costa Rica wire services

BOGOTA, Colombia — A former government minister and ambassador of this country wanted for allegedly organizing far-right paramilitary militias has arrived here after being extradited from Spain. 

Carlos Arturo Marulanda, who had been a fugitive for more than two years, arrived at the international airport here aboard a commercial plane Monday and was handed over to local authorities. 

The former development minister is accused of ordering outlawed right-wing paramilitary militias to burn the homes of 200 peasant families who had occupied one of his properties in the northern region here in 1996. 

He is also wanted for corruption during his ambassadorship to the European Union. Marulanda denies the charges. 

Spain approved the request to have Marulanda extradited last September.

Measures taken to 
boost Brazilian real

By the A.M. Costa Rica wire services

BRASILIA, Brazil — The Central Bank here has sharply raised interest rates in an effort to bolster the nation's weakening currency and ease inflationary pressures. 

In a special session Monday, the Central Bank's monetary policy council raised its annual benchmark rate from 18 to 21 percent. 

In a statement, the monetary authority said the increase was necessary because of rising prices and worsening expectations caused by the devaluation of the currency, the real. 

The real has lost more than forty percent of its value so far this year amid investor concerns about the nation's economic problems and the strong showing by leftist Workers Party leader Luiz Inacio Lula da Silva in the first round of presidential voting earlier this month. 

Da Silva has struggled to convince investors his proposed social spending would not force the country to default on a foreign debt of more than $200 billion. 

Jamaicans ready to vote
as social woes dominate 

By the A.M. Costa Rica wire services

KINGSTON, Jamaica — Citizens here will cast ballots Wednesday in a national election dominated by concern over rising crime and unemployment on the island of nearly 3 million people. Polls are scheduled to open at 12 hours Universal Time. 

Security is expected to be heavy as voters decide whether the ruling People's National Party, led by Prime Minister P.J. Patterson, will win its fourth consecutive five-year term. 

Recent opinion polls suggest the ruling party will defeat the main opposition Jamaica Labor Party, led by Edward Seaga. The party trails by nine percentage points in the opinion polls. 

Two other parties are also contesting the election, which will be monitored by nearly 60 international observers. The group will be headed by Jimmy Carter, former U.S. president and Nobel Peace Prize winner. 

The former president arrived here Monday on his first mission since winning the peace prize for international mediation efforts. 

Last week, Carter said Jamaicans have voiced a strong commitment to an open electoral process, and he says monitors are optimistic the election will be another proud moment in Jamaica's history. 

During the election, a new electronic voting system will be tested. The system was first used last Friday when some 20-thousand army personnel, police and election day workers cast their ballots.

Washington still worried
about Venezuelan politics

Special to A.M. Costa Rica

MIAMI, Fla. — The Bush administration remains deeply concerned about the political situation in Venezuela following a recent "heating up of the rhetoric" in that Andean nation, says Otto Reich, assistant secretary of state for Western Hemisphere Affairs.

Speaking Tuesday at a press conference here, Reich said the United States does not see a "thawing" of the political situation in Venezuela. He said that it is "incumbent" upon the Venezuelan government, "because they have the power and the guns," to reach out and disarm pro-government groups that threaten peace in the country.

Reich noted, however, that recent competing demonstrations by pro-and anti-government groups were "a positive thing in that they were peaceful." 

"I think that the authorities and the people taking part in the demonstrations deserve commendation for their respect for other people's rights," he said.

Reich said there has been little change in the relationship between the United States and Venezuela in the last six months since the unsuccessful attempt to overthrow Venezuelan leader Hugo Chavez. 
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A Letter
Villalobos victim of political agendas, says reader
Dear A.M. Costa Rica:

Thank you for making the latest events concerning the direct repercussions of Bush's so-called anti-terrorist campaign public as special headlines.

I believe it is time for us investors to see the bigger picture. Any and all anger, which is an individual's fear of future problems, is simply false when directed towards Luis Enrique. As a matter of fact, we would be barking up the wrong tree altogether.

Two things are happening here simultaneously. The Bush administration is using the terrorist crisis to push through their conservative agenda. Part of this agenda is to have electronic control over each citizen. Control, in this case, over private investments and the right of an individual to make his own choices of what investments to enter into.

In the case of Villalobos, a foreign (Canadian) government asked Costa Rica authorities for bureaucratic help. Allegedly some $300,000 dollars of drug proceeds were deposited in the money exchange branch of the brothers Villalobos. It has never been declared that these companies are one entity, so that the blocking of some 50 bank accounts of the investment branch of Villalobos is highly questionable.

The U.S. is clearly exerting their diplomatic and saber rattling muscle around the world in getting governments to comply with their agenda, to declare, for example, that all monies not declared is illegal in that it can potentially aid terrorists.

In realty the terrorists have their backing in place and will find every new way to channel their money, while the financial freedom of the rest of us, those whose minds are furthest away from any terrorist activity, are now feeling the crunch of these ill-conceived and self-serving policies.

We were able to observe, for example, that the pending free-trade-zone agreement that the U.S. is so generously bestowing on Central America, will only come about when the governments of the region will give full computer access of their files to the U.S.

Additionally, it is good to remember that we are living in a country where the justice system is based on Napoleonian law. You are guilty in this country until you can prove your innocence.

If Villalobos' 20 lawyers can not get those 50 bank accounts reopened within four month, we may very well assume that we are dealing with judges who are basically afraid to make decisions against the government or foreign embassies (my personal experience) and are shuffling paper back and forth, which is what the European legacy of this antiquated law is.

Nothing gets done in Costa Rica unless you are connected to a decision-maker. There is simply no

regular open court. An appeal is made on a piece of paper, submitted to a court, and a judge or a tribunal render a paper decision and submit it back to the lawyer.

They appeal again. You, our editor-in-chief, can tell us how difficult it is to even obtain public records. You can not go to the court as a media representative and view or copy the Villalobos “expediente.” You would have to hire a lawyer who would give the court an acceptable reason why he needs to see the file. Only then it could be read and possibly copied.

There are usually only open court proceedings towards the end of case. There is hardly media coverage of court proceedings, instead you see on your local TV gory close-ups of bloodied victims. This is the only time that the media can show a case. After that it disappears into halls of paper.

Luis Enrique believed that he could get his bank accounts opened again before he would run out of money to pay investors' interest. He was also counting on investors’ loyalty and on additional investments to cover the arbitrary stretch until he was back in business as normal. He lost that round, and in over 25 years, was for the first time forced to cease regular operations of his office.

But, just look at the rest of the news. Pacheco wants to tax what? Gambling. For many, gambling is another investment. You might not like it or find it uncouth, but, nevertheless, it is so for many. 

Here closes in front of your eyes another one of your freedoms. Bit by bit your personal freedoms for financial expression is being curtailed. (Pacheco also went to the Costa Rican bishops for support of his tax plans. Guess what they think about gambling?)

A friend was saying yesterday, the only hope is that enough high government officials have invested huge amounts with Villalobos, because then there is a possibility for a quick resolve even in Costa Rica. Let's say when the minister of justice was invested and not being paid his interest.

The closure of the Villalobos office is merely a demonstration of his inability to pay interest any longer after these many months when his otherwise successful investment hands were tight behind his back.

It is hoped that the pressure that results from the office closure and the resulting public outcry by investors will force the government investigators to work a bit faster or the judges to render a fair decision very quickly. This case will only be handled right when the investors remember where to complain to, and public and media pressure is being directed to where it should.

Carl Franklin
Fortuna, Guanacaste
U.S. to propose objectives on free trade in Quito 
Special to A.M. Costa Rica

MIAMI, Fla — The United States will pursue a number of objectives when the trade ministers from the Western Hemisphere's 34 democracies meet Nov. 1 in Quito, Ecuador, to continue work on the Free Trade Area of the Americas (FTAA), says U.S. Trade Representative Robert Zoellick.

In an address Monday to the sixth annual Americas Conference in Miami, Zoellick said the trade ministers at Quito need to launch what he called a "Hemispheric Cooperative Program" so that smaller developing nations, especially in the Caribbean and Central America, can benefit from an FTAA that encompasses 800 million people.

Zoellick said the U.S. goal is to ensure that these smaller countries have the support to negotiate complex subjects, the ability to implement the final FTAA pact, and the help to make the necessary structural adjustments that will be part of creating an effective free-trade area stretching from Canada to Argentina.

The U.S. Agency for International Development, the U.S. Trade and Development Agency, and the Inter-American Development Bank have been "excellent partners in this effort to combine trade with aid for growth and opportunity," Zoellick said.

The official said the United States will urge at Quito that the latest draft text of the FTAA agreement be in the public domain, in order to enhance its "transparency."

"We value public input, which we will seek to take into consideration" as work continues on completing the FTAA by a target date of 2005, he said.

Zoellick also said the United States hopes that Quito "provides another opportunity to engage groups from our civil societies" about the FTAA.
"We will listen" to these groups, Zoellick said. 

Zoellick said that civil society groups have offered "unprecedented input" into the FTAA process. Recommendations from civil society, he said, are being forwarded on an ongoing basis — in both English and Spanish — to the FTAA negotiators.

Zoellick said the trade ministers also look forward to receiving recommendations from private business leaders. The private sector will hold an Americas Business Forum in Quito immediately before the trade ministerial. 

He said the FTAA can only be an "enabling framework within which the genius of entrepreneurs, the commitments of investors, and the energy of growing businesses create jobs, growth, and hope for the peoples of the Americas."

The trade official opened his speech by announcing that the United States will propose at Quito that Miami host the next FTAA trade ministerial in 2003. 

He asked his audience of government officials and business leaders to let Miami "make history" for the region by leveraging "the benefits of trade for the ever brighter future of Florida within the new Americas." 

Zoellick also said that Brazil, which is scheduled to co-chair with the United States the ongoing FTAA negotiations following the Quito meeting, should host the 2004 trade ministerial.

Zoellick reiterated U.S. resolve to stay engaged in the Americas, despite the September 2001 attacks on the United States which focused the Bush administration's attention on homeland security and fighting global terrorism. 

Zoellick said that rather than losing interest in Latin America, Bush is committed to the region as a "fundamental economic, political, and security partner." Later in October, Zoellick said, he will visit Bolivia and Ecuador.

Zoellick said the United States must stay involved in Latin America for the benefit of the entire hemisphere. He said that "not surprisingly, skeptics abound" about whether an FTAA can be constructed.

Some political leaders, he said, "position themselves at home with warnings, while others seek to engage their publics about opportunities. 

Each of us has sensitive topics that we need to address with care, while not losing sight of the great gain for all. 

Only time will tell whether the sharp objections are negotiating positions or the bluster of fearful politicians."

The United States, he said, is moving toward a free trade agreement with Chile, and after that with Central America. It is also preparing the way for more free trade by opening the U.S. market through the Caribbean Basin Trade Partnership Act and the Andean Trade Preference Act.

Zoellick said the United States wants "to negotiate with all the democracies of the Americas through the FTAA," but it is also prepared to move "step-by-step toward free trade if others turn back or simply are not yet ready" for a hemispheric-wide trade agreement. 

Zoellick said the U.S. free-trade agenda "can help fragile democracies in the Americas, just as U.S. trade policy after World War II helped secure democracy and hope in Western Europe and Japan."

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