Mexico City, Mexico — Costa Rican President Carlos Alvarado affirms that one of his priorities near the end of his term is to close the agreement that his government sealed with the International Monetary Fund that will allow the country to modify a substantial part of its debt profile in order to promote social investment initiatives.
In an interview with Bloomberg Línea in Mexico City (where he attended the summit of the Community of Latin American and Caribbean States) Alvarado stated that “An important and very considerable part (of the IMF’s US$1.778 billions credit) goes to debt servicing, that is to say, to exchange expensive local market debt for cheaper external debt and thus alleviate our budget commitments”.
Just this week, an IMF delegation began a visit to the country as a follow up on the financing agreement, announced in January of this year. The mission will hold meetings with the federal government and members of the legislative branch, as well as various public and private entities.
As far as the government is concerned, Alvarado said that the agreement came to fruition and expressed his optimism that the entire package of fiscal and tax reforms proposed by the IMF will be approved by the legislature. Among these measures are taxes on lottery prizes, taxing luxury homes, reducing tax benefits and public employment reforms.
“In January we finalized the agreement, and by the end of this year, a little less than twelve months later, we already have the agreement and two of the fundamental pieces already approved. So we feel confident, but in addition, the government has presented a budget and has had a performance in its investment, in its public expenditure, which has exceeded the expectations of the agreement.
For Alvarado, the main contribution of the credit will be the reduction of the debt in order to free resources for social investment.
“Much of the loan will support social security, an important part, particularly due to the pandemic. Other loans have to do with access to cheaper financing for purchases of, for example, medical supplies or vaccines or emergency care. An important and very considerable part goes to debt servicing, that is to say, to change expensive local market debt for cheaper external debt and thus alleviate our budget commitments, but which in the long run relieves the citizen and frees up space for investment such as social investment or development investment”, he said.
Despite the fact that Costa Rica is already immersed in an electoral process that culminates with the presidential voting in February 2022, Alvarado believes that the agreements will close in time to release the resources to leave his legacy of a better fiscal order.
“The executive has also done its part in ensuring that the agreement route remains firm.”
Despite the impact of the pandemic, which caused a 4% drop in the country’s gross domestic product (more than a third due to the impact on the tourism sector, the main source of income), Alvarado says that Costa Rica’s green agenda will not stop, especially the country’s goal of completely decarbonizing the economy by 2050.
“The pandemic has not made us slow down the pace of what we are doing in environmental issues, but rather the pandemic is an alert that we cannot lower our guard in this field and that we all have to do our part,” he said.
Cannabis and other herbs
Alvarado acknowledges that although it was not part of his campaign, he will respect the decisions made in Congress regarding an eventual legalization of cannabis “for medicinal purposes and some for recreational purposes”.
“In Costa Rica the cannabis debate is ongoing, many congressmen are pushing for legalization (...) while I promised many things in my campaign and I have committed to do what I said in my government program, the issue of cannabis was not one of them, I did not commit it as part of my program. However, having said that, I have also said that I will respect the decision that the Congress makes on the use of cannabis and the terms in which they raise it”.
In some countries in the region, the issue has already reached legal status at the federal level, as in Uruguay and Mexico, although with some nuances. Likewise, Alvarado refers that another topic in vogue, such as cryptocurrencies, will also be a debate to be followed by the country’s institutions.
“While we have to continue studying issues such as blockchain and issues such as cryptocurrency, it would be too early to advance what is next, particularly from our central banks and our economy in relation to it. We have to follow one more phase of getting to know and punctuate more on this,” he said.
Alvarado will finish his term in 2022, having just turned 42. What’s next for him? After taking “a healthy rest”, he says he will continue to support Costa Rica in the causes he considers just.