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Costa Rica’s Solis Vows No New Taxes If He Wins Election

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Solis Vows No New Taxes for Two Years Ahead of Costa Rica Runoff
Luis Guillermo Solis, who led Costa Rica’s first-round presidential election, said he wants to restore people’s confidence in the government before asking them to pay higher taxes if he wins a runoff in two months. Photographer: Isabella Cota/Bloomberg

Feb. 4 (Bloomberg) -- Luis Guillermo Solis, who led Costa Rica’s first-round presidential election, said he’ll postpone raising taxes until he has restored people’s confidence in the government if he wins a runoff in two months.

Solis, a history professor and former diplomat from the Citizen’s Action Party, led a 13-candidate field in taking 31 percent of the votes in the Feb. 2 election. If he wins the April 6 runoff, he vowed not to raise taxes for two years, saying he’ll trim government spending to narrow a budget deficit that rose to about 5.4 percent of gross domestic product in 2013, up from 4.4 percent the previous year.

“I’m worried about the deficit, but I’m not scandalized by it,” Solis, 55, said in an interview today at his party headquarters just outside the capital of San Jose. “We think it can be managed through sensible policy, a grounded central bank, and a government that does not spend excessively.”

President Laura Chinchilla’s approval rating was 9 percent last year, the lowest among 17 Latin American leaders, as historically high unemployment combined with accusations of corruption and a lack of transparency in her top infrastructure projects undermined support for her government, according to a survey by Mexico City-based pollster Consulta Mitofsky.

“The problem is trustworthiness, the lack of legitimacy of the state to ask for money,” Solis said. “If we don’t gain that back, we’re never going to pass a good, progressive fiscal plan so we’re going to focus on that first.”

Historic Runoff

Solis said the government eventually will need to raise taxes because the country’s 13 percent sales tax doesn’t generate enough revenue. He said he would seek to trim travel costs and other “superfluous” spending.

Former San Jose Mayor Johnny Araya of the ruling National Liberation Party finished second in the Feb. 2 election with 29.6 percent, sending him into only the second runoff in Costa Rica’s history.

In a speech after results came out, Araya said that while the government had lost support, “I’m here to say that we are the most effective instrument to return legitimacy to the state, our team, this party.”

Costa Rica’s $45 billion economy is rebounding in the wake of the global financial crisis, Vice President Luis Liberman said Jan. 31. Unemployment fell to 8.3 percent last year after peaking at 10.9 percent in the third quarter of 2011. Economic growth will accelerate to 3.8 percent this year from 3.5 percent in 2013, central bank President Rodrigo Bolanos said last week.

Divided Congress

Whoever wins in April will face a fragmented 57-seat Congress. According to an analysis of the election results by newspaper La Nacion, Solis’s PAC party will probably take 14 seats, three more than it had under Chinchilla. The ruling PLN will still be the biggest bloc with 18 seats. The Broad Front, whose candidate finished third in the presidential vote, gained the most, winning nine seats compared with one previously.

That will make governability a challenge for Solis, who is “at best an unproven political operator,” Jefferson Finch, an analyst at the Eurasia Group, wrote in a report today.

Solis, who received a master’s degree in Latin American studies from Tulane University in New Orleans, served in the Foreign Ministry during the first administration of President Oscar Arias Sanchez. According to his official biography, he left the PLN in 2005 after criticizing “irregularities” in the party’s internal elections, joining the PAC soon afterward.

“I’m pretty confident, not only because of political reasons but because of statistical reasons,” Solis said. “The odds are in favor of the opposition, simply because the electorate supported the opposition, they supported change over continuity, and that is the key.”

To contact the reporter on this story: Isabella Cota in San Jose, Costa Rica at icota@bloomberg.net

To contact the editors responsible for this story: Bill Faries at wfaries@bloomberg.net; Andre Soliani at asoliani@bloomberg.net

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