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Solis Wins Costa Rica Presidency After Opponent Quits

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Costa Rican Opposition Candidate Luis Guillermo Solis
Costa Rican opposition candidate Luis Guillermo Solis speaks to supporters during the closing rally of his campaign in San Jose, on March 30, 2014. Photogrpaher: Ezequiel Becerra/AFP via Getty Images

April 7 (Bloomberg) -- Costa Rican opposition leader Luis Guillermo Solis won a landslide election victory yesterday after vowing to tackle the corruption that had fueled voter frustration with the government of President Laura Chinchilla.

With about 96 percent of precincts counted, Solis, a 55-year-old history professor and former diplomat, won 79 percent of the votes in the runoff ballot, the national electoral tribunal said yesterday. Johnny Araya of the incumbent National Liberation Party conceded the race. He received 22 percent after suspending his campaign last month, saying voters wanted change. His name remained on the ballot.

The vote represents “a turning point in Costa Rican politics as the people have voted for change,” Solis said in his acceptance speech. “We’ve concluded a process in which no one knew me as a candidate, and which ended in this wonderful night.”

Chinchilla, who didn’t campaign with Araya, lost her finance, transport and communications ministers in a series of scandals in 2012-2013. Beyond tackling corruption, Solis vowed during the campaign not to impose news taxes before 2016 to narrow a fiscal deficit that the Finance Ministry forecasts will widen to 6 percent of gross domestic product this year.

“The first difference between the last administration and ours will be that we will be truly strict with corruption,” Solis, who will be sworn in May 8, said in an interview before the runoff. “We are not a party that has conflicts of interest like the last administration did.”

Challenges Ahead

Solis will face a divided Congress, where his Citizen’s Action Party is the second-biggest bloc with 13 of 57 seats, compared with 18 for Chinchilla’s party.

“Solis will likely face governability challenges,” Risa Grais-Targow, a Latin America analyst at Eurasia Group, wrote in a report April 4. “Solis himself is a political newcomer, having never held an elected office, which suggests he will likely struggle to strike deals in Congress.”

The president-elect said he would cut superfluous spending and improve tax collection to reduce the fiscal deficit.

Costa Rica’s $45 billion economy, home to exporters including computer chip-maker Intel Corp. and Dole Food Company Inc., expanded 3.1 percent last year, more than the 2.4 percent average of 10 Latin American countries tracked by Bloomberg.

Bond Markets

Under Chinchilla, Costa Rica returned to global bond markets for the first time since 2004, selling $3 billion in debt in the past two years. The country’s dollar bonds have lost 5.6 percent over the past year, more than the 1.4 percent decline for emerging markets, according to JPMorgan Chase & Co.’s EMBIG index.

Officials in Chinchilla’s press office rejected Solis’s statement that her government had conflicts of interest.

Unemployment averaging 10 percent the past two years and the series of resignations tied to accusations of corruption pushed Chinchilla’s approval rating to 9 percent, the lowest among 17 Latin American leaders, according to a 2013 survey by Mexico City-based pollster Consulta Mitofsky. Unemployment fell to 8.3 percent in the fourth quarter of 2013.

Araya, a 56-year-old former mayor of San Jose, suspended his campaign March 6 after a poll published by newspaper Semanario Universidad gave Solis a 43-point lead.

“Our people votes for a change in government,” Araya told supporters yesterday. “We respect the will of the people.”

Fiscal Plan

Solis, who received a Masters in Latin American studies from Tulane University and served in the Foreign Ministry under President Oscar Arias Sanchez, may start immediately trying to get pieces of a fiscal package passed and delay implementation of the laws until 2016, Vice President Helio Fallas said.

“In the last 15 years no administration has been able to pass a fiscal plan, because when a package is sent to Congress one single tax or measure kills the entire plan and we don’t want that to happen,” Fallas, a former finance minister, said in an interview.

Individual measures could include broadening the taxpayer base to reduce the deficit by one percentage point every year, Fallas said.

The budget gap is mostly due to government payrolls, which will be politically difficult to contain for the new government, Grais-Targow said.

In a Feb. 4 interview, Solis said he was “worried about the fiscal deficit, but not scandalized by it,” adding that the government needs to do a better job collecting the taxes it already charges.

“We’re optimistic that we can improve collection and reduce the rate of spending,” Fallas said.

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 Philip Sanders

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