Costa Rican President-elect Luis Guillermo Solis appointed his economic team as the Central American country moves to reassure investors and the public after two foreign investors announced plans to cut jobs.
Solis yesterday tapped economist and Vice President-elect Helio Fallas, 67, to be finance minister and Banco Nacional de Costa Rica Director Olivier Castro as central bank president. Welmer Ramos was picked to be economy minister. The new government will be sworn in May 8. The Costa Rican colon gained 1.1 percent today to 543.79 per dollar, its strongest level since March 21 and its biggest gain since March 17.
Solis, 55, and his economic advisers will take office a month after Intel Corp. and Bank of America Corp. stunned the country by announcing 3,000 firings, prompting Citigroup Inc. to cut its growth forecast for the $45 billion economy. They’ll also confront a budget deficit the government says will reach 6 percent of gross domestic product this year, up from 5.4 percent last year. Solis has ruled out raising taxes before 2016.
“Fiscal reform is important, but it’s more important to improve tax collections,” Fallas said in an interview after the announcement in the capital, San Jose. “The reforms should be made simultaneously, but most efforts should go to tax collection,” he added.
In a Bloomberg survey published last month, Costa Rica was ranked fourth behind Russia, Argentina and Ukraine on a list of countries confronting the biggest loss of investor confidence. The survey cited data including the rising cost of credit default swaps and the currency’s performance against the dollar.
Intel, the world’s largest computer-chip maker, said it would cut 1,500 out of 2,500 jobs in Costa Rica as part of an effort to consolidate some operations in Asia. BofA said it would exit some operations in Costa Rica as well as in Guadalajara, Mexico and Taguig, Philippines.
Following the announcement, Citi cut its growth forecast for Costa Rica’s 2014 GDP to 3.1 percent from 3.5 percent. The 2015 forecast was lowered to 2.2 percent from 4 percent.
The firings come after President Laura Chinchilla, who wasn’t eligible for re-election, made progress in reducing unemployment that peaked at 10.5 percent in the second quarter of 2013. Joblessness has since fallen to 8.3 percent. Nevertheless, frustration over corruption scandals involving Chinchilla’s aides undermined support for the ruling party, whose candidate withdrew from last week’s election.
The country of 4.7 million people climbed seven spots to 102nd in the World Bank’s annual “Doing Business” report this year, lagging behind China, Vietnam and Namibia. Moody’s Investors Service lowered its outlook on Costa Rica to negative from neutral in September, citing a rising debt burden and widening budget deficit. Moody’s rates the country Baa3, putting it in the same category as Turkey and Iceland.