The government’s situation from a legal point of view

What challenges do you think the government will face in this new stage to increase the country’s economic development?

Their main challenge is generating trust amongst the political class, so that they may allow the President to govern. In Costa Rica, when the president doesn’t have society’s trust, he has trouble executing his power.
In that sense, the President says he isn’t thinking about creating new taxes, but he is thinking about improving the collection of the ones that already exist and of battling tax evasion. Nevertheless, in his first days they have insisted on reviewing the way large contributors have declared their income, so an important part of the business sector is criticizing him for directing his efforts at controlling the people who pay their taxes instead of at finding the people who don’t.
The fact is this administration has a great challenge in trying to improve the national economy and the tax collection and in controlling public spending. And it has to achieve those three factors with actions that strengthen the governing class’s credibility, which has fallen on hard times in past decades.

Costa Rica opted for a social organization model based on solidarity. And this model, which offers education and health for the people, certainly requires tax authorities that collect taxes efficiently; and that work has to be done without creating discriminatory situations, abuse of power or any other modality that might generate mistrust or discourage the productive sectors, which are the engine of Costa Rica’s development model.

We have to organize and plan our institutional structure to strengthen local industry and give it development conditions so that it can enter into the global economy, in which we are already immersed thanks to the foreign direct investment that has trusted the conditions our country offers. I have no doubt that the current President has this vision and the objective is to pour it into the ministries. We have to avoid the encouragement of legal uncertainty and companies moving in uncertain terrain. The government has to open different dialogue paths (non-ceremonial) with the productive sector and the academy, and join them in finding solutions for the country’s greatest problems. It has to look for the right ways to create alliances with the private sector for the development of the great works of infrastructure the country needs and it has to evolve from radical ideological paths that always see the private sector as a threat.

We have to generate infrastructure that responds to the needs of our productive sectors. We need a public policy that is in accordance with the needs of those productive sectors; we have to align the different public institutions so that they can work together to generate better conditions for the private sector’s development.

In that sense I see great challenges for the new government, because there are some institutions that seem to exist in a world completely apart from the one the productive sector needs. There are challenges in improving bureaucratic procedures with simpler and more agile paperwork for the companies. In short, the government will generate trust by producing short and medium-term result so that society can eliminate those fears that it gets with every new electoral cycle.

Costa Rica faces problems that affect its competitiveness. We have to review and update the education model and adapt it to the productive sector’s demands. We have a huge challenge in terms of energy, because the generation costs have increased, affecting the companies’ operation costs and we still have a legal straitjacket that makes it impossible to develop better options for the generation of energy. We have a problem in our prison system, with overpopulation of inmates and meager results in terms of their reinsertion into society. We also have matters to resolve in our social security system and other institutions that have been “managed” with political criteria and are now facing financial crisis.

All the challenges I mentioned generate great opportunities to change tack and change our institutional modus operandi in Costa Roca and for the different sectors to work to achieve the demands of the new generation. We have to analyze these challenges with a macro view and focusing on development.

With good ideas and proposals, would the rest of the representatives align themselves or would they still oppose?

Without a doubt one of this administration’s greatest challenges is that it doesn’t have the support of the majority of lawmakers. This means that if this administration wants to push through any new laws, it will have to use the best political negotiation tools available. During the campaign, the speeches of all the candidates referred to multilateral and multiparty dialogue as a key element for the new administration. They talked a lot about generating consensus to propel the country forward, because to resolve the issues we have we need bridges, we need to close the gaps of our differences, avoiding conflict and division.

I feel that commitment must have generated the political conditions to enable the process; nonetheless, recent events that created divisions from all political sectors, including the government, generate mistrust. I believe politicians have a huge responsibility with the people and the country, which has worked so hard to create the institutional structure we have today that distinguishes us from many other countries. Nonetheless, we need tools so that citizens can evaluate political performance and pressure their leaders to be consistent with what they offered during their campaigns.

During the last administration and the first days of the current one, we have felt a tendency in our leaders to stall decisions that might not be popular, which generates the feeling that they lack a road map to lead them through a clear path. I believe that is a challenge for our country: to be able to find leaders that are consistent with what they say, promise and do.

Currently, dissidence when it comes to execution is generating an important political crisis and this will continue to happen until we reach high levels of consensus.

Going back to your question; I also believe good ideas can prosper. But it is very important to define our priorities clearly and focus on the truly urgent matters. Its clear people have a strong will to participate, especially the productive sector, which has offered its help repeatedly in relevant initiatives. It will depend on the vision and leadership of President Solís to make the best of this circumstance. 

Speaking about the different sectors, is infrastructure a priority?

I think so. Infrastructure and energy matters. We need a substantial energy reform because we have legal and regulatory conditions that have affected national competitiveness. He current model was designed for a very different Costa Rica, in which industrial and residential demands presented different consumption patterns. Also, a country with so many natural resources, with which we know we can produce renewable energy, can’t have a legal system that doesn’t promote the investment of generating sources. When it comes to energy, the consumer –either industrial or residential– doesn’t care if the generator is public or private, he only cares about the quality of the energy, of it being constant and reasonably priced. The current model still benefits the ICE (Costa Rican Electricity Institute) without paying any attention to how the service has deteriorated and how to face the challenges raised by maintaining and improving the country’s competitiveness levels.

In terms of energy, we have to establish a legal reform with a general electricity bill that defines the country’s energy model. A model that lets us modify our energy matrix in an efficient and smart way and that establishes the bases so that the generation, distributions and transportation of energy can be divided into different institutions. We need to overcome the obsolete model we are working with; we have to evolve. We need a lot of investment and I can’t think of a better way to get it than letting private companies come in. The ICE has done a notable job since it was founded, undoubtedly contributing with the country’s development, but its seems that at the time it doesn’t have the financial conditions to offer the service the country needs in the short and long terms. Also, there are still protectionist measures that don’t contribute to a greater development or to attract foreign direct investment.

If we want to continue to be an attractive country for the development of investments and businesses, we can’t forget about matters as basic as road, port and energy infrastructure. That is why we urgently need to get all the different institutions speaking the same language, so that they can articulate their programs efficiently and work towards the same objective.

I believe interesting changes have happened in terms of telecommunications, the opening of the market established in June 2008 has produced a great evolution that has benefited all users. The market was opened up, a business-like vision was established and we achieved a more fruitful competition, when many thought opening the market would destroy the State operator. It has been a complex process because some institutions weren’t aligned with the opening, but we reached positive results in spite of the delays we suffered. Just an example: the new operators had five years to cover the whole national territory and they dedicated themselves to doing it in less than one year, facing very high costs but providing a first-world service, forcing the State operator to raise its standards and compete, ultimately benefiting the consumer the most.

The investment that telecommunications companies have generated has been impressive and it has directly affected many sectors of the economy, increasing competitiveness levels in one of the activities that, before the opening, was one of the country’s most complicated aspects. There are still sectors that are resisting the magnitude of the impact of a dynamic telecommunications market and the direct and indirect benefits these investments generate. For example, the improvement of competitiveness levels is intimately related to the improvement of the country’s connectivity, of which all sectors benefit: private companies, education, health, public services, the administration looking for ways to digitalize its processes, entrepreneurship, the generation of opportunities in the different social strata, amongst others. In fact, neutral sources have indicated that Costa Rica is the country with the highest data consumption levels per capita in all Latin America. 

What will the Expo Telecom be about?

The organization of this important event has trusted Amcham with the possibility of organizing a forum in which we will be honored by the participation of the CEOs of three most important mobile operators in the country (CLARO, MOVISTAR and the ICE). We want to talk about the effect mobile services have on the improvement of the country’s competitiveness. Lets recall the globally accepted theory that states that the digital gap is battled with mobile Internet services.

We want to raise the authorities’ sensibility on the importance of telecommunications services and the urgent need for the spectrum frequencies to be managed efficiently by the State and assigned to those who can and are willing to use them harmoniously with the best practices in the industry and with objectives aligned with the National Telecommunications Development Plan in the country.

In this market, which has only been open for a few years, there are still distortions that have to be controlled by the State in search of the improvement of competition (this mandate comes directly from a law of the Republic), amongst them, for example, the management and assignment of the radio spectrum. The country is wasting a great opportunity to provide telecommunications operators a spectrum that allows them to give more and better services, with which the opportunities and expectations of the users are directly limited.

How will you work on infrastructure for the telecommunications sector?

That matter is still a pending challenge for local authorities, because certain municipalities are still hostile towards the deployment of the necessary infrastructure. My personal opinion is that some authorities have lacked the consistency in enforcing a principle that states that the development of infrastructure is a matter of public interest. This is stated in the Telecommunications General Bill; in spite of that, it has been complicated for all the local governments to respect the principle, which generates delays in the deployment of networks. The executive and regulatory authorities have tried to hold their positions, but the political environment after the DR-CAFTA was approved has affected the success of those procedures. The new government has shown it has the best intentions of propelling the necessary procedures, but they haven’t been established yet as a consequence of different institutional dynamics.

Vanessa Massimini (ProjectDirector)
Matteo Transtevere (Editorial Director)