Costa Rica: A Paradise for the Few after First Round of Elections

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By Giovanni Beluche V.
San José, Costa Rica

It seems that hard times indeed are coming for the working class, micro- and small-business owners, and small-scale farmers of Costa Rica after the first round of presidential voting on February 6. The two candidates that will go on to the runoff, José María Figueres Olsen and Rodrigo Chaves, have clearly neoliberal proposals: more free trade, more taxes on wage earners, and more cuts to university budgets and social spending. They offer no specific proposals to address the serious crisis of tax evasion and tax avoidance, nor anything to curtail the use of tax havens to hide people’s fortunes. The new Legislative Assembly, far from being a counterbalance, will serve as a conveyor belt transmitting these policies that will finish the job of dismantling what has been called the Social Rule of Law in Costa Rica. This is what we surmise from the winners of the February 2022 Congressional elections.

One can expect the privatization of such institutions as the Fábrica Nacional de Licores (National Liquor Factory or FANAL), which supplied the country with alcohol and hand sanitizer during the pandemic since the private sector proved unable to meet market demand. Also in the crosshairs are the Water and Sewage Company (AyA), the Costa Rican Electricity Institute (ICE), the National Power and Light Company (CNFL), internet service provider Radiográfica Costarricense (RACSA), the National Center for the Supply and Distribution of Food (CENADA), as well as the privatization of hospitals in the Costa Rican Social Security Fund (CCSS) that was already announced by Figueres.

This deepening of neoliberalism will take place in a context in which social movements are de-mobilized and de-politicized. Middle class people who are quite frightened by their loss of purchasing power can support an authoritarian solution in the person of Rodrigo Chaves. His opponent offers more of the same. Therefore, it is urgent to establish a popular front of struggle to defend and strengthen social gains. But for this to happen, the sectarianism on the left and in the trade union blocks must be overcome, and the movement of high school and university students must be reassembled, bringing in youth, women, indigenous communities, and peasant farmers with a representative and democratically defined plan of struggle.

For now, the cards are on the table but only the ruling class is playing the game.

A dramatic snapshot of Costa Rica today

We must start by talking about how Costa Rica is doing today. The country used to be in second place in Latin America, following Uruguay, in terms of social equity (Gini coefficient), thanks to what had come to be called the Social Rule of Law, built primarily since the 1940s. However, thanks to the neoliberal policies applied by successive administrations for at least the past 40 years, Costa Rica is now among the 10 most unequal countries in the world.

A process of intense concentration of wealth coupled with a decline in redistributive public policies has increasingly impoverished the lower income groups and the middle class. Wage earners, small urban and rural producers—particularly those who produce basic grains for domestic consumption—have been severely impacted by the free trade model. This is such that for the new school year starting now, the basic supplies needed to send a child to primary school cost C/ 84,000 colons (US$130). What does a family with two or three school-age children do? For a secondary school student, the basic supplies cost around C/ 100,000 (US$154).

High rates of poverty in the “Switzerland of Central America”

The figures are alarming and quite different from the image sold abroad of the “Switzerland of Central America” and “the happiest country in the world.” Data from the National Statistics and Data Institute (INEC) report that in 2020 at the beginning of the COVID-19 pandemic poverty reached 26.2% according to the most imprecise method of measurement, the poverty line. It is worse for women, youth, and when looking at different regions, territorial inequalities are observed. Poverty reached 34% in the Central Pacific region, 32% in the Chorotega region, 30% in Huetar Caribe, 29% in Huetar Norte, and 27% in the Brunca Region. The Central Region is doing best with a material poverty rate of 22%.

These are the conditions in which the most vulnerable families live, aggravated by government measures that have placed the brunt of the weight of the pandemic on the labor and social rights of working people, and on micro and small enterprises in the city and countryside. There are other serious consequences of the free trade model, such as a decline in the balance of trade, the loss of food sovereignty and security, and the proletarianization of rural families, to name a few.

Currency and wages

So far, international inflation has not had a major impact on Costa Rica. Some isolated effects are seen, such as the container crisis and the hike in fuel prices. There is a very restrictive monetary policy in anticipation of a potential “imported” inflation effect, which has some negative repercussions on employment, public expenditure (highly contained), and real wages. It is estimated that nominal wages will not be adjusted over the next 10 years. Some very slight adjustments have been made to passive rates, which is barely impacting credit rates, such that the business and financial sectors are benefitting from a “controlled” devaluation of the local currency, the colón.

Murders of indigenous leaders

In 2021 unemployment reached 17.3%. Neither the ruling class nor the corporate media lost sleep over this, as they would have if inflation had gone up a single point. The situation is more suffocating in some rural areas and indigenous communities where, on top of everything, people are being expelled from their territories by non-indigenous settlers. In some cases, armed bands of men are burning the homes and crops of the families that have a legitimate claim to the lands. The violence is so bad that two indigenous leaders and protectors of Mother Earth, Sergio Rojas and Jerhy Rivera, have now been killed by these bands, which enjoy full impunity and State complicity.

The fiscal deficit triggers many of these ills

While working families see their quality of life whittled away, many large corporations evade and avoid paying taxes, causing government social programs to deteriorate even more. But it has not been bad for everyone: in 2021, in the middle of a pandemic, exports of goods grew by 24.4%, the biggest increase in the past 15 years.

“Exports of precision and medical equipment, which is the country’s main export sector, grew by 33% in 2021; those of the agricultural sector rose by 6%; in the food industry by 26%; the chemical and pharmaceutical sector by 10%; electrical and electronics sector by 37% and those of livestock and fisheries by 13%.

Export destinations also presented a positive performance for Costa Rica, as sales in North America, its principal market, rose by 26%; to Central America by 26%; Europe by 15%; to Asia by 27%; to the Caribbean by 28%; and South America by 59 %.”[1]

Tax evasion and large corporations

These windfalls are not being shared; in fact, they correlate to growing inequality, material poverty, and social exclusion. While such growth has been occurring, the most acute problem facing Costa Rica is a fiscal deficit of around eight to nine percent of GDP. The main culprit for the deficit is rampant tax evasion and avoidance by major national and transnational corporations, which use various tricks to declare zero profits and avoid paying taxes. All of this occurs in a climate of impunity. At least 40 years of successive governments (in both the executive and legislative branches) have godfathered this shameful behavior.

Information including the names of the businesses is circulating on social media, thanks to a filing by a Deputy of the Frente Amplio, who, a few years ago, got the Supreme Court to force the Ministry of Finance to publish the list of companies in arrears and that don’t pay taxes. When this was revealed, there was widespread indignation. But the corporate media have frozen the issue, though it still has not been resolved. The news media rant against government employees, the unions, and the public universities, blaming them for the big fiscal hole, while they give cover to the true robber barons of the public coffers.

The fiscal deficit is around 8% of GDP. Evasion cannot be calculated because it is illegal and there are subtle mechanisms for hiding fortunes, but some economists estimate it at around 2% of GDP. Tax avoidance, which takes advantage of legal loopholes to avoid paying taxes, is estimated at 4% of GDP. If we add 2% for evasion and 4% for tax avoidance, that adds up to 6% of GDP. In other words, if the State could collect from tax evaders and close the loopholes for tax avoidance, Costa Rica’s fiscal deficit would be around 2%–quite a manageable figure. But this is not happening in a country in which successive administrations, with the support of the biggest parties in the legislature, have opted for regressive fiscal policy. There is no tax justice.

“Contained” anger

The farce of widespread poverty for the majority, while the government facilitates the actions of millionaire tax scofflaws, is part of the reason why the Costa Rican people are disenchanted with the “political class,” to such a degree that there were 26 candidates for President in the 2022 general elections, and 40% abstention. There is tremendous anger which for now is “contained,” like a volcano ready to erupt and that keeps building up steam. This annoyance was seen in the fact that almost half of voters stayed home.

It is worth reflecting a bit on the possible reasons why this rage has not yet exploded. The main reason is the major defeat of the strike in late 2018, which lasted 93 days and was led by the teachers’ union. It was a big blow to the grassroots movement, called upon to confront the regressive tax policy that wound up being imposed by the Legislative Assembly. The neoliberal offensive grew stronger after this defeat, with the passage of Law 9635 (Fiscal Plan), the anti-strike law in true authoritarian style, and the criminalization of social protest (which had already started). In the Switzerland of Central America, blocking a street for protests is a criminal offense. Adding to the subjectivity that generates defeat, these developments make it harder to fight new battles.

Law 9635, ill-named the Law to Strengthen Public Finances, not only increased the tax burden of the working classes, exempted the big banana and pineapple producers from tax obligations, and forgave the multi-million-dollar debts of the major corporations, it also included a Fiscal Rule that has paralyzed and threatens to close programs in education, culture, the national census, public housing, and public universities. Noteworthy was the betrayal by the presidents of the public universities in 2018 during the strike who, together with some student leaders linked to the Citizen’s Action Party (PAC), managed to demobilize the universities. Now that the universities are going to be subject to the Fiscal Plan, Fiscal Rule, and the Public Employment Law, the damage done by the university presidents in 2018 is more apparent.

The betrayal by PAC

The emergence of the PAC in December 2000 seduced a good number of social activists with its social democratic discourse, which was quickly abandoned by the two administrations that came to hold office (in 2014 and 2018). The party that promised to confront neoliberalism under the banners of ecology and feminism, wound up betraying all such aspirations. Under Carlos Alvarado, the PAC has been the most efficient tool for dismantling the Social Rule of Law and further feminizing poverty. Unfortunately, many of those social activists wound up supporting the regressive tax policy of 2018. Instead of mobilizing against it, they betrayed their erstwhile causes. This has led to the colossal electoral failure of the party in the 2022 elections.

Another weighty factor was the role played by the corporate media who, for more than 30 years, have waged a campaign blaming all the country’s problems on the unions, collective bargaining agreements, public employees, and now the public universities. They serve as a protective shield around tax evading companies that, in some cases, own those same media outlets. While rendering critical thought invisible, these media offer idiotizing programs, spineless newscasts, and vapid shows that contribute to the domination of a liberal right ideology and a taste for mediocrity. This has become another obstacle to the consciousness raising, organization, and mobilization of a mass movement.

There is deep-seated distrust and division among the union leaders, split into two main blocks: Patria Justa, led primarily by the National Association of Public and Private Employees (ANEP) and some unions within the government energy and telecommunications company, the Costa Rican Electricity Institute (ICE); and the Costa Rican Single Union and Social Block (BUSSCO), with a strong presence of teachers’ and social security unions. Groups on the left are also plagued by sectarianism, self-promotion, and divisiveness, which keeps them from agreeing on anything.

The weakening of the trade unions, setbacks in the high school and university student movements, added to the ban on unions in the private sector—despite the fact that the Constitution guarantees this right—have all combined to bring about the current demobilization of organized grassroots movements.

Brief description of some candidates

I will briefly describe the candidates who received the most votes in the first round of elections for president on February 6. It was known beforehand that none of them would garner 40% of the vote and that a second round would be required in early April. The top vote-getters were: José María Figueres Olsen and Rodrigo Chaves Robles. We can also add the candidate from the Workers Party, who received a very low percent of the vote, but who claimed to represent the revolutionary left.

For each party I will give the number of votes received and the corresponding percentage, based on information obtained from the Supreme Electoral Tribunal (TSE) on February 19, 2022 with 88.2% of the vote tallied, a total of 1,853,719 votes cast, 59.7% voter turnout, 16,565 null votes, and 10,111 blank ballots. The 40.3% abstention rate is striking. It is also interesting to note that there were more blank and null votes than votes received by 19 of the political parties.

Additionally, the electoral system of Costa Rica rewards access to financing from banks and private donors. The important debates only include those who are doing best in the polls, and those are the ones with the most media exposure, thanks to the money they have to pay for ads in the major media. It is a vicious cycle that has nothing to do with democracy. Levels of support are determined more by access to financing than the quality of a candidate’s platform. In addition, during the period when campaigning is banned, the system allows the media to hold debates, to which they invite the candidates of their choosing based on so-called “freedom of information.”

José María Figueres
Votes: 497,966 (27.3%)
National Liberation Party (PLN), previously social democratic and now neoliberal, heir to the historical memory of caudillo José Figueres Ferrer, father of the current candidate. He has been one of the pillars of the two-party system that governed Costa Rica during the second half of the 20th Century and early 21st. Figueres is an economist and has announced the possibility of privatizing the CCSS hospitals.

Rodrigo Chaves Robles
Votes: 305,157 (17%)
Social Democratic Party (PSD) founded in 2018. The candidate is an economist, liberal technocrat, and former employee of the World Bank, where he was pushed out for sexual harassment.[2] As a former Minister of Finance in a PAC administration, he participated in the regressive tax reform. He comes off as a Bukele-style authoritarian figure.

Fabricio Alvarado Muñoz
Votes: 270,800 (14.8%)
In his second run for president, he is now with the New Republic Party (PNR) which he created after the breakup of the National Restoration Party (PRN), both of which are openly religious. He is a neo-Pentecostal pastor of the so-called “theology of prosperity” and admirer of Jair Bolsonaro.

Lineth Saborío Chaverri
Votes: 225,866 (12.36%)
The Social Christian Unity Party (PUSC) is the other pillar of the Costa Rican two-party system, previously called Social Christian or Christian Democrat. It has been neoliberal for a long time and has governed and co-governed through the Legislative Assembly as such, and has held the presidency several times. Two of its former presidents have been jailed, tried, and acquitted of corruption charges.

Eliecer Feinzaig Mintz
Votes: 225,239 (12.3%)
Liberal Progressive Party (PLP), he is an economist. An ultra-liberal in the style of the CATO Institute, he accuses other neoliberals of being pro-State. In 2008 he opposed the United States’ bailout of businesses such as City Bank and General Motors. He was very low in the polls, but the corporate media strongly supported him, which increased his vote count. Other candidates did not enjoy such privileges from the mass media. They have been building him up as a candidate in reserve, which served him well because he got elected as a legislator thanks to dual campaigning.

José María Villalta Flores – Estrada
Votes: 158,991 (8.7%)
Candidate for the Frente Amplio (Broad Front or FA), supported primarily by the urban middle class and some community leaders in rural areas. This is an institutionalized party that has given up any social struggle outside the Legislative Assembly. It does not profess to be anti-capitalist and seems uncomfortable when questioned about socialism. It was not open to registering as part of a front that would bring together grassroots and leftist forces among the electorate, much less a platform of struggle. The candidate is known as an ally and defender of government workers and public universities, thanks to his distinguished role as a Deputy in the current legislature.

John Vega
Votes: 1,772 (0.10%)
We include him because is the candidate of the Workers Party (PT), a Trotskyist group. He ran an educational campaign publicizing the need for a working class, socialist, and anti-capitalist government. He denounced the regimes of Nicaragua and Venezuela as false leftists, and distanced himself from the bureaucratic and authoritarian Cuban regime. His deeply sectarian campaign did not build any bridges toward a leftist electoral alliance, despite the fact that there are several groups in the country professing to be Trotskyist.

 

Giovanni Beluche is a sociologist living in Costa Rica. He holds a doctorate in societal and cultural studies.

Patricio Zamorano, Director of COHA, edited the Spanish version of this article.
Translation by Jill Clark-Gollub, COHA’s Assistant Editor/Translator

 


Sources

[1] “Costa Rica records the highest export growth in 15 years,” COSTA RICA RECORDS THE HIGHEST EXPORT GROWTH IN 15 YEARS (grupoconsultorefe.com)

[2] World Bank Mishandled Sexual-Harassment Claims, Internal Tribunal Says – WSJ