The CAFTA Report/Michael
Supporters of Luis
Guillermo Solís celebrate his apparent victory
Business community to watch new
By The CAFTA Report staff
After winning the presidency Sunday in a blowout, Luis Guillermo
Solís faces a ballooning national budget, the prospect of
declining exports and employment, as well as a divided legislature.
Solís took 77.9 percent of the votes compared to 22.1 percent
for his opponent Johnny Araya Monge of Partido Liberación
Nacional, based on more than 90 percent of the vote.
The initial and decisive results were made known about 8:07 p.m. by the
Tribunal Supremo de Elecciones. There were more than a million no shows
at the polling places. The percentages for the candidates
represent some 93 percent of the polling places. The university
economics professor will serve a four-year term.
The lopsided results were due, in part, because Araya stopped
campaigning after he finished second in the general election Feb. 2.
Solís is being watched closely by the business community. Some
say he is a bit xenophobic. He opposed the free trade treaty with the
United States, Costa Rica and Central America.
The outgoing Laura Chinchilla administration has stifled efforts by one
foreign firm to develop an open pit gold mine and by another to explore
for petroleum in northern part of the country. These situations have
been watched closely by foreign firms.
Despite the views of Solís, new lawmakers of his party
probably are hard to control. And there also is a significant
representation from the far left Frente Amplio. Most certainly these
parties will propose heavy taxes on corporation. The outgoing finance
minster warned Solís last week that he has to adopt an austere
course and consider a value-added tax of 15 percent. That is
higher and broader than the current 13 percent sales tax,
— April 6, 2014
Intel planning to chop jobs and
Special to The CAFTA Report
In 2013 Costa Rica exported $2.4 billion in electronic components for
microprocessors. That amount was 20.9 percent of the nation's total
exports of $11.4 billion that year.
In second and third place were pineapples and bananas.
The major manufacturer is Intel Corp. in Belén with 2,700
Early Friday the Spanish-language online newspaper CR Hoy went public
with a story that its reporters had been following for months. The
newspaper reported that Intel would be leaving Costa Rica.
The newspaper had some information from government sources, but the
story lacked official confirmation. That was not long in coming. Intel
told the press that some 1,200 of its workers would soon be let go and
that the manufacturing operations in Costa Rica would move to Vietnam.
The government had hoped to keep the news of this devastating economic
blow secret, perhaps until President Laura Chinchilla left office May
8. CR Hoy said a reporter asked Ms. Chinchilla about Intel's plans but
she decline comment.
Intel, which has been here 15 years, has declined recently to make more
investments in the country. The firm has had operations in Vietnam
since 1997. and in 2006 it announced a $1 billion investment there to
build its seventh and largest assembly test facility to produce
chipsets, the firm said on its Web site. In July 2010, Intel Vietnam
began using the latest Intel chipset technologies to produce chipsets
that will help support the growth of mobile computing, it added.
The Costa Rican facilities are mainly for desktop computers.
Intel now has a 500,000-square foot facility in Ho Chi Minh City, the
The company in the past has expressed concern about Costa Rica's
economic position with a soaring annual budget deficit. A main concern
was higher taxes and fees that might affect exports and operations
here. The Chinchilla administration, as part of the failed tax package
presented in 2011, proposed a 30 percent export tax for some firms.
The company also has been rebuffed in efforts to obtain a concession in
the country's labor law to allow it to schedule four 10-hour working
shifts a week instead of the usual five-day, eight-hour shifts provided
in the law. Now the firm is obligated to pay two hours of overtime for
hours for more than eight a day even though 10-hour shifts might be
more efficient n some cases.
Political figures are concerned that the great reduction in the Intel
work force might trigger similar moves by other foreign firms.
Costa Rica is certainly more expensive than some Asian locations in
which to run a business. A.M. Costa Rica estimates that the firm is
paying more than $1 million as month in social charges and perhaps $4
million in the obligatory Christmas bonus. These costa are in addition
to its Costa Rican income tax. Meanwhile the company is
struggling to maintain its place in international markets.
— April 6, 2014