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The CAFTA Report/Michael Krumholtz                              
Supporters of Luis Guillermo Solís celebrate his apparent victory

Business community to watch new president closely

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 manufacturing

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 workers.

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 former Saigon.

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

More stories:
Business sector wonders who will be on economics team
Costa Rica invested $1.5 billion abroad in 2013 HERE!
World Bank says its too early to tell what has been trade treaty impact HERE!
Free trade zones in cross hairs during this election.htm HERE!
$1 billion dollar arbitration suit promised against Costa Rica HERE!
Genetically modified crops are a major problem in EU-U.S. trade talks
102813-Pacific-project-investors-turn-to-CAFTA-for-relief HERE!
Nation's 2011 exports estimated at $15.4 billion by PROCOMER HERE!
Business is trying  to usher in craft brewing culture HERE!
Government goes online with purchases HERE!
Dutch firm gets concession for Moín port  HERE!

Only about a third of smaller firms export, study says HERE!
New banknote puts police in security mode HERE!
Rice and national self-sufficiency HERE!
Agricultural plan has its ups and downs HERE! 
Telecom firms finally asked to bid. . . HERE!
Cell phone use predicted to skyrocket . . . . HERE!
Costa Rica-China trade treaty awaits approval  HERE! 
Impact of E.U. pact on local milk market . . .  HERE!
Opening of insurance market plods along . . . HERE!
Brief history of  opening telecom market . . . HERE!
Lawmakers finally OK
last treaty measure . . . HERE!
Latin exports predicted to grow 21.4% . . . HERE! 
News feeds . . . HERE!

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