The government is still confident that it will clinch a free-trade deal with the US even though it pulled out of the final round of negotiations on 16 December. Costa Rica had become isolated on key issues such as chicken, sugar and rice. The Costa Ricans held their positions while fellow Central Americans (Guatemala, Honduras, El Salvador and Nicaragua) caved in to the US.
On rice, the other countries agreed to allow the US a quota that increased each year. The original position was to cap US imports at 20% of demand. The other countries have also accepted higher US quotas for chicken exports and sugar exports than Costa Rica would. Costa Rica's refusal to kowtow to the US is economically brave: half its exports go to the US.
Costa Rican businessmen were delighted that the government was standing up for them. They were disappointed with the hard line the US was taking. Some were furious that at the last minute the US threw in what the Costa Ricans called a maximalist suggestion on liberalising the insurance market. In Costa Rica the insurance market is still a state monopoly, under the Instituto Nacional de Seguros. The Costa Rican negotiating team was annoyed that the US initiative on insurance appeared to have been at the instigation of a couple of opposition congressmen in Costa Rica who lobbied the US to make the demand. Anabel González, the chief Costa Rican negotiator, admitted that by the end of the negotiations the country was virtually on its own.
Back at home
Domestically, the government is hopeful that its tighter fiscal policy will lead to lower interest rates. The government is jacking up utility prices in an effort to lower the fiscal deficit. The big increase will be in water and sewage charges. These are likely to go up by 30%. Electricity prices are likely to go up by 12%. The industry is a state monopoly, with all power generated and transmitted through the Instituto Costarricense de Electricidad (ICE). The ICE says that it needs to increase prices because it is investing more in plant and equipment.
Nevertheless, the increase is likely to lead to a C/1,000 a month increase in the average electricity bill, which is around C/460,000 (US$110) a month. On top of the wholesale costs, at least two of the cooperatives that distribute power have put in for hefty increases in their charges.
The government needs the money. The country's oil import bill has jumped by US$119m this year, to US$542m. Higher oil prices have pushed the bill up, but the country has also consumed 10% more oil and oil products than it did in 2002. The government reckons that by the end of 2003 the country will have used 16.8m barrels of oil. The average price of its oil imports in November was US$31 a barrel. A year ago the price was US$26 a barrel.
The country has no oil production of its own. Analysts say that it was not only electricity generation and other industrial activities which led to the increase in oil demand: the large number of cars in the country are heavy users of petrol and diesel. The country has a registered car fleet of 729,721 vehicles, up from 607,000 at the end of 2002.
End of preview - This article contains approximately 635 words.
Subscribers: Log in now to read the full article
Not a Subscriber?
Choose from one of the following options
