Weekly Report - 22 July 2003

Costa Rica's central bank has authorised the floating of a US$60m bond issue in compliance with a demand made by striking workers of the state-owned telecommunications monopoly, Instituto Costarricense de Electricidad (ICE), in late May (WR-03-21). A further US$40m of bonds were issued in the heat of the strike on 23 May. 

The government was initially reluctant to agree to the bond issue because some of the ICE's financial statements were deemed to be inaccurate. 

Economy minister Jorge Walter Bolaños resigned from his post over the matter. The central bank agreed to the issue after the ICE promised to cut its projected deficit this year by US$50m, to US$58m, and to erase the deficit altogether by 2004. 

Local commentators have argued that the bond demand was merely a cover story and that ICE directors promoted a strike by the workforce to show the government its willingness to flex its muscles ahead of the final stages of the US-Central American Free Trade Agreement (US-Cafta). 

It is no secret that the US has brought pressure to bear on the Pacheco administration to free up the telecommunications market under the Cafta.