- Category: The Nation
- Published on Saturday, December 17 2011 15:14
- Written by Rod Hughes
- Hits: 846
Both the national budget and the Social Security (Caja) that pays for hospital and clinics in the country's universal health care system threatened to close in the red this year with the Caja depending on a government bailout to pay current obligations to suppliers and run the system for the first two weeks of 2012.
The national budget has grown at double the nation's economic growth between 2006 and 2011. Chief causes of increased spending are educational expenses and benefits and salaries of government workers. In fact, the nation ends the year with the highest national debt in Latin America, La Nacion reported Tuesday.
The latter two factors are also at the root of the Caja's problems which reached crisis proportions this year. (See previous articles.) The government agreed on a bailout to the Caja of more than 52.5 billion colones ($105 million) on Dec. 20 but President Laura Chinchilla warned that the bailout would not be repeated.
But the Caja is still a potential drain on the government and the politicos cannot, in terms used so often by U.S. politicians and pundits, "kick the can down the road." So far no one has come up with a solution.
The lawmakers convened an investigative committee but, as usual for such grandstanding, arrived at no solutions. The tipping point appears to have been the Arias Administration allowing unwise salary hikes at the Caja that set up a chain reaction that raced like wildfire through the government.
A tax package to raise overall revenues is currently nearing a vote in the Legislative Assembly but will, if it passes, be unable to make up the shortfall. After a series of forays by leftist parties, exemptions that had been eliminated were restored.
In fact, the International Monetary Fund reported that the debt would reach 5.6% of production, although Finance Minister Fernando Herrero put the sum closer to 5%.
The debt, as in so many countries of the world, is the most worrisome of the entire economic picture. Production growth improved moderately but did not equal hikes in government salaries.
But a bright side exists -- the government managed to keep inflation down for the third straight year -- making it one of the few countries in the region with a stable inflation.
Miguel Gutierrez, coordinator of the State of the Nation report says that time is running out, especially for the poor who are always hit hardest by economic downturns. "There isn't much time to mount fiscal solutions," he said, before mounting debt catches up with the government.
Central Bank President Rodrigo Bolanos warned that interest rates have remained low due to low demand in the private sector but that "it's getting harder and harder for the Finance Ministry to keep them down."
But this is the domestic budget debt. There is another, less serious one of foreign debt of about 5%. This has already been reduced from the 9% of 2008, the largest in the last decade.
This debt threatens to soar again due to the balance of trade deficit. This has been offset by foreign investment but Gutierrez warned that this was not the way to use these funds.
Attempts at budget cutting by lawmakers have also proved to be contentious but have produced more heat than light. Leftist parties refused to slash heavily into social programs while the rightist Libertarians wanted to slash everything, breaking apart the coalition of the opposition.