Lothar Kahl Immobilien (LKI) answers questions from people who want to live in Costa Rica, are looking for a property or are planning to start a business.
Real Estate FAQ Costa Rica
Question: Protest marches and road blockades in peaceful Pura Vida country. What is it actually about?
LKI: Financial mismanagement and waste in Costa Rica are on the decline. The budget deficit this year is over 10% and the unemployment rate is 24%.
The law passed in 2019 to strengthen public finances also failed to generate the hoped-for additional revenue.
The country allows itself 320 government institutions for just five million inhabitants. A wave of mergers is expected next year in order to reduce the costs of the bloated administrative apparatus.he öpublic sector decimated.
In order to remain solvent, the Alvarado government began negotiations with the International Monetary Fund (IMF) for a loan of 1.75 billion dollars. In return, Alvarado proposed, among other things, tax increases (income tax from 10% to 12.5%, from 15% to 20%, from 20% to 25% and from 25% to 35%, depending on the tax bracket). Income tax starts at 840,000 colones, around 1,200 euros), a bank transaction tax, an increase in property tax to 0.75% and the introduction of a global tax from 2023. In contrast, the government’s announced austerity measures looked rather modest.
This led to protests and (sometimes violent) road blockades, which lasted for two weeks and resulted in millions in losses, particularly for agricultural businesses.
Under pressure from the street, the government broke off the negotiations and called for a “National Dialogue“.
It began last Friday in a room at the National Stadium, where representatives from around 70 different sectors of the country met for the first time. Trade unionists, educators, professors, judges, women’s organizations, cooperatives, churches and other sectors have until 20 November to come up with proposals for overcoming the country’s worst economic crisis.
However, most financial experts in the country assume that a solution without IMF loans is virtually impossible.
Private creditors would demand much higher interest rates, and the country also needs fresh funds quickly in order to be able to make upcoming (salary) payments in the coming months.
Next up: Is it true that the road toll (Marchamo) will be reduced by 50% for 2021?