All last week, Costa Rican streets served as staging areas for a nationwide labor strike incited by public sector unions. For a country with a political history relatively less volatile than other Central American nations, the week’s strikes are an alarming development for government officials and global investors alike as frustrated citizens decry President Carlos Alvarado’s deficit-reduction agenda.
“Costa Rica’s government is struggling with a deficit estimated at 7.1 percent of GDP this year, which has pushed up the public debt load and increased its need for revenue.
Alvarado is proposing to implement a value added tax to replace the existing sales tax and expand it to goods and services that are currently exempt. One of the most controversial measures is a 1 percent duty on basic foodstuffs.
Those and other changes that would limit unemployment assistance and the payment of some salary bonuses have met with vigorous opposition from public sector unions. Social security officials reported a daily staff absentee rate of 13 percent to 26 percent, causing dozens of surgeries to be postponed.“