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Latin America Investment News on Viva Tropical

Surging Public Debt Plagues Costa Rica for Third Straight Year

Article Summary:

Costa Rica’s burden of public debt, the amount of loans compared to production for the country, rose in 2011 for the third consecutive year.

Photo Credit: Nacion

Original Article Text From Nacion via Google Translate :

Public Debt Burden Rises For Third Straight Year

The burden of public debt, the amount of loans compared to the production of the country rose in 2011 for the third consecutive year.

When debt is used to invest, as in the case of works of ICE, that increases the ability to pay in the future.

According to the Central Bank’s monthly report to February, the ratio reached 44.7% in 2011.

The increase is concentrated in the internal debt and loans that are made within the country as the external in 2011 represented 10.7% of production. This is the lowest value in the last 27 years.

Currently, the Legislature is discussing a bill that would allow the country to change internal external debt, as was done between 1995 and 1997.

For entities, the increase is mainly in the Central Government, in which the ratio increased from 27.5% of production in 2009 to 30.8% in 2011.

High deficits (excess of expenses over revenue) has registered the Government in the last three years account for this increase to fund the shortfall for the State requires debt.

How much space is there?
Asked how much the country can increase its debt burden without falling into trouble, the Finance Minister Fernando Herrero, replied that it could reach 60% without this being a problem.

“However, we must take great care spending caused by the increase in debt to focus on investment rather than current expenditure (eg salaries),” said the minister.

Therefore, he added, proposed to raise taxes to make debt for investment and taxes to cover current expenditure.

He added that if the economy grows, it can increase lending without raising the load, which is why, he said, have tried to attack the main constraint to growth is investment in infrastructure.

The economist noted that Helio Failures investment expenditures of the central government fell in 2011 as part of the constraint that the government has had to be imposed. For him, yes there is still room to raise the national debt.

For his part, economist Hermann Hess said that the country has endured higher loads before, but that does not mean that the current level of 45% “do not have to do with care, especially considering the moderate economic growth prospects globally and locally” .

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From Nacion

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