Costa Rica president looks to job and tax overhaul

Q: Pre-elections surveys show that unemployment tops the population’s list of concerns. How are you going to tackle it?

A: Unemployment is a concern for us. It has a lot to do with inequality: we have an unemployment rate of about 9%, and it’s really concentrated on people with a low level of schooling; it has a lot to do with education. It’s also concentrated at the periphery of the country. To tackle that, we need to work on education and on producing jobs in the whole of the country, not only in [the capital] San José. That’s a great challenge for us. Also, we need to be prepared for the fourth industrial revolution. We need people educated to confront things such as 3D printing and big data.

Q: The World Bank estimates that half of the country’s jobs are at risk of automation. Is Industry 4.0 more of an opportunity or a challenge for the country?

A: Costa Rica is a relatively small country with fewer than 5 million citizens, but it’s really integrated in the real economy. If we upgrade education for all the population, we have a big chance to provide [business] services for investment, for tourism, and leverage that to narrow unemployment. Being connected with large economies such as the US, the rest of the Americas, China, India and Europe gives us a lot of opportunities to do that. But we need to improve our education system, and also work on our bureaucracy and infrastructure. That’s the commitment of the new government – to accelerate those innovations so that we can recover our leadership in the region.

Q: What is the role you envision for FDI in your country?

A: FDI is key to Costa Rica. We supply investors with talent, stability, democracy and the rule of law all of which are a guarantee for FDI and provide a [good] environment for foreign investment. We are working to improve the skillset [available in the job market to benefit] foreign investors. We also need to work on infrastructure to make it easier for investors, and to make it attractive for them to be operating all around the country, not only in the capital.

Also, we have to work on the macroeconomic and fiscal part of the equation, because if we fix that, our fundamentals will be strengthened. The key is how to link foreign investment to local entrepreneurs that can provide investors with goods and services. We are committed to this agenda.

Q: International observers are highlighting the risk coming from a high fiscal deficit. What’s your strategy there?

A: There is a bill to establish a value-added tax and to reform income taxes. At the same time, we have to commit to fiscal discipline to slow down the growth in public expenditure to keep it below economic growth, and also overhaul the public sector to make it more efficient and get rid of distortions that affect the budget.

With these elements in place, we are committed to reducing the fiscal deficit from the current 6.2% of GDP to 3% by the end of my mandate [in 2021]. In this way, we are going to have a solid base to retain access to international markets and keep luring investors into the country.