Political Unrest and the State of Unemployment

IMG_0985.jpgIn the United States, we see a vast amount of opinions expressed and preached. Assuming a country has a similar diplomatic format to that of the United States, many similarities can and will occur. In Costa Rica, they have a democracy like the United States. This, mixed with many opinions about candidates and the country’s political history, have caused a great amount of distress among its people.

When discussing the state of unemployment within Costa Rica, why is the number rather high at 12%? — In Costa Rica, hiring a worker is very expensive. For each pay check, the business must pay 66% of that value as a tax. That money isn’t taken from the worker’s money, but rather from the business. This makes it very expensive to have many workers. After the pay is determined and distributed, the worker must pay a 9.84% tax from their check. While it’s much less than that of the business, it’s a large amount of money to remove from each pay check. To offset this large amount of money being taken, the government has set in place the 13 salary. This means that each worker will get a bonus of sorts that is equal to a month of pay. All of these factors considered, it’s very expensive to hire and keep workers. I believe that this taxation is too high for both the employees and the businesses. The taxes should be lower and spending for programs withing the country should be reduced in order to offset the deficit.

With the change in presidency occurring tomorrow, why is there some hesitation, with Ticos, about the future of politics in Costa Rica? — Costa Rica has a mixed history when it comes to politics. Between the 1970’s and 1980’s, the government was moving from a leftists approach to a more right approach. This caused the state to get weaker, but the country was growing much faster than before. Because of this rapid growth, the inflation hit an all time high during the 80’s. In the 1990’s, the country established its first free trade agreement with Mexico. In the 2000’s, it wasn’t good or bad for the country. The deficit was growing and taxes were raised to combat this issue. Accounting for this rather recent history in the country, Carlos Alvarado, the new president to take office May 8, is causing a bit of a stir. He is taking a more leftist approach to the country’s economics, which Costa Rica hasn’t seen since the 1970’s. Ticos are a proud people who value transparency. I believe that with this unusual political candidate, some people should be a bit more optimistic. Change can be good sometimes and the country hasn’t seen left ideas for quite sometime.

Why is Costa Rica struggling to pay its large deficit with its high taxes? — Costa Rica is positioned as a very socially developed country within Central America. The country spends a great deal of its money on programs for its people. With development comes inflation. Right now, the country is sitting with about 6% inflation. The Central Bank of Costa Rica is growing at a rate of 4%. The country follows the rate of the bank so that means that there is a two percent difference between growth and inflation. The taxes cannot combat such a large difference between the economic growth of the country compared to its inflation rate. I believe that in order to reduce inflation, the country should maintain its taxation policies and reduce its spending. This will slow economic growth with the goal to reduce demand and thus reducing inflation.

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