EspañolAfter four years of lobbying, Costa Rica’s small and mid-size businesses are on the verge of a windfall in the form of a bailout. Representatives in the Legislative Assembly will vote on a bill this evening, May 11, to subsidize companies they claim were most affected by the Great Recession, which began in 2008.
The pending bailout’s scope is broad and includes state purchases of toxic assets such as defaulted debt. The central government is even set to take ownership of repossessed hotels and restaurants currently in the hands of financial institutions.
Besides restructuring debts — including a 4 percentage-point reduction of interests rates — the corporate-welfare program will burden taxpayers to the tune of US$15 million. These funds will flow through the Costa Rica Tourism Board (ITC) and the Banking System for Development (SBD), both state-run institutions.
One of the masterminds behind the bailout is Venezuelan-American Boris Marchegiani, chairman of the local Association for Tourism Protection. He has bragged that in 2011 he delivered a list of companies for corporate welfare to an official in the Laura Chinchilla administration (2010-2014).
However, recently-appointed Minister of Tourism Mauricio Ventura, himself a former leading member of the National Chamber of Tourism and the Central American Federation of Chambers of Tourism, has denied the existence of any such a list.
Ventura believes that “some sections are still unclear,” such as those to benefit from the law and the process by which subsidies will be granted. The bill, however, can only be changed if 38 representatives vote for a full debate.
On the other hand, Marchegiani has contributed to all major political parties in Costa Rica, and defends the initiative by placing blame on the ITC. Way back in 2004, he contends, companies miscalculated their investment projects after an inaccurate ITC estimate. “Then 2008 arrived, and everything collapsed,” he told local daily La Nación.
When asked why the government should bail out private businesses, he said: “It’s the private sector, but things would have been different if the risk index was known.… They [the government] said that there would be a 75 percent occupancy rate of [hotel] rooms, and then there was only 35 percent; different decisions would have been made.”
Internal and External Opposition
Discontent over the bill prevails among both government officials and opposition politicians. Sources from Costa Rica’s Libertarian Movement, for example, have told the PanAm Post that their four-member legislative bloc will reject the initiative.
Even the ITC itself has complained about the opaque manner in which the bill has proceeded, with uncertainty over who will receive the handouts: “Who are they? How much do they owe? Did they renegotiate their debt? Is there a judicial process open to collect the debt?” ITC manager Alberto López has asked.
López also castigates representatives for increasing the magnitude of money that the ITC is set to contribute to the bailout. The original plan was for $2.5 million, a third of the current $7.5 million.
In turn, the SBD board of directors have deemed the four-point reduction of the interest rate a “subsidy,” and they say the move could threaten their financial stability. “The resources of the SBD were created as a mechanism to finance and promote viable productive projects. So companies that failed to recover over a period of seven years cannot meet this condition,” states a document sent to a congressional commission.
Marchegiani has maintained more than a decade-long affection for taxpayer money. In 2003, 10 percent of the oil traded by Venezuelan state oil company PDVSA passed through his online trading platform Pepex, amid a strike of PDVSA’s sales divisions.
Despite doubling the platform’s commissions during that time, from $0.1 to $0.2 per barrel, Marchegiani was appointed to restructure the international sales department of PDVSA.
“It’s an unbelievable case of conflict of interest that can only be explained by obscure maneuvers in the sales,” former PDVSA sales manager, Ciro Izarra, said at the time.
Edited by Fergus Hodgson.