COSTA RICA: Unemployment with stability
In Costa Rica, President Carlos Alvarado stated in his first “state of the country” address on May 2nd that the country had been on the brink of a fiscal crisis in H2 2018, but that timely decisions by the executive branch and Congress -- in particular, passage of a fiscal reform law -- had put Costa Rica on a path to solving the situation.Alvarado reiterated his commitment to seeking greater efficiency in public spending, including by approving a public employment law, and continuing to fight tax evasion.
The economy is adjusting, but some key economic variables could move into difficult territory. From October 2018 to March 2019, the Monthly Index of Economic Activity (IMAE) rose 1.8% y/y and, excluding special regimes, grew just 0.7% y/y.That weak performance makes it very difficult to create enough job opportunities.So it’s not surprising that unemployment would become the major problem of the economy, with open unemployment exceeding 11%. Relative economic stagnation also partly explains the evolution of inflation (slightly over the lower range of the Central Bank), the exchange rate (3.4% currency appreciation ytd) and weak domestic credit growth to the private sector.
In Guatemala, uncertainty remains over which candidates will appear on the June 16th presidential ballot.The Constitutional Court has ruled that neither Zury Ríos, the daughter of former dictator Efraím Ríos Mont, or former Attorney General Thelma Aldana, may run. As they were two of the three frontrunners, their exclusion willchange the equation, especially for the August runoff expected to decide the presidency.
In El Salvador, just two weeks from taking office, President-elect Nayib Bukele and his administration still haven’t given clear signals about what sorts of public policies they intend to pursue for the next five years. Some analysts expect a more eclectic view on political, social and economic issues, compared with the current radical positions of the FMLN on the left, and ARENA on the right. We haven’t seen explicit statements from Bukele on those important matters, but only on some broad objectives, such as fighting corruption, attracting foreign investment and creating more jobs, although with no mention of specific actions or strategies. However, we share the vision that he’s likely to take a more eclectic approach, and to steer between radical extremes.
The cabinet includes people new to politics, and with little experience in public sector management, which makes it difficult to appraise their potential contribution to the new administration’s agenda, and their effectiveness in achieving positive results.
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