Factbox-What kind of country will Costa Rica’s next president inherit?

FILE PHOTO: Costa Rican presidential candidate Figueres' closing campaign rally in San Jose
FILE PHOTO: Costa Rican presidential candidate Jose Maria Figueres of the National Liberation Party (PLN) speaks to supporters during his closing campaign rally ahead of the April 3 presidential election run-off, in San Jose, Costa Rica March 27, 2022. REUTERS/Mayela Lopez/File Photo

March 31, 2022

(Reuters) – Costa Ricans will elect President Carlos Alvarado’s successor on Sunday to govern what has been of the most stable democracies in Latin America over the next four years.

The winner of the duel between Rodrigo Chaves, an anti-establishment former World Bank official, and ex-president Jose Maria Figueres, will inherit a country grappling with economic and social problems exacerbated by the COVID-19 pandemic.

Here are the main challenges the new president faces:

POVERTY, INEQUALITY

With some 23% of the population living in poverty, there is discontent about how governments have failed to reduce the problem, even though the country’s gross domestic product (GDP) has more than quintupled since 1994.

Moreover, inequality between the 1.3 million poor and the country’s wealthiest has widened since 2005, studies show. Measured by the Gini coefficient, Costa Rica is one of the most unequal countries in the world, which has undermined confidence in its institutions.

“Costa Rica is experiencing a strong erosion of the political and institutional capacities of its political system and its state to implement public policies” that address problems like inequality and poverty, according to the most recent country report presented by local public universities.

CORRUPTION

Although viewed internationally as one of Latin America’s least corrupt nations, Costa Ricans worry increasingly about graft.

Concerns flared up after the so-called “Cochinilla” public works bribery scandal that led to $125 million being embezzled by officials between 2018 and 2020, according to investigators.

The case has led to the arrest of top construction executives and more than a dozen government officials.

The bribes included money, travel, vehicles, land and even sexual favours, according to Walter Espinoza, director of the Judicial Investigation Agency handling the case.

Another public contracts bribery scandal known as “Diamante” led to four mayors of Figueres’ National Liberation Party (PLN) being suspended, including the mayor of San Jose.

Confidence has been further shaken by probes into the alleged influence of drug traffickers in towns run by the PLN, as well suspected links between traffickers and other politicians.

DEBT

President Alvarado, a one-time journalist and writer, will leave office on 8 May after four years marked by an inability to fully implement tax reforms to replenish state coffers.

Lacking a parliamentary majority, Alvarado’s party was only able to push through piecemeal changes to tax laws to boost state revenues, though it did manage to limit spending somewhat.

But after the worst economic recession in 40 years in 2020 due to the coronavirus pandemic, his government agreed in January 2021 to financial assistance from the International Monetary Fund (IMF).

In return, the government said it would push through a raft of fiscal changes and austerity measures, but lawmakers have only passed a law to make savings on public sector workers benefits.

The country ran a lower fiscal deficit in 2021 than a year earlier, but it still stands at 5.18% of GDP. The public debt/GDP ratio is the highest in Central America, at 70.3%.

(Reporting by Diego Ore in Mexico City; Additional reporting by Alvaro Murillo in San Jose; Writing by Drazen Jorgic; Editing by Kenneth Maxwell)