The Miami Herald
Fri, Sep. 17, 2004

Scandal plagues Costa Rican leader, allies

After last week's mass resignation, opponents of Costa Rica's Social Christian Unity Party find themselves in an enviable position.

Special to the Herald

SAN JOSE, Costa Rica - Costa Rican President Abel Pacheco has tapped several low-profile junior officials to fill the gaping holes in his Cabinet left when his entire economic team walked out amid political turmoil.

The new team named this week, seemingly more apolitical than its predecessor, is not expected to push any controversial new policy initiatives. And Pacheco has shown his detachment from the public by denying that last week's mass resignations expose a weakness in his administration.

But Pacheco's Social Christian Unity Party finds itself struggling to survive a corruption scandal that cuts at the very heart of the party's leadership and ideology.


The two crises have emboldened opposition groups and raised doubts that this country will ratify the Central America Free Trade Agreement -- CAFTA -- with Washington, signed earlier this year, before Pacheco's term expires in 2006.

A year ago, CAFTA seemed a sure bet to win popular approval by assuring favorable access for Costa Rica's export-dependent economy to its main market. But now the labor union and farmers' groups that oppose CAFTA see a chance to block its passage by the legislature, which has been cool to Pacheco.

Pacheco's free market-oriented finance, trade and public works ministers resigned after he caved in to pressure from state employee unions for a 0.5% pay increase above what the government had previously decided.

It was the second capitulation to union threats in as many years and, in the eyes of many, provided proof that Pacheco is interested more in serving out his term than in pushing for economic reforms. The country avoided the 1990s privatization trend and the state still represents over 40% of the national economy.

The resignations threatened to cause some friction between Pacheco and his party, though the latter, which has held the presidency and largest legislative voting blocs for the past six years, has ''collapsed'' according to pollster and Costa Rica-American Chamber of Commerce president Carlos Denton.


The party was rocked this month by revelations that founder and former President Rafael Angel Calderón received a large cash commission from a 2000 Finnish loan that allowed the state health services to buy medicines from the private Costa Rican pharmaceutical firm Fischel. On Monday, police searched Calderon's office.

The scandal has embarrassed Social Christian ideologues who have long touted the virtues of privatizing state services, like supplying medicines, and who often cited Fischel, headed by a family closely linked to the party, as a an example of private sector efficiency and transparency.

''You can definitely note that the Social Christian Unity Party, if it has a future, will find it very difficult to form another government at least in the next 10 years,'' Denton told The Herald.


But even before the recent setbacks, Pacheco's administration had taken an air of impotency. In mid-2002, just months after sweeping to victory in a run-off election, the former psychiatrist announced his top legislative priority would be to have a sweeping tax reform in place by Jan. 1, 2004. The tax plan has yet to make it out of its legislative committee, and few expect it will ever be approved.

Meanwhile, interest payments on the public debt continue to consume a third of all public spending while state services and salaries for public workers continue to slip.


All of this bodes well for 1987 Nobel Peace Prize laureate and former President Oscar Arias, who hopes to return to the presidency in 2006.

Ironically Arias, of the generally anti-privatization National Liberation Party, is in favor of CAFTA and opening many of the state's monopolies to private competition, a position he shares with many of the Pacheco ministers who resigned last week.