Bloomberg News

Costa Rica Deficit Plans Face Delay After Finance Minister Quits

April 03, 2012

The resignation of Costa Rica’s Finance Minister Fernando Herrero may delay a congressional vote on tax changes aimed at paring a $2 billion fiscal deficit, said Boris Segura, strategist at Nomura Securities in New York.

Herrero submitted his resignation to President Laura Chinchilla yesterday following allegations by the La Nacion newspaper that he underpaid taxes for 12 years. In a statement last week, he denied deliberately evading taxes.

“The main issue is if his resignation is going to impede the tax reform approval,” said Segura in a phone interview from Costa Rica. “It will likely cause some further delays.”

Drafted last year by Herrero and Chinchilla’s government, the tax package would add about $650 million a year to government revenue to narrow a deficit currently valued at more than 5 percent of gross domestic product, according to the Finance Ministry. Changes include replacing the 13 percent sales tax with a 14 percent value-added tax and imposing a 15 percent tax on dividends paid by companies that enter the country’s free-trade zones after 2015.

Herrero said in a statement that he resigned to protect Chinchilla’s government and so that “my name won’t be used as an obstacle to the great transformations we dreamed of.”

To contact the reporter responsible for this story: Adam Williams in San Jose at

To contact the editor responsible for this story: Joshua Goodman in Rio de Janeiro at or .

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