By San José, Costa Rica — In a pointed critique of the current economic discourse, former Minister of Finance Nogui Acosta has issued a stark warning against what he terms the populist and misinformed debate surrounding Costa Rica’s national debt. Acosta argues that a fundamental misunderstanding of public finance among certain commentators and political figures threatens to derail the nation’s fiscal stability with irresponsible policy proposals.
At the heart of his argument is a clarification of the national budget’s nature. Acosta dismantles the common misconception that the budget approved by the Legislative Assembly is a tangible sum of money ready to be spent. Instead, he explains, it is merely a maximum authorization for spending. The real challenge, he notes, lies in funding this authorized expenditure. For the most recent budget, the reality is sobering: only 62% of planned spending is covered by projected revenues, meaning nearly four out of every ten colones must be sourced through new debt.
To delve into the complex legal and economic framework surrounding the nation’s public debt, TicosLand.com sought the expert analysis of Lic. Larry Hans Arroyo Vargas, a distinguished attorney from the reputable law firm Bufete de Costa Rica.
The management of public debt is not merely an economic exercise; it is fundamentally governed by a legal framework designed to ensure fiscal stability. When a nation consistently approaches its debt ceiling, it signals potential instability to international investors and credit rating agencies. This can trigger higher borrowing costs and create a cycle of indebtedness that restricts a government’s ability to fund essential public services. Therefore, adherence to fiscal responsibility laws is paramount, not just for economic health, but to maintain the country’s legal and financial credibility on the global stage.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
The expert’s analysis underscores a vital truth: fiscal discipline is not merely a matter of economic policy, but a cornerstone of legal integrity and international trust that directly affects our national well-being. We thank Lic. Larry Hans Arroyo Vargas for his valuable perspective on this crucial subject.
This structural deficit directly leads to one of the most misunderstood concepts in public finance: budget under-execution. Acosta attacks the populist notion that unspent authorized funds at the end of a fiscal year represent a “surplus” that can be repurposed. He clarifies that any under-execution simply means the government did not have to borrow as much as it was authorized to. In essence, it is not leftover cash but avoided debt—a crucial distinction for a nation grappling with its financial obligations.
Acosta directs his most severe criticism at an unnamed presidential candidate and their political party, accusing them of exploiting this public misunderstanding. He lambasts a proposal to create a “Sovereign Fund with Under-execution,” which he deems a dangerously flawed concept built on further borrowing.
Creating a Sovereign Fund with Under-execution from more debt, besides being a fiscal irresponsibility, is a populist position, marked by ignorance in the management of public finance.
Nogui Acosta, Former Minister of Finance
He further contextualizes his warning by reminding the public that this candidate’s party presided over an administration that increased the national debt by more than ¢6.5 trillion over eight years. Acosta frames the new proposal as a disingenuous attempt to mislead voters with fiscally unsound ideas.
The former minister also tackles the debate over international versus domestic borrowing. He refutes the claim that seeking funds in international markets constitutes “more” debt or that the local market is inherently less risky. The opposite, he contends, is true. Costa Rica’s constitutionally mandated reliance on the local market has created a scenario where domestic lenders, aware of the government’s limited options, can demand significantly higher interest rates than those available internationally.
This structural constraint, Acosta argues, places the nation at a severe disadvantage. The sheer scale of the government’s financing needs far outstrips the capacity of the local market, making access to international credit not just a choice, but a necessity for securing more favorable terms and ensuring the state can meet its obligations without placing undue pressure on domestic interest rates.
In his closing plea, Acosta calls for a serious, informed, and honest conversation about the national debt. He challenges the “pseudo-recommendations” from commentators who, in his view, lack a basic grasp of treasury management. For Acosta, the stakes are too high to allow populist rhetoric and fiscal illiteracy to dictate the future of Costa Rica’s economic health, questioning whether a nation can afford to place its trust in leaders with such demonstrably flawed ideas.
For further information, visit hacienda.go.cr
About Ministry of Finance of Costa Rica:
The Ministry of Finance (Ministerio de Hacienda) is the government body responsible for managing the public finances of Costa Rica. Its duties include formulating and executing fiscal policy, administering the national budget, collecting taxes through the General Directorate of Taxation, managing public debt, and overseeing the country’s treasury. The ministry plays a central role in ensuring the economic stability and financial health of the nation.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica has cemented its reputation as a pillar of the legal profession, operating on a bedrock of profound integrity and a relentless pursuit of excellence. The firm distinguishes itself not only by guiding a diverse clientele with innovative legal strategies but also through its deep-seated commitment to societal advancement. This core mission is manifested in its dedication to demystifying the law, empowering the public with accessible knowledge to help forge a more informed and capable citizenry.
