President Arias Fears Children Will Be Pressured to Ditch School for Work.

While the United States has dug itself deeper into its trillion dollar deficit in this time of economic crisis, the Costa Rica government is stripping away funding and hoarding its money to avoid the effects, while turning its back on needy citizens. The government’s first call to temporarily cut work hours and salaries to allow companies to employ more people for shorter periods at a lower wage has angered unions and labor rights groups, who say the government is taking advantage of the crisis to deny workers their rights. The government’s newest move to reorganize its budget includes a .5 million cut in funding to public universities.

The budget cut will be applied starting in March and will affect four public universities: the University of Costa Rica (UCR), Universidad Nacional (UNA), Universidad Estatal a Distancia (UNED) and the Technological Institute of Costa Rica (ITCR).

Such a cut represents a 3.5% decrease to the nearly 0 million originally destined to the universities, and comes as part of the country’s policy to destine 1.05% of the Gross Domestic Product to a Special Fund for Higher Education (FEES). The complaint from the rectors of these universities is that the budget for 2009 had already been set and approved by the Comptroller of the Republic, so despite the drop in the GDP, the drop in funding should not be applied immediately.

The rectors have called for a meeting to further discuss the budget cut with the hope of postponing the change as this year’s budgets are already in effect. Each university will lose an average of .6 million for the year should the change take place. According to Olman Segura, the rector of the UNA, the cut would be devastating as the university already incurred added expenses due to damages valuing nearly million caused by the Jan. 8, 2009 earthquake.

The biggest fear is that the money will be taken out of scholarship funding, directly affecting low income students who may not be able to continue with their studies without financial assistance. The rector of the ITCR said that 33% of the 8,000 students receive some type of financial aid, a program that would be directly affected. Funding for research projects would also have to be cut. The rector of the UCR said that the money would have to be taken out of the infrastructure budget and scholarships would not be affected, a sentiment reflected by the rector of the UNA.

In another hit to low income students, schedule changes for continuing adult education classes, special education classes as well as special programs for young students who had to drop out of school to work have made it impossible for many of the students to continue benefiting from the programs. A decision by the Ministry of Public Education declared that classes for continuing adult education should only be offered from 5 p.m. to 10 p.m. However, as there are many children and adolescents that benefit from these programs, as well as those who live a long distance from the classes with no public transportation, the dangers of getting to class at night will keep them from continuing with their education.

Many of these programs are provided by the International Program to Eradicate Child Labor (IPEC), which previously offered two daytime scheduling options. In Turrialba and Santa Cruz alone, 400 students have said they will have to end their education due to the schedule change, which was put into effect throughout the country.

President Oscar Arias expressed additional concerns that the financial crisis will affect enrollment levels among students as many will feel the pressure to drop out and get a job to help support low income families. He made a call to families to realize the value of education and to make due sacrifices to keep their children in class, and noted that a government program called “Let’s Advance” offering 150,000 scholarships should help in this effort.

Costa Rica Business Set to Benefit from New Tax Law.

In order to mitigate the effects of the economic crisis on Costa Rica, the Costa Rica Tax Administration authorized a special accelerated depreciation for all new assets (as in tangible property) increasing the acceleration of the useful life to 60% from the previous 50%. This measure applies to all new assets purchased from January 2009 until the end of the year. The move comes as part of President Arias’s new “Shield Plan” that hopes to protect the country from recession by implementing a series of temporary fixes to promote commerce and protect Costa Rica jobs.

Accelerated depreciation refers to any one of several methods by which a company, for ‘financial accounting’ and/or tax purposes, depreciates a fixed asset in such a way that the amount of depreciation taken each year is higher during the earlier years of an asset’s life. For tax purposes, accelerated depreciation provides a way of deferring corporate income taxes by reducing taxable income in current years, in exchange for increased taxable income in future years.

According to the Costa Rica Tax Administration, the accelerated depreciation is a smart move to confront the weakening economy by promoting investment because this measure allows companies a larger deduction when determining how much income tax is due. This should help soften the decision to acquire new assets when the world’s economists are telling people to save big purchases for later.

Once this resolution is published in “La Gaceta” it won’t be necessary for companies to specifically request authorization to use the special accelerated depreciation from the Tax Administration. The only requirement is that the owner prove that the assets were acquired during 2009. This can be proven with the accountant register or with legal documents.