VZCZCXYZ0005
OO RUEHWEB

DE RUEHSJ #0220/01 0781819
ZNR UUUUU ZZH
O 181819Z MAR 08
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC IMMEDIATE 9535
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SAN JOSE 000220 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR WHA, WHA/CEN, WHA/EPSC PMAIER AND EEB/IFD/OMA 
ASNOW AND RFIGUEROA; 
PLEASE PASS TO TREASURY: SGRAY 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PGOV PREL CS
SUBJECT: COSTA RICAN FISCAL TRANSPARENCY 
 
REF: STATE 16737 
 
¶1.  SUMMARY. The GOCR is transparent with the management 
and conduct of its fiscal and financial affairs. The 
budgeting process is public and readily accessible by 
electronic means.  The Minister of Finance directs the 
process with a commitment to real reform.  Treasury's 
Office of Technical Assistance is an effective catalyst to 
the process with its assistance in the areas of tax 
administration, budgeting, debt management, and internal 
enforcement. A 2007 IMF report confirmed the fiscal 
transparency of Costa Rica's fiscal policies.  End Summary. 
 
¶2.  In accordance with reftel, Post prepared the following 
report: 
 
Begin Report 
 
The current executive management of the Ministry of Finance 
is committed to improving the overall performance and 
enhancing the transparency of fiscal policy and 
administration.  The Minister and the two Vice Ministers 
are eager to embrace reforms and believe in the public 
dissemination of information regarding the Finance 
Ministry's operations and annual budgets, a hallmark of 
transparency. 
 
The GOCR publishes its annual budget in both hard copy and 
electronic formats for easy access.  The budget 
incorporates all of the activities of the central 
government (composed of eighteen ministries, the national 
legislature, the judiciary, and the electoral tribune). 
Separate from the central government budget are the budgets 
for decentralized state institutions such as the state 
insurance entity, the state telecommunications and 
electrical utility, and the public universities.  Each of 
these organizations publishes it own separate budget. 
 
The GOCR budget provides an accurate and meaningful plan on 
how the government intends to allocate expenditures and to 
gain revenue.  Typically, total actual expenditures and 
revenue will vary from the originally budgeted expenditures 
and revenue within a reasonable range of 5% to 10%. The 
Ministry of Finance normally proposes amendments to the 
budget during the fiscal year that do not significantly 
vary from the original projections. 
 
In the accounting area, the National Accounting Department 
is currently undertaking an ambitious reform project to 
implement most of the International Public Sector 
Accounting Standards by 2009.  Once achieved, this reform 
will greatly enhance the quality and quantity of 
information made available through the GOCR's annual 
financial statements. 
 
The Comptroller General of the Republic supervises all 
public spending, including those of decentralized 
institutions and government sponsored enterprises, for 
compliance with budgets and related rules and regulations. 
The Comptroller General publishes an annual evaluation of 
the GOCR's financial performance and position and issues an 
evaluation of the President's fiscal proposals during the 
budget formulation process, including a validation of the 
revenue estimates for the budget year.  These and other key 
Comptroller General reports are published in hardcopy and 
are available on the Comptroller General's website. 
 
The GOCR is committed to fiscal transparency as evidenced 
in the most recent budget approval process.  The Finance 
Ministry developed a budget which included such 
advancements as the introduction of different budgeting 
scenarios (reflecting different spending priorities and the 
revenue consequences) and multi-year planning.  As required 
by Costa Rica's constitution, the Ministry submitted the 
budget to the Legislative Assembly for mandated discussion 
during the month of November.  The national legislature 
discussion focused on the social spending priorities, 
particularly education.  The Legislative Assembly approved 
the budget before the end of the month, and the debate was 
openly reported on in the national newspapers. 
 
The U.S. Department of Treasury offers assistance to the 
Costa Rican central government through its Office of 
Technical Assistance.  Currently, OTA sponsors three 
advisory programs:  tax policy and administration, budget 
policy and management, and government debt issuance and 
management.  The first two programs yielded noteworthy 
results in 2007. Tax administration improved with revenue 
collection up nearly 30 percent. Budgeting reforms included 
spending scenarios to set national spending priorities, and 
the GOCR declared a budget surplus for the first time in 50 
years. The Finance Ministry also launched an inspector 
general's unit. The tax and budget policy advisor programs 
introduced management systems designed to achieve specific 
objectives, with both programs tightening and strengthening 
overall management objectives, control, and execution.  The 
third program, debt management, started in early 2008 and 
is too new to report results. 
 
In addition to USG assistance, the GOCR received assistance 
from the Inter-American Development Bank (IDB) over the 
2002-2005 period.  The IDB provided assistance on CAFTA-DR 
and tax reform issues with benefits realized in education, 
health, environment, and energy.  In 2007, IDB provided 
technical assistance to the GOCR in the areas of budget and 
program evaluation.  The objective of this project was to 
improve the GOCR's ability to evaluate the effectiveness of 
the use of public resources and to communicate such 
information to the public and other stakeholders, including 
the Legislative Assembly and the Comptroller General. 
 
The World Bank has also been providing Costa Rica technical 
assistance in debt management through its FIRST initiative. 
The initiative includes a transparency component, 
encouraging better communication of funding plans and debt 
strategy.  The OTA debt program is coordinating some of its 
efforts with the FIRST initiative. 
 
In addition, the International Monetary Fund (IMF) 
completed a study in 2007 entitled Report on Observance of 
Standards and Codes - Fiscal Transparency Module (IMF 
Country Report No. 07/372, November 2007).  Key findings 
from the report included: 
 
- "The (Costa Rican) budget process is well specified and 
publicized." 
 
- Government responsibilities are "clearly specified," with 
the Central Bank of Costa Rica and Comptroller's General 
office operating independently. 
 
- The GOCR has made "significant progress in centralizing 
and improving debt and cash management, updating accounting 
norms, and upgrading the data management systems." 
 
- Cross-government institutional responsibilities need 
further clarification in order "to avoid duplication" and 
"improve coordination." 
 
- Future reforms in the budgeting process need to include 
"integrating government autonomous institutions into the 
budget, developing priorities for the "evaluation and 
approval of investment projects," and "eliminating 
earmarked spending mandates." 
 
The IMF's findings lauded the public access to information; 
the independence of the Finance Ministry, Central Bank, and 
Comptroller's General office; and the overall transparency. 
The IMF, however, recommended that the GOCR focus on 
improving the mechanics of governance. 
 
End Report 
 
======= 
COMMENT 
======= 
 
¶3.  Costa Rica has experienced significantly lower levels 
of corruption than other countries in the region, with 
greater fiscal transparency as one of the underlying 
explanations.  Minister of Finance Guillermo Zuniga seeks 
continued improvements, however.  His willingness to make 
positive changes, coupled with the effectiveness of 
Treasury's Office of Technical Assistance, has created an 
environment conducive to real fiscal and financial reform. 
This partnership has been a win-win for the GOCR and the 
USG. 
 
BRENNAN