Global Economy Affects Spending and jobs in Costa Rica.

If there was any doubt before, recently released information reporting 15,000 lost jobs in Costa Rica during the month of December 2008 seems to prove that the world economic crisis has indeed hit this Central American nation. The report was released by the Costa Rican Union of Private Business Chambers and Associations (Uccaep), while the Labor Ministry said that 5,000 Costa Ricans presented themselves in January of this year to ask about their severance pay. The ministry said an average of 250 recently unemployed Costa Ricans arrived daily.

Business closings and plummeting revenue due to lowered global spending power are the main culprits, and there is no end in sight as headlines around the world read of job loss and rising unemployment. To add to the increasing numbers, Sylvania will be closing its plant in Pavas, San Jose, leaving another 200 people unemployed.

Unfortunately, economists are predicting that the end to the crisis is not yet in sight and things are expected to get worse before they get better. One expert predicted that the crisis could last up to 18 more months. Last year’s unemployment level was set at 4.9, while it is expected that the unemployment rate for 2009 could rise to 6%.

In an attempt to combat further negative effects of the crisis, Uccaep said it will be presenting a bill to congress in the next couple of days called the “Law of Employment Protection in Moments of Crisis”.

The law would present temporary amendments to the Employment Code to allow business owners to take the necessary precautions to avoid firing their personnel. Such precautions would include reducing work hours by one third, and offering an advance on vacation time. Both of these would allow the company to slightly decrease individual salaries, and therefore employ more people at the same price. Companies would also be able to lower executive salaries.

One Uccaep representative said that if an employee does not agree to the changes, which would not exceed a period of six months, they will be fired and receive severance pay.

This bill is very similar to the government’s “Shield Plan” that would allow for more flexible work hours including a three day week working 12 hours a day, or changing daily work hours between 6 and 10 hours a day. So far they have succeeded in influencing banks to lower interest rates on loans to small and medium sized companies in the hope of keeping them in business so they can offer more jobs to the population.

Both bills will need approval by Congress before they are passed. Uccaep’s bill is currently being presented to the General Assembly, and so far has received support from the Citizen’s Action Party (PAC).

Currently, the Labor Ministry is working to strengthen their unemployment assistance program by offering financial aid to small companies and generating their own employment through public works programs. Needless to say, the current economic environment will have employees holding on to their jobs for dear life, lowering turn over rates and giving those who are employed one thing to be very thankful for.

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Filed under: Business on February 9th, 2009