Introduction
[Richard Bexon]
Again, not anything in any moment we can do, but I’ll pause, say good morning, we’ll get started, okay? Okay, let’s do it. Good morning Juan Carlos, how are you doing?
I’m doing fine, how are you? Good man, good. It’s, you know, it’s a little rainy outside today, but I’m in Costa Rica, so it’s, yeah, could be worse.
[Juan Carlos Hidalgo]
It’s been a pretty erratic rainy season, you know? It doesn’t rain every single day.
[Richard Bexon]
I like that. You know, I like it because, again, I’m having to pour foundations and dig stuff in certain areas of Costa Rica, so it’s really helped me, the weather.
[Juan Carlos Hidalgo]
Yeah, so, I mean, we’re in the middle of, what is it, September, and some days it looked like it’s summer outside. Yeah, yeah. It looks like it’s December or January, you have these amazing sunsets.
It doesn’t look like rainy season.
[Richard Bexon]
No, it doesn’t. Well, last year looked a lot like rainy season, too much like rainy season, so this year, yeah, hopefully it’ll, you know, yeah. Well, Juan Carlos, my first question for you, I mean, you know, 2025 so far, do you think it’s been a good year for Costa Rica, it’s been a bad year for Costa Rica, and why?
Costa Rica’s Current State: 2025 Assessment
[Juan Carlos Hidalgo]
It’s not a good year for Costa Rica, for sure. I mean, we keep having a very bad security crisis. This is the worst security crisis in our history.
The trajectory of murders committed this year is the same as in 2023, which was the highest murder rate in our nation’s history. And we will probably finish with a murder rate similar to 2023, which will make us the second most dangerous country in Central America.
[Richard Bexon]
That’s incredible to just hear that, though, man, because it doesn’t feel unsafe here.
The Security Crisis Reality
[Juan Carlos Hidalgo]
I mean, the only country that has a higher murder rate in the region than Costa Rica is Honduras. It’s appalling. Not even Guatemala.
Guatemala is now below Costa Rica. And you see it, I mean, there’s no safe place anymore. You saw the shooting in Santa Ana a couple of weeks ago, in a very popular bar.
And you see shootouts in outside schools and outside bars. And it can happen anywhere. The number of Costa Ricans and people murdered every year is above 900.
So this is affecting, of course, our international image. We see tourism being affected by a couple of factors. One of those is that Costa Rica has become a very expensive destination.
But now on top of that, we’re not safe anymore. So I think that when you ask Costa Ricans, when you see polls, you see that more than 50% of Costa Ricans believe that security is the most pressing concern.
Exchange Rate Crisis and Economic Impact
[Richard Bexon]
I mean, for me, as a Costa Rican, it’s security and exchange rate is my biggest concern. Because again, they’re the two things that bring investors here and keep investors here.
[Juan Carlos Hidalgo]
Yeah, yeah. And the exchange rate, that’s quite the discussion right there. Just today, I was looking at the numbers, the latest numbers on inflation.
Inflation is minus one right now. The central bank has tightened the screws too much. And it’s doing it on purpose.
I don’t think that there is nothing accidental here. There is a deliberate policy from the central bank, probably under pressure from the government, to have a strong cologne. A strong income in cologne.
Even the people who work on those sectors that are exposed to the exchange rate, affected by the strong cologne, like tourism and export industries and so on, they’re workers earning cologne. And that makes it politically sensitive for someone like me, for a candidate, to say, oh, we need a weaker cologne. Because then people will say, well, this guy wants to debase my salary.
He wants to debase my income. So from a political point of view, it’s a very sensitive subject. You don’t see many candidates out there talking about a weaker cologne or to devalue the currency.
But it’s something that if it’s not corrected in the short term, we’re going to have serious consequences, particularly on employment. Unemployment in exports and services and agriculture and tourism. If you look at the employment numbers, and also yesterday I was looking at those, the number of Costa Ricans, the number of people working in Costa Rica is lower right now than the month before the pandemic.
So people are withdrawing from the workforce. We don’t know exactly what they’re doing, but they’re withdrawing from the workforce. Less Costa Ricans are working every month.
And this is not sustainable. It’s not good for the economy. It’s not good for the country.
Dollar Debt Exposure and Car Import Surge
[Richard Bexon]
Yeah, I mean, my concern with the exchange rate is it’s just going to swing back the other way drastically. And then we’re going to have a bigger problem, if that makes sense, because it’s been held down.
[Juan Carlos Hidalgo]
You have something to worry about, many things to worry about. But one of the particular things about this discussion is that people getting loans in dollars is increasing three times the pace of people getting loans in colones. Of course, I mean, people react, they are rational actors.
And if you are making your income in colones, of course, you want to have a debt in dollars. So indebtedness in dollars is increasing at two times, three times the rate of indebtedness in colones. And this is dangerous, then, because you’re going to have a lot of people exposed to a change in the exchange rate.
And it’s going to be more difficult for the next president or the next authorities to make the necessary correction on the exchange rate, because then you can leave many people exposed to their loans. So this is a particular sensitive area. Another thing that doesn’t have to do with that, but did you know that last year, 130,000 cars were imported into Costa Rica?
New cars and used cars, 130,000 cars. That’s insane. We are in the trajectory for the same number this year.
And this is because of the exchange rate. People are buying cars. And this has to do a lot now with the collapsing of roads, you know, the traffic, which is making life unbearable for many people out there.
So you see many of the secondary consequences of having a policy of a strong colone that doesn’t make any sense.
Government Fiscal Strategy and Its Consequences
[Richard Bexon]
Well, I mean, it makes sense from a government point of view, that has its income in colones and its expenses in dollars, if that makes sense from an international debt point of view, because, you know, again, years back, you know, it was nearly 700. So if you devalue, you know, make stronger your colone, it’s easier to repay your international debt.
[Juan Carlos Hidalgo]
In theory, yes. And that certainly happened from that point of view, from that perspective. But on the other hand, we do see a drop in the revenue from the income tax of businesses, of industries.
So in theory, yes, the government is saving money by servicing its debt, its dollar denominated debt, because the colone is stronger and the revenues in colones are strong. But the problem is that, Darren, some industries are struggling, and you can see that in the revenue from the income tax that comes from these industries, corporate tax revenues are dropping. And that’s making that the fiscal situation actually deteriorating.
So maybe in the short term, it made some sense to have a stronger colone from a fiscal perspective. But now when the effects of the exchange rates are becoming pervasive, it doesn’t make any more sense from the fiscal perspective, at least. So I don’t think it’s a good economic policy either.
[Richard Bexon]
Yeah, I mean, look, I don’t either, dude. I mean, you know, I love a free exchange rate that moves around, you know, I mean, it’s a less safe type of government rather than something that gets its, you know, unfortunately, you know, sometimes governments get too big and involve themselves in stuff that they don’t need to sometimes. But anyway, yeah.
The Dual Economy Problem
I mean, what do you think? Is there any other challenges that you think that Costa Rica is going to have in the future? I mean, you mentioned their security, you’d mentioned exchange rate, you know, is there anything else that you think that’s going to be challenging for Costa Rica in the future?
[Juan Carlos Hidalgo]
Well, there are several things, but I always mentioned the fact that we have a dual economy that is not sustainable in the long term. Just yesterday, we had a headline in the newspaper saying that the gap between free trade zones, the special regime, what we call, and the rest of the economy, what we call the definitive regime, that gap is growing dramatically. And you have free zones growing at a yearly rate of 12-15%, whereas the rest of the economy barely grows at 2%.
And free trade zones only represent 15% of our GDP. So we have two Costa Ricas, and that’s an increasing topic, you know, when it comes to talk about electoral politics, the two Costa Ricas, the Costa and the Rica, the coast and the rich, you know, you have the Central Valley, where most of the free trade zones are, you have plenty of job opportunities here, you have a well educated workforce. And then you go to the cost, or you go to the rural areas, and you find many people struggling.
You have people who didn’t finish their high school, you have pervasive unemployment, pervasive informality. Right now, the formality rate in Costa Rica is 45%. Over 180,000 Costa Ricans are working in the informal sector.
And this is a time bomb, because sooner or later, these hundreds of thousands of Costa Ricans that are not working in the formal sector, they’re going to have to retire, and they’re going to have to need a pension, which they didn’t pay for during their lives, you know, working lives. And so you have a social time bomb there that sooner or later is going to become a huge problem for Costa Rica’s finances. But I think that’s the greatest challenge.
That’s why in my campaign, I talk about leveling up, that Costa Rica needs to level up the playing field. And it doesn’t mean bringing down the free trade zone regime, which some politicians believe that we need to get rid of the free trade zone regime and that we need to burden them with taxes and so on. What I’m talking about is we need to ease the burden for doing businesses for the rest of the economy.
You know, if free trade zones are so successful, how come we cannot make the rest of the economy more like a free trade zone? Of course, there is a whole debate about taxes. You know, free trade zones, they don’t pay income tax, at least in the short term.
Eventually, they start paying after eight years. But it’s not only about taxes where you need to level up, you need to level up when it comes to regulations, you need to level up when it comes to the services that the government provides to businesses, and so on. So that’s most of my economic plan is based on the idea that we need to level up the playing field for the companies, the businesses that are not on free trade zones.
Tourism as Rural Development Solution
[Richard Bexon]
You know, I mean, you bring up a good point there, you know, and it kind of, you know, I come from a tourism world, as you know, and tourism can have huge impacts in rural areas, huge impacts. I mean, look at areas like Punta Islita. That’s just one area.
I mean, La Fortuna, I mean, you wind back the clock years, La Fortuna, Monteverde, like all of these rural areas. The question here is, why is there not being free trade zones and tourism put together where you’re like, hey, guys, we have huge unemployment up in Upala or, you know, in San Vito. So I’m just pulling these names out.
We’re going to make them free trade zones for tourism, you know, and people can go in and they can get like IDB, you know, kind of lower interest loans, they can kind of develop stuff that’s already there, they have to employ locals, they get reduced social security, you know, but they have to also buy locally as well. You can’t go out to some of the big, you know, companies, you have to buy everything locally. And then that economy starts to move, if that makes sense.
[Juan Carlos Hidalgo]
Yeah, no, no, I totally agree. I think that tourism and agriculture are particularly sensitive industries for the country, because they take place where we need employment of both, which is the rural areas. For some particular reason, San Jose is not attracted to tourists.
When you have friends coming into the country, you tell them don’t spend a night in San Jose, go to the coast immediately or go to volcanoes and so on. But yeah, that’s why I think that tourism needs a particular focus of attention from the authorities when it comes to incentives. And it could be your idea of a free trade zone or some sort of framework.
But we need to keep those two sectors very, you have to keep them in mind when it comes to elaborating policy.
Government Neglect of Tourism Sector
[Richard Bexon]
You know, it’s very frustrating for me, and I know a lot of my friends in tourism, that the government never really cares about tourism, they don’t put that much focus on it, like there’s never that much talk about it. And it’s a huge part of the GDP directly and indirectly.
[Juan Carlos Hidalgo]
Yeah, and I think it’s 6% or 8% of GDP that can be attributed to tourism. And it’s there, you know, it’s something that I think the authorities take for granted. It’s going to keep happening.
And tourism is a way more complex industry than many people believe. I mean, it’s a changing industry, facing lots of competition from new destinations, and sometimes we believe that we compete as a country with a region, you know, with other Latin American countries, but we don’t. I mean, if we want to attract European tourism, we’re not competing with Guatemala, we’re not competing with Colombia, we’re competing with Thailand, or with countries in Southeast Asia, you know.
So we have to keep all this in mind. And I think that when you see the discussion on certain policies, you can see that some politicians take for granted tourism, it’s going to happen, they’re going to keep coming here. We are too splendid, we’re too beautiful for tourists not to come here.
And unfortunately, it doesn’t work that way. I’m particularly worried again, about the security situation, because it takes a tragedy to taint the image of Costa Rica for a long term. And we cannot rule out that that could happen anytime soon.
How Costa Rica Became a Drug Trafficking Hub
[Richard Bexon]
But I mean, how did we get here Juan Carlos? That’s the question, you know, I mean, it’s just, it just seems in the most recent government, we seem to have had this issue. Maybe it was from governments before, I don’t know.
But it’s like, yeah, it’s, I don’t know how we got here.
[Juan Carlos Hidalgo]
It’s been building up, it’s been building up, you know, that drug trafficking is a quite fluid enterprise, a fluid business. I don’t know, I mean, you probably remember Miami Vice back in the 1980s, you know, the series? Well, Miami was the murder capital of the US.
The cocaine coming from Colombia used to enter the United States through Miami. Then the Coast Guard, the US Coast Guard shut down the Caribbean route, and then the cocaine started flowing into the Pacific. And then it came from land, Mexico became the new hotspot for drug trafficking.
So it’s always changing, it’s an always changing picture. And the thing is that in the last 15 years or so, the attractiveness of Costa Rica for these criminal gangs, transnational criminal gangs, lie in the fact that we became the leading exporter of cocaine to Europe. Why Costa Rica?
Well, the cartels found out that Costa Rica is a very successful exporter nation. We export a lot of agricultural products to Europe, coffee, bananas, pineapple, flowers, etc. And we don’t have a strong security forces.
I mean, we abolished the army back in the late 1940s. Our police forces are pretty weak. So all of a sudden, they found a soft belly in the region where it’s pretty easy for them to conduct businesses.
So we’re close to Colombia. Colombia is producing right now the most cocaine in its history. So the cocaine is freely flowing into the country.
This government has taken some decisions that are pretty suspicious. For example, they dismantled the Coast Guard. It withdrew the drug police force from airports and the borders.
Costa Rica used to be one of the leading nations in the region when it came to seizing cocaine. Now we barely see any cocaine in the country. It’s not because the drug is not coming into our country.
European Union Police Cooperation Proposal
So that’s why I think if we want to face this threat, and I think it’s an existential threat to the country, we want to face it seriously, we need international support. We cannot by ourselves defeat these drug gangs. Transnational, I keep insisting, is transnational drug gangs.
That’s why one of my leading proposals when it comes to security is reaching an agreement with the European Union. So we will have a police force from the European Union based in our port in Moin because it’s only one port in the Caribbean that is the focus of all these exports. And make sure that the Europeans are the ones monitoring, screening that our exports are not contaminated with cocaine going into Europe.
I already have this discussion with European politicians. I’ve been in a couple of meetings with European members of parliament, with members of several sister parties that my party La Unidad has in Europe, the CDU from Germany, Partido Popular in Spain. And they all agree that this is a great idea.
They say, well, for us, it’s easier to monitor, to control a port that is this big compared to ours. It’s easier to make sure that the drug don’t leave Costa Rica in a port that is this big instead of trying to find drugs in ports like this in Hamburg or all the other ports, Rotterdam and the big ones in Europe. Every week, every month, we see news coming from these countries of cocaine coming from Costa Rica being seized.
Tons of them. So for me, this is the most important policy that you can implement. You can always talk about more police force, I mean, more policemen, which we have to have, tougher laws, which we have to have, more equipment and technology for our police forces, which we need to have.
We need to do all those things. But as long as we don’t control our port in the Caribbean, as long as we don’t make Costa Rica less attractive for international drug criminal organizations, we’re going to keep having this problem. We’re going to keep being flooded with drugs and with all the consequences that those drugs bring.
Security as Top Priority
[Richard Bexon]
I mean, I think it’s the number one priority for the country, to be honest with you. I mean, economically, we’re doing okay, if that makes sense. But the security thing can just wipe everything in two seconds.
And I mean, just international press that we’re getting sometimes is not great. We’re still doing okay. There is time.
But I think whoever the next president is, this needs to be their number one priority. And again, I agree. It’s not just about putting more policemen out there at all, but you need international help.
I agree 1000% on that. Yeah.
Extradition and International Cooperation
[Juan Carlos Hidalgo]
And we just introduced in the country extradition. Extradition was something controversial for many years in Costa Rica. We pride ourselves that we didn’t extradite our to other countries.
But faced with this reality, finally, the political class in Costa Rica came to the realization that either we extradited violent crime, criminals, or die with organized crime, or our justice system cannot cope with this threat. And this is something where finally, we need to come to terms with the idea that we need help from abroad, and that our security forces, our judicial system are not strong enough to face this threat.
Electoral Strategy and Voter Base
[Richard Bexon]
Juan Carlos, again, forgive me for my naivety. Is it the, I suppose, working class, lower class that makes the decisions in Costa Rica, whether you win or you don’t win an election? Is that right or not?
What is the base that any presidential candidate needs to win in order to win the election in Costa Rica?
[Juan Carlos Hidalgo]
It’s a great question. That’s a great question, because the problem now is that we have a very fragmented political landscape. We used to have a bipartisan system, like most of the world.
We had a center-right party, which was mine, Unidad Social Cristiana, then a center-left party, Liberación Nacional. And that was the way of doing business for up until the early 2000s. And then it started fragmented.
And now we have, right now for this election, we have at least eight presidential candidates that are going to be drawing attention from the media, are going to be invited to the debates, and so on. And you have candidates that are catering to different constituencies. You have conservatives, you have evangelicals, you have free market liberals, you have center-left, you have communists.
And it’s very difficult then to say, well, you better win this segment of the electorate or you’re out. Because the thing is that now to win an election, you need to go into the runoff. Back in the old days, you were expected to win a right in the first round with more than 40% of the vote.
Now it’s pretty much a certainty that there’s going to be a runoff. And then the threshold to reach the runoff has been decreasing in the last elections. In 2014, it was 29%.
In 2018, it was 21%. And in 2022, it was 16%. So you can go into the runoff with a very small segment of the electorate.
You can cater to a constituency. It could be urban, it can be rural, it can be well-educated, it can be working class, whatever. But if you are successful in tying up that constituency, then you can make it to the runoff.
And once you’re in the runoff, anything can happen. Yeah. As we’ve seen.
It’s a big discussion. It’s a big discussion within a campaign. Should we have a message that is broad appeal?
Or should we have a message that goes targeted to a particular constituency that is like a low-hanging fruit of your message? For example, if you’re a conservative candidate, you want to appeal to religious voters, and then your message is going to be targeted to religious voters. If you’re a center-left candidate, probably you want to appeal to a younger voter base, etc.
If you are a center-right candidate like mine, I try to talk to everyone, but of course, people who own businesses, who are independent professionals, and so on, people who struggle every day paying their bills and trying to keep their businesses open. That’s my natural constituency. And that’s the people I try to reach out to.
Campaign Message to Costa Ricans
[Richard Bexon]
What would be your message to Costa Ricans listening to this podcast, going into this election? What would you like them to know in a very, I don’t know, in a minute, dude? If I gave you the opportunity, which you have now with this podcast and everyone that listens to it, to give them a message for one minute, what would that message be?
[Juan Carlos Hidalgo]
Well, Costa Rica cannot continue in the same path as we’ve been in the last few years. We have become the second most violent country in the region. We have a crisis in our health care system where eight people are dying every day in waiting lists.
Our education system is in shambles. And if we can go on, on different aspects of our life and see that the country is not doing well, we need change. But we need change within the parameters of our republican system.
We cannot torch our nation and try to found a new country like the current president is promising. I don’t believe, I mean, we have to be very careful of the populist threat that we’re facing in this country, which is very similar to what I’ve seen in other countries in the region, where you have this outsider that finds out that the population is tired. The population is mad about a system that is failing, is failing in security, is failing in education, is failing in when it comes to infrastructure, is failing in the health care system.
And they want change. But the problem is that this outsider promises change only based on the premises that you need to give him absolute power. And that’s exactly what we’re facing right now.
That’s the narrative of the current president. Give me 40 diputados, 40 MPs, and I will solve all your problems. Well, we have seen that picture in other countries and we don’t.
We know it doesn’t work. We need solutions. We need concrete solutions to our problems.
And Costa Ricans deserve a candidate that speaks truth to power, speaks candidly about the problems that we’re facing, and explains which solution, specific solutions, are going to be applied to every single problem. I don’t believe in giving a blank check to anyone. And we have the president saying, give me a blank check.
If you give me 40 diputados, close your eyes, and everything will be better. I think that’s a trap. That’s a huge mistake, and it never ends well.
I’m here with a very strong platform that we’ve been working on for more than over a year, with very serious people. I’m proud of myself with the number of people that have joined my team when it comes to economic policy, when it comes to education, healthcare, and so on. And we are going to face the next month.
We have almost five months ahead of us before the vote in February. And we’re going to give Costa Ricans a very strong platform and very concrete solutions to the problems that we’re facing.
Investment Question
[Richard Bexon]
It’s a pretty good message, dude. Thank you very much. Well, my last question for you, which, again, every guest answers.
I mean, if you had $500,000 to invest into a business or real estate in Costa Rica, Juan Carlos, what would you do with it and why? Did it stop there? Juan Carlos, my last question for you that I love to ask everyone.
If you had $500,000 to invest into a real estate in Costa Rica, what would you invest it in and why?
[Juan Carlos Hidalgo]
Well, if I had that kind of money, I would invest in my campaign. Of course. But if it weren’t for that, well that’s a great question. I think I’m gonna repeat the answer I gave you a couple of years ago: I think that medical cannabis, medical marijuana can be very good business for Costa Rica. We already have legalized it and the regulatory framework is still a work in process and there is still some resistance from the authorities in granting permits because it is new and there are some taboos regarding marijuana. But I think that’s an industry that can take off eventually, and obviously I think that marijuana has to be legalized for recreative purposes, too, and that could be very successful business. If we see what has happened in other countries that have moved in that direction.
[Richard Bexon]
That’s a great answer, man. I love that answer. Well, Juan Carlos it’s been an absolute pleasure having you here on the podcast, again I’m sure we’ll get you on I some time in the future, but I appreciate you taking the time of what I know is very busy campaign to join us.
