UPDATE 2-Scandals, inequality loom large as Costa Rica votes for new leader

Sun Feb 2, 2014 1:45pm EST

By Alexandra Alper and Zach Dyer
    SAN JOSE, Feb 2 (Reuters) - As voters streamed to the polls
on Sunday, Costa Rica's centrist ruling party front-runner hoped
to fend off a leftist surge fueled by resentment over corruption
scandals and rising inequality. 
    Centrist former San Jose Mayor Johnny Araya led polls on
promises to reduce poverty, while distancing himself from
President Laura Chinchilla's scandal-plagued government and
painting rivals as radicals.
    As he passed through a voting location on Sunday morning,
Araya proclaimed his candidacy "the safest, most responsible
option" for Central America's second-largest economy. 
    But voter anger over government corruption has buoyed a
challenge from leftist lawmaker Jose Maria Villalta, who also
promised to tackle inequality in the coffee-producing nation. 
    If none of the thirteen candidates wins more than 40 percent
of votes, as expected, there will be an run-off in April for
only the second time in Costa Rican history.
    "I see Araya as more of the same, a misfortune for this
country after all the corruption of the past," said Maria Ines
Martinez, 57, a businesswoman, lining up outside a high school
to vote as polling stations opened on Sunday.
 
    But other voters expressed concern that the main leftist
challenger would take the country down an extreme path.
    Villalta's party "is a communist party" while most Costa
Ricans "believe in freedom for businesses, private property,"
said financial planner Jose Conejo, 45, as he stood outside a
voting center in the capital.  
    A winner will have to tackle growing debt that totals more
than half of gross domestic product, as generous salaries and
mandatory education spending weigh on a weak tax take. 
    "If they don't do something, then this somewhat negative
trend on the debt could continue and that could have an impact
on the credit rating," said Joydeep Mukherji, a sovereign credit
analyst with Standard & Poor's, which rates Costa Rica at BB
with a stable outlook. 
    Villalta told Reuters on Saturday he would seek to address
the problem by combating waste, tax evasion, and lightening a
heavy burden on the middle class if he wins. 
    "What we want is a progressive reform with greater tax
fairness where those who have more pay more," he said. 
    A lawyer by training, Villalta, 36, cut his teeth organizing
against the Central American Free Trade Agreement. 
    He is the only member of his Broad Front party, formed in
2004, to serve in Congress during the 2010-2014 term. But he
proposed more than 100 bills, including one to strip high-level
officials of immunity while in office.
    That resonated with voters, after Chinchilla sparked outrage
by accepting flights on a private jet, despite laws barring
public officials from accepting sizeable gifts.
    National Liberation Party frontrunner Araya, 56, has vowed
to tackle the deficit by limiting public sector bonuses,
creating a capital gains tax and shifting to a value added tax.
    Gaffes, such as underestimating the price of milk in an
interview, have distanced Araya from equality-conscious voters,
while the national prosecutor's probe of allegations of abuse of
authority and embezzlement have also dampened his appeal.
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