COSTA RICAN POLITICAL ECONOMY
Prepared by Dale Johnson, Broker for Investments and Properties El Tucan, www.eltucan.co.cr email troporg@racsa.co.cr  Sociologist, author in self-imposed exile in Costa Rica
Compared with its Central American neighbors, Costa Rica has achieved a high standard of living, with a per capita income of over U.S. $5,000, a rate of economic growth over the decade of the 2000s averaging 6%, and an unemployment rate normally under 5%. Costa Rica’s economic advantage is due to the historical success of its development policies, the nation´s lack of an army diverting funds from development to military ends, the reigning stable democracy, its well-educated, healthy, and hard-working population, and its location in Central America with easy access to North and South American markets and direct ocean access to the European and Asian Continents.

Costa Rica is a country with a population of only 4.5 million people and a small geographical area, much of it consisting of mountains with limited agricultural potential. Nevertheless, the country compares well on all economic and social indices to the most advanced Latin American countries. While Costa Rica does not have the industrial might of Brazil, Argentina, Chile, or Mexico, its development policies have been successful in diversification away from traditional agricultural exports like coffee and bananas to industrial activity in electronics, pharmaceuticals and medical hardware, to a vital service sector in call centers and other outsourcing activity and software development, and Costa Rica enjoys a flourishing tourism industry that takes advantage of the country´s tropical marvels. The nation is at or near the top of the list for Latin America on indicators such as poverty level, life expectancy, and educational and health services. There is less inequality in income than other countries in the hemisphere, except Cuba. Costa Rica´s environmental policies are notably among the most advanced in the world. As a matter of public service since the 1950s, state enterprises have extended potable water, electric and telephone services, and serviceable roads to almost the entire population. A national health care system of high quality and low cost covers almost all Costa Ricans and the many foreigners who settle here. One study even makes the claim that Costa Ricans are the happiest people in the world. http:/www.happyplantetindex.org/ The index combines environmental impacts on human wellbeing to measure the total environmental efficacy that favor persons in different countries living long and happy lives.

This is not to say that Costa Rica is a paradise without real problems. The economy is in fact integrated into the global economy in a highly dependent position, vulnerable to international events over which national economic actors have little or no control. (See our comments below on the impact of the 2008-2009 international financial crisis and economic recession). Income inequality and poverty levels are rising, even since the recovery from the crash of 2008-2009, resulting in increased levels of social problems and crime. Real incomes of working and middle class people are declining, exacerbated by a steep rise in the cost of consumption goode caused by an over valuation of the colon in relation to the great influx of speculative dollars (explained below). The historical extension of public services by state institutions and enterprises are now being curtailed. The infrastructure necessary to national development, such as roads, water systems and electrical grids, is being ignored, while the government is extending contracts to international conglomerates for port, airport, road and other facilities which were previously the responsibility of government and oriented toward community development.

Costa Rica has been moving away from its historical record of successful government directed development programs toward what is conventionally termed the policies of neo-liberalism. These policies, promulgated to the extreme in most of Latin America beginning in the 1970s, involved opening the economy to integrate into the global system, an emphasis on exporting natural resource based products, dismantling government regulatory and development agencies, the privatization of public enterprises, the repression of unions and flexibilization of labor, and other measures that had very serious effects. In Chile and Argentina these policies were imposed by fierce military dictatorship, and in Argentina lead directly to economic collapse in 2000 and 2001. In the region as a whole, the policies imposed resulted in greatly increased poverty, income inequality, and social discontent, creating the conditions for recent successful political movement away from neo-liberalism.

While in Costa Rica this policy shift began in the 1980s it did not reach the extremes of most of the region and only became pronounced under President Oscar Arias administration from 2006 to 2010. This is in sharp contrast to some countries in Latin America which now experiencing a decided move away from neo-liberalism toward more autonomous development and social democracy. In Venezuela, Bolivia, and Ecuador this takes the more radical form of “Socialism for the 21st Century” and in Argentina, Brazil, Chile, Uruguay, and Paraguay new forms of Social Democracy, although in recent years these positive changes have been reversed and the elites espousing neoliberalism are back in power. In El Salvador, Guatemala, and Nicaragua former revolutionary of the 1980s have been elected to form more left-leaning governments moving away from class dictatorship, military interventions, and neo-liberalism. This tendency was reversed in Honduras with the May 2009 military coup there. In more recent years Brazil and Argentina have returned to authoritarian, oligarchic neoliberal governments. At present, Costa Rica is going against the hemisphere trend of a more progressive direction, but has maintained a course of moderation with the election in 2014 and again in 2018 of governments of the mildly center-left Partido de Acción Civica.

In 2008-2009 the Costa Rica legislature enacted enabling legislation for CAFTA, the Central American Free Trade Agreement with the United States. This is a commercial treaty that enshrines the principles of neo-liberalism. The free trade agreement, originally negotiated in 2006, met with widespread public opposition. Social forces opposed to the agreement included trade unions, farmers associations, environmentalists, university counsels, many professional associations, all progressive political parties and movements, high school and college teachers and students, religious groups, and other sectors of the public grouped into a loose association called the Patriotic Alliance. Opponents held massive protests on the streets and kept vigils in front of the Legislature. Active supporters of CAFTA were business associations and the media, controlled by business interests, and conservative political parties, which had a majority in the Legislature. The outcome was decided by a plebiscite with a narrow Yes vote in October 2008, gained according to opponents by a campaign of fear and intimidation.

In Costa Rica there are two competing visions of the future, one defined by the Free Trade Agreement and the policies it requires and the other a resurgence of the vision of a Costa Rica based on principles of social justice, social democracy, and autonomous development. With presidential and legislative elections in February 2010 President Arias successor was Laura Chinchilla of the National Liberation Party who pledged to continue to work toward Arias´s vision of the future. This caused a considerable political reaction and the more or less left of center party, the Partido de Acción Civica gained the Presidency and a large presence in the Camara de Deputados in 2014 and again in 2018.