J Brauer | © Stone Garden Economics
In global news and views, Costa Rica enjoys a well-deserved recognition as a democratic country that abolished its armed forces in 1948 and, instead, invested in its people and its land. It hosts the United Nations University for Peace, established in 1980, and generated a Nobel Peace Prize winner in former two-time President Oscar Arias who helped settle a nasty series of civil wars that plagued neighboring countries in the 1980s. In addition, the Central American two-oceans country (Atlantic and Pacific) is well-recognized for setting aside vast spaces of land and sea as protected areas, free of human habitation. All this has made Costa Rica seem to outsiders a bit like a Norway or a New Zealand.
Figure 1: Per capita GDP, 1950-2009 (I$; base year=2005). Source: Penn World Table v7.
In consequence, the country has attracted a fair bit of foreign direct investment, in high-tech manufacturing and financial services for instance. Average education levels are high, and so is average output—at least as compared to the rest of Latin America. Measured in so-called international dollars (I$) and adjusted for inflation and population growth, Costa Rica leads Central American states in terms of per capita economic output, followed by Panama and Belize (Figure 1). It ranks on par with Argentina, Chile, and Mexico, and is far ahead of Brazil. In terms of per capita consumption, Costa Rica likewise leads the Central American group of countries.
Costa Rica’s economy is diversified. Of course, there is agriculture (tropical fruits, palm oil, coffee), but also some manufacturing (computer chips) and tourism and other services. The share of government in the economy is relatively low (under 10 percent), the ratio of foreign debt to GDP is under 30 percent, unemployment is around 7 percent, illiteracy about 3 percent, and life expectancy nearly 80 years of age due, in part, to affordable and widely available health care services.
But there are problems as well. Infrastructure development, particularly roads, does not keep up with traffic, and the traffic jams can be quite vexing. Rural roads are periodically washed out by heavy seasonal rains, a fate Costa Rica shares with other tropical rain-affected countries. Public transport is readily available but overly time-consuming to use. High rates of inflation are a perennial problem, moderated only recently by dampened demand due to the 2008/9 world economic crisis. The tax base is small, and tax administration weak, so that government revenue is not as high as it should be, leading to increasing government budget deficits and debt loads. Income inequality is very high, and rising, and sadly on par with income maldistribution elsewhere in Latin America. This seems to be driven by low-earning economic migrants from Nicaragua who work seasonally in agriculture or permanently in construction.
As elsewhere in Latin America, the justice system appears deficient. In fact, crime rates, and especially violent crime (robbery, assault, homicide), have risen drastically during the 2000s. During this time period, homicide rates f0r instance have nearly doubled from about 6 to 11 murders per 100,000 people in the population. (For comparison, by 2009, Mexico had a rate of 15, the United States 5, New Zealand 2.2, and Norway 0.6.) Chile and Uruguay score much better than does Costa Rica in the crime statistics. In terms of “internal peace,” the Global Peace Index ranks Costa Rica at exactly the same level as it ranks the United States, not a status that a country known for “peace” can be proud of.
Nicaraguan migrants are popularly associated with increases in crime, but this association is hard to establish as a matter of fact. For one thing, no one knows how many Nicaraguan migrants there are in the country. Numbers range between a credible 500,000 to a not-so-credible one million—out of a total population of 4.6 million. Often living in ghetto-like conditions, they are on average far less well-educated and take the menial jobs most Costa Ricans no longer wish to take. Poverty rates are high among these migrants. Migrant women are especially disadvantaged. An explicit social and development policy to integrate poor migrants into Costa Rican society appears not to have been developed. [These are problems Costa Rica shares with other countries receiving large number of economic migrants such as the U.S. (mostly Mexicans) or Germany (Turks). It is ironic that a number of the 2 percent of Costa Ricans who themselves have migrated abroad, often to the United States, are on the receiving end of xenophobia and discrimination themselves.]
Urban places in Costa Rica are heavily fortified. Not a building without a barbed-wire or glass-spiked fence and barred-up windows and doors is in sight. Public police and private security guards carry firearms openly. In rural areas, however, life is visibly more tranquil and no special security precautions appear to be taken.
A third migrant stream—in addition to South-South (Nicaragua-Costa Rica) and South-North (Costa Rica-U.S.)—is the North-South stream of wealthy retirees looking for sunshine, good medical care, cheap household and gardening help, and an overall low cost of living. The country brims with Canadians, U.S. Americans, and Europeans enjoying a relatively liberal immigration policy, and this has contributed to a property price boom. Again, it is not clear that the Costa Rican government has a clear understanding of the costs and benefits of retiree immigrants to the country and an appropriately geared policy toward them.
Costa Ricans are a lovely, relaxed, and welcoming people. Over the years, their elected legislatures and governments have, on the whole, written and enacted forward-looking laws upholding and fostering the value of human beings and of the rest of nature. But internal research and administrative capacity to implement and follow through on some of the ideals appears stretched.
J Brauer is Professor of Economics, James M. Hull College of Business, Augusta State University, Augusta, Georgia, USA.
