By Arturo Cortes Berg - International Relations student
How is Costa Rica’s foreign policy taking care of economic development? Costa Rica has been working intensively in attracting more Multinational Companies (MNCs) to come and invest in Costa Rica for the last decade. It is possible to see how its Foreign Policy (FP) and its Foreign Trade Policy (FTP) have been focused on diversifying Costa Rica’s economic activities and bringing new opportunities (included Foreign Direct Investment) for its citizens to develop themselves in diverse areas, such as manufacturing, services, technology, among others. At the same time, Costa Rica has been able to build a recognized and respected reputation in the international society, which has allowed it to be highly successful in its duty of bringing new opportunities to the country. Therefore, in this article, we are going to discuss the impact of Costa Rica’s Foreign Policy and Foreign Trade Policy, the benefits that these two have brought to its citizens, and the challenges that Costa Rica faces in order to continue being successful on its duty of achieving development for its citizens.
By the end of 2019, the Government of Costa Rica announced that more than 16.000 jobs had been created throughout the year by MNCs. In total, more than 300 MNCs reported a stunning number of 118.000 direct and 58.000 indirect jobs that were being occupied by Costa Ricans throughout the national territory (Gobierno de la República de Costa Rica, 2019). Furthermore, the Organization for Economic Cooperation and Development (OECD) indicated, in 2012, that Costa Rica had proactively diversified its economy in the last 40 years, as by 1965, 65% of its exports were mainly agricultural products (coffee, bananas, meat and sugar) but by 2012 these had decreased to 22% of total Costa Rica’s exports. At the same time, industrial exports (business services, medical devices, share service centers, etc.) accounted for 50% of Costa Rica’s total exports that same year (OECD, 2012, p. 48). In the same way, it is extremely important to highlight the Foreign Direct Investment of about USD 2.300 million that has been perceived by Costa Rica, in 2018, from companies such as IBM with USD 22 million, Kimberly Clark with USD 42 million, or Mexifrutas with USD 20 million, just to mention a few examples (BCCR, 2019).
On the other hand, there are three major challenges that Costa Rica currently faces to attract more opportunities and Foreign Direct Investment: infrastructure (ranked 125 of 148 countries in ‘Roads Quality’), competitiveness (54), and facility to start a business or well, tramitology (133) (UCCAEP, 2015). But, at the same time, there are other challenges that Costa Rica needs to overcome in order to avoid losing the international recognition that has built in recent years, such as cost of public services (water, electricity and transportation), accessibility to credits (loans), and the formation and preparation of its workforce. Costa Rica’s workforce is considered to be one of the most well prepared in the region (it is recognized for its elevated soft and technical skills) mainly because of the high investment that Costa Rica has made in its educational system since the abolition of its National Army in 1948 (spending about 8% of its GDP on education) (La República, 2017). It does not mean that its educational system does not have some ‘weaknesses’ that must be treated, as for example the lack of a second language (or even third), and the remarked gap between public and private schools.
As stated before, Costa Rica’s Foreign Policy and Foreign Trade Policy have been focused on attracting more FDI and, at the same time, new job opportunities for all its citizens. The country has been able to do so by creating a strong reputation in the international system, where other states actually see Costa Rica as a stable country (strong democracy and juridical security) with availability of a qualified workforce (that needs to keep learning new skills to avoid losing competitivity) and, even more important, as a country that has created the conditions for MNCs to invest on it (the creation of free zones, tax reductions, accessibility to enter the market, among others). All these achievements have been reached mainly by the enforcement of its Foreign Policy that, since the abolition of the National Army in 1948, has been working towards the creation of better conditions for the economic development of Costa Rica by spending much more resources in education, building a strong image of a democratic and peaceful country, and generating the necessary conditions for the country to achieve more economically, socially and politically.
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BCCR. (2019, December). Inversión directa, economía declarante, anual (por régimen. Retrieved from https://gee.bccr.fi.cr/indicadoreseconomicos/Cuadros/frmVerCatCuadro.aspx?idioma=1&CodCuadro=%202183
Gobierno de la República de Costa Rica. (2019, December 16). EMPRESAS MULTINACIONALES GENERAN CIFRA RÉCORD DE 16.718 NUEVOS EMPLEOS EN COSTA RICA. Retrieved from https://www.presidencia.go.cr/comunicados/2019/12/empresas-multinacionales-generan-cifra-record-de-16-718-nuevos-empleos-en-costa-rica/
La República. (2017, August 07). Costa Rica invierte en educación más que cualquier país de OCDE. Retrieved from https://www.larepublica.net/noticia/costa-rica-invierte-en-educacion-mas-que-cualquier-pais-de-ocde
OECD. (2012). Attracting knowledge-intensive FDI to Costa Rica. Retrieved from https://www.oecd.org/countries/costarica/E-book%20FDI%20to%20Costa%20Rica.pdf
UCCAEP. (2015). Costa Rica debe mejorar en infraestructura y facilidad para hacer negocios. Retrieved from https://www.uccaep.or.cr/index.php/noticias/168-costa-rica-debe-mejorar-en-infraestructura-y-facilidad-para-hacer-negocios.html