By Nickole Saborío Gómez - International Relations Student
Is the development model of Costa Rica a good one? According to Trapé (2020), Costa Rica is a successful example in terms of development in several aspects. It is considered an upper-middle-income country that has experienced sustained economic growth in the last 25 years thanks to its foreign-oriented strategy, attracting foreign investment, and trade liberalization. In this paper, topics such as Costa Rica's position in terms of development, flaws in the development model, and a brief exposition of the variants caused by the pandemic will be covered.
According to the World Bank (2021), Costa Rica is considered a world leader thanks to its environmental policies and achievements, which have helped the country build its Green Brand. Focusing on today, the impact of the health emergency due to COVID-19 according to Méndez (2020) on the economic situation of the country, citizens undoubtedly recognize the importance of Costa Rica continuing to invest in infrastructure, health and education. Costa Rica has been successful in terms of development, the pandemic has been the trigger.
The triumph of Costa Rica in the area of development is said that according to the antecedents of World Bank (2021) the country experienced sustained economic growth in the last 25 years. This progress is the result of an outward-oriented growth strategy, based on openness to foreign investment, as well as gradual trade liberalization. Now the effects of the pandemic have caused an economic recession in the world of a magnitude that is only compared to the Great Depression of the 1930s. To contextualize, mentioning some data from World Bank (2021) "it is estimated that GDP contracted 4.6 percent and the poverty rate rose to 13 percent in 2020."
Taking into account projections, it is said that Costa Rica will be tied as the sixth country that will take the longest to resume the pre-pandemic levels of Covid-19 in GDP per capita, even exceeding 2022 without that recovery, according to the Organization for Cooperation and Economic Development two development challenges stand out: the fiscal situation and persistent inequality (Gudiño, 2021). The tax reform approved in December 2018 was a historic step to restore fiscal sustainability, but the pandemic has had a significant impact, as the global economic slowdown and the necessary containment measures complicate it.
Analyzing general impacts in Costa Rica, we appreciate that tourism, mass entertainment, chains to supply raw materials, education, and the industry dependent on a single supplier in the world, are part of the sectors that, due to their characteristics, will be seen affected by the situation. An important point is the export sector, Costa Rican foreign trade companies report the slow progress of shipments and landings in Asian ports, delays in the return of containers and the "cooling" of purchase orders in the countries to that Costa Rica exports, as consequence of the impact on markets and logistics of the pandemic. (Ruiz, 2020).
An opposite point of view that Costa Rica has been successful in terms of pre-pandemic development says that the model has long failed. One factor in the argument is unemployment specifically in 2013 (years before the pandemic), the increase has been generalized in recent years, as revealed in the XIX State of the Nation Report. According to Monge (2013), the model is defective because it has been based on macroeconomic aspects such as the criterion that development based on economic growth would solve social problems, it showed that there was no automatic relationship between economic growth and increased welfare of people and poverty reduction. However, the combination of political stability, social contract and sustained growth have resulted in one of the lowest rates of poverty in Latin America and the Caribbean, where the proportion of the population with incomes below US $ 5.5 per person per day decreased slightly from 12.9 to 10.6 percent between 2010 and 2019 (World Bank, 2021).
In conclusion, Costa Rica at the development level is not perfect but it is admirable in several areas. The aforementioned challenges affect the basic pillars of the Costa Rican development model, which are inclusion, growth and sustainability. The combination of political stability, social contract, and sustained growth have resulted in one of the lowest poverty rates in Latin America and the Caribbean. The government has sought to address these problems and is committed to an inclusive society that guarantees the well-being of its population, relying on transparent and accountable public institutions.
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Gudiño, R. (2021, June 05). Costa Rica is one of the countries that will take the longest to recover their GDP per capita. The Republic. https://www.larepublica.net/noticia/costa-rica-es-de-los-paises-a-los-que-le-tomara-mas-tiempo-recuperar-su-pib-per-capita
Méndez Montero, A. (2020, September 21). Citizens support the country's development model in the midst of the economic and health crisis. UCR. https://www.ucr.ac.cr/noticias/2020/09/21/ciudadania-respalda-modelo-de-desarrollo-del-pais-en-medio-de-crisis-economica -y-sanitary.html
Monge Pacheco, B. (2013, December 02). The development model of Costa Rica. The Republic. https://www.larepublica.net/noticia/el_modelo_de_desarrollo_de_costa_rica
Ruiz Hidalgo, H. (2020). Impacts of covid-19 on the Costa Rican and world economy. State Distance University. https://www.uned.ac.cr/ocex/index.php/124-boletines-articulos/556-impactos-del-covid-19-en-la-economia-costarricense-y-mundial
Trapé, A. (2020, October 05). Costa Rica- Economy and Pandemic. The Republic. https://www.larepublica.net/noticia/costa-rica-economia-y-pandemia
World Bank. (2021, April 06). Costa Rica: overview. https://www.bancomundial.org/es/country/costarica/overview#1