Costa Rica’s New Economy
What’s all the fuss? The current world economic situation has been changing dramatically in recent months with rising fuel, energy and food costs, as Costa Rica awaits the implementation of CAFTA—which was postponed by the slowness of the legislative approval process in Costa Rica. Now we must wait until the end of 2008, already having failed the previous spring’s deadline. Former President Pacheco, Oscar Arias’ predecessor, negotiated the treaty. He refused, however, to push for its ratification unless the Costa Rican Assembly would first act to improve tax collection in the country. As usual, political interests won out and nothing got done. However, the argument was that without a truly professional tax collection system, Costa Rica’s social guarantees of health care, an effective public education capacity and adequate pensions could not be met. Costa Rica must move forward by standing still….I have yet to figure out how progress is accomplished by stagnation, and I don’t think that Former President Pacheco ever figured it out. In any event, it was he who said that we could always go back to using pencil and paper when asked why he would not authorize ICE, the national electricity, telephone and Internet monopoly to borrow money for optimization and development.
Meanwhile, there are there are many Free trade agreements in many places in the world with low labor costs which gives them easy and/or preferential access to the U.S. market. Costa Rica has some of these advantages as well as liabilities. Its wages are competitively speaking, no longer that low, when compared to China, or even Nicaragua. Leaving aside its particular geographic advantages due to climate, flora, and the abundance of potable water, the reforms that were created after 1948 have produced an educated work force that largely speaks both English and Spanish. That workforce, combined with Costa Rica’s highly developed telecommunications system, has attracted international call centers to the country. Another new market has resulted from the liberalization of sexual mores, which has allowed for the installment of various pornographic websites to locate in Costa Rica. International betting, now being restricted by the United States, was also formerly centered there. Costa Ricans are trained to have a disciplined work ethic. Advanced, modern sectors of other countries seeking lower wage levels in a stable work environment will continue to find it advantageous to locate in the country.
As presently viewed from San Jose, the U.S. market is somewhat tapped out. The country is already flooded with cheap foreign goods, consumer anticipated spending is gagging, and with the deflation of the housing bubble and the dubious financing behind it, the reservoir of cash and credit with which the American consumers used to finance their purchases and supply investment funds are gone.
On the other hand, Europe, in continuing to integrate a contiguous trade bloc, has been enjoying significant successes. The integration into its Common Market of Spain, Greece, and former eastern countries like Poland was accompanied by massive investment in infrastructure and other forms of aid. Access by these countries to the European Union market was not seen as the only benefit, but certainly could serve as an attractive alternative for Costa Rica, rather than to continue courting CAFTA. Costa Rica, along with other Central American countries, is actively seeking EU access as well as a functioning CAFTA, but Costa Ricans still believe tat the US market is likely to be more lucrative, despite current US economic problems.
Our website visitors and registered users need to be aware of the global political condition because it will directly affect the business condition. Costa Rica seems insulated and isolated at times, but not so isolated that we don’t feel the crunch of rising energy, fuel and food costs. We want the companies that have created a profile on our site to have a way of keeping track of world affairs, while conducting their business and using TicosLand.com, the leading web directory in Costa Rica.
