Looking at the Costa Rican Economy

Today we received a lecture from Dr. Jose Sanchez about the state of Costa Rica’s economy.  In response, I chose three questions to analyse based on my newly acquired knowledge of economics. First, why was the Costa Rican economy so successful in the 90s but has seemed to decline in recent times? Costa Rica had a lot going for them in the 1990s.  They signed their first trade agreement, hosted a world cup, and had a distinct increase in professional workers. Having established connections with foreign countries, the value of their coffee rose sharply as an export as they were able to brand their coffee as high quality.  The economy was thriving through exporting bananas and coffee as the country gained more free trade agreements. However, as time progress, more Costa Rican citizens began working for the government leading to almost an eighth of the entire population working federal jobs today. High taxes were charged in order to fuel the high salary of government workers, causing an influx of tax money into the hands of those holding state jobs, instead of into infrastructure and programs to aid the declining economy.  As a result the rate of economic growth in Costa Rica has fallen behind the rate of inflation. The most recent election has lead to a Leftist President, which is problematic as his ideologies do not promote a competitive market.

Secondly, why has Costa Rican politics become more divided in recent times, giving way to the creation of more parties? Costa Rican politics has become more divided in order to create parties which more accurately represent the developing views of the Tico people.   While Costa Rica has historically followed a two party political division, similar to the division of Democrats and Republicans in the United States, in recent times they have incorporated various newer parties into their national elections. Currently, they are around thirteen active parties which all have the same goal in mind: to represent the ideology of how they see fit that that the country be ran.  The actual divisions in political views arise from the difference in typical Leftist and Rightist views on a variety of different topics, including the size of the role of the government in commerce, social programs, and private property. Thus, as ideologies continue to diversify as time progresses, new parties are formed offering a unique opinion on such subjects which might attract the votes of the Tico people.

Finally, Why is Costa Rica so heavily influenced by foreign investments? Without much need to study the history of Costa Rica, one may quite easily observe foreign influence throughout Costa Rica.  It is evident through the presence Taco Bell and Pizza Hut restaurants throughout Heredia, often even overshadowing local sodas or other local dining options.  Costa Rica’s heavy foreign influence began with their economy, which until the 2000s was heavily depending on exporting coffee and bananas. As a result of having an economy heavily based on trade, creating relationships with foreign countries became a priority for Costa Rica, ultimately becoming the country with the second most free trade agreements in Central America.  However, trade agreements work both ways and the amount of imports steadily began to outgrew the amount of exports, especially as the Costa Rican economy turned from coffee and bananas to tourism. As a result, today we see various areas of foreign investment as imported products far outnumber exported ones. This is all manifested in the Mcdonalds, KFCs, and Quiznos which Ticos have learned to love.

As for contradictions between expressed culture and Tico behavior, I have noticed that a declining economy does not dictate the steadily positive behavior of Costa Rican people. In fact, prior to this lecture, I could not tell that the Costa Rican economy was in decline as it is not at all evident in neither my interactions with locals nor observations of my surroundings. The helpful, friendly personality of Costa Rican people is something to admire, and something that  makes me feel welcomed to this country as if it was my own.

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