On my second day in Costa Rica, I continued to learn about the traditions and values of the Ticos, and I am liking the country more and more as I do. My Monday morning began with a hefty serving of gallo pinto, this time paired with scrambled eggs to create a delicious, authentic breakfast. As always, coffee was included with the meal, and I can’t get enough of it. How did coffee become such a gourmet item in Costa Rica, though?
Coffee has been an important part of the Costa Rican economy for as long as Costa Rica has been a country. However, its role has changed significantly over the years. In the 70’s and 80’s, coffee beans were only seen as a raw material and were simply grown in the country and sold to others. In fact, law stated that only low-quality beans could remain in Costa Rica for consumption. This approach was changed in the 90’s, when Costa Rica decided to brand its coffee as its own and advertise it as a delicacy because of how good it tastes. Instead of being shipped after being picked, the beans were roasted and prepared in country and sold to other countries at a much higher price, bringing more money into the economy. Other countries were and are willing to pay more because there was already an established demand for the gourmet coffee. Costa Rica enjoyed the profits from this during the 90’s, during which coffee was the number one cash crop and the agriculture industry as a whole accounted for 20 percent of Costa Rica’s GDP. However, today in Costa Rica, coffee is not as much of a cash crop. It is still regarded as some of the best in the world, but it does not control the economy as much as it used to as tourism becomes increasingly popular.
The rise of tourism and drop in reliance on agriculture are just a few examples of the volatile Costa Rican economy. There are several economic indicators that do not bode well for the future of Costa Rica. The first of these is the trade deficit, which currently stands at 6.6 percent. While this is something that should be addressed, it is to be expected for a country as small as Costa Rica. Considering the economic shift from agriculture to tourism, it would be difficult for the Ticos to produce everything they need for themselves. Because of this, the trade deficit is not as big as pressing issue as it may seem at first glance. Instead of trying to reduce imports, it may be more effective for Costa Rica to take advantage of what its land offers, such as medicine. Medical devices are quickly becoming a bigger export than agriculture, and it may be the avenue to reducing the deficit.
Another economic issue in Costa Rica has to do with taxes. Specifically, Ticos take issue to where their tax money is being spent. Instead of this money going towards infrastructure improvements, housing, or medicine, a large portion of it is going towards paying the state and its massive number of employees. With a population of around 4.8 million, it may be surprising to find that Costa Rica has over seven hundred thousand citizens employed by the government. For comparison, there are around only 3 million civil servants in the US, where the population exceeds 300 million. This has certainly been the cause of some unrest for Ticos.
Lastly, Costa Rica is the second most expensive place to live in the Americas. This is largely due to the number of taxes being imposed at the point of sale. Sales tax currently sits at 13 percent and may soon be raised to 14. In addition, often a 10 percent service tax added to any purchase where tipping would normally be expected. Furthermore, the inauguration of the new president, Carlos Alvarado, may lead to increased taxes across the board as that is his approach to alleviating the trade deficit that the country faces. This makes certain products and services even more expensive while adding taxes to services that were not previously taxed including some private medical services. I believe that there are better ways to close a trade deficit that do not involve making products more expensive for Ticos, including exporting more of what Costa Rica has to offer, like medical devices. This will counteract the large amount of imports better than taxing citizens.
The growth of a country comes with many struggles. Costa Rica is a model of how an economy shifts away from agriculture and a country experiences growing pains while industrializing. While there are several indicators that Costa Rica is not doing well for the time being, the small country has a lot to offer and the Ticos will undoubtedly work hard to preserve their future as they have done many times in the past.