Green success

Costa Rica is at the forefront of environmental policy and is one of the greenest countries in the world. The country has succeeded in reversing deforestation, and over half of the land is currently covered by forests. Nature reserves and national parks currently cover about a quarter of the country’s territory.

Costa Rica is often ranked high on various measurements of environmental performance. In 2012, the country was ranked fifth on Yale University’s Environmental Performance Index (EPI), but in 2014 dropped to 54th place. This was due to the fact that EPI in 2014 had included, among other things, wastewater treatment as a new category in the index. Water pollution is one of the main environmental challenges for the country. Costa Rica has set itself the goal of becoming carbon neutral by the two-hundredth anniversary of the country’s independence in 2021. A major obstacle to this ambitious goal is, in particular, the transport sector’s dependence on and increasing consumption of fossil fuels.

Homogeneous population

Costa Rica’s population is more homogeneous than is typical of the region, consisting mainly of whites, descendants of Spaniards and other Europeans. According to the CIA World Factbook, whites make up 94 percent, Afro-Costa Americans three percent, Chinese and the other two percent. Indigenous groups make up the remaining percentage, divided into eight different indigenous groups.

The government does not give priority to the rights of indigenous peoples, who mostly live in the mountainous areas of the southern part of the country. Three-quarters of the country’s indigenous population have little or no access to electricity, clean drinking water, health care and schooling.

Immigrants are a growing part of the population. Mostly, immigrants are job-seeking Nicaraguan who travel to Costa Rica every year legally and illegally. According to the 2011 census, the Nicaraguans make up about seven percent (about 290,000 people) of the country’s population. The male immigrants often work on the coffee and banana plantations, while the women take jobs as domestic help.

Growth with inequality

According to Countryaah.com, Costa Rica did relatively well through the global financial crisis that began in 2008. Costa Rica’s economy has been steadily growing since 2006. Growth in gross domestic product (GDP) of just over 5 percent in 2012 remained above the average for Latin America. Inflation has gradually fallen from 22.5 percent in the mid-1990s to 5.6 in 2013. In 2012, unemployment was 7.8 percent.

But growth has not benefited all parts of the population. According to el Estado de la Nación from 2013, 20.6 percent of the population still lives in poverty, while 6.3 percent lives in extreme poverty. The social differences have increased. In 2012, the Gini coefficient was 0.518. If everyone has the same income, the Gini coefficient will be equal to zero, while it will be one if one person has all income in society. In the Latin American context, Costa Rica is one of the few countries to show increasing income gaps over the past decade.

Increased influence from China

The United States is still Costa Rica’s largest trading partner, but China has become increasingly important. In 2007, Costa Rica broke off diplomatic relations with Taiwan, which was replaced by abundant Chinese investment in the form of financial support and assistance. China, for example, fully funded the construction of a brand new football stadium in the capital, San José. A free trade agreement with China was signed in 2011. Chinese companies are involved in various large infrastructure projects financed through loans from Chinese banks. It concerns the expansion of the Moin oil refinery on the Atlantic coast and the improvement of the main road between the capital San José and Limón, the country’s most important port city on the Atlantic coast. Costa Rica aims to become a full member of the Pacific Alliance trade block (Chile, Peru, Colombia, Mexico), which is Mercosur’s regional competitor.

Ecotourism and components for the data industry

About 68 percent of the value added in the country comes from the service industries. Tourism, and especially ecotourism, is the country’s largest industry. An impressive biodiversity is the main reason why Costa Rica is an important destination for ecotourism.

Traditionally, exports of bananas, coffee and pineapple have been the backbone of Costa Rica’s foreign trade, but in recent years pharmaceutical products for the health industry and electronic components and software for the computer industry have been an increasing part of exports. Intel Corporation chose Costa Rica as one of the bases for its business in the 1990s. Intel products make up about 20 percent of the country’s exports. But just a month before Solís was elected president, Intel announced that it would close its business in Costa Rica. At the same time, Bank of America also announced that it would end its operations in Costa Rica. It is therefore President Solís who will be tasked with attracting new foreign investment to the country to offset the loss of jobs that the withdrawal of Intel and Bank of America entails.

President Solí’s predecessor failed to adopt a broad tax reform aimed at increasing the state’s tax revenue equivalent to 2.5 percent of GDP. Solís has therefore put tax reform on ice and is instead focusing on reducing government spending and improving tax collection. The goal is to cut the deficit by one percent during the first budget year.

The flagship of the Costa Rican welfare state, the Social Security Fund, Caja Costarricense de Seguro Social (CCSS), has been on the verge of bankruptcy for several years, threatening the country’s national health care system. There is broad political agreement on the reforms needed to get La Caja on the right track, so here is the door for consensus.

A turning point in national politics?

The 2014 presidential election was an eventful affair with many unexpected twists and turns. The surprising victory of PAC’s Luis Guillermo Solis, after two consecutive periods of presidency of the traditional PLN party, is highlighted as a potentially revitalizing turning point in national politics. However, in order to bring about a revitalization, the president must be able to work with a still fragmented parliament. A foundation has been laid with PAC’s cooperation with PUSC and FA, but expectations are high and many challenges.

FACTS:

Capital: San José
Population: 4.87 million (2016)
Life expectancy: 78.6 years (2016)
Infant mortality: 8.3 per 1000 (2016)
GDP per capita (PPP): US $ 16,100 (2016)
Religion: Catholicism 76.3%, evangelism 13.7%, other 6.8%
Official languages: Spanish
Currency: Costa Rican colon
Export items: Bananas, pineapple, melons, decorative plants, sugar, beef, seafood, electronics and medical equipment.
Regional relations: Member of CAFTA, CELAC, OAS, Pacific Alliance (observer) and Union Latina.