Costa Rica: History and the Role of Evaluation
Costa Rica’s development history demonstrates how the decisions of the past forge the present and
the future of a country. Its successful structural change and economic stability was built on the
pillars of a market based economy, integration into the world economy, good regulatory institutions,
and environmentally sustainable policies. At the same time, it secured a stable democracy, political
stability and social cohesion, based on policies aimed at providing a better quality of life for its
population in the long run. The development of solid institutions has been accompanied with a
judicial system that is based on the rule of law, transparency in public administration, and strong
enforcement of the law, including anti-corruption regulations. Costa Rica´s political, economic and
social characteristics, combined with its geographical location and its high-skill labor force, make
the country a very attractive destination for high-value added foreign direct investment, including
high-tech firms.
Costa Rica’s successful development model has been recognized by various international fora and
organizations. It tops rankings in democracy, freedom, and environmental protection in Latin
America, and constitutes one of the middle-income countries with higher levels of human
development. The Republic is one of the most open and competitive countries in the region, mainly
because its exports are linked to the high-value added chains. In 2011 it became the fourth country
in the world with the largest share of high-tech industrial exports and the first in Latin America.
Costa Rica abolished its armed forces over 60 years ago, relying exclusively on the international
community and legal institutions to ensure its safety and territorial integrity. While war was raging
en the Central American region in the 1980s, Costa Rica was not only reaping a “peace dividend”
that allowed it to build both its educational and national health systems, but also played a crucial
role in bringing both peace and democracy to the region when former President Oscar Arias was
awarded the Nobel Peace Prize for his role in putting an end to the civil wars that were tearing
Central America apart.
Costa Rica is a mixed economy, in which productive activity is undertaken mostly by the private
sector, and all exports of products and services originate in the private sector. The exceptions are
banking, insurance and telecoms, where there is both public and private participation under an open
competition regime; power generation, where there is regulated private participation; and imports
and refinery of oil and its derivatives, and water utilities, which are either public or owned by nonprofit community organizations.
The
rest
completely
of
the
market
economy
based,
is
institutional provisions to prevent
anti-competitive
behavior,
while
protecting consumers’ rights. Three
specialized entities regulate banking,
insurance and securities, under a
common board of directors, the
National Council for the Supervision
of Financial Services. The quality
of regulation in Costa Rica ranks
among
the
best
in
the
Regulatory Quality in Latin America, 2011
(percentil rank)
with
Chile
Peru
El Salvador
Costa Rica
Panama
Uruguay
Colombia
Mexico
Honduras
Paraguay
Nicaragua
Argentina
Bolivia
Ecuador
Venezuela
93
69
68
67
65
64
61
61
49
40
39
25
24
16
6
0
20
40
60
80
Latin
American.
As a result, Costa Rica’s financial sector has not suffered any systematic crisis since the early
1980s.
100
Source: Kaufmann D., A. Kraay, and M. Mastruzzi (2010), The Worldwide Governance Indicators: Methodology and Analytical Issues
Individual banks have encountered difficulties and have been forced to close their
operations in an orderly fashion, under the regulator’s supervision, but not even the financial crisis
of 2009 created any systemic pressures for the sector as a whole. Neither solvency nor liquidity has
posed dangers for any bank. There is no doubt that the lessons of the 1980s were learnt, and today
the country enjoys a sound and solid financial system.
From very early on, but with more intensity since the early 1950s, Costa Rica invested considerable
resources in human capital, in the form of education and health. A healthy, well educated, flexible
and fast learning work force has proven to be a decisive factor in Costa Rica’s export success and
transformation from a commodity exporter to a knowledge intensive one.
Costa Rica made elementary education free, mandatory – for boys and girls - and publicly funded as
early as the 19th century and has achieved by now universal enrolment in elementary education,
rapidly expanding coverage in secondary education, and high rates of enrollments in higher
education. Additionally, enrollment in early childhood programs, negligible a few years ago, has
already reached almost 69% of the relevant age group. Even more, in 2011 the Government
invested 7% of GDP in public education, and will continue to expand this allocation through the
recently approved Constitutional mandate to reach 8% of GDP by 2014, which is high even by
developed world standards. The quality of Costa Rica´s educational system is well known
internationally. The Global Competitiveness Report (2012), for example, recognizes the quality of
Costa Rica’s educational system as an important competitive advantage.
Costa Rica also created in the 1940s a public health system that provides both insurance and
medical services. Today the system is universal, mandatory, and delivers a life expectancy that is
higher than many Latin American countries and on par with most European countries, while
offering every citizen –regardless of income- universal access to high quality health services.
Furthermore, infant mortality has been improving and in 2011 was ranked the second lowest rate in
Infant Mortality Rate: 1980 and
2011
180
Life Expectancy at Birth: 1980 and
2011
1980
2011
Source: Based on data from UNPD
1980
Chile
Source: Based on data from UNPD
Just as important, Costa Rica heavily invested in institutional development well before “building
institutions for growth” became commonplace in the development economics literature. Rule of
law, an independent judiciary, protection of both human rights and property rights – both
strengthened in the 21st century – and political stability have also proven to be a decisive
competitive advantage for the Republic.
Costa Rica
Mexico
Uruguay
Ecuador
Argentina
Peru
Venezuela
Nicaragua
Brazil
Colombia
Paraguay
2011
Honduras
El Salvador
Bolivia
90
75
60
45
30
15
0
Guatemala
Bolivia
Honduras
Guatemala
Ecuador
Nicaragua
Peru
Paraguay
Brazil
Colombia
Mexico
Venezuela
El Salvador
Uruguay
Argentina
Chile
Years
150
120
90
60
30
0
Costa Rica
For each 1.000 births
Latin America.
Economic performance
Costa Rica has been able to achieve
average GDP growth of 5.5% annually
over the past 60 years, while undergoing
8
several structural changes. Given its
6
relatively small size, Costa Rica always
Costa Rican Economic Growth, 1950-2011
10
(average annual growth rate )
4
has pursued an export-led development
2
strategy. In the period 1950-1963, Costa
exports. The following period up to 1982
Five-year period
Average
2005-2011
2000-2004
1995-1999
1990-1994
1985-1989
1980-1984
1975-1979
1970-1974
1965-1969
1960-1964
1955-1959
model mostly based on agricultural
0
1950-1954
Rica’s economic dynamism was led by a
Source: Central Bank of Costa Rica
centered on the import substitution strategy that took advantage of the Central American Common
Market, but eventually ran out of steam because of limited market size. This period is also
characterized by strong public investment in infrastructure, health and education. The final period is
characterized by increasing product diversity and destination of exports, but most importantly by
lowering trade barriers, allowing exports to the rest of the world to lead economic development.
The record shows that Costa Rica’s
Latin America Economic Growth Rate, 1960-2011
-Average growth rate-
policies over such a long period have
yielded high growth with a very
equitable income distribution. Since
1960, Costa Rica has been the third
highest growing economy in Latin
America and since 1984 it was the
second behind Chile.
Since the early 1950s, Costa Rica´s
Dominican Republic
Panama
Costa Rica
Brazil
Paraguay
Colombia
Chile
Mexico
Honduras
Ecuador
Guatemala
Peru
Argentina
Bolivia
Venezuela, RB
El Salvador
Nicaragua
Uruguay
5,3
5,0
4,7
4,4
4,3
4,2
4,2
4,1
4,0
3,9
3,9
3,6
2,9
2,9
2,8
2,8
2,4
2,2
0,0
economic
structure
has
undergone
1,0
2,0
3,0
4,0
5,0
6,0
Source: World Bank
significant changes. For example, agricultural employment represented nearly 57% of total
employment in 1950; by 2011 the figure is just 14%, still much higher than the corresponding
percentage in many developed countries. In terms of the composition of GDP, the change is even
more dramatic, with services accounting for 65.6% of GDP (compared to 40.2% in 1950), and
agriculture for 7% (compared to 41% in 1950), while manufacturing industry accounts for 18.3% of
GDP and non-manufacturing industry for 9.0% (compared to 13% and 24% in 1950, respectively).
Costa Rica has become one of world’s top agricultural exporters both in per capita terms and in
terms of exports per hectare of arable land.
Costa Rica took advantage of the international debt crisis of the 1980s to transform its economic
model of growth, which has led to highly satisfactory growth rates ever since. Severely impacted by
that economic crisis, like many Latin American countries, Costa Rica was able to restore order to its
public finances and overcome the external debt crisis at the same time that it jump-started an
outward oriented, pro-growth policy, and protected its social institutions, combining universal
access programs with targeted programs for its most vulnerable sectors of society. During the
1990s, macroeconomic stability was restored through responsible fiscal and monetary policies, with
a pro-growth policy stance, while safeguarding social institutions. As a result, the economy
stabilized and poverty levels were reduced dramatically during this decade, after a crisis that
resulted in doubling the number of Costa Ricans living in poverty.
Post-crisis fiscal policy resulted in reduced public debt and deficit levels rather quickly. Inflation
was also brought under control, but remained in the low double digits until recently. After a large
devaluation that became inevitable after the crisis, the country turned very rapidly to a pro-growth
strategy with a considerably expansive fiscal policy, even if fiscal expenditures took the form of
incentives rather than cash outlays.
Export promotion was a more deliberate effort from the start, but attention was paid to identify and
supporting revealed competitive advantage - rather than engaging in the game of picking winners.
Hence, when a promotion instrument did not yield the expected results, it was abandoned and
replaced by a new one, until a very effective set of policies and instruments was put in place.
In a relatively short period, an economy that exported a few agricultural products to a few markets
was transformed into an economy that exports today over 43.000 products and services, many of
them quite sophisticated and knowledge-intensive, to more than 150 markets. Today, Costa Rica
has one of the most open economies in Latin America, as measured by the sum of exports and
imports as a percentage of GDP. While the value of this indicator came down as a result of the
2009 world financial crisis, it has remained Latin America’s highest and it has already rebounded.
Value of Exports (f.o.b.) by Principal Products and Percentages of Total
(in millions of U.S. dollars)
For the Year Ended Decem ber 31,
2008
2009
2010
2011
Traditional
1.066,9
11,2
921,7
10,5
1.081,1
11,4
1.242,7
11,9
Bananas
689,7
7,3
622,4
7,1
702,9
7,4
752,4
7,2
Coffee
305,0
3,2
232,2
2,6
257,5
2,7
374,9
3,6
Sugar cane
34,4
0,4
27,7
0,3
81,0
0,9
68,6
0,7
Beef
37,8
0,4
39,4
0,4
39,8
0,4
46,7
0,4
Non-traditional
8.436,8
88,8
7.862,0
89,5
8.367,0
88,6
9.165,8
88,1
Industry
2.164,7
22,8
1.899,0
21,6
2.124,9
22,5
2.441,9
23,5
Agricultural
1.044,8
11,0
1.032,0
11,7
1.106,5
11,7
1.153,6
11,1
Free Trade Zones
4.866,3
51,2
4.677,4
53,3
4.959,0
52,5
5.381,0
51,7
361,1
3,8
253,6
2,9
176,5
1,9
189,2
1,8
9.503,7
100,0
8.783,7
100,0
9.448,1
100,0
10.408,4
100,0
In-bond
Total
Source: Central Bank of Costa Rica
The relative weight of the North
Exports Destination, 2008-2011
American market for the country´s
exports has fallen from 29.2% to
(percentage of total)
100
90
28.8%, while Europe remains Costa
80
Rica’s second most important market,
70
at around 20% of total exports, in spite
60
2,6
9,0
2,6
7,4
3,3
4,5
3,5
4,3
16,3
16,6
17,1
17,5
21,7
21,8
22,5
23,0
22,7
23,3
23,3
23,0
27,7
28,3
29,2
28,8
50
of the current economic situation.
40
Central America, Asia, the Caribbean
30
and other markets have also grown in
20
10
importance, while the participation of
South America remains stable. In
short, Costa Rica’s portfolio of export
0
2008
North America
Europe
2009
Central America
2010
Rest of Latin America
2011
Others
Asia
Source: Central Bank of Costa Rica
destinations is now more balanced and the impact of risks associated with negative developments in
any individual region would be lower.
In the manufacturing sector, a similar, if
High Tech Exports, 1994-2010
perhaps more dramatic transformation has
taken place, as Costa Rica’s main exports
(% manufactured goods exports)
70
60
have shifted toward more knowledge
Latinamerican average
part of Costa Rica’s export basket. As a
2010
2009
2008
2007
2006
2005
2004
2003
0
2002
aeronautic and aerospace products are all
2001
products, medical devices, automotive and
10
2000
electrical
1999
Electronics,
1998
chains .
20
1997
value
1
30
1996
associated with participation in global
40
1995
close to 40% of Costa Rica’s exports are
50
1994
intensive –not labor intensive- exports and
Costa Rica
Source: Based on data from World
result, the share of high-tech exports in total manufactured exports is extremely high in Costa Rica
by international standards.
On the services side, Costa Rica has
developed
a
highly
successful
Tourism, 2004-2011
and
innovative tourism industry, which has led
the way on eco-tourism first and on the
(million of US$)
2.500
2.174
2.000
wider concept of sustainable tourism later,
1.500
and has become since the 1980s the main
driver of service exports. Notably, the vast
majority of companies in this sector are
1.985
1.927
1.570
1.621
2005
2006
1.806
1.858
2009
2010
1.359
1.000
500
small and medium-size enterprises, which
bring opportunity and employment in some
of the country’s less advanced areas.
0
2004
2007
2008
2011
Source: Costa Rican Tourism Institute
Medical tourism is a high potential new development, and Costa Rica is already second among top
destinations offered by medical tourism facilitation companies to United States residents.
During the past years business services of increasing complexity have become more important.
These services include customer service, shared financial, accounting, logistics and human resource
services, technical support, collections, digital animation, market studies and interactive advertising,
plus complex services such as software development, embedded software, process engineering, user
1
Monge-Ariñano, Francisco (2011): Costa Rica: Trade Opening, FDI Attraction and Global Production
Sharing. WTO, Economics Research and Statistics, Division, Staff Working Paper ERSD-2011-09
experience and automation, and engineering design, amongst others. Business services currently
account for almost 50% of total service exports and their contribution to GDP equaled that of
agricultural exports for the first time in 2011.
Costa Rica’s stabilization, market integration and export promotion policies have yielded
consistently high growth rates over the past thirty years, and even the international financial events
of 2008 and 2009 resulted in no more than a mild economic contraction in 2009. The crisis led to a
drastic fall in exports and investments that resulted in a small contraction in GDP and reduced
employment. Two years later, despite an international stage still marked by adversity, the Republic
has grown by more than 4%. Such dynamism led to the creation of nearly 190,000 new jobs in the
last year and rates of inflation that show the lowest level of the past forty years.
Foreign investment and exports of goods and
Exports and Foreign Direct Invesment, 2001-2011
(growth rate)
services were important driver of this
20
recovery, which can be observed in most
previous year.
Exports growth rate
in 2011 grew by more than 45% over the
45
10
30
5
15
0
0
-15
-5
FDI growth rate
2010. Foreign direct investment to Costa Rica
60
15
productive sectors. For example, exports
grew in 2011 by 10.2%, compared with
75
-30
-10
-45
-15
-60
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
-75
2001
-20
Source: Ministry of Finance and Central Bank of Costa Rica
Complementing growth with sustainable policies
Costa Rica’s stability in the past years has been key to growth. After the 1980s the world
experienced several global crises, some of them financial, some exchange-rate related, and others
fiscal. Through all of them Costa Rica has experience positive economic growth with no exchange
rate, financial, balance of payments, fiscal or any other type of crisis. Costa Rica has been an
example of stability in the region. Even globally, it is hard to find other countries with a similar
record of growth and stability.
The decisions made during the past
decades in the environment and
social areas have supported an
equitable distribution of income.
Since early on, Costa Rica pursued
policies to protect the environment
and undertook social policies that
have contributed to achieve one of
Gini Index, 2008
Argentina
Uruguay
El Salvador
Mexico
Costa Rica
Peru
Dominican Republic
Ecuador
Paraguay
Brazil
Bolivia
Colombia
Honduras
46,3
46,3
46,8
48,3
48,9
49,0
49,0
50,6
52,1
55,1
56,3
57,2
61,3
30
20
10
0
the best income distributions in Latin
60
50
40
Source: World Bank
America.
Costa Rica has been a pioneer in
Electricity Production From Hydroelectric Sources, 2009
environmental policy. Since the early
1950s, Costa Rica started to take
(% of total)
Paraguay
100,0
Costa Rica
advantage of its ample network of
77,8
Venezuela, RB
72,8
Colombia
rivers to generate power through
71,7
Uruguay
59,4
Peru
hydroelectric
projects
that
have
57,6
Panama
56,1
Ecuador
allowed it to produce over 78% of its
53,5
Honduras
42,5
Chile
electricity
70
from
clean,
renewable
41,7
Bolivia
37,5
Argentina
sources. As climate change has made
precipitation more variable, Costa Rica
is increasingly producing clean energy
27,8
El Salvador
26,0
Mexico
10,2
Nicaragua
8,6
0
20
40
60
80
100
Source: World Bank
from other sources, including eolic, biomass, waste-to-energy, geothermal and solar projects.
In the 1970s, Costa Rica started to develop a network of national parks and other protected areas
that today comprise approximately 30% of its territory, and pioneered the payment of
environmental services to landowners to either agree to preserve the forest on their lands or allow
for natural forest regeneration. As a result, Costa Rica has one of the highest land protection rates in
the world and has become the first country in Latin America to reverse the deforestation trend,
boasting a higher percentage of forest coverage than it did 50 years ago.
Since the early 1950s, Costa Rica´s society has had a social contract that assigns considerable
resources to public health and education, to the provision of potable water and energy to everyone,
to the protection and enforcement of an expanding array of human and social rights, and a relatively
equalitarian income distribution. As a result, structural adjustment has been always complemented
by social programs to alleviate the transition costs for those who initially lacked the skills to
become fully integrated into the new economic structure, and by educational and training programs
aimed at making an increasing proportion of the population become high skill workers.
In an economy based on innovation, the contribution of digital technologies is key. According to the
World Economic Forum, Costa Rica is now among the ten nations with the population better
prepared to take advantage of digital technology. The Government has made a significant
investment for the allocation of 19,000 PCs to students and today 88% of schools and colleges
already have some level of connectivity.
The most recent World Economic Forum report confirms the good harvest of the Republic’s public
policies to improve its competitiveness. In 2011, Costa Rica improved four positions, from 61 (in
2010) to 57 (out of 144 countries), making it the fifth most competitive country in Latin
America. Costa Rica improved in seven of the 12 general categories covering basic requirements,
efficiency enhancers and innovation and sophistication factors.
Selected Economic Indicators
(in millions of US dollars, except where noted)
For the year ended and at December 31,
2008
2009
2010
2012 (1)
2011
Economic Data
GDP
Real GDP % change from prior year
Nominal GDP (2)
2,7
29.835
(1,0)
29.375
4,7
36.235
4,2
40.867
4,8
44.828
13,9
4,0
5,8
4,7
2,7
20,6
4,9
(1,0)
7,8
4,1
7,3
8,1
7,7
3,3
N.A.
(2.787)
(5.013)
9.555
(14.569)
2.201
(417)
442
2.487
(576)
(2.039)
8.838
(10.877)
2.188
(1.084)
359
707
(1.281)
(3.440)
9.516
(12.956)
2.537
(745)
366
1.986
(2.185)
(5.151)
10.383
(15.534)
3.210
(567)
323
2.557
(645)
(2.373)
5.945
(8.318)
2.005
(427)
150
869
348
(260)
(561)
(132)
(117)
3.767
3.971
3,9
4.626
3.962
5,7
5.073
4.471
3,5
4.734
4.753
4,9
4.566
4.750
3,4
Consumer Price Index (% change)
End of period
Industrial production price index (% change)
End of period
(3)
Unemployment Rate
Balance of Payments Data
Current account balance
M erchandise trade balance
Exports (f.o.b.)
Imports (c.i.f.)
Service trade balance, net
Rent trade balance, net
Current transfers balance, net
Capital account balance
Change in Central Bank’s international reserves
Net international reserves of the banking system
Net international reserves of the Central Bank
Import coverage reserves (months of imports)
(4)
Public Finance
Central Government
Total Revenue
Total Expenditure
Primary balance
% of GDP
Overall balance
% of GDP
Consolidated public sector
% of GDP
4.731
4.675
541
1,8
56,2
0,2
136,0
0,5
4.121
5.121
(510)
(1,7)
(999,3)
(3,4)
(1.145,6)
(3,9)
5.219
7.087
(1.227)
(3,4)
(1.867,3)
(5,2)
(2.179,9)
(6,0)
5.981
7.652
(899)
(2,2)
(1.671,7)
(4,1)
(2.296,7)
(5,6)
3.057
4.019
(539)
(1,2)
(961,7)
(2,1)
N.A.
N.A.
2.049
6,9
5.237
17,6
1.735
5,9
6.334
21,6
2.252
6,2
8.507
23,5
1.972
4,8
9.252
22,6
N.A.
N.A.
N.A.
N.A.
Public Debt
External debt
% of GDP
Domestic debt
% of GDP
Notes
(1) First semester data
(2) 2012 data correspond to Central Bank of Costa Rica projection
(3) Before and after 2010, not comparable beacuse of a change in methodology instituted in 2010 by the National Institute of Statistics in
compiling data.
(4) T he 2012 first semester data correspond to a Ministry of Finance estimation
Sources: Ministry of Finance and Central Bank of Costa Rica
The role of evaluation
While modern societies are fast developing, the role of evaluation and its challenges are changing
too. During the past decade, many new institutions, organizations, and companies were founded on
the basis of evaluation theories, approaches and methods. As one result of this development,
evaluation must be seen as an important issue with an increasing diversity of tasks and efforts.
The increasing importance of global issues (e.g. climate change, financial crises, migration) and
joint actions for solving these problems is confronting the existing transnational and national
institutions with new challenges. This increased complexity and globalism call for a transnational
network of evaluation mechanisms. Countries, political solutions and power interests (of both
governments and private groups) need to be integrated and geared toward sustainability. Hence, the
functions of evaluation need to be redefined. Evaluation needs to be a strategic instrument for
supporting the governance of our society. It delivers not only independently produced scientific
results for decision makers, but it should also include the different viewpoints of stakeholders in
decision making processes. Consequently, evaluation would help control social programs more
effectively and efficiently, justifying as well the usage of common resources for these activities and
measures.
The economic rise and increasing political significance of emerging countries (particularly China,
India, Brazil and South Africa) are contributing to the complexity of international politics and
extending and complicating transnational relationships. A new world order with a multipolar power
structure is coming about, with some emerging countries introducing different concepts of the
importance of human rights, democratic participation, policy‐making and development aid, etc.,
into the international discussion. These processes will affect evaluation too. The outcome could be
an increased demand for evaluation, e.g. in order to make rational selection decisions in times of
limited financial resources, thus demonstrating the impact of policy programs and legitimating their
implementation.
If the demand for evaluation increases further in our modern societies which already use this
instrument (possibly with changed requirements) and in countries which follow modern
development patterns, such as Costa Rica, the need for qualified evaluators will grow too. Thus the
demands for quality and quality assurance in the evaluation process will increase.
Furthermore, the citizens of each country deserve that taxes be spent in the most efficient manner,
and evaluation plays a key role. The authorities have a powerful instrument to assess the
effectiveness of the policies they are implementing and should use it. Many countries measure the
efficiency of the policies they implement by an input-based approach, meaning that they only look
at the amount of resources they put in the budget for priority activities. However, they should care
about the effectiveness of the policies they undertake which implies an output-based approach,
where evaluation will play a key role, implies further increases in demand for evaluators.
This increase in demand for evaluation competences at national level, and will be fostered by the
general public, that public calling more and more for sustainability oriented policies, fostering the
need to integrate economic, social and environmental issues. In this context especially, the role of
evaluation as a powerful instrument should be emphasized.
Conclusions
During the past 60 years the Costa Rica has implement policies designed to maintain political
stability, promote economic growth, and advance social development. As a result, the country’s
economy has grown steadily at an average rate of 5% over the last 60 years, with one of the lowest
poverty rates in Latin America at 21.6% of the population, and health services and education have
been provided to every citizen. Additionally, the country has experienced uninterrupted
democratically elected governments since 1949, while as of 2012, approximately 52% of public
expenditures were directed to social services.
After the debt crisis in the early 1980s, Costa Rica transitioned out of the import-substitution
growth model into an export-led development model based on international economic integration,
export diversification and foreign direct investment. These policies have enabled Costa Rica to
diversify its trade portfolio by destination and by products. Today, Costa Rica hosts a number of
large international companies, such as Intel, IBM, Proctor & Gamble, UPS and DHL. Costa Rica’s
literacy rate, which is the highest in Central America, strong educational system, strategic
geographic location, and political, economic and social stability contribute to its global
competitiveness in international commerce.
Costa Rica is highly committed to sustainable development, through two main initiatives: (a)
becoming a carbon-neutral country by 2021 and (b) maximizing its energy production through
renewable sources. Today, 93% and 78% of electricity comes from renewable and hydroelectric
sources, respectively, and 25% of the territory in Costa Rica is environmentally protected areas.
Costa Rica has also demonstrated its commitment to building human capital. Since the 19th century,
elementary education in Costa Rica has been mandatory and publicly funded. The Constitution
mandates that beginning in 2014 a minimum of 8% of GDP be invested in the education system, an
increase from the current requirement of 6% of GDP. The Government is also focused on
improving secondary and tertiary education in order to enhance the technical skills of the population
to match demand for workers in the science and technology fields.
In the past years, Costa Rica was able to lower inflation to less than 6% and face the global
financial crisis successfully. Strong growth in from 2000 to 2008 allowed to government to increase
tax collections and lower debt, creating the fiscal buffers to face the 2009 global financial crisis.
Costa Rica’s inflation rate was 13.9% during 2008, primarily as a result of increases in international
commodity prices in the first half of the year. As a result of the slowdown in the Costa Rican
economy that occurred following the global financial crisis that began in the fourth quarter of 2008
and the decrease in commodity prices in 2009, the inflation rate declined to 4.0% in 2009. The
Central Bank`s target band of 4.0% to 6.0%, has been achieved in the next years, primarily due its
actions aimed at improving monetary control, the relative exchange rate stability, and reducing
pressures from external source inflationary pressures.
Finally, the Government is implementing a comprehensive fiscal strategy to further increase
competitiveness, including: (a) executing strict policies to restrain current expenditures by limiting
government hiring and limiting wage increases to match expected inflation; (b) safeguarding public
investment and social spending through productive investment projects using innovative financing,
and enacting measures to maintain current levels of social expenditure; (c) strengthening the fight
against tax evasion, tax elusion and contraband, increasing fiscal transparency and training judges and
prosecutors to better understand and fight tax crimes; (d) extending financing options for the
Government with the goal of expanding its investor base and lowering borrowing costs; and (e)
encouraging a national dialogue with all stakeholders to reach a consensus on ways to strengthen the
finances of the public sector.
Government understands that the country requires structural changes in the way we collect and
spend resources, but also in the way we design policies. More participatory processes, better
consultation with all sectors of society, and, most importantly, improved monitoring and
evaluation systems, will be essential. Governments should begin to anticipate evaluation from the
very outset. They should set aside budget for rigorous studies and they should assign
consequences to those evaluations. The quest for a more equal society is also de quest for a more
efficient State. We should redefine public priorities but we should also make sure that those
priorities are actually materialized in the decisions we implement.