DEPENDING on the economist, Costa Rica's economy is either the
Central American success story of the decade or a jerry-built
structure about to come tumbling down with a thud.
On the surface, Costa Rica's economy is booming. Never mind that
San Jose, the capital of what was once called the Switzerland of
Central America, is a car-crammed and increasingly smog-ridden
city. Costa Rica is riding a $400 million wave of tourist
investment that has dotted its lush landscape with new hotels and
package tours for the ecology-minded.
High growth rates, soaring exports, rising per capita income,
single-digit inflation, and Latin America's lowest unemployment
combine to form a star-studded statistical picture.
The glowing present is the product of a 10-year process of
"structural adjustment." Before a crisis in the early 1980s,
strongly interventionist governments protected domestic industry,
while providing Costa Ricans with perhaps the highest standard of
public welfare in Latin America.
In little more than a decade, however, policymakers have
reversed this. They have opened up the economy to a flood of
imports, cut spending on social programs, and privatized state-run
businesses in an effort to win the game of international
Once known mainly as a producer of bananas and coffee, Costa
Rica now sells on world markets a wide variety of agricultural
produce and simple manufactured goods, many of them produced in
duty-free zones within Costa Rica.
One question, however, is whether the 6 to 7 percent growth of
the last two years can be sustained. Noting that outgoing President
Rafael Calderon is leaving behind record high reserves and a tiny
government deficit, economist Ronulfo Jimenez with the governing
Social Christian Unity Party argues that "if current policies are
adhered to, the economy can grow 5 to 6 percent over the next four
Carlos Manuel Castillo, also an economist and president of the
National Liberation Party which won a national election Feb. 6,
disagrees. "These growth rates have been nurtured in an explosion
of imports, and are not sound or sustainable."
Mr. Castillo is pointing to the immediate problem which will
confront president-elect Jose Maria Figueres when he takes office
May 8 - Costa Rica's massive trade deficit. If tourist income and
"nontraditional" exports are booming, imports are rising even
more rapidly, to the point of creating an $800 million deficit -
7.8 percent of national output - in 1993.
Economist Otton Solis, who won election as a deputy this year
and is a critic of government policy, notes the irony in this
result. Referring to a trade and payments crisis in the early
1980s, which forced the turn toward current policies, Mr. Solis
argues that "the problem that was supposed to be solved by
economic adjustment has gotten worse."
Although strong foreign investment and speculative capital
inflows have kept Costa Rica's accounts in balance the last couple
of years, World Bank experts privately foresee a crunch coming,
perhaps by the end of 1994. …